A Possibility That You Are Going To Lose Everything
It’s Friday desk clearing time for this blogger. “Greenwich homeowners, saddled with the worst sales climate in 30 years, are turning to the rental market. The number of single-family properties for rent in this suburb an hour outside Manhattan climbed more than six-fold this year as sales fell by almost half. ‘Never in the market history have I ever seen anything like this where you have a whole group of the normal buyers in Greenwich renting luxury homes instead of buying them,’ said Jeanne Howell, a broker for Greenwich Fine Properties.”
“Cheryl MacCluskey broke ground on a five-bedroom luxury home in Greenwich, Connecticut, last year, hoping it would sell by June. After cutting the price 13 percent to $4.4 million failed to lure buyers, she rented it this week for $13,000 a month. The house MacCluskey built costs more than $15,000 each month to carry. ‘I’d never have put it on for rent before,’ MacCluskey, president of M&M Development, said of the 7,800 square-foot house. ‘In this down market, you don’t really have a choice.’”
“Nichol and Bryan Okvath, whose ranch-style home with a leaky roof was leveled and replaced on ABC’s ‘Extreme Makeover: Home Edition’ in early 2005, are selling their Gilbert house for $1.2 million. Nichol Okvath, a stay-at-home mom, is looking for a job, and the family put the house on the market after realizing it was impossible to keep up with expenses, including utility bills. The original home was leveled and replaced with a 7,200-square-foot, six-room Spanish Colonial-style mansion replete in extras like a movie theater, hardwood and travertine flooring, granite countertops in the kitchen and bathrooms and ultraviolet-light air and water filtration systems.”
“Tony Moore, a real estate agen who is handling the transaction, said selling the Okvath home won’t be easy. The luxury market has a two-year inventory in the pipeline because there are fewer people able to purchase homes that are $800,000 and above. Obtaining financing for those who qualify is another obstacle.”
“‘So I’ve been very honest with them and explained that it is a challenging time to sell a luxury home,’ he said.”
“There are two widely accepted villains in the story of the housing market crash: greedy banks making predatory loans and greedy homebuyers buying McMansions. A third group gets less attention: people on society’s margins who had few housing choices except for high-interest mobile home loans. In 2000, Christina Gutierrez purchased a new double-wide manufactured home with her then-boyfriend and his mothe. The home was installed at the mobile home park on Zepol Road, a tidy neighborhood where many mobile homes have handmade ‘for sale’ signs in the windows.”
“According to court documents, the home itself cost $61,600. Green Tree’s finance charge was more than double that amount: $128,700. Such massive finance charges on mobile homes are typical, as several other local cases confirm. Green Tree charged one Santa Fe woman $19,600 in finance charges on an $18,700 mobile home loan; it charged another $87,400 in finance charges on a $41,800 loan.”
“The company has faced allegations of predatory lending since the 1990s. ‘Green Tree did a lot of bad shit,’ Homewise Executive Director Mike Loftin says.”
“Colorado’s housing market suffered an unusual blow this week. On Monday, the Colorado Division of Real Estate deactivated 4,560 mortgage broker licenses for ignoring the state’s new mortgage broker licensing law. The number amounts to more than half the lenders in the state. The new licensing law was intended to improve lending practices by requiring new and existing loan officers to complete 40 hours of licensing education and pass a written test.”
“After a year and a half, a time extension and dozens of reminders, 4,560 mortgage brokers still failed to meet the new requirements, according to Erin Toll, director of the Colorado Division of Real Estate. ‘I don’t want to be Chicken Little, but the market is so volatile, it could be disastrous for Colorado,’ she told the Denver Business Journal. ‘You shrink the loan-originator population and then tell the lenders ‘we’re not going to buy your loans on the secondary market’ … We could have a disaster.’”
“Portland-area foreclosure filings have begun ticking up again this summer, reversing a spring trend that showed mortgage defaults had leveled off. ‘We’re not seeing any relief,’ said Sande Sivani, a consultant who researches property records and records documents for title companies. ‘It’s going up and up and up.’”
“In the three-county Portland area, Sivani said she found 800 loan modifications recorded in the first six months of the year. But, she said, her sampling found about only one in 10 were modifications tied to a delinquent mortgage.Those modifications were dwarfed by the more than 6,300 new mortgage defaults the lenders had recorded in those three counties in the same time period.”
“Despite Obama’s calls for banks to lighten up on troubled borrowers, said Patrick Newport, U.S. economist with economics firm IHS Global Insight. ‘That isn’t going to happen. Usually it’s in the banks’ interest to take the loan into foreclosure.’”
“Portland’s housing bureau is recommending that the city shelve an affordable housing project into which it’s already poured nearly $2 million. Margaret Van Vliet, the city’s housing director, told City Commissioner Nick Fish last week that the project ‘as currently structured should not move forward. ‘I have to be able to present a responsible financing plan to my colleagues, and she’s advised me that the current proposal doesn’t fly,’ Fish said. ‘If (downtown developer) Tom Moyer can’t get financing to build a tower in downtown Portland, it tells you that the state of market is bad.’”
“Bank of the Cascades…said the FDIC and the Oregon Division of Finance and Corporate Securities required it to: Raise money. Reduce its level of nonperforming assets. Reduce its loan concentrations in certain portfolios, including commercial real estate. Improve management practices. Maintain liquidity ratios. In consenting to the order, the bank did not concede the findings or admit to any of its assertions. Patricia L. Moss, the bank’s CEO, said declines in the value of real estate used as collateral for loans have hurt the bank.”
“‘As a community bank, our performance is directly tied to our local and regional economies and, as such, we have been significantly impacted by the sharp and prolonged downturn in the economy and the Northwest housing market,’ she said in a statement.”
“Hovnanian Enterprises Inc.’s CEO said Thursday the homebuilder has begun buying land, raising home prices and reopening previously mothballed developments in response to signs that the worst of the housing market slide has passed. Builders loaded up on land during the housing boom, but since the market tanked they’ve had to sell off lots and walk away from deposits on land option contracts - all while booking huge losses.”
“‘In most cases, we are buying the finished lots at a discount to the development cost with the land essentially free,’ Hovnanian said. ‘For the first time in three years, you can make an economic return based on the lousy current prices and the lousy current sales pace.’”
“We learned that Marc Rutenberg Homes, a luxury home builder based in Trinity, got dunned by its bank. The South Carolina lender demanded repayment of $2.66 million that had financed waterfront lots in Palm Harbor. Owner Marc Rutenberg had been diligent about making his monthly payments. He demanded to see the latest bank appraisal of the land. It came in at about $4 million. Things got a lot clearer in Rutenberg’s mind. The land was worth more than the loan.”
“No wonder it was so eager to close out the loan. Sympathetic bankers told Rutenberg they had ‘marching orders’ to get out of Florida real estate.”
“Steve Atchison was named president of Illinois/Michigan for Pulte Homes last month when Pulte bought Centex in a $1.3-billion deal that created the nation’s biggest homebuilder. Mr. Atchison says his goal is for Pulte to take on smaller developments, citing a recent Centex acquisition of a 25-home subdivision in west suburban Glen Ellyn called the Enclave. The firm is looking at both open-land and partially developed sites where either a previous developer — or its lender — is bailing, he says.”
“‘Most of them (acquisition targets) seem to be work-out deals,’ Mr. Atchison says.”
“The end is nearing for the first-time homebuyer tax credit. Qualified Illinois first-time homebuyers have a double advantage utilizing the tax credit with the Illinois Housing Development Authority’s new Illinois Home Start Loan program.
“‘Ideally, we are encouraging buyers to consider contract signings by late September or early October to comfortably meet the IRS tax credit deadline, as the buying process can take time to proceed to closure.’ said said Pat Callan, president of the Illinois Association of REALTORS(R). ‘There are many great buying opportunities for first-time buyers with property prices having been adjusted to meet current conditions.’”
“The DuPage Homestead Program… partnership cobbles together several funding sources to offer low-interest home loans, said Executive Director Dru Bergman. The center is seeing plenty of homeowners nearing the brink of home loss. Before the housing crisis began in 2007, about five families came in each month for the center’s foreclosure counseling services. Bergman said 54 families were counseled in 2006. The number has gone up each year since then, most dramatically in the recent year. In the first eight months of 2009, there have been 374 clients advised.”
“While some of the homeowners fell prey to bad mortgage offers, often it’s a good home loan that has run into bad luck. ‘In some cases we are having to sit down with the families and just have a reality check,’ Bergman said. ‘Sometimes we see homeowners who never should have been in the house in the first place (and) we have seen a fair number of people who got themselves into trouble because they took out equity loans.’”
“The window is starting to close on an $8,000 tax credit for first-time home buyers. ‘The National Association of Realtors estimates around one-third of home sales this year reported nationally are first-time home buyers. In a normal market, it’s between 10 and 15 percent,’ said Jim Gaines, research economist at the Real Estate Center at Texas A&M University.”
“‘Of the 24 buyers I’ve helped close since March, all but two were motivated by the tax credit,’ said Tracey Amaya, a Realtor with Re/Max Trinity. ‘A lot of them have been younger buyers and single women. The majority of the properties have been foreclosures.’”
“North Texas homebuyers who are hoping to find a huge supply of houses for sale may be in for a surprise. The supply of pre-owned homes for sale is down almost 17 percent from this time last year and has fallen by a quarter from the summer of 2007. The drop in inventory of newly built homes is even steeper – about 50 percent since mid-2007.”
“‘I’ve seen lately that the demand for homes that are in good condition and in the first-time homebuyer price range is huge and the supply is low,’ said agent Scott Schueler of Keller Williams. ‘If buyers take a weekend to think about it, forget about it. The home is already sold.’”
“In the town of Gunter in Grayson County, they’ve agreed to waive building permit and inspection fees for folks willing to build a house in a new subdivision. In Plano, city officials will no longer charge developers fees to help pay for infrastructure like water and sewer lines. There’s nothing like a home-building recession to get municipalities worried about the lack of construction.”
“This cycle is nothing new. We saw it before and after the great 1980s real estate crash.”
“The decline has been dramatic. Housing starts in the Dallas-Fort Worth area have dropped almost 70 percent during the last two years. And just this week, the last high-end condo tower being built in Uptown was finished.”
“At 83 years old, Alget Campbell isn’t as nimble as he used to be. His joints are a little rusty and he has some trouble getting around. On Monday, though, after he closed on his very first home, Campbell was doing cartwheels inside, his daughter said. ‘Your own is your own,’ said a satisfied Campbell, a native of Jamaica, who with his wife, will move into their Miramar townhome in about a month. ‘I want something for myself. I don’t like to pay other people’s mortgages.”’
“Home prices in Orange and Dutchess counties have fallen back to normal, if there is such a thing. That’s according to the latest…quarterly study by IHS Global Insight. The study found that homes in the region were ‘overvalued’ by just 1.4 percent during the second quarter of the year. A year ago, homes were overvalued by 13 percent. Three years ago, near the height of the housing bubble, homes around here were overvalued by 28.7 percent.”
“The study compares actual home sale prices with expected prices based on historical trends, inflation and other factors. A combination of falling prices and the passage of time seems to have brought the market back into line.”
“‘That should mean we are at the bottom. I think we are,’ said Ann Garti, CEO of the Orange County Association of Realtors. ‘I don’t see prices going lower.’”
“Homebuilders and Realtors are lobbying Congress to keep alive the tax credit for home purchases and to make it available to more buyers. They say the $8,000 credit—which is for people who have not owned a home for three years or more and expires after Nov. 30—has boosted demand for low-priced homes, many of them foreclosed and in need of repair. But, they maintain, it has done nothing for the ‘move-up’ market, let alone the luxury segment.”
“There is evidence that sales fall when credits expire: In California, homebuilding slowed in July after a $10,000 credit for newly built homes expired. And with the rush of summer buying over, the market remains vulnerable to rising unemployment as well as a new wave of foreclosures, which could flood the market and drive down home prices.”
“With prices down and mortgage rates low, housing affordability is the best in years for those who can qualify for a mortgage (admittedly no easy feat). Michelle Meyer, an economist with Barclays Capital in New York, says that while the tax credit did contribute to the lift in sales and prices, ‘A lot of it has to do with greater affordability and a brighter economic outlook. Even if you say some of the gain is artificial, it’s still true that we’re seeing an increase in housing demand, and that shows fundamental strength.’”
“Washington County’s residential housing market has encountered dramatic losses in recent months, but some industry experts are beginning to notice encouraging signs indicating future growth. Lecia Langston, regional economist for the Department of Workforce Services, said the county’s residential housing market has witnessed its worst crash in recent memory, but the industry is expected to recover slowly as time heals the deep wounds inflicted by widespread greed and overconfidence.”
“The trend is likely to continue for the foreseeable future, said Jeremy Larkin, a local realtor. Several years ago, Larkin said bank-owned homes were somewhat rare in Washington County, but distressed properties currently represent 60 to 70 percent of his business as a realtor. ‘Foreclosures were not even a discussion item in the mid 2000s,’ he said, but distressed properties have grown in prevalence, and he expects the trend to continue, stifling housing growth in the county for years to come. ‘I don’t see dramatic growth for a long time because we are going to continue to see foreclosure activity,’ he said. ‘This is going to be a multi-year trend.’”
“‘This will take a while to work through,’ Langston said. ‘It’s not going to be a quick fix.’ Leading to the downturn, home values were artificially inflated amid rampant speculation.”
“‘What people forget is that anytime there is a chance of great gains from speculation, there is also an equal possibility that you are going to lose everything,’ Langston said.”
Another great week! My thanks to those who support this blog and the guest posters. We have more coming up, so please check back this weekend.
Ben, do you have any T-shirts in TALL and EX-LG?
“Cheryl MacCluskey broke ground on a five-bedroom luxury home in Greenwich, Connecticut, last year, hoping it would sell by June. After cutting the price 13 percent to $4.4 million failed to lure buyers, she rented it this week for $13,000 a month. The house MacCluskey built costs more than $15,000 each month to carry. ‘I’d never have put it on for rent before,’ MacCluskey, president of M&M Development, said of the 7,800 square-foot house. ‘In this down market, you don’t really have a choice.’”
I can understand why Cheryl’s in the development bitness, she has foresight and is really good with numbers. : - )
wmbz,
Another Kool-Aid drinker that thought “the downturn won’t affect the truly affluent”. How’s ‘that workin’ out for ya’ Cheryl?
Uhhh… 4.4M dollar home, and rent for 13K a month. Let’s look at those numbers for a second, shall we.
A 4M dollar loan (at 5% interest, very low historically) is about 22K a month. Add in taxes (min of 40K a year), insurance and maint, and you’re absolutely north of 30K a month for the 4.4M dollar home.
Now, the real question here; who in their right mind is DUMB enough to buy something for 4.4M dollars when you can rent it for about 1/3 of the price of owning it? That’s really takes a special kind of stupid; what on earth could motivate someone to buy this thing?
If it rents for 13K a month, it’s worth about 1.5M dollars. 2M tops.
Do these people really believe that this is a “down market” and that there’s going to be a rebound? Every person who believes that should be required to read Shiller’s book. We’re not even to the “down market” stage in most areas; we’re just approaching a “normal market”.
Sounds like SOMEONE missed out on that sweet 8k tax credit.
Now THAT was funny!
Michael:
Greenwich IS different she probably took out a loan at 1/2 that…figured she’d double her money
This city has a very low mill rate for real estate taxes, due to lots of kids in private school the very low crime rate and almost no poor people to service…so it might be 1/2 that 40K a year
It says her monthly bills are $15K……probably close to correct…but she still is a LOSER!
http://www.bestplaces.net/find/ Taxes for Greenwich are 15.07 per 1000.00
That’s useful, but only half the story. How do assessments compare w/ market values?
She also wanted to make the renter agree to show the house to more FBs while they were there !!!
Another unanswered question: why did she “break ground” in 2008? Wasn’t the situation clear enough for her then?
If she broke ground in 08, couldn’t she have seen the writing on the wall, and downsized the house, offering a cheaper alternative in the greenwich area. Sort of like a jewel in a jewel box?
But no, guess the developer decided to go all in. DUMB.
Even in bad times,never a bad idea to regroup and offer something better/smaller.
She wanted to be done in time for “the market to come back”.
Heavens to Murgatroyd ( spelling ). $ 13k a month ? That’s a lotta scratch to pay for rent. I’ll bet the renter could have found a gorgeous palace owned by some desperate homeowner for only $6K per month.
Campbell was doing cartwheels inside, his daughter said. ‘Your own is your own,’ said a satisfied Campbell, a native of Jamaica, who with his wife, will move into their Miramar townhome in about a month. ‘I want something for myself. I don’t like to pay other people’s mortgages.”’
That last line has been seared into countless peoples minds. I’ve heard it for decades.
But of course these days, renters are only paying a portion of other people’s mortgages (see the post by Michael Fink in the thread above)
What do you Florida posters here think of Mr. Campbell’s victory? In the article it said his monthly payment was going to be $550. Also, that he was going to replace the windows and the AC unit ($$$).
Do you think he and his wife will live out their lives cheaper compared to renting? The have some retirement savings including her rental property, but what if the rental goes belly up?
As far as “your own is your own”, he’s paying nothing but interest on the mortgage for a significant number of years, so at age 83 what are you gaining, especially if you have to make a large upfront capital outlay for new windows and AC equipment.
All I could think was the REIC is REALLY scrounging for business if they are going after retirees as first time home buyers.
Hopefully, his daughter thought things thru before she helped him. Might he have been better off in the community he lived in for 17 years and was familiar with?
He’s still paying rent. The only difference is that he’s paying it to a bank. That the reason that I won’t buy if we ever sell. If I havwe to pay rent at 80, I don’t want to be responbile for maintance.
Might he have been better off in the community he lived in for 17 years and was familiar with?
I do think that community matters. And all you ‘free as the wind’ renters can go ahead and flame as you will—I’ll pay attention to your compelling refutations.
I’d own if the total cost were 500 lower.
I would love to be in my own place. Something that would only be doable if working a Mcd’s job ft. With NO worries. Bottom line.
Community does matter. My parents owned in one community for 35 years without knowing their neighbors who also owned. We’ve rented in several neighborhoods and known our also rental neighbors. We currently own and know both owner and rental neighbors. Its not always owning that matters. It’s also getting out and talking to the people around you.
“deactivated 4,560 mortgage broker licenses for ignoring the state’s new mortgage broker licensing law”
Good for YOU Colorado! ( It’s a start? )
After all, “dedicating” a whole 40 hours out of your life ‘would’ be a major setback. So… was it the 40 hrs. or that likely they didn’t feel they could pass the finger printing requirement?
They were all unemployed anyway so they couldn’t be bothered.
potential buyer,
LOL! ( Probably )
But there ‘is’ such a thing as “parking your license” and it’s a pretty common practice. Simply conforming to the Required Education, filling out the Annual Employee Certification and making sure you’re complying with any Insurance Regs. or whatever, but not really actively participating in the business?
I think this ‘event’ ( and it IS a catastrophic EVENT ) speaks volumes as to the “caliber” of these people! So long as it was easy money and there were ZILCH regulations, oh they were fine with it! But add the teensiest bit of regulatory requirement and a slow market and they’re off and down the road. Love to see -more- states get on the bandwagon!
The US Patent & Trademark Office clamped down on patent attorneys a few years back. Patent attorneys are supposed to keep their contact information current. So the PTO mass-mailed a notice to the last-known address of record for all of us. The envelope said don’t forward. If a patent attorney didn’t respond to the mailing in a timely manner he had his license administratively revoked! A lot of guys got hammered and had to pay a petition fee of a couple hundred bucks to get re-instated.
That’ll teach em!
Having an up to date address on file is critical.
“‘That should mean we are at the bottom. I think we are,’ said Ann Garti, CEO of the Orange County Association of Realtors. ‘I don’t see prices going lower.’”
Ann Garti is the lower hudson valleys chief liar and propagandist much the same as Californias Senior RealtLiar LeslieAppletonYoung. By fall 2007, Bob Troll stated “Dutchess County is the bright spot in the northeast”. Guess again.
Dutchess county inventory of REO grows by the week, sales volume is down 40% because prices are stil too high and we’re at the bottom huh Liar Ann Garti?
It’s time for you to stop lying to the public Ann Garti.
As a former resident of Dutchess county I can testify that prices can go a whole lot lower. Dutchess is a bedroom suburb of lower NY and NYC, there are few well paying local jobs other than the IBM plants so commuting 2 or more hours a day is common. The last time local unemployment got higher than 5% the market dropped 50% and every street had foreclosures.
‘Never in the market history have I ever seen anything like this where you have a whole group of the normal buyers in Greenwich renting luxury homes instead of buying them,’
There has never been a better time to rent a luxury home!
“After cutting the price 13 percent to $4.4 million failed to lure buyers, she rented it this week for $13,000 a month.”
Holy Bejeebus — can you imagine throwing away $156,000 a year on rent?
That really is throwing money away on rent. Couldn’t these people find something quite nice for, say, $5k?
I can’t, but having lived in Greenwich and spent time in the Hamptons back in the day, there are people who don’t care. I knew one rather large, wealthy family that used to rent a house for a few years and then move to something else. In the Hamptons, some houses rent at $100,000 per month in the summer season (referencing the Vanity Fair article).
But the bigger picture here is, WHY are they renting in Greenwich right now? Bear in mind that this is hedge fund, private equity and investment banking territory. These folks generally prefer to buy and some with cash. So if they’re holding off and renting, I think that says something about where the prices of homes are going. When these folks say “wait and see”, they’re not particularly bullish.
can you imagine throwing away $156,000 a year on rent?
I can’t even believe you wrote that, Prof. It saddens me to see you use the words “rent” and “throw away” in the same sentence. If the alternative is to want to live in a place such as Greenwich and “owning” would be $300,000 per year how is it throwing away. Sometimes I’m amazed at the things I read from HBB veterans. This one has me floored.
I didn’t mean to suggest I thought “owning away” an even larger sum of money on comparable housing was a good idea.
“There is evidence that sales fall when credits expire: In California, homebuilding slowed in July after a $10,000 credit for newly built homes expired. And with the rush of summer buying over, the market remains vulnerable to rising unemployment as well as a new wave of foreclosures, which could flood the market and drive down home prices.”
Great news for all those priced out, bitter renters out there: Affordable housing is soon on the way in California.
Affordable housing is soon on the way in California.
Wake me up when this happens.
I’ll be sure to let everyone know about it right here
One thing to think about: The early 1990s recession ended in March 1991, but CA housing did not bottom out until 1996. If we are on the same time scale this time and the recession ended this fall, then I guess we would be looking at a bottom by 2014 or so? And that’s the optimistic scenario, as the recession and foreclosure tsunami are far worse this go round than in the relatively mild early 1990s housing bust. The pessimistic scenario would require a longer time to reach the bottom.
I can vouch for that. 70k -94 house bought in 4 closure.
2@ $20k condos bought in 4clsr-95
+++^2 to you Professor.
And back in 90’s there were lending standards. Still took 6 years. Here in Sacramento after the initial hit in 90-91 home values crept down at 1-2% a year up to 1996. You can see it on the Case-Shiller graph for the Sacramento MSA.
Regarding lending standards, my parents purchased their first home in 1996 with a 33% down payment using a conventional 30 year loan. My dad retired early and my mom had a new career\job as a nurse in a new town. She had to write a letter to the lender explaining herself because the bank was concerned for her employment situation.
When I tell my mother what lenders started doing just a few years later her jaw hits the floor. She had to jump thru hoops.
Affordable housing is soon on the way in California.
Wake me up when this happens.
Me too - I’ve already ripped through almost 3 ‘Page-A-Day’ calendars waiting for this moment… 0_o
What I’m seeing is that prices are not lowering in the slightest- with all the ‘green shoots’ news, people are even more happy to let their places languish on the MLS for months without a price cut.
Its like watching a game of Chicken played in Geological Time…..
I’m almost convinced a this point that pricier parts of CA will hold out long enough that they’ll meet prices going up the other side of the crash sometime in the next couple of decades
At the moment, its the only way I can explain the kind of mindset - that still considers a sub-1000 foot bungalow on a sub-5000 ft lot, on a busy street in Santa Monica - being a ‘deal’ at $1.2 million dollars….
They’ll get there. We just scored ‘a deal’ that will not look like a deal when the bottom is REALLY in, but it was substantially down from where the house would have sold at the peak. We got it because it was an estate with a hard deadline for selling, and the heirs were “Not going to give it away” until they finally had less than a month to sell and had to take what they could get.
Capitulation is coming, and will be ugly.
I’ve seen prices here in San Mateo County below $400,000. Didn’t see that two years ago. Prices are coming down. Patience grasshopper patience.
You are gonna be sleeping for a while……in my neck of the woods, anything that is not a dump that is listed under $550,000 sells in about a week. My area (Thousand Oaks/Westlake, CA) bottomed as far as price/sq foot and median in March of this year.
I am getting the feeling that the promised “tsunami” of potential REO is never gonna hit the market. I think the fix is in and the Feds are gonna let the lenders work their financial magic with 99 year loans, teaser rates, balloon payments, etc. because they see that there is no way they can let all of this stuff end up for sale. And they are gonna probably push the FHA EZ-financing even harder.
People are just dumb enough to accept having their monthly payment reduced on a home worth half of the mortgage balance - all they care about is the monthly payment anyway.
Now if the Feds were playing fair, the lenders would have to reduce the carrying value of their loans to the market value of the house - but all of us know they are not playing fair.
Bogus accounting rules and free money from the Federal Reserve, that is their playbook for the next few years (decades??)……
I am getting the feeling that the promised “tsunami” of potential REO is never gonna hit the market. I think the fix is in…
That’s what they WANT you to think! That’s the whole point of everything that they’ve been doing is to make consumers THINK it’s safe to go back in the water. When you do…. CHOMP!
That’s what they WANT you to think! That’s the whole point of everything that they’ve been doing is to make consumers THINK it’s safe to go back in the water. When you do…. CHOMP!
That is so incredibly insightful.
Mindsets are such fascinating things. For the most part, I don’t think that REIC people are thinking,
“We’ve got to keep REOs off the market to keep prices up to fool people into buying”
I’m willing to give most of them the benefit of the doubt and assume they are thinking things like,
“All these REOs are really hurting comps for decent properties”
or,
“We’ve got to put a floor under prices (by stopping foreclosure sales) in order to return stability to the market!”
or
“We can’t afford to put these REOs on the market until the prices rebound”
“We’ve got to keep REOs off the market to keep prices up to fool people into buying”
We’ve got to report the REOs we take off the market to outfits like DataQuick as sales at high prices for which they never sold in order to keep those median sales price statistics up at stratospheric levels.
sfbubblebuyer
I think you are missing my point. I don’t think holding up the foreclosure process is a grand conspiracy by the lenders where they are gonna fool people into buying today, and then dump properties later, further depressing prices.
I think the lenders (and the regulators) realize:
1.) there is simply no way the market will be able to digest all of the potential REO if they actually foreclose
2.) the lenders can’t withstand the hit to their portfolio values if they were to dump all this stuff
3.) the Feds know that they will have to fill the hole on the lender’s balance sheets if they sell these houses for 50% (or worse) of their reported loan balances
So, the Feds have:
1.) given the lenders the go ahead to allow for ridiculous loan mods, even if will keep people underwater for decades
2.) pumped up the FHA financing
3.) allowed the lenders to pretend that their loan balances are not less than the underlying asset values
So I think we are going to be in a situation where there are gonna be hardly any decent houses (at decent prices) for sale for the next several years……
“So, the Feds have:
…
3.) allowed the lenders to pretend that their loan balances are not less than the underlying asset values”
Reference, please?
“Now if the Feds were playing fair, the lenders would have to reduce the carrying value of their loans to the market value of the house - but all of us know they are not playing fair.”
What would such a requirement portend for (1) bank balance sheets; (2) bank failures?
You and I both know what that would mean, which is why it ain’t gonna happen anytime soon and why the Feds are never gonna let any lender start dumping REO on the market.
They would rather buy their mortgages at face and give them Treasury securities to shore up their balance sheets - you and I will take the hit via increased taxes or inflation in a few years…in fact, that’s what the Federal Reserve is doing right now via the alphabet soup of lender facilities……trading MBS for Treasuries, increasingly crappier MBS I might add…..
“They would rather buy their mortgages at face and give them Treasury securities to shore up their balance sheets - …”
Remember how there used to be this firm called Enron that had all these offshore entities which they used to play a shell game of hiding their bad debt for several years? I am thinking we are seeing Enron again, with the lending firms loaded to the gills with toxic assets playing the role of Enron, and the Fed playing the role of the offshore entities.
“I am getting the feeling that the promised “tsunami” of potential REO is never gonna hit the market. I think the fix is in…”
The toxic assets are festering below the surface like a murder victim buried out in the back yard garden. Out of sight, out of mind — until somebody notices the funny smell the police bring in their dogs to locate the decomposed body.
POINT OF VIEW/ Keiichiro Kobayashi:
G-20 needs to coordinate policy on bad assets
THE ASAHI SHIMBUN
2009/9/5
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With Japan recently in the grip of election fever, policy debate has focused on domestic issues. Meanwhile, around the world, serious discussion is centered on the radical reform of financial regulation.
…
In March, U.S. Treasury Secretary Timothy Geithner announced a program to set up joint public-private funds to buy up to about 100 trillion yen in bad assets on bank balance sheets. In July, however, the program was scaled down to about 4 trillion yen. The U.S. government said the downsizing was due to an improving financial environment, but it is hard not to describe the move as a step backward in policy efforts.
Western economists have been eagerly discussing new regulations on financial institutions or lenders, but have mostly remained silent about how to deal with borrowers and their bad assets.
Sadly, this picture of post-bubble policy debate looks a lot like what went on in Japan during the 1990s.
Most of the troubled assets the financial crisis bequeathed to the U.S. and European markets are mortgage-backed securities, which differ from the bad loans left in the Japanese banking system in the 1990s. Given that these troubled assets are scattered worldwide, it is next to impossible for the private sector alone to dispose of them all.
The governments involved must work together through coordinated policy efforts to ensure these assets are removed.
Since bad assets are now a global problem, one important policy challenge will be harmonizing bankruptcy procedures and approaches to debt reduction in the related countries.
The process of debt disposal during a financial crisis must be speeded up. An idea worth serious consideration may be to design systems that make it possible to turn debt into equity and forgive debt under relaxed conditions during a crisis.
Japan could do the world no small service by raising these issues for international debate, especially by offering ideas on how to deal with troubled borrowers and specifically by proposing a policy framework for the disposal of troubled assets around the globe.
* * *
The author is a senior fellow at the Ministry of Economy, Trade and Industry’s Research Institute of Economy, Trade and Industry.(IHT/Asahi: September 5,2009)
Boy that his the nail on the head, however chilling that reference may be for most of us. Very insightful
Motivating me to visit the Morro Bay MLS once again.
In three years, asking prices for small beach houses there have declined about 25%. That they remain absurd is illustrated by the $360K ad bragging about the $1000/mo rental (yup, for the whole property).
My best guess is another 25% decline in the next three years. Just a wild guess. Would I then buy? (Yawwnn.) Maybe.
Morro Bay used to be soooo cheap, it will return someday, not everyone likes the fog and severe lack of sophistication. Lack of jobs, will play into it someday or it will become a retirement village and drive out the cool people.
It’s already pretty much a retirement village, no? On the coast of Maine I find a lot of “summer people” in the 50-65 age group. In Morro Bay I find 65-80. What you said. Lack of jobs. And I’m only in MB in winter, so I don’t see the “summer people” there.
Morro Bay a “retirement village”. Lol.
Driving out the “cool people” becuz of a lack of sophistication. Now you have me laughing outloud… Yup, that’s why people move to MB… for the sophistication… what a riot.
You guys know MB like you know the back side of the moon.
“The company has faced allegations of predatory lending since the 1990s. ‘Green Tree did a lot of bad shit,’ Homewise Executive Director Mike Loftin says.”
I like a guy who doesn’t mince words.
Grizzly, awhile ago you talked about the economic impacts coming to small western WA towns, Aberdeen, Hoquiam, etc, well, I went camping and road-tripping around the Olympic peninsula rainforest last weekend and wow! It was looking tough last time I was out there, but now? Even worse.
I went through Forks for the first time and I believe every single person in that town would kiss Stephanie Meyers (wrote the Twilight series) on the lips, overcome with gratitude. If it wasn’t for those books and the giggling Japanese school-girl tourists I betcha Forks would now be populated by about 15 people, covered in moss and wearing loin-cloths and waving heads on sticks. That town is the most depressed little town I’ve seen in years. It made Aberdeen look like a thriving, bustling metropolis of prosperity. (Oh, yeah—on Aberdeen’s main street it looked like about a third of the retail spaces were closed/for rent.)
I don’t have any hard numbers on the actual breakdown on declining lumber sales and so forth and I’m feeling lazy and uninclined to look them up—any posters from Aberdeen area? Speak up, if so!
But just looking around—yikes.
About Forks and surroundings—one thing that really struck me was how outside the protective park boundaries all the big trees are gone. Forks is surrounded by relatively midget-like replanted mono-culture forests, and there is just no comparison, none.
It is, of course, a lumber town, and that’s what you do, is you cut down trees and sell them. And I DO believe you can have ‘working forests’, and I live in a house composed of dead trees.
But I thought, over the years you guys cut down some of the most remarkable trees and destroyed some of the most amazing and irreplaceable biosystems on the whole freakin’ planet and for what?
So you could become a shabby little crappy town filled with people who don’t have all their teeth? Yay. Great trade-off, there.
The people who profited from this exploitation do not live in Forks, and they surely have all their teeth, wherever they live, probably in Texas.
The clear-cutting around Olympic National Park is legendary, and absolutely disgusting IMO. It’s devastated the ecosystem. Check out Google maps, Oly. It’s horrific. While my grampa was a logger, I’m very much outspoken against current logging practices. The logging off of steep slopes is what led to the destabilization of soils, and the subsequently massive storm runoff and TWO 500 year floods in back-to-back years in western WA. Weyerhaeuser must die. Check out this photo:
http://www.nwprogressive.org/weblog/uploaded_images/LewisForest-713552.jpg
and this:
http://www.wsdot.wa.gov/NR/rdonlyres/2A0F2C8F-AEB5-4C3B-B6DE-E7C66CF5EC9B/0/ChehalisFlood_120407_2.jpg
I hate Weyerhauser. Hate hate hate. I hates them forever! They ruins my Precious!
And I also hate their evil spawn: ‘Quadrant Homes’. May they all rot in Mordor*!
I’m at home and trying to have the start of a relaxing weekend, with a beer, but otherwise I’d be shouting.
*focuses my chi and tries not to spill beer in the process *
*Actually, they built Mordor, so that’s not a very good curse.
But I thought, over the years you guys cut down some of the most remarkable trees and destroyed some of the most amazing and irreplaceable biosystems on the whole freakin’ planet and for what?
Oly, Oly, Oly. You just don’t unnerstand financial stuff, at all!.
They had to cut down all the trees so that lumberjacks would have jobs cutting down all the trees.
Oh, and to rid the planet of those dangerous marxist/socialist spotted-owls.
Delicious grilled. With the spots they make
great targets, especially the ones nesting on the freeway signs.
Delicious grilled. With the spots they make
great targets, especially the ones nesting on the freeway signs.
Oh, whatever. Owls don’t taste that good. They taste like wisdom and feathers.
I think you’re just trying to provoke us. This’s why I put on my “Patient, kindly, tolerant face’ on this lovely Friday evening, just for you, Ranchaaa…..
Speaking of owls, has anyone read Wesley the Owl? True story of a young animal biologist who raised a barn owl in her bedroom for 19 years. She talks about visiting Oregon with her boyfriend and how the roads were lined with trees, but if you looked more closely you realized that it was like a backdrop, the forest behind was completely strip cut. She also explains the controversy over the spotted owl. Its not just about saving the owl, but this particular animal is a harbinger for the entire eco-system.
Oregon forests often look as though somebody got overly enthusiastic with the clone tool in Photoshop. (Monoculture forests planted after clear-cutting decades ago.) It’s more than a little creepy.
I don’t doubt it, Oly. I’ve seen how bad things can get out in those little logging towns. It’s truly depressing. People are dirt poor, and live a rundown existence. Once the lumber industry craters, the whole economy is done as most all businesses are supported by it. The rates of child abuse, drug addiction, and property crime are epidemic. The RealtWHORES who sold these places as the next big thing are criminals. It will be hard to find areas more devastated by the bubble and it’s collapse.
GrizzlyBear, you ain’t seen nothing, until you see places like Kayford Mtn. in West Virginia, and other WVa. towns that have had their mountaintops removed by greedy coal companies. The destruction is unbelievable.
Last year I posted my western WA experience — coming back from a hiking and camping trip, I received a costly speeding ticket somewhere around Chehalis. Once the deputy saw my Florida drivers license it was all over.
Probably highway 12. The Lewis County highway patrol aren’t very tolerant. Also, highway 12 is a MAJOR drug route used by the Mexican drug cartels.
Yup. Coming back from Ranier National Park and heading west to connect with I-5.
The funny thing about that whole Twilight mania is that the movie wasn’t even filmed in Forks. Most of the footage is from the Portland, Or area. The teeny boppers are begging their families to take them to Forks, and when they get there they’re like “whaaaaaaat?” I’ve even heard that young girls want to move there sight unseen because of the novel. They have no idea that Forks is an absolutely miserable place to live for a number of reasons. Aside from it’s proximity to the Olympics, it has next to nothing going for it.
Oly, your road trip sounds like a road trip thru my old home town in Northern CA. You drive along Hwy 20, Hwy 128, and Hwy 1 there are all these big redwoods lining the road. But, if you stop and walk a few hundred feet off the road the terrain is different. Clear cutting in some places. Tree farms in others.
Is that why you don’t live there anymore? Because you could not stand to see what was happening?
Leaving my hometown was mostly economic. No gainful employment. Unless you wish to work a low wage service job catering to tourists.
That section of CA coastline was logged out and fished out by the time I was 18. I don’t even think there’s a commercial fishing season anymore. Wild salmon fishing operations were halted a few years ago due to massive declines in population. Boats are idle. Except for Dungeness Crab vessels.
Although, it is Mendocino County. So, there is the Marijuana production industry.
Leaving my hometown was mostly economic. No gainful employment. Unless you wish to work a low wage service job catering to tourists.
I was going to complain about your misguided priorities and then rebuke you for your shallowness and then I suddenly remembered why I left my own home town…
My own home-town was in the wilderness of Utarr.
Hard times, huh? We do what we can, because there’s nothing left to do.
Your rebuke would have been warranted. College and urban existence was the easy way out for me and many others.
What was it like growing up in the wilderness of Utah with all those brothers and sisters? Remember, I was an only child so siblings are a foreign concept to me. You must be a hearty soul?
I was a bit startled to see that comment. I makes me wonder what publication published it. Normally you don’t see that kind of language in print from an Executive Director type of individual.
Olygal - how did the bear hunting go?
Alas, I hunted no bears. But goody! No bears hunted me, either.
Bears, schmares. I learned that the most dangerous creature to be found in the Olympic National park is…wasps. Yeah. Dumb ol’ wasps. They damage more people than bears do. Ranger Jon told us allllll about wasps, in elaborate detail. He just loves his wasps, and enjoys discussing them at length.
Actually it was pretty interesting and anyway I like people who really get passionately excited about stuff, even if it’s wasps.
Rialto beach just blew me wee pea-brain. It was fabulous, miles and miles of gray waves pounding the shoreline and the sea-stacks, making this weird hissing susurrus on the dark smooth stones and everywhere were piled the heaped, bleached white, smoothly worn bodies of giant trees. I’ve never seen a beach like it.
I love Rialto beach. The WA coast is my favorite place on earth. I’ve never found a finer campsite than one at Kalaloch which overlooks the sea.
Oh, yes?
We stopped at Kalaloch to eat at the lodge there, but that was in the afternoon and there was no camping.
Of course I knew that stopping at the only available eatery for many long miles promised to be a mediocre experience, because they know you gots nowhere else to go, but the alternative was that I would be forced to consume a fellow road-tripper. Look—I have a fast metabolism and I am really, really grouchy when I get hungry.
Anyway, I said this about 5 times and the decision was swiftly made to stop at Kalaloch Lodge. Blahh.
One good thing was, I sneakily planted many garlic bulblets and sprinkled a copious amount of poppy seeds* all over the place. I’ll see how they did on the next road trip.
*p. somniferum.
“Look—I have a fast metabolism and I am really, really grouchy when I get hungry.”
You don’t have any ancestors by the name of Donner, do ya?
You don’t have any ancestors by the name of Donner, do ya?
None that survived.
*haha! Straight face. *
Oh man, that reminds me. I used to work with two brothers many years ago here in Sacramento.
1. J. Donner
2. C. Donner
Never had the guts to ask if they were descendants of George and Jacob Donner. But, one of them did live in the sierra foothills.
Strange thing though…..sometimes during lunch I’d be in the break room and get a chill. Only happened when “J” was there. He’d get this look on his face, my foot would tingle, and I swear he was licking his chops. Nah….couldn’t be.
But, I always wondered why he carried his lunch in a cast iron kettle. Maybe he liked soups and stews?
“Look—I have a fast metabolism and I am really, really grouchy when I get hungry.”
You don’t have any ancestors by the name of Donner, do ya?
LOL
Such nice dinner guests.
Bears can be downright cordial if you treat them right
Oh, yeah? So how do I do that, feed them honey and handy Realtors?
Okay, I’ll make a note of it.
Honey is delicious; Realtors™ will do for a bear in a foul enough mood.
Olygal
If you lived less than a thousand miles from me, I’d be buying up bear traps and baiting them with cute little rib-eyes, mushrooms and beer…and I STILL wouldn’t feel safe knowing that you could be out there somewhere…on dark rainy nights.
Oly, what’s the name of the Hot springs on the north side of the peninsula? It’s been years but
sure remember going from the hot to the icy cold.
Hmmm. Could this be the Sol Duc hotsprings? I haven’t been myself, but I hear they’re great. I think it would be great to go while the sky it pouring chilly water, what a lovely contrast! Is that when you went?
This makes me think of going to the hot pots in south Utarr in winter. Driving and driving on and on in the frozen night and then scampering out of the pickup to leap into wonderfully warm and sulfury water….best of all was when it was snowing at the same time. It was utterly magical.
Of course, getting out completely su*cked.
Not to defend Green Tree, but what exactly did they do? Did they hold a gun to your head and make you buy a trailer? Yeah, paying interest sucks, but again, didn’t any one read the paper? Can’t anyone do the the math… Oh wait, I shouldn’t have made the math remark…
Oh wait, I shouldn’t have made the math remark…
Yeah! Cut it out, ya mathist! You act like adult people should be able to add and do long division and stuff! Sheesh!
Hey I remember when they were going strong. Folks had nowhere else to get financing for those things. It seemed like Greentree was the only game in town.
“The study found that homes in the region were ‘overvalued’ by just 1.4 percent during the second quarter of the year. A year ago, homes were overvalued by 13 percent. Three years ago, near the height of the housing bubble, homes around here were overvalued by 28.7 percent…That should mean we are at the bottom.”
People don’t seem to understand that the average is not the bottom of the range.
I wish someone would do a comprehensive survey on the houses featured in the various bubble-era television shows — specifically, how many are in foreclosure, how many have been sold or are for sale, and how many have been abandoned. Was there any reason, other than selling a fantasy, why a 7,000 square foot house was built for a family that could not afford to live in it? Why did we as a culture build scores of 7,000 square foot houses in the first place?
I’m seeing a lot of houses for sale in Tampa, perhaps people trying to cash in on the tax credit. On my street alone, two houses bought in the last twelve months are on the market, as is a house near me that, other than a week-long rental during the Super Bowl, has been empty since I came to the neighborhood.
I wish someone would do a comprehensive survey on the houses featured in the various bubble-era television shows
“Property Bulldozer”
“Flip this Dynamite (Into That House)”
“HGTV’s Arson Hour (Or, What I Learned Watching CSI)”
I’m kinda disbelieving the DFW numbers. I wonder if they are just checking MLS numbers and missing a lot of the FSBO and REO properties. I see more “for sale” signs now than ever.
I dont beleive the govt numbers thats for sure.The jobs reports are a joke.they have no clue how many jobs were lost.As far as the NAR numbers goes we all know how those books are cooked.
I agree - the Dallas numbers are ridiculous - unless a whole boat-load of folks pulled homes that won’t sell.
I see a lot of homes for sale, and much less new stuff going up. Besides, who the heck is buying at the moment - the spinmeisters keep trying to make spin positives, but the overall feel I get from most people is sheer terror for what’s to come.
The problem with DFW and Texas in particular is that the mortgage is often the smaller portion of the total payment. You can buy for cheap and pay it off with 3 to 4% annual property taxes the State of Texas will always be the true owner…
‘For the first time in three years, you can make an economic return based on the lousy current prices and the lousy current sales pace.’”
Anyone here catch this gem?
Homebuilders CAN indeed build with profit. Those homes that are being sold for less than what it cost to build them suffered from high construction and land costs.
As these prices go down, a profit can still be had.
With our new baby and the wife in severe “nesting” mode I’ve been capitulating and letting her shop for a house. I gave a few basic considerations -
1: I don’t feel like paying over 110K for a house. When we moved to Tempe, AZ 6-7 years ago you could buy a decent house in a decent neighborhood anywhere in town for that - and the only difference now is prices are still nearly double along with vastly inflated inventory (and shadow inventory) and a far worse economy. Cinderblock 1100 sq footers with a swamp cooler for just 198K a block from scenic and rustic Guadalupe? No thanks. We’re a young family (married for years, together over a decade) who wouldn’t mind having a starter house at a price that’s sensible based on local wages and not located in a ghetto.
2: I don’t feel like driving more then 15 miles to work (this means I’m willing to stretch into chandler, gilbert, or even the right part of mesa). 15 miles would also stretch into phoenix, but for those of you who haven’t visited south central phoenix (between southern and baseline) -it’s not a place you’d want to live-.
The end result? 4 months later we’re still looking. Every offer we put in on a house is beaten (even at asking price) by 5,000$-30,000$ by all of these “super smart” buyers trying to spend 120,000$ to make 8,000$. It doesn’t matter that I have a great down payment, or that at the right price I’ll pay closing costs. No home in this pricerange is sitting on the market, even the absolute dumps seem to be moving right now with 5-10 offers. I’ve gotta admit, I’m starting to get very annoyed at the whole thing.
I keep telling the wife to relax, we’ll find something once this stupid cash for crapshacks goes away. The news around here is hooting and hollaring that good times are back again for home sales - but I am certain once this program dies (assuming they LET it die) it’s going to be a LOOONNNNGGGG winter of discontent for plenty of sellers.
Oh, another funny thing, the case of the missing Air Conditioners!
I’ve been noticing many of the homes you see for sale all over town are missing their A/C’s (along with all of the other appliances). For awhile I wondered where they all went to. Recently I was riding a bicycle back from work (I cycle-commute every now and then to try and keep in shape) and I decided on a whim to ride down a canal I’ve never ridden down (I figured it would go in the general direction I was heading). A few minutes later I’m crusing along this canal through Guadalupe, and on the other side of the canal I was shocked to see a fricken shanty town. I mean, right along the canal, plywood and partical board shanty’s behind these homes, with tin roofing. Like something you’d see out of a south american favela, or a slum in a third-world-country.
And of course, it seems every shack had beautiful A/C units jury-rigged up to them.
There you have it, Temporal solved the case.
I’ve driven through guadalupe several times.It is basically a shantytown between tempe and elliot road I beleive.Sheriff arpaio was raising hell over there awhile back.It is just south of mills mall.I do not advice going there at night.
The market is being propped up by an amazingly large supply of investors who have yet to learn that buying a house is easy, finding a trustworthy tenant is not and vacancies can and do happen.
Daughter of friend was renting in Paradise or Surprise.( thinking these names are apt) and LL had them move after lease was up. Next day his Windows had 4Clsr signs everywhere.
Now they are renting with Lease to own written in.
Dang, I didn’t want to rain on that parade. I had to do everything to keep my mouth shut. You know that aint easy.
“Tony Moore, a real estate agen who is handling the transaction, said selling the Okvath home won’t be easy. The luxury market has a two-year inventory in the pipeline because there are fewer people able to purchase homes that are $800,000 and above. Obtaining financing for those who qualify is another obstacle.”
Tip for Tony: Lower the list price to somewhere within range of $729,750 and see if there are any takers.
“Nichol and Bryan Okvath, whose ranch-style home with a leaky roof was leveled and replaced on ABC’s ‘Extreme Makeover: Home Edition’ in early 2005, are selling their Gilbert house for $1.2 million.”
This show’s premise infuriates me. They find a needy and deserving family, and instead of helping in a realistic way, ABC’s producers build an enormous home costing the beneficiaries a lot to heat, cool, and maintain. Forget about the enormous tax bills! A needy family does not really benefit from being given a super-sized luxury due to the higher expenses. And these super-sized homes are being developed in modest neighborhoods–not a great investment idea, which becomes all the more apparent when they inevitably have to sell. If the show would instead deliver a modest home, mortgage free, perhaps with a cash prize or trust fund, that would go a long way to helping these families.
Well, it’s doesn’t say so in the article but I’d bet dollars to doughnuts they took a mortgage out on that paid off house to help make ends meet. They are probably just as flipped as everyone else :). That’s probably what ultimately helped put them into a “selling” position, hubby lost his job and now those bills (and that big old mortgage) are coming due. Only this time, they can’t heloc the Makeover house.
Agreed though, the last thing that family needed was a flipping mansion. I understand 7 kids under one roof means space is definately appreciated, but 7 kids also means spending rediculous sums of money on general life support. Good luck paying for all those kids, and your daughters medical bills, and the “paid off” house that costs 4-5 thousand a month to maintain. I grew up in a family one kid shy of these guys, half a bag of M&M’s was a luxury to be enjoyed. We never lived in anything over 2000 square feet and it worked out -just fine-.
They took out a mortgage
2/2006 - $233K
10/2006 - $400K
http://recorder.maricopa.gov
http://recorder.maricopa.gov/recdocdata/GetRecDataPgDn.aspx?&rec=0&suf=&nm=OKVATH+NICHOL&bdt=01/01/1947&edt=9/4/2009&cde=&set=250&res=True&doc1=&doc2=&doc3=&doc4=&doc5=
Yes - that is the fallacy of a how “free and clear” house somehow relates to “zero cost shelter” - A lot of places like Texas and the Northeast have brutal property taxes and cost of utilities; the building and grounds have to be maintained, etc.
Just because the place is mortgage free does not mean that it is affordable. I think Extreme Makeover is a facade of goodwill and charity for the benefit of the advertisers for all the builders, and suppliers off all the stupid “bling” and excess poured into these houses.
I can’t imagine what you would do with 7k square feet, I have a relatively modest 3k sq ft house and it takes a lot of work to keep clean and maintained.
If someone did that to my house, I’d kill the person who gave permission.
If someone did that to my house, I’d kill the person who gave permission.
I purely believe you.
)
(And this’s one reason why I am so fond of you.
Interesting to read the full text of the article about mobile-home loans. What kind of freaking idiot business would be based on making THIRTY-YEAR mobile home loans? Kind of like making a 15-year auto loan.
As y’all know, my business is MH lending, though I never lend on MH unless I also get the senior note on the underlying lot. My finance charges are high, but nothing compared to Green Tree’s charges. Typically 9% for 15 years, which works out to $101.45 per month per $10K of principal; therefore, after 180 payments, the borrower has paid about 82% more than the original nominal price of the home.
In the full article, someone remarks that “nobody told the buyers they could get a loan for half the price.” (Referring to Green Tree’s 10.72% interest rate.) BS. They could NOT get a loan for half the price. Sometimes my prospects tell me they can get a cheaper loan, and I say Fine! …and then they call me back after a couple of weeks telling me why they canNOT get the cheaper loan, or why it really isn’t cheaper, just deceptively packaged.
There was quite the scam back in the early 90’s selling mobile homes in North Texas. It seemed like every time you left town there was a new company opened up off the freeway selling mobile homes and Saturday afternoon TV was full of ads during the old westerns.
I remember them hawking the low low month costs and the no money down 30 year loans. The people buying back then are the same people that moved up into no money down houses a couple of years ago.
It all of course dried up in a few years after all of the suckers had bought mobile homes and realized that they could never resell them and then abandoned them.
Mobile Home in in Texas/Great Plains States = “HeliCrate”…
Usually really good Firestarter casas.
“‘Of the 24 buyers I’ve helped close since March, all but two were motivated by the tax credit,’ said Tracey Amaya, a Realtor with Re/Max Trinity. ‘A lot of them have been younger buyers and single women. The majority of the properties have been foreclosures.’”
Future Knifecatchers of America support group members…
On the bright side, there will be a lot of desperate, successful, single women in the near future. Buy low!
Seems like times like these would be good to be young, single and bank-worthy…
My hours ago post with pic links is stuck in filter purgatory. Also, my other posts take hours to show up. Is this because a living, breathing human must read each and every post to approve it? I don’t understand server problems, or any of that technical stuff, but it seems to me it’s taking much longer for my posts to show up than in years past.
Maybe the filter is scared?
You oughtta consider renaming yourself ‘HoneyBear’. Then all your posts might go through all easy like.
I’ve been browsing the blog for years, and I can’t remember the last time I saw a spam post. I’m sure they exist, because they exist everywhere on the web, but Ben does a better job than most blocking them.
Some things I have learned: Posts with multiple hyperlinks need manual approval (not unusual), posts with trigger words (swears, insults, euphemisms for sexually perverse photography exhibits involving tennis rackets), and long posts will almost certainly wait for manual approval. Ben has made it clear he’s pretty busy lately. I’m not going to complain when my posts are delayed. But then again, my posts don’t normally contain useful info.
Nonsense, Bink. The information you’ve just given is useful to other commenters, whose posts may contain info that even you would characterize as useful. Don’t run yrself down!
“‘What people forget is that anytime there is a chance of great gains from speculation, there is also an equal possibility that you are going to lose everything,’ Langston said.”
On the one hand, it sounds like risk premiums might be making a comeback, but on the other hand, many would-be sellers are holding out for risk loving, crazy-loan fueled bubble prices.
It is so frustrating, Right now in my world in the entertainment field in Los Angeles, most of us feel lucky to have any type of job. We work as freelance artists and move from job to job. This year there isn’t much work. I have work,but I have cut my pay, bid cheaper and worked my you know what off to get any type work. I don’t know if I can last another year trying this hard. Businesses and workers are all hanging from a thin thread.
RIght now it seems the best way to make money is to get a government job and to start flipping houses, lord knows the private sector is shrinking and real estate seems to be going up!
I am so frustrated I could scream.
Would someone please shed some light on what is happening and when it is going to get better.
Rents are falling, and that’s good news for all of us here. I hope you are a renter too?
Flipping houses would be a very risky business.
“RIght now it seems the best way to make money is to get a government job and to start flipping houses, lord knows the private sector is shrinking and real estate seems to be going up!”
How many flip houses do you have that you are still trying to unload?
Greg in LA
My brother is a Production Accountant (self employed) and has been working out of state for the last 3 years. He has twin daughters he does not see much. I guess all those tax incentives to keep entertainment jobs in LA, just aren’t working.
Run away production is here to stay, according to my bro. Have you thought about switching to Documentaries? My sil has jobs lined up for the rest of the year.
Same here in NYC greg….I did a bit of PA work last year for American Idol this year zip…..I had 3 so far and maybe 4 or 5 HS Reunions cancel this year for lack of RSVP’s..at $100 a ticket. Never happened before
Ebay sales are down.. You cant hardly sell quality semi-rare records ($30-100) on ebay yet the super rare ($500+)still gets bid up like crazy.
Click on my handle I am begging bar owners to try something new and they are saying NO we want Lady gaga and T pain on the juke box when they have no business even at 6pm on Friday night.
And to make you even more angry the amount of “Intern” jobs when last year they were paying gigs…even from well known companies like Clear Channel…and the labor dept doesn’t care.
18 pct unemployment, here we come? Big question: What is the overlap between this unemployed group and those carrying mortgage balances? I would guess something like 90 pct of this group (16 pct of the employment base) will ultimately be unemployed mortgage holders…
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* September 4, 2009, 9:48 AM ET
Broader Unemployment Rate Hits 16.8% in August
By Phil Izzo
Job losses moderated in August, but the unemployment rate ticked up 0.3 percentage point to 9.7%, the highest level since June 1983.
But another more comprehensive gauge of unemployment ticked up even more. The government’s broader measure, known as the “U-6″ for its data classification, hit 16.8% in August, 0.5 percentage points higher than July.
The comprehensive measure of labor underutilization accounts for people who have stopped looking for work or who can’t find full-time jobs. The index had declined last month, along with the headline unemployment rate. That decline was sparked by more people dropping out of the labor force. This month the labor force increased by 73,000 people and the plunge in employment was larger in the household survey, which is used to calculate the jobless rate, than in the payroll survey used to calculate the change in nonfarm payrolls.
The U-6 figure is the highest since the Labor Department started this particular data series in 1994. But, similar to the headline unemployment rate, it likely isn’t as bad as it was in the 1980s. U-6 only goes back to 1994, but a discontinued measure has a longer history. That old U-6 measure peaked at 14.3% in 1982. Through some calculation, a comparable measure can be determined in the current report. Under the old U-6 methodology, the August rate would be 13.3%, the highest rate since 1983, but still below the peak.
Still, the elevated U-6 rate gives a clearer picture of the broader employment situation. The 9.7% unemployment rate is calculated based on people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The “actively looking for work” definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things.
The U-6 figure includes everyone in the official rate plus “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time schedule instead because that’s all they could find.
Many forecasters expect the official unemployment rate to top 10% by the end of this year, and the broader rate could easily top 18%. For people in this group, comparisons to the Great Depression (when 25% of Americans were out of work) may not look so wild even if overall economic activity is holding up better.
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* Economists React: ISM ‘More Than Just an Auto Story’
* Better Data Don’t Spell Fed Rate Increases
* September 1, 2009, 1:56 PM ET
Unemployment Still Rising in U.S. Metros; El Centro, Calif. Jobless Rate Hits 30%
By Kelly Evans
Unemployment rates in 372 U.S. metropolitan areas continued their upward climb in July, new Labor Department figures show.
Some 19 metros now have unemployment rates above 15%; eight of them are in California, hard-hit by the real estate collapse, and five of them are in Michigan, suffering from the auto industry’s downturn.
El Centro, Calif., continues to have the nation’s highest unemployment rate, rising to 30.2% in July. Yuma, Ariz., is next with 26.2%. The national average in July was 9.7%, not seasonally adjusted. The Labor Department will update the latter figure on Friday, when it releases its monthly employment report.
…
“‘That should mean we are at the bottom. I think we are,’ said Ann Garti, CEO of the Orange County Association of Realtors. ‘I don’t see prices going lower.’”
Wow. How original! Do the authors of these stories just leave in the same realtor quote in month after month, year after year? I’ll bet you can find the EXACT verbiage from 2004, 2005, 2006 . . .
The bottom is when prices are based on economics, as they have not been since 1999. This is when properties regularly cash flow and investors (not speculators and seminar junkies) re-enter the market and when median prices are 2-4 times median income for a zip code. We are not only not there yet, but unemployment and shadow inventories are at multi-decade highs.
At some point someone should do some real root cause analysis of absurd inflation of housing, a relatively easy to manufacture commodity. There are a bunch of industries with a well represented lobby that depend on prices always rising. That could have something to do with it! The construction, mortgage and real estate industries, places where people with high school level skillsets typically make six figure salaries, need to be restructured so that reimbursement for services reflects economic reality. That is the commission on a $800K loan should probably only be marginally higher than that on a $200K loan, as the bulk of the commission should be based on the difficulty to originate and package said loan and not some percentage of the loan size. Same with used house salespeople; their reimbursement should be based on their labor, skills, and value in the process (my experience has been they are typically subtracting value from the process and not adding any value), not merely some percentage of a total price. Basing profit purely on a percentage of the total price will ALWAYS result in pressures to increase prices and, in the case of a politically connected industry, invaribly in some cobbled together mess of unsustainability like we’ve seen since 2002.
The real issue is campaign finance reform, but I have no hope for that anytime soon. In the interim, housing must be recognized for what it is, a pretty widely available commodity that can be produced without a great deal of rocket science.
Why did we once have usury ceiling in New York State and why did Christianity once look down so heavily on lending at interest. Could it be that interest is a double-edged sword with the power to destroy society?
Once bankers charged reasonable rates and made sure that borrowers would repay loans. An increased expectation that you could just kick interest rates high enough to cover all the bad debt has lead to two things:
1. High enough interest to eat alive and destroy even the best borrowers.
2. Complete savaging of all standards of credit scoring and prudence.
We will not get our economy back on its feet until we clear out all of this rotten debt and reduce consumption in favor of capital formation and increased manufacturing and export.
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