The Law Of Supply And Demand Is At Work
KARE 11 reports on Minnesota. “A KARE 11 News investigation shows banks are often not very motivated to work with homeowners who are in financial distress. Kevin Paulson’s been trying to work with his mortgage lender for months now, to negotiate the short-sale of his townhome. Paulson’s townhome in Otsego is listed for $160,000. It’s about what he paid for it three years ago. But the town home behind him is in foreclosure and it’s listed at $85,000. His bank has told him as long as he remains current on his payments, there’s nothing they can do to help him. He doesn’t know how much longer that can last. ‘It’s just too hard to compete with the banks,’ he says, when they’re ’selling houses at half-price.’”
“There’s another for sale across the street, and couple more around the corner - a dozen on the market all around him. ‘I’m not anticipating getting full value,’ he says.”
“In downtown St. Paul at United Hospital, Jennifer Raiter tries to focus on her work while worrying about her house payment. First, the ARM activated on her mortgage and then her home in Prescott, WI lost about a third of its value. ‘You try to fix it, and no one wants to help you,’ she says. All she’s trying to do is re-work her interest rate after she was hit with a ‘double-whammy.’ ‘The strategy of the moment is just to survive,’ she says. ‘To get through every increase and do whatever we have to do to keep making our payments.’”
“Experts tell us they lose more if homeowners give up and sell the house for less than they owe, leaving the bank stuck with the difference. Banks lose even more when they go through foreclosures. You might think this is motivation to move properties faster. But it’s not. ‘And the reason they’re not motivated by it,” says Glenn Dorfman, former executive director of the Minnesota Realtors Association, is that ‘they’re not market driven, they’re government driven.’”
“Jennifer and Nick Rosengren say they worked for nearly two years with their bank, first in pursuit of a better interest rate, then to avoid foreclosure. ‘They hung up on (us). They sent (us) to a voice messaging box that was full, and kept (us) on hold for over an hour and a half, for six months!’”
“As they pack up to move out now, in foreclosure, it’s become the ultimate lose-lose-lose scenario. Not good for the banks, not good for the community, not good for them, either. The longer it takes to move distressed properties through the sale process, the longer it will take the economy to turn around and the more likely it will drag the value of other homes down with it.”
The Sun Times from Illinois. “An explosion of failed mortgage loans in moderate-income and middle-class Chicago communities last year helped drive new foreclosure filings to nearly 20,000 here, a report by the nonprofit National Training and Information Center found. The report also revealed that 75 percent of the mortgage loans were adjustable-rate or other high-risk loan products.”
“New foreclosure filings numbered 19,943 in 2008, nearly double the 10,673 filings reported in 2006. Eighty-six percent of the mortgages were made within the last three years. Chicago reported its highest level of home foreclosures due to ‘reckless lending and unregulated financial practices,’ the report said. ‘The bulk of these loans were loans made to fail, and in 2008 they did,” according to the report.’”
“‘When I lost my home, the family renting out the second floor had to leave as well,’ said Edith Adachi, a community leader from the Albany Park Neighborhood Council who lost her two-flat of 35 years to foreclosure. ‘We need immediate action to help struggling homeowners and also renters.’”
The Daily Herald from Illinois. “Today’s conditions are the ‘most phenomenal buyer’s market’ Patty Ancona has seen in her 32 years in the business. ‘I would suggest that anyone who is looking to move up to a larger home go ahead and do it,’ said Ancona, a broker in Barrington.”
“‘You may sell your current house for less, but you will also be able to buy your new house for less, and when you sell that new house in six or seven years, you will see more of an appreciation than you would if you stayed in your current house,’ she said.”
“However, if you are a homeowner who is looking to sell your last house or to downsize, Ancona has less enthusiastic news. ‘Wait a few years if you can,’ she said. ‘The law of supply and demand is at work here, so this is not the market in which you want to just put your house on the market and see what you can get.’”
“‘I am seeing lots of instances where people have gotten in trouble and they now have no place to go but to move in with parents or in-laws. This situation is bringing extended families back together again. People of all ages borrowed against the equity in their homes and now that homes are going down in value, they are stuck. This should be a big lesson for all of us. Don’t borrow against your home,’ said Ancona.”
“Very knowledgeable buyers know that the best deals today are real estate-owned properties (REOs) that have gone back to the mortgage broker after not selling in a foreclosure auction, or corporate-owned properties, Ancona said. ‘I sold a 3,800-square-foot house with no basement, which backs up to the entrance ramp of I-355, for $160,000 recently. It was a REO. And I had a corporate-owned house in Kildeer that was built six years ago for $2.6 million. When the owner got transferred a year and a half ago, they had to sell it for $1.6 million - a million less than it cost to build it,’ she said.’”
“What steps need to be taken to help strengthen the Chicago area real estate market? ‘The excess inventory needs to be cleared out so that people once again feel a sense of urgency to make a decision. Except with REOs, people are just looking, watching and waiting. They aren’t jumping. They feel that time is on their side because it will be another year or so before things really start to move again.’”
From KSBT 2 in Indiana. “Unemployment was worse than expected in January. In Indiana, more than 9% of the workforce is looking for a job. Locally, sectors like manufacturing and retail have been hit hard, but no industry has been hit harder than construction. Across the nation, fewer new residential construction sites are popping up. Local experts don’t expect that to change anytime soon.”
“‘Certainly it’s become much harder for entry level clients to gain access to funding. And when the move-ups can’t sell their home, then they can’t build a home even if they’re planning on it,’said Signature Homes Vice President Blake Taelman.”
“The numbers show it clearly. According to the Home Builders Association of St. Joseph Valley, just 282 new single family home construction permits were filed in St. Joseph County in 2008, down from 502 the year before. In South Bend, just 55 new single family home permits were filed in 2008 — half of the previous year’s total. Mishawaka recorded only 44 new permits in 2008, 61% lower than the previous year, according to the Home Builders Association of St. Joseph Valley.”
“Part of the reason, Taelman says, is a sharp drop in ‘risk takers.’ ‘Most builders have sort of stopped building spec homes, or at least a lot of them have. So, there’s really not as much competition in new home price as there was even just 12 months ago,’ he said.”
“Custom built homes, like the ones Taelman builds are still selling, he said, though, admittedly, not as fast as he’d like. ‘There’s plenty of people willing to buy. There’s just a limited number of people willing and able to buy,’ he said.”
The Kansas City Business Journal. “When Jim Kostusik appeared at Overland Park City Hall to obtain a building permit for a single-family home recently, the employee on the other side of the counter looked at him with surprise, then peered at the ceiling. ‘I said, ‘What’s going on?’ recalled Kostusik, who owns Redstone Homes Inc. in Overland Park. ‘He said: ‘I’m waiting for the confetti and balloons to start dropping. You’re the first (single-family) permit this month.’”
“What made the event strange was that Kostusik got his permit on Jan. 29. In a more typical year, Overland Park would have issued dozens of single-family permits by that date, and Johnson County would have been on target for another market-leading year of several thousand housing starts. But Johnson County, where the average price of new homes on the market exceeds $400,000, has been hit particularly hard.”
From WEAU in Wisconsin. “Rusk County is a rural county about an hour north of Eau Claire. And plenty of people there are looking for work. In fact, new numbers show Rusk County has the highest unemployment rate in the state, at 12.2%. Jean Stapleton has been at Wisconsin’s Job Center in Ladysmith for 14 years and she says this recession is the worst she’s ever seen, She says the lack of opportunities are a direct result of a lack of variety in the job market. Most jobs in the county are related to the home building industry, and with the housing market in a steep decline, people living in Rusk County are feeling the pinch.”
“‘Everyone’s looking for work and there just aren’t a lot of opportunities here in Rusk County at the moment,’ she said.”
From ABC 12 in Michigan. “If you’re interested in pursuing a home that’s been in foreclosure, you should be aware of a disturbing trend. Real estate agents are reporting that previous owners are leaving behind more than just the washer and dryer. In some instances, they’re trashing the place.”
“Charles Blowers of ERA Realty says one example from west Michigan featured an owner who plugged the upstairs tub and left the water running for three days. The home was foreclosed and the owner locked the doors, flooding the upstairs, first floor and basement. Apparently, this is the second home to be flooded for this particular real estate group — and they’ve had two arsons.”
“‘This should be a warning to all homeowners out there that are losing their house,’ said Blowers. ‘Talk to the bank. Talk to the mortgage company. Give me a call, I’ll talk to them. Usually we can get money for the mortgager to move out.’”
The St Petersburg Times. “I admit it: I went to the Cascades looking for the bleakest possible view of the local housing market. Sure, there are plenty of other unfinished subdivisions around. The weedy vacant lots, the pavement ending abruptly in sand — it’s part of our landscape now, sorry to say. If we were honest, we’d put it on our county seal.”
“But the Cascades, south of downtown Brooksville, has the added distinction of being developed by a now-bankrupt national builder, Levitt & Sons. And with only 56 completed houses out of a planned 999, the project stalled out particularly short of its goal.”
“Ray and Veronica Koziol, for example, said the worth of their home in the Cascades has shrunk to roughly half the $402,000 they paid for it two years ago. Funny, though, they didn’t seem nearly as down on Florida’s future — at least its long-term future — as I expected.”
“For one thing, these two 60-year-olds are on the leading edge of the much anticipated wave of baby boomer retirees. They figure that at least a few million of them will want to move to Florida. This is especially true — and here we come to the big reason for their optimism — if these retirees now live in Michigan.”
“‘Everybody wants to get out of Michigan,’ said Veronica Koziol, who moved with her husband from a town halfway between Detroit and Flint. ‘Michigan is dead. … It’s going to be — the last one out, turn off the lights.”’
“This, then, could be Florida’s ace in the hole: Midwestern states such as Ohio and especially Michigan — where unemployment has climbed to 11.6 percent — seem to be the only ones worse off than we are. Which, in turn, means that Hernando’s economic future could look a lot like its past, fueled by selling houses and services to Midwestern retirees.”
“The median age in Hernando has jumped from 44 earlier in the decade, when the Suncoast Parkway was drawing working-age commuters, to a current age of 50, said David Miles, a county demographics planner. Miles cautioned that this is only an estimate, and may be a suspect one, considering how few newcomers of any age have arrived in the past two years.”
“And there are plenty of other reasons not to get carried away: The huge inventory of unsold homes; an economy that is forcing more people to stay put; the state’s estimate that annual population growth in Hernando will stay below 2 percent for at least another decade.”
“Even if the retirees do roll in, we shouldn’t treat it as a green light to resume what we always have done: promote development with low taxes and lax growth management, skimp on education and sit back and enjoy a one-dimensional economy. No, what this all means is that we just might be granted another chance to do things right.”
‘Banks lose even more when they go through foreclosures. You might think this is motivation to move properties faster. But it’s not. ‘And the reason they’re not motivated by it,” says Glenn Dorfman, former executive director of the Minnesota Realtors Association, is that ‘they’re not market driven, they’re government driven.’
I’ve been trying to point out that the government is making things worse and is drawing out the time lines for getting out of this. What many people are missing is that the great majority of these houses are vacant. These deteriorate, make it hard for regular people in the area to sell, attract crime, etc.
‘ She says the lack of opportunities are a direct result of a lack of variety in the job market. Most jobs in the county are related to the home building industry’
This is the primary task at hand, IMO. These jobs built up around a housing bubble that went on for far too long; they aren’t coming back and the people in charge had better wake up to this fact.
The past few months of failure to foreclose and these bailouts make me think that every entity from local banks to the wall street thug gamblers are just BUYING TIME.
Time to prevent them from marking to market and showing their book losses that would prove that they are totally insolvent.
Time for them to cover themselves and their elite “investors” financial gambling losses from places like main street, the Royal Bank of Scotland, to the hidden banks of Channel Islands of Jersey and where ever with US taxpayer welfare checks.
The gamblers, these banks and hedge funds are just attempting and positioning themselves to extract their losses BEFORE they collapse the whole thing and dump it and the remains on to the US Gov’t = taxpayers
Yup … it is in the elites interest to recover some their gambling losses even if funded by the taxpayers. Too many white-collar criminals today or they have gained too much power.
‘US Gov’t = taxpayers’
I’ll say it again, this is not the case. We probably don’t even pay the minimum interest on the national debt, and US citizens can’t possibly pay what the gov has run up. US Gov = worlds biggest FB. You can join that parade or not. I chose the latter.
How do you suggest we avoid the parade as subjugated citizens/wage slaves under the heel of that Gov? I don’t believe we have a choice, but would be interested in hearing why I’m wrong should that be the case.
Banks would not lose so much through foreclosure if we could minimize the role of government and particularly lawyers in the process. I cannot agree more the reason banks are not motivated is due to government and specifically their infusions of cash to the banks.
People seem to forget that even today there are many many prudent people sitting and waiting to buy who have the down payment and even the full amount of cash but refuse to enter due to the uncertainty caused by the NObama administration (also previous administration)
There are equal amounts of people not putting their properties on the market, just waiting for the mkt to come back and put their overpriced house up for sale.
Drove around today and was amazed at the # of 4 sale signs up in the high rent districts, of Palm Springs. Still not enough reduction.
Maybe 300k off of 1.9 or 1.6 mill but still way way over priced. The same homes, I looked at in 94-97 were around 400-700k. No more.
Just amazing the # of 4sale signs.Just had to repeat the amazement.
“These jobs built up around a housing bubble that went on for far too long; they aren’t coming back and the people in charge had better wake up to this fact.”
I am frankly quite amazed at how long the PTB can remain in denial, and it does not bode well for a quick resolution to the burst housing bubble.
I don’t get what is meant by “they’re government driven.” I see Ben’s claim, but that suggests the government is slowing down the process. But, before the bailout banks had been going slow on foreclosures. I would think the regulators are forcing them to count these losses, which would mean the government is speeding things up (except for the drag produced by uncertainty as things keep changing in DC). But, is this just another “It’s the government” smokescreen because banks are overwhelmed and looking for someone to blame?
IAT
“What many people are missing is that the great majority of these houses are vacant. These deteriorate, make it hard for regular people in the area to sell, attract crime, etc.”
Bingo! There is so much lame commentary in the MSM to the effect that foreclosures are what drags down the value of a neighborhood. I would argue that it is vacant homes, and the vermin (including criminals, rodents and used home sales people) that they attract which drag down neighborhood values, and having an owner-occupant who can both afford the payments and maintenance is a good alternative to keeping a home indefinitely vacant at prices where it will never sell.
How’s this for a motivator?
I say toss ALL the top brass involved in the housing fiasco - government, banks, NAR, real estate flunkies, regulators, lawyers, appraisers - into the clink.
Tell ‘em they can’t get out of jail until they’ve fixed the problem.
That would be my tax money well spent.
Good Eudemon.. good one.
Eudemon,
Oh baybee.
We just don’t have enough people.
Frack.
Grrr.
Leigh
The Hernando County Article is fascinating. David Miles needs to do a more discrete job of mining demographic data. The population of Hernando county is growing at a rate of 12% per annum. Second only to Pasco County.
The demograpic shift in age is due in large part to the migration of the Building trades out of the county. The building trades constituted the largest employer in the county from 2001-2006. Much of this group is young. The much anticipated commuters to Tampa were by in large a figment of immagination of those of a Disney land mentality.
The real resident commuters are and will be commuting to the Suncoast and the intersections of US52 to US 54 and surrounding radiuses. Or to the 900 plus acres of rezoned ndustrial sites and/or the many under construction industrial sites along 98 and at the county airport, or to one of the many expanding assisted living/nursing home/medical support facilities being constructed as I type.
Additionally, PHCC, the community college for Pasco Hernando is expanding with a multi story campus being constructed along US 19 between Spring Hill Drive and County Line Road, also as I type. This campus is offering 4 year degrees through a variety of discuplines and associations with 5 other Colleges and Universities.
Furthermore, Hernando County is set to have certified it’s first Medical College within the next several weeks. Streamlined Permitting for the Industrial Sector was instituted in January and industiral projects are being fast tracked including airport expansion and a new tower in response to new corporate incomers to the county.
There is no denying the present residential inventory, but the fastest growing occupation here is property management. The demographics and deregulated incompetant bank debacle are making Hernando County a rental community for the time being.
However, If you are blogging trends, I suggest you graph all the trends, not a choice few of the trends. Short term your comments are quite valid, intermediate term and long term. Watchout. By the way, More people migrate to Hernando from New York and New Jersey than the midwest. Pennsyvania is also right up there with Michigan and Illinois.
I do not give much credibility to the Real Estate Columnists either based on their track record of being stuck in the now. They were, for the most part, exclaiming it was a good residential real estate market in 2006…. when I was pulling my investors (the ones that would listen) out of the market. Myopic and in the moment… these people helped create the bubble.
The banks are not market or government driven, they are incompetence and denial driven. Routinely they foreclose on homes for a greater loss than if they would modify loans and/or would short sale them….and I am talking about a net loss after expenses.
Why would they do this?
In large part the short sale investor industry is seizing the day and pinning the banking industries ears to the wall.
For example: I offer 120K cash for a property the bank holds 300K in mortgage notes. They rebuff me and 6 clients with pre-approved (legitmate) mortgages at much higher prices. I have my attorney send a letter for a Mortgage Audit Review with my next off of 100,00K. The bank immediately acquiesces to my non market (low ball) offer. Not because of the market or the government, but because the bank committed fraud in the original processing of the sellers mortgage, through ‘packaging’ or pencil whipping the original loan application post signature. Why, because the little boy and girl mortgage executives were living beyond their means and paid on commission with no audits… no regulation…
The reason this bubble exists is 75% or more founded in bank fraud. Markets nor the Tarp have little to do with the actions of the banks (except among those incompetent banks that agreed to take over loans from banks that had perpetrated fraud on a large scale) . Basic fear of legal retribution for past fraudulent acts is the basis for their crazy conduct.
You trust your investments to the unregulated and the unaudited…. and you are one of those born every minute according to B.T. Barnum.
Furthermore, over 50% of the foreclosures are in two states, California and Florida. The two states among 4 with the highest rate of mortgage fraud. Why?
These happen to be the two states the least state regulation of mortgages and lax auditing requirements. We call Florida the state of banks on the corners and lawyers in control. Lawyers, Insurance Companies and Banks own Tallahassee more than in any state in the union… in that order. So why are there more foreclosures and short sales in these states of double deregulation? There is a reason for this. If there are not clearly defined guidelines for mortgages and mortgage applications to be audited by government auditors, more fraud gets to occur over a longer period of time before it burst on the scene, a artificial bubble burst. The bubble is an opportunity for the lawyers to make obscene amounts of cash litigating fraud and manipulating markets with many legal tools ancient of days tools of law prevalent during pre-regulatory days. One such legal vehicle is the contract for ‘option to purchase’. It’s a lawyers dream unless you are a lawyer for the bank.
From the field… too honest to be an academic or a journalist…
watching the game….
Apropos of the MSM and this mortgage and credit issue, read the RE columnist for the Philadelphia Inquirer:
http://www.philly.com/inquirer/real_estate/40734842.html
Prior to and during this housing bubble pop, he has had some of the most ridiculous observations, commentary and suggestions . The audience for this blog would howl at some of them, and be appalled. He writes for the major newspaper in the fifth largest city in the country. What hope does a casual reader of this paper have in learning anything about what is happening?
After they pursue the bad appraisers, mortgage pushers, lying-doc signers and multi-home fraudsters, they ought to go after hacks like this.
It always warms my heart when yet another MSM propaganda outlet is forced to close its doors due to plunging circulation. For real news and real truth, the politically-correct, bought-and-paid-for media cannot compete with credible bloggers.
Man, you’re correct on so many levels. Modern MSM output is pure schlock, trash, garbage, drivel, etc…pick your favorite adjective. Fact-checking appears to ave become a lost art - even the so-called “newspaper of record” (aka the NY Times) rarely prints a science or business piece without some sort of blatantly obvious (and usually hilarious) error that clearly indicates that the reporter writing the story doesn’t know what the hell is going on and can’t be bothered to find out. Then, the so-called “Life” sections read as pure business propaganda designed to bamboozle fools with more credit than brains into laying down money on whatever asinine “trends” the editors think are cool these days.
What bothers me the most is when naive people rip on internet sources like Wikipedia and blogs because, well, “anyone can write for those, so how do you know what they’re saying is true”? Well, can you really trust the biased, business-tainted ad-driven MSM to tell you the truth about anything anymore? For me, the fact that anybody can write blog entries is part of what makes the blogosphere so great - you actually get real opinions from real people on the ground instead of the smarmy, sanitized, biased, commercialized nonsense the MSM issues these days.
While I very much enjoy reading the bulk of the LA Times daily, I totally agree about the lack of bias available to web readers. When you look at the two major advertisers in traditional newspapers (real estate and automobiles), the downward trend is obvious. Dan Neil, however, is entertaining and doesn’t pander to the Big2.
http://tinyurl.com/c78byb
‘775 turn out looking for Wash. baseball jobs’
In a sign of the times because of the nation’s dismal economy, this year’s Rainiers job fair drew nearly four times the number of applicants who turned out for the event in 2008. Most of the jobs pay minimum wage and last from mid-April through early September.
*sings loudly “Take me out to the ballgame” *
I like baseball. I don’t keep track of all that ticky stuff, like statistics and averages, I just like watching it. Green grass, hotdogs and beer, the tragedy, the hope…
*resumes singing *
I played for the Rainier’s…
Cool. A celeb amongst us.. aside from BJones.
scdave, post photos.
Kevin Paulson’s been trying to work with his mortgage lender for months now, to negotiate the short-sale of his townhome…. His bank has told him as long as he remains current on his payments, there’s nothing they can do to help him. He doesn’t know how much longer that can last.
So why is this guy trying to sell in the first place? Article doesn’t say. Great journalism, guys.
“From ABC 12 in Michigan. “If you’re interested in pursuing a home that’s been in foreclosure, you should be aware of a disturbing trend. Real estate agents are reporting that previous owners are leaving behind more than just the washer and dryer. In some instances, they’re trashing the place.””
I can’t believe this! To hear Obama, Dodd, and Frank talk, these people “losing” “their” “homes” are noble Victims, deserving of all the money we can print and throw at them. They got into their desperate financial state because they were Tricked, not because they were greedy hucksters themselves who lied and cheated their way to a mortgage. These upstanding folks wouldn’t destroy bank property, would they?
“Charles Blowers of ERA Realty says one example from west Michigan featured an owner who plugged the upstairs tub and left the water running for three days. The home was foreclosed and the owner locked the doors, flooding the upstairs, first floor and basement….”
What else would you expect in a place called Grand Rapids, Michigan? Duh-uh.
Luv,
Jen
“‘You may sell your current house for less, but you will also be able to buy your new house for less, and when you sell that new house in six or seven years, you will see more of an appreciation than you would if you stayed in your current house,’ she said.”
I think my head just exploded. Actually the first half of that sentence is entirely correct. The 2nd half has to be in contention for the most idiotic assertion I’ve yet seen from a UHS, and we HBB followers have seen a lot of them.
The whole passage made my head explode. Buy more house! You’ll make more profit when you sell!
Stuck in 2005…
“I think my head just exploded”.
No sh!t!! These folks are flat out stupid, have no clue what so ever. This is evolving into the greatest show on earth.
My fav was a home that I went to look at that said, “slight fire damage.” From the outside it looked like the perfect little home..upon entering I was afraid to breathe…for fear of have the few black ash walls come falling down..also loved the extended sun roof that went from one end of the house to the other…you could almost see the entire skyline…!
It was REO that needed to RIP….
Hahahahahahaha
Someone loses their flat of 35 years to foreclosure, and then fashions herself an advocate for the other “victims”? Give me a break. Who loses a home to foreclosure 5 years after their mortgage should be paid off?
Yeah, that one got me too. This person refis into a foreclosure, gets the renters booted out, and then has the gall to whine about it.
5 years? If it was originally purchased in 1974, odds are it was a 20-year, and it should have been paid off 15 years ago.
Actually, even if it were purchased today, it still should be a 10/15/20 year. I still think 30 year mortgages are insane at any time, place, or interest rate, but that’s just my own fixation, I suppose.
Now maybe if you were in your late 20s, and were about to purchase the home that you expected to retire in, a 30 might make sense. It’s still a lot of extra unnecessary tribute to pay to a lender, though.
We’re looking to get a 30-year mortgage for a house that we will live in as long as possible. (As in, we’re early 30s and wouldn’t mind taking a house to retirement and possibly beyond.)
The caveat is that we’re only getting one if there’s no prepayment penalty. Just one extra payment a year drops the length of the mortgage to nineteen years, and the more you throw at it, the shorter the term.
Just because it *says* 30 years doesn’t mean you have to *take* 30 years.
We had a thirty year and just paid it off in 24 years.
Bingo. That is exactly what I did with our last house (well, almost).
What I did was print out the amortization schedule showing principle and interest of each payment. As you all know, at the start of a loan most of the payment is interest. I would pay the current payment plus the next principle amount, cross them out and do the same thing the next month. In the beginning the extra payment was almost nothing. When you calculate how much money you can save versus paying on schedule it is astounding. I was excited each month seeing the payments vanish (but I excite easily) and realizing we might have the house paid off in 12 or 13 years.
“There’s another for sale across the street, and couple more around the corner - a dozen on the market all around him. ‘I’m not anticipating getting full value,’ he says.”
Full value ain’t what it used to be. A bank-owned home in our neighborhood has an open house today, and there are at least five bright yellow signs nearby advertised ‘Bank Owned Open House.’ Boldly advertising that you are going to sell at fire sale prices seems to me like a questionable marketing strategy.
Maybe they’re hoping they can start a bidding war? After all, if it’s bank owned, it’s GOT to be a screaming deal, right?
I am sure they could start a bidding war if that is there aim. For instance, if they listed it at a price of $0, I might even wander over to have a look, in the hopes that there might be some free guacamole sauce on the table.
LOL. You really like that pasteurized mass-produced green stuff they sell at the quik-marts? Coz that’s probably all you’ll get.
I wish they’d be able to start a bidding war in the other direction - a race to the bottom of sorts
Yes, I’ve been thinking of starting a reverse bidding war in my desirable neighborhood. Something like: I will buy your home @ $250K I need 3 bedrooms a garage, etc. No brokers. Call 888-888-8888 to make me an offer. I’ll make fliers and note that brokers should not call unless they have already established an agreement price with their client. Perhaps it would be better to just leave an email address for this purpose, one exclusively created. Anyway, but if I leave a phone #, I can say to brokers, What have you got for me for 250? You do the negotiations, not me. You wanna make money? I got an excellent credit score and a down payment. Call me back on my cell phone (usually off) when you can make this work, not before. I can prove this stuff, so call me back when you can offer me a price not a penny over 250.” (Prices here are resisting under 300K)
“Let them come to you. Oh but I know what will make you sleep tonight.”
-
“The Law Of Supply And Demand Is At Work”
And so is the US govt.
Jas
test
I don’t get the claim that foreclosures are slow because its the government’s fault. Before the bailout banks were behind on foreclosures. The uncertainty of the bailout may have stalled things, but other than that government regulators have been forcing banks to put the losses on the books, which forces banks to move the property or run afoul of regulators because the bank who holds such bad debts will look more insolvent than otherwise. Thus, I don’t get the claim that foreclosures are slow because it is a government-driven process; seems to me, the government-driven part makes foreclosures move faster. Is this just another effort of banks to blame someone else, and thus they trot out the easy-to-get-applause “It’s the governments fault” excuse?
IAT
From what I see out in the field locally, it is true and it isn’t.
‘Experts tell us they lose more if homeowners give up and sell the house for less than they owe, leaving the bank stuck with the difference. Banks lose even more when they go through foreclosures. You might think this is motivation to move properties faster. But it’s not. ‘And the reason they’re not motivated by it,” says Glenn Dorfman, former executive director of the Minnesota Realtors Association, is that ‘they’re not market driven, they’re government driven.’
In the 80’s, banks were liquidated and the RTC sold stuff in bulk as fast as they could. Prices fell quickly and things were more orderly. Also, in the 90’s in CA I’m told, lenders were in a hurry to sell because it would be worth less next month.
There was a slow down late last year as the government got involved. And it can be argued that meddling has prevented a quick liquidation of their foreclosures. But all it has done is cost these clowns even more money. After all, an REO sold last summer would have brought in more cash than one sold this spring.
But that said, the system is so clogged up that probably no single person or group knows exactly what’s going on.
Perhaps the staffing problem is a factor.
The banks layed off so many to prop up the bottom line, I can guess they are overwhelmed.
Sigh,
Leigh
So why is it that only “test” gets through but other posts do not?
IAT
I had trouble getting my posts through in a timely fashion… then I stripped my URL from my info and they posted right away.
It’s probably a function of the anti-spam filter.
But, Itsabouttime, your post DID get through.
Here. But I am still waiting for the one on bits bucket, and that was posted about 8 hours ago. I think it is gone forever.
Thanks for the advice about cookies, I have cleared them out on general principles.
And, yes, I appreciate the resource of HBB and am not advocating for additional complexity or for Ben to do anything other than the excellent work he is doing to provide this resource and continue to expose the idiocy of the PTB who can’t or won’t face the music.
IAT
Okay, here’s a theory. The reason the banks don’t care about working with borrowers to prevent foreclosure isn’t because of some nefarious scheme to hide losses as long as possible. The cost of bank employees spending time haggling with financially irresponsible borrowers, writing a new loan, and then seeing (in most cases) the new loan go bad within 6 months is just too high. It’s much easier to just foreclose.
On federally backed loans, it’s a no-brainer. Who is more likely to pay as promised–an FB with a loan modification, or the federal government after a foreclosure?
I wrote a post at the top of the hour. Never showed.
I then submitted “test.” It showed.
I then re-posted the top of the hour post. Still, no show.
I then submitted the query, “So why is it that only ‘test’ gets through but other posts do not?”
Any idea what’s up?
IAT
I’ve seen plenty of my posts delayed from time to time. Most delayed ones show up within 15 minutes or so, although some don’t show for many hours. To my knowledge never has one completely failed to show. So when I don’t see a post, I just let it go, I figure it’ll show up at some point.
It’s just quirks of the hosting service, I presume, and I’m not sure that there’s much to be done about it, other than move to a different blog software or hosting service, at considerable time and expense to Ben. This blog is a free public service to all of us, so I’m just happy that it continues, quirks and all.
hahaha-funny, jenbones
The above was posted 1 hr earlier and hasn’t shown up yet.
Sorry for my queries, but I posted something early this morning and it never showed in bits bucket.
IAT
IAT,
Try this:
Clear your cookies and temp files.
I usually reboot, as I am on Windows ME.
This ol clunker is still spittin the stuff out!
Grin,
Leigh
Windows ME !!!??? Good God.
LOL Steve.
I made that comment a couple of years ago here on the board and got a good dose of ribbing from some of the regulars.
Truth is I can have any machine I want, but I’m the kind of gal that waits until it dies. If it can be fixed and function for the cost, I’ll do that too!
Leigh
My 88-year-old mother uses Windows ME! Actually. it suffices -
So we’re looking around at houses and because we actually want to pay a sane price, it’s all foreclosures and short sales. Thus far we’ve seen only one that had deliberate damage… and a whole lot that had deferred maintenance. And I mean, “how can they live with this deferred maintenance.”
Dings in the corners and the walls. Light fixtures that have one arm broken. Cabinet doors off in the kitchen. Carpets that look like your worst nightmare of a scary hotel where you leave your shoes on (I have unfortunate experience in that area!) In one memorably weird multi-level crazy design, the carpet on the stairs was unsecured. And that was a short sale!
Another thing I’ve seen is a stain on the wall in the master bedroom that I’ve come to recognize as the color rubbing off from colored sheets– no headboard. Of course.
In general, it seems as though the former purchasers purchased at the top of the market and couldn’t afford maintenance. Except when they were simply incapable and tried covering it up with a bad paint job. Incomplete or ill-advised colors are the word of the day. The worst of the bunch was peach and brown stripes. As in “old Crayola flesh tone peach” and “kindergardener brown brown.” In equal widths.
?!?
OW.
Your post hurt my overly sensitive visual imagination!
Further post of this nature will precede with a warning!
Leigh
I dunno. Sounds like a typical HGTV paint job to me. They like [pale color] + brown for some reason. It must be that modernist style.
One home, asking 1.7k “entertainment home”.
Kitchen the only room of update ie:granite etc, and the piece d’resistance…the massive master room had 2 king size beds.
No it wasn’t any weird 1950’s version of couples not sleeping together. Um, think, alternative party styles. I think.
“…People of all ages borrowed against the equity in their homes and now that homes are going down in value, they are stuck. This should be a big lesson for all of us. Don’t borrow against your home,’ said Ancona.”
I wonder what percent of the foreclosures are the result of HELOC’s?
“Don’t borrow against your home,’ said Ancona.” simple statement and yet so true.
“I wonder what percent of the foreclosures are the result of HELOC’s?” I’m curious to know the answer.
Well, I have a slightly more nuanced take on this. You should never take out a loan that has a term longer than the expected lifespan of the thing that you’re borrowing to buy. That’s why car loans are shorter than mortgages. But people who were paying off their credit cards with a HELOC were effectively getting a 30 year mortgage for the privilege of eating out to often. They seem to be incapable of living within their means, but the ability to take their cc debt and roll it into their mortgage gives them the ILLUSION that they are being fiscally responsible.
‘We need immediate action to help struggling homeowners and also renters.’”
With statements like this, who could wonder why congresscritters vote for absolutely useless “feel-good” bills!
But true Homeowners (i.e., people with a paid-up mortgage) are never considered for any help. You’d think the most responsible of Americans would, at least, be spared from paying for everyone else’s mess!
‘I’m not anticipating getting full value,’ he says.”
To say the very least, Kev.
Summers to world economic leaders: Pump together or die together.
Summers calls for boost to demand
By Edward Luce and Chrystia Freeland in Washington
Published: March 8 2009 22:03 | Last updated: March 8 2009 22:03
Barack Obama’s top economic adviser has urged world leaders to pump more public money into the economy in a co-ordinated effort to boost demand and lift the world out of recession.
In an interview with the Financial Times, Lawrence Summers said the urgent need for a short-term increase in spending by governments temporarily overrode the longer-term goal of tackling the global imbalances many economists believe caused the financial crisis.
Has there ever before been an internationally coordinated effort to blow a credit bubble?
There is a great deal of confusion between real value and perceived value due to price discovery. When Enron collapsed, it was not because the company suddenly destroyed a great deal of wealth over night, but rather because markets suddenly discovered the shell game they were playing with off shore accounts used to hide liabilities. Something similar has recently occurred with respect to mortgage backed securities and the discovery by market participants that the mortgages that backed them were nearly worthless. It is amazing to me that even the Financial Times editors seem confused on this basic distinction between real and nominal wealth. Further, the notion that such wealth can be somehow restored if governments all over the planet coordinate efforts to pump in money are also confused, as wealth is not created by printing presses.
(BTW, this and the article referenced above are from the Financial TImes online.)
Plunging assets cost $50,000bn
By Raphael Minder in Hong Kong and Alan Beattie in Washington
Published: March 8 2009 18:43 | Last updated: March 8 2009 23:31
Falls in the value of financial assets worldwide might have reached more than $50,000bn, equivalent to a year’s global economic output, the Asian Development Bank will warn on Monday.
Asia has been hit disproportionately hard, the bank will say, in a report that warns of many Asian stimulus plans lagging behind those of the leading global economies.
U.S. Downturn Dragging World Into Recession
Report Says Global Economy Will Shrink for First Time Since 1940s
By Anthony Faiola
Washington Post Staff Writer
Monday, March 9, 2009; Page A01
The world is falling into the first global recession since World War II as the crisis that started in the United States engulfs once-booming developing nations, confronting them with massive financial shortfalls that could turn back the clock on poverty reduction by years, the World Bank warned yesterday.
The World Bank also cautioned that the cost of helping poorer nations in crisis would exceed the current financial resources of multilateral lenders. Such aid could prove critical to political stability as concerns mount over unrest in poorer nations, particularly in Eastern Europe, generated by their sharp reversal of fortunes as private investment evaporates and global trade collapses.
Beggars can’t be choosers.
Financial Times
Greenberg attacks US over AIG
By Francesco Guerrera and Chrystia Freeland in New York
Published: March 8 2009 23:30 | Last updated: March 8 2009 23:30
Hank Greenberg, the former chief executive of AIG, has accused the US government of bungling the insurer’s rescue by imposing a high-interest loan and forcing the repayment of $30bn-plus to banks and partners.
In a video interview with the Financial Times, Mr Greenberg, who led AIG for 38 years before being ousted in 2005 during a probe of its accounting practices, suggested the US authorities’ actions made the company’s break-up inevitable.
Methinks this explanation understates the role of the Fed in loosening regulatory and monetary restraints and peddling snake oil to a degree that encouraged market participants to oversupply long-lived capital (e.g. houses) and to burn the chair legs out from under future demand. But I agree with the basic point that unfettered capitalism, without proper regulatory restraints, is a recipe for economic disaster, especially when many market participants are mistakenly acting on the assumption that traditional regulatory checks are in force.
Financial Times
A failure to control the animal spirits
By Robert Shiller
Published: March 8 2009 18:34 | Last updated: March 8 2009 18:34
Lydia Lopokova, wife of the economist John Maynard Keynes, was a famous ballerina. She was also a Russian émigré. Thus Keynes knew from the experience of his in-laws the horrors of living in the worst of socialist economies. But he also knew first-hand the great difficulties that come from unregulated, unfettered capitalism. He lived through the British depression of the 1920s and 1930s. Thus Keynes was inspired to find a middle way for modern economies.
We are seeing, in this financial crisis, a rebirth of Keynesian economics. We are talking again of his 1936 book The General Theory of Employment, Interest and Money, which was written during the Great Depression. This era, like the present, saw many calls to end capitalism as we know it. The 1930s have been called the heyday of communism in western countries. Keynes’s middle way would avoid the unemployment and the panics and manias of capitalism. But it would also avoid the economic and political controls of communism. The General Theory became the most important economics book of the 20th century because of its sensible balanced message.
…
The idea that unfettered, unregulated capitalism would invariably produce the good outcomes was a wrong economic theory regarding how capitalist societies behave and what causes their crises. That wrong economic theory fails to take account of how the animal spirits affect economic behaviour. It fails to take into account the roles of confidence, stories and snake oil in economic fluctuation.
The writer is the Arthur M. Okun professor of economics at Yale University and co-founder and chief economist of MacroMarkets. To join the debate go to http://www.ft.com/capitalismblog
Global recession could last til end 2010 or longer: report
1 day ago
NEW DELHI (AFP) — The US professor nicknamed “Dr. Doom” for forecasting the financial crisis has said the global recession will last all of this year and probably next, India’s Mail Today reported Saturday.
New York University professor Nouriel Roubini said that in the best-case scenario, the recession will continue through 2010 in advanced economies while job losses will persist for an additional year, the paper reported.
…
“… we are in the middle of an ugly U-shaped recession,” he said Friday.
Roubini said the bottom of the ‘U’ — the length of time the world economy will continue to contract — would last a minimum of three years starting from December 2007.
But he said there was a “one-in-three chance” that recession would turn into an ‘L’ — a prolonged period of stagnation or shrinking output, coupled with falling prices as demand dries up.
As early as 2005, Roubini said US home prices were riding a speculative wave that would soon sink the economy, but was dismissed as a doomsayer.
The global economy is developing a glut of fear.
Wall Street Journal
* MARCH 9, 2009
New Fears as Credit Markets Tighten Up
By LIZ RAPPAPORT and SERENA NG
The credit markets are seizing up again amid new anxieties about the global financial system.
The fear and uncertainty that sent stocks to 12-year lows is now roiling the market for corporate bonds and loans, which have given back much of the gains they chalked up earlier in the year.
Short-term credit markets are still performing better than they did last year thanks to government programs to buy commercial paper and guarantee short-term debt. But Libor, the London interbank offered rate, a common benchmark interest rate, has crept up over the past weeks, from 1.1% in mid-January to 1.3% on Friday, reflecting banks’ concerns about being paid back for even short-term loans. It is still well below its peak of 4.8% last October.
This time around, the economy is slipping deeper into a recession, and bond investors worry the government’s repeated modifications to its financial-rescue packages are undermining the very foundations of bond investing: the right of creditors to claim their assets first if a borrower defaults. Without this assurance, bonds of even the most stalwart institutions are much riskier to own.
FPSS — What do you think of the 1995 level call on the headline U.S. stock market indexes? Given that we are really looking at the delayed unraveling of the tech stock bubble, wouldn’t it be reasonable to expect overshooting to pre-1995 levels?
And are you sticking to your guns regarding your 1983 call on housing prices?
I suppose one should clarify in each case whether we are talking nominal or real price levels.
Wall Street Journal
* ABREAST OF THE MARKET
* MARCH 9, 2009
Dow 5000? A Bearish Possibility
Strategists Still See Rally, but Earnings Point to 1995 Levels for Stocks
By ANNELENA LOBB
Just how low can stocks go?
Despite Friday’s small gain, the Dow Jones Industrial Average marked its fourth consecutive week of losses as it tumbled through the 7000-point mark and spiraled to new 12-year lows. The Standard & Poor’s 500-stock index is trading below 700 for the first time since 1996.
As earnings estimates are ratcheted down and hopes for a quick economic fix fade, the once-inconceivable notion of returning to Dow 5000 or S&P 500 at 500 looks a little less far-fetched.
A decline to 500 on the S&P is 183.38 points and 27% away. The index already has lost 881.77 points, or 56%, since its peak in October 2007. The index, which lost 7% last week, hasn’t been below 500 since 1995, when the tech-stock bubble was just beginning. After dropping 6.2% last week, the Dow is 1626.94 points and 25% above 5000, a level it also hasn’t seen since 1995.
Basic investing advice: Avoid throwing away money into black holes, like the U.S. housing and stock markets, for instance.
The writer apparently misspelled clepto-financials in this article.
Wall Street Journal
* ROI
* MARCH 8, 2009, 6:04 P.M. ET
Keeping Your Money Out of the Black Hole
What if all the financials finally, totally implode? Seek out growth funds.
By BRETT ARENDS
A thought experiment: What if all the financial stocks are completely worthless? I’m including General Electric, and other crypto-financials, in that group.
What if the derivatives black hole swallows up all their equity, and governments end up owning them all?
It’s an intriguing possibility. Many investors continue to be far too interested in the fate of Citigroup or GE or Bank of America. I find them very dull. I’ve been telling people for ages to steer clear of financials because they are simply a guessing game. Nobody knows what, if anything, the stock is worth, and that includes the board.
It is easy to imagine a scenario where all these institutions end up being owned by the world’s governments, and then the G8 have to sit down and disentangle the most almighty pile of derivatives.
Suppose Greedy Bank (Cayman Islands) owes $2 trillion it can never hope to repay to Loathsome Brothers (New York). Then Loathsome Brothers owes $2 trillion to Pink Gin Partners (Singapore), which in turn owe $2 trillion… to Greedy Bank. Viewed individually, as they are at the moment, the debts look catastrophic. Viewed collectively many of them will presumably offset.
John Stewart vs CNBC
http://blogs.moneycentral.msn.com/topstocks/archive/2009/03/05/jon-stewart-rips-cnbc.aspx
He’s on a roll!
March 4, 2009
AIG insures crappy loans
Joe Nocera explains to Jon why we have to give money to companies like AIG.
Joe Nocera: “AIG stands for Always Invest in Garbage.”
I am trying to update my score card. Are we even out of the first inning yet?
Salon dot com
When the big banks tanked
“Frontline” offers a play-by-play of how Bernanke and Paulson tried to prevent a catastrophe during last year’s unprecedented financial implosion.
By Heather Havrilesky
Feb. 17, 2009 | “What can you do if you’re on the side of a mountain and an avalanche comes at you. An avalanche goes what, 60 miles an hour? You can’t outrun it, right? So what can you do?” — Ace Greenberg, chairman of the Executive Committee of Bear Stearns
Bear Stearns’ near demise began with rumors. The venerable investment bank had massive stakes in subprime mortgages, sure, but it also had $18 billion in cash reserves — or at least it did before the dark talk began. Then its stock was sliced in half, and fearing bankruptcy, investors rushed to withdraw their cash. By the end of the week, cash reserves were down to $3.5 billion.
As unthinkable as it was to imagine a panic of Great Depression proportions, that’s exactly what Federal Reserve Board Chairman Ben Bernanke and Treasury Secretary Henry Paulson were facing in March of 2008, when Bear Stearns’ books revealed huge amounts of toxic debt and an interdependence on other banks that threatened to bring down the entire financial system. As Obama’s new Treasury Secretary Timothy Geithner presents the country with a $2 trillion bank rescue plan this week, PBS’s “Frontline” series looks back on the high-level meetings and panicked maneuvers that took place in the early days of our financial crisis in “Inside the Meltdown” (9 p.m. Tuesday, Feb. 17, on PBS, check local listings). From the near collapse of teetering giants Fannie Mae, Freddie Mac and AIG, to the eventual downfall of Lehman Brothers, this investigative play-by-play of the start of the financial crash unveils how the nation’s banks, unregulated for so many decades, revealed themselves to be a disturbingly shaky house of cards.
…
“Inside the Meltdown” offers a fascinating blow-by-blow of last year’s crisis and the emergency gambits performed along the way. Of course, as dramatic and unexpectedly intrusive as many of Paulson’s moves were considered then, they’re characterized as insufficient by Geithner as he unveils his own enormous banking bailout plan. In other words, as catastrophic, unpredictable and head-spinning as last year’s financial nightmare was, apparently it was only the beginning.
FPSS —
You did mean the housing market when you predicted a return to 1983 levels, no?
Japan Stocks Decline as Recession Concern Mounts; Inpex Rises
By Masaki Kondo
March 9 (Bloomberg) — Japanese stocks fell as a current- account deficit, rising U.S. unemployment and the U.K.’s takeover of Lloyds Banking Group Plc fanned concern the global economic slump is deepening.
Honda Motor Co., which gets more than half its sales from North America, lost 3 percent as Japan’s current account went negative for the first time in 13 years and the U.S. jobless rate rose to a quarter-century high. Insurer Tokio Marine Holdings Inc. sank 6.7 percent after London-based Lloyds said it will cede control to the government. Oil explorer Inpex Corp. climbed 4 percent after crude prices advanced.
The Nikkei 225 Stock Average fell 101.43, or 1.4 percent, to 7,071.67 as of 12:44 p.m. in Tokyo, on track for the lowest close since October 1982. The Topix index slid 12.83, or 1.8 percent, to 708.56, with more than two stocks declining for each that advanced.
“Ongoing output reduction and job cuts will likely drive the U.S. and Japan into deeper trouble,” said Hiroshi Morikawa, a senior strategist at Tokyo-based MU Investments Co., which manages about $14 billion. “Though government takeovers are a necessary step to restore investor confidence in the financial system, questions will arise whether the state can assume all the risk if a bank’s exposure is too big.”
Wall Street Journal
* OPINION: BUSINESS WORLD
* MARCH 4, 2009
Rethinking the Fan and Fred Takeover
‘Nationalization’ has done nothing good.
By HOLMAN W. JENKINS, JR.
Those of us who criticized Fannie Mae and Freddie Mac on policy grounds, and who last year called for their nationalization to cure what we considered a pernicious subsidy program, must still reckon with the cavalier way their shareholders were treated when they were taken over last September.
Markets rightly judged that conservative objections to Fannie and Freddie in no way meant that shareholders in other financial institutions would therefore be treated any better if and when government decided to intervene.
An additional irony is that Fannie and Freddie now pose a bigger risk to taxpayers than ever, as arms of Congressional housing policy.
Take it as sour grapes if you want, but two respected fund managers, Edward Lampert and Bill Miller, both of whom were big shareholders in the mortgage giants, argue that Fannie and Freddie’s forcible takeover helped kick off the landslide that has nearly wiped out equity values in the financial sector.
http://www.nytimes.com/2009/03/09/nyregion/09foreclosure.html?hp
At Real Estate Auctions, Sales at a Frenzy.
NYC.