An Artificial Band Aid To Postpone The Pain
The News Journal reports from Delaware. “President Barack Obama on Wednesday pledged $75 billion to help homeowners at risk of default. In September, Delaware saw its percentage of loans 30 days past due hit 4 percent, nearly a full point above the United States average and the ninth-highest rate in the country. Delaware officials could not say how many local borrowers might be among the 9 million the Obama initiative could help, but one local borrower said the program could help him save his house.”
“William Watson bought his Bear home in 2006 when the economy was humming. He said he and his wife were both working and took comfort from the lenders who told him he could easily refinance as real estate prices continued to climb. Now, the 35-year-old father of five is ‘upside down’ — paying $1,800 a month for a home that was recently appraised at $194,000, thousands less than what he still owes on the mortgage. His wife is now out of work.”
“‘I’m willing to pay for my home,’ he said Wednesday. ‘I have kids. I just wanted some breathing room. I don’t want 60 percent of my pay to go toward a mortgage.’”
From WHP CBS in Pennsylvania. “At The Home Builders Association booth in Strawberry Square, if you want to buy or sell, you can ask an expert. Bill Pierce of the Fulton Mortgage Company says now is the time to buy a new home. Interest rates are low. There is a big tax break for first-time buyers and the icing on the cake? President Barack Obama’s 75-billion dollar mortgage relief plan. ‘Here in Central Pennsylvania, we’re seeing a 20-percent increase in foreclosure related activity,’ said Pierce.”
“Julie Hoover says she’s struggling to pay her mortgage. ‘I think it’ll help with the economy. I think that’s what we need. We need to start buying,’ said Hoover, homeowner, South Middleton Township.”
The Philadelphia Inquirer from Pennsylvania. “Even when mortgages are modified, the end result in many cases is a higher payment. Government surveys show that more than half of the loans modified in the first six months of 2008 slipped back into problems before year’s end. Brian F. Duross, who lives in the Pennsylvania suburbs, modified his 8.5 percent adjustable-rate loan in July to an 8.5 percent fixed rate, but after his mortgage servicer tacked on late payments and fees to the balance, his monthly payment was the same.”
“‘The problem is people like me who legitimately try, are not helped by that,’ said Duross, who contacted the lender in January for a further modification, but has not heard back.”
“Philadelphia economist Kevin Gillen maintains that both mortgages and the homes that securitize them must be marked to market, meaning ‘that the values of both need to drop, but not by too much.’”
“Second, the government needs to distinguish between deserving households and undeserving households, not just between flippers and primary buyers. ‘My biggest concern remains the long-term moral hazard this will impose,’ Gillen said. ‘The administration runs the very real risk of signaling to the public that making stupid decisions is OK, provided that enough people make them.’”
From North Jersey.com. “Mortgage broker Wendy Nastasi…cited one recent customer who in June paid $278,000 for a Mahwah condominium, putting 20 percent down. The homeowner tried to refinance in December into a lower rate, but was unsuccessful because an updated appraisal set the condo’s value at $258,000, a 7.2 percent drop in six months.”
“But Obama’s foreclosure programs won’t be much help to the growing number of New Jersey homeowners who are unemployed, Nastasi noted. ‘Anybody who’s lost their jobs, they’re probably not going to qualify,’ she said.”
“In announcing his foreclosure plan, Obama endorsed a proposal in Congress to allow bankruptcy judges to lower mortgage payments for homeowners who have filed for bankruptcy. Lenders strongly oppose the bankruptcy proposal, arguing that they would have to raise interest rates and tighten credit to offset the added risk, and that would impede a housing market recovery. ‘If that came in, you’d need higher credit scores and lower loan-to-value ratios to get a loan,’ said Alfred F. Buzzetti, president of Bank of New Jersey in Fort Lee.”
The Gazette from Maryland. “While low interest rates have brought a ‘big rush’ in refinancing loan applications, Adam Avery, managing partner of AA Mortgage Group in Frederick, just wishes there was a big rush in closing them.”
“‘Applications and approved loans are two different animals,’ Avery said in an e-mail to The Gazette. ‘Although rates have dropped dramatically, only a small percentage of homeowners qualify given the more stringent guidelines for credit score, debt ratio, and LTV [loan-to-value]. … Just because a low rate is offered does not mean an application will be approved and funded.’”
“Avery called the lower rates a ‘public relations campaign’ by the government and said that the homeowners who truly need refinancing are those who have subprime loans and may be facing foreclosure. Struggling homeowners are now required to pay up to $800 upfront to apply for refinancing with no guarantee that they will even qualify, he said.”
“Avery said he was skeptical about the plan’s ability to reverse housing market woes and called it ‘window dressing.’ ‘The federal government is primarily responsible for the debacle we find ourselves in. Why would anyone believe they would be the solution to get us out?’”
Delmarva Now on Maryland. “County councilwoman…Sheree Sample-Hughes said most economists agree a ’second wave’ of foreclosures is on the way. Many who default on their home mortgages this year will have lost their jobs in the recession. For a county that had two armed robberies this week — including one at an ATM on Mount Hermon Road that severely wounded 69-year-old County Administrator Ted Shea — crime is a hot topic.”
“Foreclosures are pushing criminal activity up across the country, said Wicomico County Sheriff Mike Lewis, who planned to meet today with Salisbury Police Chief Allan Webster and the local Maryland State Police barrack to discuss increased patrol efforts. ‘Desperate people do desperate things,’ Lewis said. ‘People see their whole lives deteriorating around them. Things they used to be able to do financially, they no longer can.’”
The Frederick News Post from Maryland. “The National Association of Home Builders, in conjunction with Wells Fargo, released its Housing Market Index, which rose one point to nine — out of potential 100 points — for the month of February. ‘It basically fell to its lowest point ever (in January),’ said David Crowe, chief economist for the National Association of Home Builders.”
“Crowe added that the score ‘clearly indicates that builders aren’t seeing the end of the tunnel.’ ‘Builders are competing at lower prices. Some of the prices are below what it costs builders to build the houses,’ Crowe said.”
The Richmond Times Dispatch from Virginia. “Chesterfield County is looking at ways to limit the number of people living under a single roof. The county’s exploration of the housing issue comes in response to complaints during the past year that large numbers of people were living together in single-family homes. Jo Trout, a resident of the 500-home Surreywood subdivision north of Hull Street Road, was one of those who complained about a house in her neighborhood.”
“‘We have actually had a situation where a group of immigrants purchased a house in our subdivision. They made bedrooms out of the living room, the dining room. They had a huge two-car garage where everybody ate — they actually put some stoves and things in there,’ she said.”
The Daily Press from Virginia. “An $8,000 tax credit for first-time homebuyers could be a shot in the arm for a struggling real estate market, some local real estate agents said. Bob Sullivan, president of the Virginia Peninsula Association of Realtors…said there are historically low interest rates, a slew of homes to pick from on the market and sellers willing to negotiate. ‘Man, it’s like the perfect storm for homebuying,’ Sullivan said.”
“Buyers are looking for something that they can afford and eventually sell for a profit, Sullivan said.”
The DC Examiner. “The Washington area is expected to be slammed by a second wave of foreclosures later this year as a new crop of adjustable-rate mortgages resets to higher rates and homeowners struggle with rising monthly payments. The problem is with ‘Alt-A’ loans. The region has some of the highest rates of Alt-A mortgages in the nation, according to the Federal Reserve Bank of New York: Maryland ranks third with 16.8 such loans per 1,000 owner-occupied houses, a December report found. D.C. homeowners have a 16.7 rate, while Virginia comes in at 12.9. California led the nation with 40.8.”
“Carol Robinson, a counselor at HomeFree-USA, estimated that at least one-third of the organization’s clients are facing loan resets. ‘Unfortunately, a lot are not even aware that their mortgages are due to reset,’ she said. ‘We ask to see their note, and then it becomes evident that they have an adjustable-rate mortgage — it takes them by surprise.’”
“(Prince William County) held a lottery Feb. 10 to provide county employees the opportunity to buy low-cost homes in the county, including foreclosed properties. Teresa Dakon, who works in the county’s budget office, was one of more than 150 winners. She said she had been considering buying a house before the event, but had reservations because of the tough market. ‘I was just very worried,’ she said. ‘I wanted to be careful.’”
“‘One of the things to look at is to right-size the loan, meaning to bring property values down to where they should be, given today’s market,’ Robinson said.”
News Channel 36 from North Carolina. “They’re all the rage in states like California, Florida and Nevada. Charlotte’s foreclosure numbers don’t look anything like Las Vegas or Fort Myers, Fla., but three south Charlotte real estate agents decided to give the foreclosure bus tour a try here.”
“Natalie Terry and the other realtors say there are plenty of distressed homes out there and if a house is foreclosed, the banks are ready to deal. Terry added, ‘We still don’t have the same numbers as the rest of the country does, but we are seeing that trend. You know, the prediction for Charlotte is we’re the last ones into this shift and we’re going to be the first ones out.’”
The St Petersburg Times. “It’s too early to tell if Linda Dubayah will qualify for President Obama’s $75 billion housing rescue package. But time is running out for Dubayah and scores of other Tampa Bay area homeowners. The 58-year-old Dubayah is selling her household furniture to fend off foreclosure.”
“‘The savings is gone. Everything is gone,’ said Dubayah, who can’t work because of a disability. Her only source of income, a Clearwater rental home, is threatened by foreclosure. ‘I have to figure something out. I don’t have a lot of time.’”
“Local real estate experts, community development officials and attorneys who specialize in foreclosure say the optimism may be fleeting. ‘This is an artificial Band Aid,’ said Peter K. Murphy, a real estate consultant in Ybor City. ‘It’s not going to fix the market. It’s going to postpone the pain.’”
“‘For certain people it could be great,’ said attorney Michael Alex Wasylik, referring to the plan. But Wasylik, who works throughout the Tampa Bay area defending clients against foreclosures, said that because of some of the restrictions, ‘I think a lot of people are not going to benefit from this.’”
“A Pasco County housing official said Obama’s refinancing plan is not that different than one offered in 2007 by President George W. Bush. Most homeowners were ineligible for the Bush plan simply because they owed more than what their homes were worth. George Romagnoli, Pasco County Community Development Manager, was unsure Obama’s plan would change the dynamics. ‘If you didn’t put a big down payment down, and most people didn’t, I think it will be tough to qualify,’ he said.”
“Ken Thomas, a Miami based banking consultant and economist, said the Obama administration’s attempt to arrest the falling housing market is probably doomed to failure. Real estate will have to go through the messy process of healing itself, Thomas said. That includes more foreclosures and more people abandoning homes they consider to be losing investments.”
“‘There’s no immediate cure for the housing recession no matter what the government does,’ Thomas said. ‘It’s like a canker sore: It will cure in seven days with medication and a week without medication.’”
“For some, the offer of help comes too late. Kimberly Kaloski has felt the real estate bust from more than one direction. She was an energetic, always busy real estate agent in St. Petersburg until ’something happened where I just couldn’t sell. Nobody wanted to buy anything. I just couldn’t produce.’”
“She moved to North Carolina, but the market went bust there, too. And then she couldn’t keep up the payments on her St. Petersburg house. She said her house in the Gateway area is scheduled to be sold in a foreclosure sale today. Late Wednesday, she was still making phone calls from North Carolina, trying to stop the sale.”
“‘I had so much anxiety, I had heart palpitations,’ she said. She tried to negotiate a better deal with her lenders, but it was nearly impossible.”
‘Philadelphia economist Kevin Gillen maintains that both mortgages and the homes that securitize them must be marked to market, meaning ‘that the values of both need to drop, but not by too much’
Not by “too” much? How in the heck can this guy even call himself an economist?
He must have gone to the Goldilocks school of economics, where everything is just right.
Perhaps he meant home prices need to drop 30-40% but not 70-80%.
The point is moot. Market value is market value.
True, but if “market value” is 80% lower than today, you’ll need to worry about where to get the next batch of apples to sell on the street corner, rather than buying a house ‘on the cheap.’
What the hell are you talking about? In many Californian locales the average home price would STILL need to drop by 70-80% to be affordable to the average wage earner.
The health of the economy is NOT, for the hundred millionth time, dictated by home prices. NOR is it nursed by artificially propping up those ridiculous wishing prices.
Do you seriously believe what you’re writing, or does it come from a voice inside you?
Seriously.
It’s not the end of the world if houses fall 80% in value. It just means that prices got cheap. The market will take care of it. End of story. People will be locked in, but there’s a risk in buying a home. Your monthly is still the same as it was the month before. If anything, your insurance and taxes will go down. How is that bad?
Thanks Julius, my comments were meant for Apple, not you.
I think Apple is referring to what a 70% home value drop would mean to the banks. They are leveraged 30:1, and if everyone walks at once, there will be a global run on the banks that can be solved only by mass forfeiture of global debt, or Wiemar inflation. BOth will bring chaos.
I don’t think Obama can solve this. The damage is too deep.
I think Apple is referring to the economic collapse that would have to happen to precipitate an 80% average decline in national house prices. Some parts of CA are already there, but those are the more extreme cases.
“I don’t think Obama can solve this. The damage is too deep.”
+1 Everyone knows it too, including Obama.
“How in the heck can this guy even call himself an economist?”
He’s still better than any of these idiot “economists” the MSM keep quoting !!!
They can call themselves whatever they want. I call them lying suns-a-beaches.
I don’t trust any “science” that amends its observations for the purposes of politicians and the corporate mafia.
“Just give me a one-armed economist.”
- Harry S. Truman
http://www.larouchepub.com/other/2002/2924fannie_mae.html
One economist proved remarkably precient back in 2002, when he was warning of the housing bubble loud and clear. But since the MSM had dubbed him a “conspiracy theorist” he was virtually ignored. Turns out he was dead on, as this 2002 warning shows.
NoVa RE Supernova,
Wow. Absolutely flabbergasting read. Half way down he talks about the value of ‘all’ homes in the country rising by $1 T between 1990 to 1995. BUT… rising TWO $T from just 1999 to 2001! Hmm..?
Just looking back on that article feels like thumbing through your High School yearbook. Reminscing about how “simple” life was before balding, weight gain, divorce, tax audits and colonoscopies? Jeez, just child-like in comparison.
“Reminscing about how “simple” life was before balding, weight gain, divorce, tax audits and colonoscopies? Jeez, just child-like in comparison.”
Not to get preachy here, but it sounds like someone isn’t taking very good care of themselves.
Eat right, get lots of exercise, don’t smoke, and die anyway.
Yes, even ascetics die.
“Second, the government needs to distinguish between deserving households and undeserving households, not just between flippers and primary buyers. ‘My biggest concern remains the long-term moral hazard this will impose,’ Gillen said. ‘The administration runs the very real risk of signaling to the public that making stupid decisions is OK, provided that enough people make them.’”
I’m sorry to notifiy you but Mr. Long-term Moral Hazard “bought the farm” long ago, was buried and now his place is just another REO default in Florida like his wild and crazy cousins shacks in AZ and CA
Yeah, that’s right. And how in the hell does this vegan “cookie” I just accidentally bought get away with calling itself a cookie? Look, baked goods of the world, if you’re not made with butter, THEN YOU ARE NOT A COOKIE.
I bet ya just love carob as well.
I like my veggie burgers with bacon.
Oooo, not good. I tried one of those abominations in ‘99 or so (it was definitely during the tech boom, so maybe it was ‘98). No eggs, no butter = no flavor, no texture. (This was a chocolate chip cookie, which means the dough would normally use egg as a binding agent. Oh, and it was odd they were using choco anyway; no cruelty to animals but no worries about child labor?)
Though, about that butter thing … I bought some Mexican cookies (galetas) at my local hispanic store once (this was in Rockville, MD, years ago) and they tasted kind of funky… turns out the secret ingredient was fish oil. No kidding.
To top it off, Gillen does not know the difference between “to secure” and “to securitize”…but to give him credit where credit is due, I like his comment about Obama signaling to the public that it’s OK to make stupid decisions if a large enough number of people make the same stupid decision.
I am reading a lot about potential foreclosure relief plans, but without forcing the banks to take a 50% haircut in terms of loan amount and interest, I see little to be done here.
I could see a program where the bank in effect is forced to give up some of the profit on a high interest loan and refactor it to 4 or 5 % being effective in a small number of cases, but then not so much, and of course all the qualifying criteria would have to go out the window since they are not making payments credit score is going to be in the dumps and there will be negative equity, so the work will need to be done against what amounted to an unsecured loan to begin with given appraisals were too high and values were not sustainable. Not going to happen!
Better IMO - give these people a few thousand to get moved voluntarily and allow the property to foreclose, allowing the market to adjust more quickly.
I remember my BIL arguing portable SOH would save Florida’s housing market. Then, it was Hope Now. Although he doesn’t even qualify for the new plan — it is restricted to GSE mortgages — my BIL is hopeful again.
All this does is widen the mouth of the deflating spiral, sucking in more and more people who should have sold for a small loss or walked away months, even years ago.
Totally agree. Additionaly, like GH, I can see the cram-downs. In order to make it fair though, should said FB sell and sell at a profit somewhere down the road, their profit needs to be lessened in proportion w/ the percentage of their cram-down.
The balance goes back to the Taxpayer Relief Fund.
Sorry to be the one to tell you, but your BIL is a moron. Explain to me how locking out first time buyers (SOH portability) is supposed to fix a market that insanely glutted with homes? I’m not sure I understand the logic in that one; the only thing that helps is RE agents, as it makes it easier for people to move from house to house. Does nothing to get the first time buyer (the ONLY person who can remove inventory) into the market.
AND it didn’t actually do much to get people moving from house to house. I remember Charlie Crist’s predicting that the portability would create a “sonic boom” in RE transactions. That was back in summer. No soap radio.
The plan is working……
-Nationalize the banks (either openly, or by stealth)
-Bail out the homedebtors, when the government owns the paper. Let the craziest mortgages go into default, to preserve the illusion that “moral hazard” is alive and well. Doesn’t matter; the government still owns the mortgages, and takes the hit, no matter what the resolution.
-Instill “confidence”
-Figure out how to pay for it later. Better yet, kick the can down the road far enough to make it someone else’s problem.
My question: When did the parallel universes collide, and why did I end up in the one labeled “Bizzaro World”?
Won’t the bad credit score automatically trigger maximum credit card rates and other fun stuff?
One can hope.
‘My biggest concern remains the long-term moral hazard this will impose,’ Gillen said. ‘The administration runs the very real risk of signaling to the public that making stupid decisions is OK, provided that enough people make them.’”
Waaaay too late dude, the gubmint has been signaling that for a long time.
No kidding. This ain’t just the beginning - it’s the beginning of the end!
ROFLMAO
RE: The administration runs the very real risk of signaling to the public that making stupid decisions is OK, provided that enough people make them.’”
The central editorial in today’s Wall Street Journal virtually shreds
O’Bama’s mortgage bail-out.
Central theme…if you were a responsible person, say a renter, who sat on the sideline and refused to get caught up the all the flip this-flip that; I’ll buy the moom whether I can afford it not mayhem…then YOU ARE A SUCKER!
NOT ONLY DO YOU NOT HAVE A PERSONAL RESIDENCE TO REFINACE UNDER GOVERNMENT SECTION 8 “PAY WHAT YOU CAN AFFORD-THE GOVERNMENT WILL CUT A SUBSIDY CHECK FOR THE BALANCE RULES; BUT YOU ARE GOING TO PAY WITH YOUR TAX DOLLARS AND FUTURE HIGHER MORTGAGE INTERESTS RATES, TO KEEP MILLIONS OF IRRESPONSIBLE DEADBEATS IN THEIR HOMES!
“We have begun the essential work of keeping the American Dream alive in our times”
-B. O’Bama
Amen to that.
And what’s with the wailing about PEOPLE LOSING THEIR HOMES. Rent an apt. The media is playing it like either you live in a house or you’re……..out on the street! The sense of entitlement in this country has become so imbedded in people’s pysche it’s sick. Meanwhile India is gearing up to kick our butts. As is China. You know they’re laughing at us. This once great country has become a parody of itself.
No, India and China are falling apart. You can also rent a house. There’s no need to rent an apartment.
Why rent a house when renting an apartment helps accomplish my mission?
My mission?
To see house prices drop another 50% nationwide.
The typical homeowner apparently is as greedy as an NYC investment banker. Huge swaths of homeowners (mortgagees) nationwide fully support Federal forced fleecing of millions of responsible non-debtors from coast-to-coast.
I say screw them. Let the Depression begin. I’ve had it.
If I’m going to be dirt poor due to greedy bastards in New York, California, Florida, Arizona and Nevada, then they can join me in my quest to eat lead paint.
Why should I work? Why should I continue to be responsible? So I can save your sorry @sses?
So we can give over 1 trillion to Wall Street and nobody there says a word. But when it comes to the little guy we bar the door!
EXACTAMUNDO, WAman.
It was wrong to give the billions to Wall Street. Two wrongs don’t make a right.
I think all of us tenants are going to be so far ahead of all of those homeowners that I am not even that angry about the goodies being offered to FBs. I don’t want to see the “cramdown” though. I believe it will encourage all mortgagors to stop paying.
Terry added, ‘We still don’t have the same numbers as the rest of the country does, but we are seeing that trend. You know, the prediction for Charlotte is we’re the last ones into this shift and we’re going to be the first ones out.’”
No Terry I have not heard that prediction! The endless line of oft quoted idiots is just that, endless. Also Terry it’s not a “shift” it’s far more like tectonic plate movement, keep riding the short tour bus you’ll see.
Charlotte is toast and even though they are opening an Ikea it won’t save them. LOL!
How does LIFO apply here?? IOW, how does last in automatically translate to first out, especially in an economic downturn?
Makes zero sense, unless this is another artifact of the entitlement mentality…
CA…AZ…NV…FL were first in and they are getting killed.
DC (where i live) was late to the party just like NC was.
Last in, last out.
The person who starts drinking at 3 PM is in bed by 8. The late-comers party ’till 2 or 3, but the next day is ruined.
“The person who starts drinking at 3 PM is in bed by 8.”
Lightweight!
‘The person who starts drinking at 3 PM is in bed by 8.’
Yes, this is frequently true.
* shakes fluffy Olyhead ruefully*
Sometimes it doesn’t even take until 8. And then you’re faced with what to do for the rest of the evening. That’s when I usually think inside my head, ‘Hey, I know! I believe I’ll drink some more.’
DC metro was not late to the party — it was bubbly when I moved here in 2002 (Fairfax). Cripes, I remember accepting a job in Dec 2001, partially based/contingent on local affordability, and being shocked by how much prices had moved up by April 2002. Heck, there were bidding wars! When my realtor told me that, I thought she thought I was a chump.
no bidding wars today!
MORE US DEBT BORROWING FOR MORTGAGE DEADBEATS!
“WE HAVE THE ESSENTIAL WORK OF KEEPING THE AMERICAN DREAM ALIVE IN OUR TIME”-Barak O’Bama
http://www.youtube.com/watch?v=bEZB4taSEoA
That was one of the best things I’ve seen to come out of the mainstream media. Hear, hear!
‘Anybody who’s lost their jobs, they’re probably not going to qualify,’
Home prices = (-50% +)
Heloc creek = (bone dry)
Cheney-Shrub “Shadow Legacy” effect = (unemployment “decline drift” still has kinetic energy & velocity post Jan20th 2009)
Mark-to-Fanasty = (killed by evil twin brother…Mark-to-Market)
National average family income = ($52,160.00)
National average sq foot post 2002 home = (3,086 sqf)
# of homes built with less than 1500 sqf in the last 8 years = (.00023%)
Human & Environmental damage due to imported Chinese/India products = (yet TBD)
Homeland Security Alert Flag = (Still not green)
M.I.A. = HBB blogger “death-spiral”
This post cracked me up. Whew.
MtF killed by etb MtM. Fantastic.
Is that a real percentage on homes with the sq footage?
# of homes built with less than 1500 sqf in the last 8 years = (.00023%)
addendum: (99.7% built without proper permits, note: does not include inner-city garage conversions or tornado/hurricane magnet dwellings)
Here’s the letter I sent out to my senators, represetative, and Obama. I hope you guys like it:
Dear Senator Boxer:
Our economy is imploding because our trade deficit is out of this world. We have outsourced so many of our jobs to foreign countries that US workers are losing their ability to prosper. This is due strictly to wage arbitrage, it is a race to the bottom, and it only benefits the countries that have been allowed to siphon off our hard-earned success. It is not fair trade. It is an artificial system designed for and by short-sighted corporations to exploit people in countries without human rights.
We must bring back US jobs by reinstating the tariffs that served us so well for so many years. Chindexico imposes heavy tariffs against us, both directly and indirectly (through worthless currencies). It is foolish of us to think that these mass exporters can or would “retaliate” against us for reinstating tariffs to correct for the differences among currencies. The tariff is a tried a true tool used for thousands of years by every society that ever traded with another society. Removing the tariff has been disastrous to us. We should learn from our own mistakes and undo the damage now.
You know, the crisis-level housing prices that developed from 1998-2005 were caused by a massive credit bubble that was blown by the Federal Reserve to mask the deleterious effects of offshoring. When US workers found themselves unemployed or underpayed, they complacently borrowed money against their houses and thought “It’s OK that I’m not making any money through my work. My house is making me rich”. That only worked until it didn’t. Now that house prices are (naturally) returning to a sustainable level, people are starting to notice that their incomes are much smaller than they used to be.
Trying to prop up house prices will only make life even harder for the average American, who has to work to earn the money to pay her mortgage. The only way to help us is to stop allowing Chindexico to steal all our jobs. You let them develop their own economies and, with tariffs in place, we will continue to develop ours.
Sincerely,
Big V
+1
Good one Big V!
“…That only worked until it didn’t.”
Are you smarter than a 40 years experience veteran FED Chairman?:
(extra credit for brevity):
“How does FED funds @ 1%… restrict “real estate” speculation?”
what impact would this have on our current standard of living?
We all lived better when we had tariffs, so I’m sure such a move would only be good for us.
Big V,
Overall, very well said. I hope it’s only too obvious that many ( former ) workers allowed a cruel joke to be played upon themselves by Zillowing their homes “value” on a daily basis when they should have been complaining about ever eroding pay and benefits.
At his point nevermind tariffs, but how about a couple of speedbumps fer’ chrissakes?
IMO it would push our standard of living closer to what we can reasonably expect to sustain given our ability to produce. The adjustment will be a bit disruptive and will lower our material standard of living a but, but the increased job stability and security of having more control over our own destiny should make it more comfortable. Kind of like going to grandma’s house and having no TV or computer, but good food and family make up for it.
climber,
I think that’s a good analogy of what we might expect. It -will- be disruptive for a time, but more from a lack ( or desire ) for credit than plummeting wages.
Most people already have a tv and computer, there just wouldn’t be one in every child’s room above the age of 5! Oh and sorry but you can forget about cruise vacations and elective surgery. Think… Wisconsin Dells!
worked great in 1930
Are you referring to the Smoot-Hawley act? The consequences of that act were negligible when it was passed. Furthermore, one can not extrapolate that the consequences of a similar act passed today would have the same effect as it did in 1930. This is because we are suffering from an unprecedented trade deficit, and tariffs are historically low.
Please see below the tariffs imposed on greater Mekong subregion (GMS) products by various countries:
Products US EU Japan China Thailand
Animal products 2.5 25.4 15.5 14.8 28.1
Fruit and vegetables 5 11.8 12.9 14.9 27.6
Fish and fish products 1.1 10.3 5.7 11 14.5
Textiles 7.9 6.6 5.5 9.7 8.1
Clothing 11.5 11.5 9.2 16.1 24.5
Leather and footwear 4.3
As you can see, our current tariff rate is WAY lower than it was in 1929, and also WAY lower than everyone else’s. Hence, while the Smoot-Hawley act was negligible during the Great Depression, a similar passed today (and tailored for today’s circumstances) would help greatly.
I posted something complex. It will probably show up at midnight.
My thing still isn’t showing up, so how about this:
Now let us consider agricultural and fish products. It is clearly seen that tariffs imposed by the U.S. are low compared with EU, Japan, China and Thailand. The U.S. tariff rates on animal products; and fish and fish products are at only 2.5% and 1.1%, respectively. As for EU, the tariff structure shows that local animal products are sensitive and highly protected. The EU tariff rate on such products is 25.4%, which is far higher than tariff rates on fruit and vegetables; and fish and fish products. Likewise, animal products are highly protected in Japan; average tariff rate is 15.5%, while tariff rates on fruit and vegetables; and fish and fish products are 12.9% and 5.7%, respectively. For China, tariffs levied on animal products; fruit and vegetables; and fish and fish products are about the same. They range from 11% to 14.9%. Comparing tariffs charged by Thailand and other GMS’ export destinations, it can be seen that Thailand is very protective for its local agricultural and fishery sectors. Tariff rates on these products imported into Thailand are significantly greater than other GMS’ export destinations. The figures are 28.1%, 27.6% and 14.5% for animal products; fruit and vegetables; and fish and fish products, respectively.
I think we stopped exporting products other than movies many years ago.
In 1930 we were a major exporter.
In 2009 we are a major importer.
I think starting a trade war would not be the best idea.
A huge portion of the trade imbalance is due to oil and we desperatly need to cut consumption. Obama and his useless cronies did very little to attack problems in automotive, as expected. Basically, the midwest autoworker/GM/F lobby did a good job to pimp us for more money. Much of the energy improvements in buildings is nice, but does little to cut oil consumption. I think however, that peoples viewpoint/position on debt is changing and excess consumption via large vehicles should go way down. That will give substantial relief to the deficit.
It should also be noted that many of the companies producing goods in China are owned by foriegn interests. So, much of the profits have actually been leaving China.
Further note that while a step like you are proposing might have a somewhat benificial effect to labor, which includes me, it might have a devistating effect on the good people of china.
Personally would prefer to see regulations gradually stepped in that require enviromental, wage and worker standards if you want to sell product in the USA. Again gradual. Lots to think about there as China has a different healthcare/welfare system so equivalent isn’t always easy to find.
I’d like to encourage China to invest those reserves in the US again. If they do that, the capital inflows would alieviate some of the deflationary effects. Hopefully they invest in businesses that help us sell goods back in China.
Would also be good to see Obama et al spend some money on new business ideas that we could market over there. Why aren’t we making a fortune selling them automobiles? Sending engineers over to work on civil engineering/road construction projects? If there is some kind of block, maybe we should work on that.
While a move like this would cause more jobs, it would lower efficiency and create inflation. So, your standard of living would not necessarily improve.
Typical deflationary response is protectionism.
james,
Good points as always. I think the thing that jumps out at me is the fact that we can’t continuously be the emerging market’s “consumer of last resort”. We’ve done that for at least a decade and embraced it as tightly as we could.
Whatever our threshold of consumption for their products is ( I think we’ve reached it? ) The emerging markets have had a solid decade ( basically a century when measured against yester-year ) to build out their basic infrastructure and develop their markets. How long are we supposed to pretend we no longer have the technology to make shovels?
Those “profits” that are leaving China do not end up back in the US and will not unless we arrange another tax free holiday on overseas profits.
I am very surprised that you are concerned with the people of China that are producing all of the goods that enter the US. You do however raise an interesting philosophical point: should Chinese factories that treat its employees like slaves be shutdown or should it remain open in order to allow those employees to make money to buy food?
I believe it was also asked during the 1850s with regards to slaves being better off in the US than back in the jungles of Africa.
There is a huge difference between “not starting a trade war” and “not being a doormat”. Not to be rude, but james sounds a little like the abused wife who tries her darndest not to make her hubbie mad. She usually has a black eye, but still thinks that all she has to do is give in a little more to make it work.
The good people of China would do well to look toward their own government if they are in need of industry.
I agree that international trade could work without tariffs if there were a way to ensure that people in the various countries were all playing by an equivalent (truly fair) set of rules. Unfortunately, I do not think that we, as a global society, are capable of making such assurances. The differences amongst our cultures are too big, and WE (the US) can’t MAKE any of them do anything.
That’s why we always used tariffs in the past, and everyone else in the world still uses huge tariffs (in comparison to ours). Tariffs are used because they work.
What Big V said.
+2
Big V,
Are you a K-Street lobbyist with big bucks to sway your Congressman or Senator’s vote? If so, you might be heard. Otherwise some intern will give your letter a cursury look, sign you up for their e-mail updates on random subjects you probably don’t care about, and pitch your letter in the round file.
I personally don’t see any reason for banks to lend under he current economic and political climate. With inflation sure to be a problem in the near future why not wait to lend when rates are higher ? Why lend if you can’t foreclose ?
+10
same thing for car loans, small business loans, etc.
Comment Bubble
Because nobody has any net worth cash. They have to pull out Mastercard for a pack of gum. Companies need to get continual 30-day loans just to cut paychecks.
If nobody lends, nobody gets paid anything, nobody buys anything, businesses go down, etc.
It would be nice if we had some Great Day of Reckoning, where everybody suddenly sold their assets to cash, and paid all debt to everyone find out who is actually solvent, thus wiping out 90% of the money supply. At that time, we HBBer would be the last people standing on a little pile of very valuable cash. Unfortunately we’re likely to get swept into the chaos that such a reckoning would bring about.
The region has some of the highest rates of Alt-A mortgages in the nation, according to the Federal Reserve Bank of New York: Maryland ranks third with 16.8 such loans per 1,000 owner-occupied houses, a December report found. D.C. homeowners have a 16.7 rate, while Virginia comes in at 12.9. California led the nation with 40.8.”
That 40.8 percent number is astonishing!
with 16.8 such loans per 1,000 owner-occupied houses
It’s per 1000 houses, not 100, so it’s a 4.08% rating.
Which is why the mortgage default show is a long way from being over. Except now we are talking about $800K houses, not $417K houses.
Indeed. what I’m seeing in my own condo complex is that anyone who bought in the last 2 or 3 years is getting wiped out. The 920sf unit below me took a $130K haircut, and that’s only previous sale vs current REO asking. I just don’t see how any sort of normal person could have qualified for something in 2006-2008 without both lying and being lied to — including lying to oneself. Everyone accepted that state of affairs as “the new normal.”
That’s not 40.8%. That’s 4% of owner occupied homes. If only 1/3 of homes have a mortgage, then that’s 6% of loans.
I stand corrected. Sorry for the confusing post.
But it does show the differences between CA and the rest of the country. And I also wonder about that stat - 6% seems awfully low for CA. I would think it would be more like 20%.
“Owner occupied” is the fudge word. I’ll bet there are 2 subprime rentals for every subprime owner-occupied house in CA.
FICO is useless. I don’t care if it’s subprim Alt-A or Prime. Just tell me
1. Income.
2. Price and LTV
3. What happens at Month #37.
and I can place a fudge market value on that loan pretty fast without all the economist dithering about models and “pricing risk.” When in doubt, I’d say 25 cents on the dollar.
Can some of the Virgina-area posters help me out here? According to Ben’s DCExaminer link posted above, Prince William County is holding ( rather already held ) a “lottery” FOR… county employees so they can have a crack at low-cost housing!?
Is that uh… the “standard” in your neck of the woods? How does employment w/ the county entitle you to first crack at the foreclosures? I’m lost here.
As a Northern Va. resident, I’ve never heard of anything like this before. However, there are plenty of foreclosed houses in Pr. William Co. to go around. I don’t think anyone’s going to get shut out of buying one.
Seriously, the entire county is essentially one big foreclosed property. Prices have already taken a huge drop there, but the underlying reality is that very few people who commute to DC or the close-in burbs would willing live way out in Pr. William by choice. The only reason it bubbled up was because of the insane pricing inside the Beltway.
I live in Arlington, which has been annoyingly sticky on prices, though that is starting to change in some parts of the county, mostly the parts where everyone speaks Spanish. However, I’ve started noticing some foreclosure deals in the nicer parts of Arlington, along with plenty of “wishing prices”.
ChrisO,
Oh I’ve no doubt there’s plenty to go around! And I’m not implying that today’s “steals” won’t become tomorrows knife wounds? I just think it sends a dangerous precedent.
Since someone from within their sphere of influence sees or may have direct access to NOD’s etc. I just want to say I think this is a bad idea. Those delinquent on property taxes may find that when they go to get caught up that their “check got lost in the system” and wasn’t found until -after- the auction?
“Gosh, I’ve always ‘wanted’ to live there?”
“‘We have actually had a situation where a group of immigrants purchased a house in our subdivision. They made bedrooms out of the living room, the dining room. They had a huge two-car garage where everybody ate — they actually put some stoves and things in there,’ she said.”
I sometimes hang out at one of the immigration blogs, and this has been a huge issue in some Virginia and Maryland counties for a while, like going back a couple of years. I was totally shocked at the scope of the situation. Even here in Florida it is not that big of an issue, although it exists. But in Florida, there’s so much subsidized housing for ag workers (nice stuff, too, complete with tot lots and swimming pools) that immigrants, both legal and illegal, don’t need to crowd into houses to make ends meet. And, even though the housing is supposed to be for ag workers, they look the other way if the renters get other gigs, just so long as they had ag work when they first rented.
There are also cheap mobile homes here. The immigrants make about the same wages whether it is Florida or Virginia, but expenses are higher in VA, so they need more people to crack a bigger nut.
Yeah, Arlington has been annoyingly one of those “it’s different here” places. There’s still a ton of commercial building going on in Clarendon. They’ve pretty much demolished all the mom and pop stores and restaurants and put up luxury condos/apts and chain restaurants/stores. sad.
DinOR I live in PWC and I can tell you that they had that auction and it won’t make a bit of different. I have seen house after house from one end of the county to the other sitting empty. There are even house that were bought late in ‘07 that people must move now. Yes I have been in houses that the immigrants have turn the house into a boarding house. We even have a friend who is the Fire chief and explain to him that one house had two stoves (one in the kitchen and the other in the basement where another family was staying) Also they turned a den office with no rooms into a bedroom (against fire code). Needless to say they got a visit from the fire department for some citations.
“Real estate will have to go through the messy process of healing itself, Thomas said. ”
Like any economic cycle, the housing market must and will correct on it’s own. Any plan to delay the process will most certainly cause this mess to last much longer!
Do you understand this NAR?
But what about the RE agent’s pocketbooks? Who’s gonna put Jr. through boarding school and tennis camp? How about the 8 speculative properties they bought during the boom that they can’t raise the rent for?
Have a heart FB, it’s hard times out there for these poor hardworking souls…
Ooooo, Ben, this post is a gem. First, we have:
“Ken Thomas, a Miami based banking consultant and economist, said the Obama administration’s attempt to arrest the falling housing market is probably doomed to failure. Real estate will have to go through the messy process of healing itself, Thomas said. That includes more foreclosures and more people abandoning homes they consider to be losing investments.”
“‘There’s no immediate cure for the housing recession no matter what the government does,’ Thomas said. ‘It’s like a canker sore: It will cure in seven days with medication and a week without medication.’”
Reminds me of that nasty cold I had in January. The one that interfered with *minor* things like eating, sleeping and talking. I finally figured out that it was going to be around for as long as it was, no matter what I did. And that meant that I had to put up with it for three crummy weeks.
I feel better now. Better enough to feast upon the following:
“For some, the offer of help comes too late. Kimberly Kaloski has felt the real estate bust from more than one direction. She was an energetic, always busy real estate agent in St. Petersburg until ’something happened where I just couldn’t sell. Nobody wanted to buy anything. I just couldn’t produce.’”
Seems that the words “real estate agent” and “produce” don’t belong in the same paragraph. I mean, come on, what do these people produce? Paperwork? Marketing-speak? Happy talk?
Seems that the words “real estate agent” and “produce” don’t belong in the same paragraph. I mean, come on, what do these people produce? Paperwork? Marketing-speak? Happy talk?
Work for cosmetic surgeons.
Kimberly Kaloski has felt the real estate bust from more than one direction.
Joshua Tree delivery?
Oh, I agree, the dingbat sold… the only thing produced was commisions. It was like Florida 1925 again.
Got Popcorn?
Neil
If it lasted for 3 weeks, then you had the flu. Hope you lost a little weight anyway (assuming you’re fat, that is… but you’re name is “Arizona Slim”, so mabye not).
“‘I had so much anxiety, I had heart palpitations,’ she said. She tried to negotiate a better deal with her lenders, but it was nearly impossible.”
Nearly impossible or it WAS impossible. You are in foreclosure, Kimberly. I’m guessing it was impossible.
Aw man, Gateway sucks, no wonder she can’t sell there. I have no idea what the point of bridge commuting does in that scenario? It’s not like NYC where you get more yard… If you live in Tampa, and work in gateway, you have a chitty commute to an ugly, horribly scaled office park. If you live in gateway, and work in Tampa, you have a chitty commute to an ugly, horribly scaled office park/abandoned city.
There is that one rental complex where some of the Bucs stay. There was a time when every weekend the pool there was like a rap video. One of my low-hanging-fruit-grabbing colleagues used to “get some” there.
That area is DUI paradise come sundown.
LMAO!
Funny, because it’s true!
Delaware —“‘I’m willing to pay for my home,’ he said Wednesday. ‘I have kids. I just wanted some breathing room. I don’t want 60 percent of my pay to go toward a mortgage.’”
I think anyone here would have made this consideration before signing up for house-debtorship. Why didn’t this guy?
Delaware- GroundZero for RE speculation in the Philly/Balto/DC market.
“I just wanted some breathing room.”
How much breathing room is enough? My rule of thumb is, if you can’t clean it yourself and have to hire a cleaning person, it’s too big.
My eighty-something parents still clean their own house.
If NAR could talk the FB and GF into over-priced houses maybe we could pay them to talk the same fools into rows of electric chairs.
It would be quicker, cheaper and they’re FRIED Crispy Critters either way
I still am in awe after going to Rehoboth last year… I mean, Delaware?
“I still am in awe after going to Rehoboth last year… I mean, Delaware?”
Yes indeed. I’m glad someone else saw it for themselves. I’ve never seen anything like it anywhere else.
At $198K, that house in Bear is still $100K overpriced.
It’s a barren, flat wasteland of beige vinyl boxes and strip malls, rife with Section 8 apartment complexes and their attendant crime.
“I don’t want 60% of my pay to go towards a mortgage”
Neither do I. So rent, like I did.
But this is the USA, Land of the big PX…..where stupid is subsidized, and government will bail these chumps out, one way or another..
No one wants price regulation (except for health care), but they want bailouts and subsidization. This is why I argue so strongly against subsidized health care. Isn’t shelter, food, clothing, transportation, and legal representation just as important to basic needs? I’ve never once seen the health care industry beg for a bailout.
I’m guessing you have never been seriously ill or you can afford health insurance?
Subsidies only drive prices up.
I think we’ll see people calling for nationally-provided clothing when the temperature is below freezing and long underwear, pants, shirts, and coats cost one million dollars a piece. Otherwise, the analogy with health care is mis-placed.
IAT
Dont’cha remember Jefferson’s Declaration of Independence?
”We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness, and subsidized health care…”
Karl Marx said all those plasma TVs bought on credit would be the end of capitalism.
I’ve never once seen the health care industry beg for a bailout.
Malpractice crisis of 1976.
Rick Santelli’s Chicago Tea Party:
http://tinyurl.com/cb3mk8
My heart feels embiggened!
That was great…thanks for posting that!
I’d read the posts about it on the other thread, but seeing it was inspirational. How about the girlyman anchor who said Mayor Daley was going to call the police and National Guard…awww…he was AFWAID of the bad mean tax revolters…
I don’t think the elites (and that includes girlyman anchors) comprehend the anger brewing on the street. I’ve heard tax revolt speak on sports radio, for criminy sake.
every time I post a t i n y u r l ,it gets eaten!
what makes otis so special?
I don’t remember who it was, but someone here asked me to let them (her?) know when the DC area had a supermarket offering to triple coupons. Well, Bloom is tripling coupons up to 99 cents on Friday, Saturday and Sunday according to the circular. Up to 20 coupons per visit per day.
Unfortunatly, the sales don’t look great this week, so not as good a deal as it could be. And, of course, you have to shop at Bloom. And buy food for which coupons are available (not fresh stuff).
Enjoy. (Sorry for the off topic, but it is the Northeast/Atlantic coast thread.)
Bloom? Ugh.
Check out the labeling on all their pork and chicken products. It’s all adulterated. “Up to 15% seasoning broth.” “Self-basting.”
Got salt?
That was me, Polly, and thank you for the info. I’ve never shopped at Bloom but will search one out.
“‘We have actually had a situation where a group of immigrants purchased a house in our subdivision. They made bedrooms out of the living room, the dining room. They had a huge two-car garage where everybody ate — they actually put some stoves and things in there,’ she said.”
They used to call those “boarding houses,” didn’t they? Not a bad idea, really. If people could leave each other the hell alone which I’m not sure people can do now. Lots of weird bastids out there now.
These people live in really close quarters and many times it is not healthy for the children, who run the risk of getting diddled or worse.
Yup. Not good for families.
I’ll say they run the risk of getting “diddled.” In one case with which I’m familiar, Grandpapa/patriarch had his way with 6-or 7-year old granddaughter over a summer until the little girl finally complained to an aunt who did not live under the same roof with Grandpapa’s extended family. Aunt took little girl to little girl’s mother and asked mother if she was aware of what was happening. Mother’s response? “We all had to go through it”; now it was just her daughter’s turn.
I’m always astounded when the law views as less of a threat those who sexually abuse their own. The way I see it, if someone would do that to his own flesh and blood, then just imagine what he’ll do to a stranger! But what do I know?
Critisizing this arrangement is anti-Family values, isn’t it?
Its the way of the future, don’t ya know! As long as each tribe leaves the others alone (no violence), and it gives you a local source to barter with, too.
Bloom is Food Lion, as BottomDollar is Food Lion in the DC area. Bloom is upscale, and rather nice. At BottomDollar the food is left in the shipping boxes. I used to watch with amusement which areas Food Lion deemed worthy of Blooms.
I’m in Kroger-land now(and a Piggly-Wiggly!).
Regarding the Daily Press / Peninsula Assocation of Realtors… This area (Hampton Roads / Southeastern Virginia) is still VERY bubbly. The home prices still eclipse the salaries by far. The one saving grace is that a huge amount of the good jobs are all tied to gov’t. Gov’t contractors that circle the military bases that hire the ex-military people who are connected. But even those jobs won’t support the nutty home prices without funky loans.
Julie Hoover says she’s struggling to dig her hole. ‘I think it’ll help with the climbing out. I think that’s what we need. We need to start digging,’ said Hoover, hole-digger, South Middleton Township.”
“‘Applications and approved loans are two different animals,’ Avery said in an e-mail to The Gazette. ‘Although rates have dropped dramatically, only a small percentage of homeowners qualify given the more stringent guidelines for credit score, debt ratio, and LTV [loan-to-value]. … Just because a low rate is offered does not mean an application will be approved and funded.’”
One of the mortgage sites I visit made the point that these highly publicized lower rates, and the rush to re-finance, may actually increase the speed of the collapse. The more people try to re-finance, and realize they CAN’T, and that they are truly stuck with their FB loan and their overpriced house, the more people will realize it’s time to walk away.
Conventional lending doesn’t work with bubble prices, it just doesn’t.
Now the point of the $729K conforming loan limit comes into clear perspective: Rescue folks who bought homes costing over $729K and implicitly charge everyone else the tab.
Wall Street Journal
* OPINION
* FEBRUARY 18, 2009, 11:12 P.M. ET
Assessing the President’s Mortgage Plan
Judicial ‘cramdowns’ could roil the markets.
by ALAN REYNOLDS
The president’s new mortgage-relief plan contains clever elements that might indeed help homeowners. However, the superfluous threat of inviting judges to rewrite contracts must dilute the collateral behind troubled mortgage-backed securities. That, in turn, would jeopardize the endangered capital of banks, pension funds and other holders of such securities, including the Federal Reserve, Fannie Mae and Freddie Mac.
The simplest yet arguably most potent part of the strategy is the plan to allow Fannie and Freddie to refinance conforming loans (up to $729,750) without the quaint requirement that the refinanced loan be no larger than 80% of the value of the house. This change provides access to today’s low mortgage rates even to “underwater” borrowers — those who owe more that their houses are worth. Although such borrowers have no skin in the game, President Obama assumes or hopes that their reduced payments will result in fewer defaults.