It Makes Everything Look Like It’s Underwater
It’s Friday desk clearing time for this blogger. “A tempting job offer brought Mike Chang and his family from Connecticut to Coral Springs in the early ’90s. Soon after he moved to the city, Chang bought a four-bedroom house for $150,000. In 2004, Chang purchased a five-bedroom home; this one in the Wyndham Lakes community in Coral Springs. When a job offer from Texas that he couldn’t refuse came Chang’s way in 2007, the family shifted to Texas. ‘We refinanced our first house and took $300,000. Buying the second house seemed like the ideal thing to do,’ he said.”
“Not long after the family moved to Texas, Chang’s wife was diagnosed with breast cancer. ‘We found out that we were not able to pay both the medical bills and the mortgage. In 2008, we decided to sell our homes.’ Chang admits it wasn’t the best time to put the homes on the market. ‘The housing market started to crash by the time we thought of selling our homes. The timing wasn’t great, but I just couldn’t afford to pay mortgage. It was simple, I had to choose between my wife’s health and our homes.’”
“After 25 years of saving for his first home, Kevin Gehle bought a townhouse in Coral Springs for $189,000. This was a home he was going to live in for 30 years. ‘All your savings and everything goes to, you think, your home, and you think it’s going to hold price,’ he said. ‘Well, it did for about a year.’”
“Looking back, Gehle said if he hadn’t bought the house he would be fine now. He and his girlfriend don’t go on vacations or out to dinner and he doesn’t have much left for retirement. ‘I just hope we keep our jobs and we can keep the house we’re in,’ he said.”
“New York City recently passed a mortgage antifraud law that requires loan-modification companies to reveal that they cannot charge upfront fees. But many of the scammers are located in other parts of the United States. For example, a man in Queens, a borough of New York City, recently contacted a California company that was advertising heavily on radio and television that it could modify mortgages.”
“‘They asked for $4,800 upfront, and the desperate homeowner sent them $2,200 dollars,’ says Petra Tuomi, policy director at a network of nonprofits that provides services for housing counseling. ‘They told him to stop paying the mortgage to the lender, and then he was stuck with them.’”
“Greg Horoski and his wife, Diana Jano-Horoski, of North Patchogue won a stunning court ruling in November against IndyMac Mortgage Services when an angry judge ordered the bank to eat the couple’s housing debt because of the institution’s alleged cold-blooded lending practices. But the homeowners said that the next month, they received a letter from the bank insisting they still owe $474,936.78.”
“Horoski said the 3,400-square-foot ranch home is valued now at only about $275,000, but if taxation is figured on the full amount that was allegedly owed, the tax bill would be much heftier. ‘The housing market crashed. It’s not like we took the money and lost it in Atlantic City. All we did was refinance the house,’ Horoski said.”
“‘I’m a highly educated woman who has been taken advantage of by mortgage lenders and banks.’ That’s how Scottsdale resident Cheryl Pace started her e-mail, and it got the attention of our 3 On Your Side unit.”
“Like thousands in Arizona, Cheryl is in a desperate situation with her home. Cheryl says that after getting into what she calls a bad loan, she hired a loan modification company and was told her payments were going from $1,900 dollars to $1,500 a month. She began paying the new payment amount. The trouble is, the bank never signed on for this deal. Now Cheryl finds herself in an even bigger mess and at a loss, ‘I just don’t know what to do’ she said. ‘I don’t know who to turn to.’”
“From 2008 to 2009, construction was completed on 7,750 condo units downtown, which includes the Gold Coast, River North, Streeterville, Loop, West Loop and South Loop, said Gail Lissner, VP at an appraisal and consulting firm in Chicago. Of that amount, about 2,200 new-construction units are still available for sale by developers. According to Midwest Real Estate Data LLC, 5,020 condo units are listed for sale or resale in the downtown area.”
“American Invsco instituted drastic discounts of up to $150,000 per unit at its Private Residences at Ontario Place last month. ‘The developers thought they would make a profit. That’s gone,’ said Nicholas Gouletas, CEO of American Invsco. ‘Then they put in some equity. That’s gone. And then the bank had a loan for somewhere between 40 to 60 percent. Now you’re going to the bank and asking them to take a haircut. … I’ve been in this business for 40 years. We have five generations of Gouletas family members in this business. I’ve never seen this before. I see this as a real buyer’s market.’”
“Nearly half of Hamilton County’s neighborhoods have a median home value that’s less than the average homeowner’s mortgage. But South Lebanon is the Tri-State’s most severely underwater neighborhood when it comes to home equity. ‘It’s an issue,’ said Robert Sibcy, CEO of the region’s largest residential real estate firm. ‘If they bought their home in the last three years, they’re probably upside down or close to it.’”
“The 45202 ZIP code, which includes downtown and Over-the-Rhine, was close behind with an average mortgage balance of $309,433 compared with a median home value of $203,808. ‘There have been a lot of new transfers in Over-the-Rhine,’ Sibcy said. ‘As those transfers stop or slow down, that average comes way down quickly, and it makes everything look like it’s underwater.’”
“Nearly 10 percent of San Diego County homeowners with mortgages are at least two months late on their payments and are likely to default and fall into foreclosure, a sampling of area credit records shows. A monthly mortgage payment on a $379,000, 30-year fixed loan currently runs about $2,034, so someone two months in arrears would owe about $6,000, including the current payment.”
“FJ Guarrera, TransUnion VP of financial services…said history shows that anyone who is 60 days behind on the mortgage has a tough time making up the difference and becoming current. ‘Many if not most of the (delinquent) homes are going to end up in foreclosure,’ Guarrera said.”
“Norm Miller, a real estate professor at the University of San Diego and VP of CoStar Group, said the distress is not as widespread as the numbers suggest. About 60 percent of homes carry a mortgage — roughly 600,000 countywide — and about one-third of those were bought at the peak of the real estate boom, 2004 through 2007. ‘A point to remember is that 80 percent of foreclosures are in 20 percent of the submarkets,’ Miller said — such as in parts of Oceanside, Escondido, East County and South Bay. ‘I’m not saying Rancho Santa Fe, La Jolla and Cardiff don’t have any foreclosures — they do — but there’s not so much that it creates a tipping point in falling values.’”
“In lower-priced areas where most foreclosures have occurred, many homeowners have lost value because of their neighbors’ plight. That doesn’t mean they will go delinquent and end up in foreclosure. ‘Hopefully, they’ll ride this thing out,’ Miller said. ‘These are people that don’t pay attention to the lawyers on TV, are stressed out by the threat of foreclosure and feel they should be responsible and make their payments. So even though they don’t have any equity in their homes, they understand they’d lose a lot if they walked away.’”
“More proof that the world as we know it is ending: For as long as I’ve been tracking human behavior through the lens of real estate, it’s been dogma that homeowners who are strapped for cash will pay the mortgage first, then use whatever is left for the credit card bill. But a recent report from the TransUnion credit-scoring firm says that since the recession took hold, credit cards have one-upped, though the credit industry has presumed that the populace would revert to a mortgage-first priority once the recession improved. To the contrary, this ‘hierarchy reversal,’ as TransUnion calls it, is becoming even more pronounced.”
“Speaking of the housing industry. Membership in the Chicago-based National Association of Realtors is shrinking like the price of a South Loop condo. The trade group’s Web site has long claimed 1.2 million dues-paying members, though a recent report from its chief economist, Lawrence Yun, notes that membership in January was just over 1 million, down from its 1.4 million peak in 2007.”
“Fannie Mae and Freddie Mac would no longer be able to rely on subprime mortgages to meet their government-mandated goals for helping lower-income Americans obtain home loans, according to proposed regulations. The rules offered by the Federal Housing Finance Agency would restrict the companies from using private-label bonds backed by Alt-A and subprime mortgages, or commercial mortgage- backed securities, to meet affordable-housing targets.”
“‘The results of providing large-scale funding for such loans were adverse for borrowers who entered into mortgages that did not sustain homeownership and for the enterprises themselves,’ the agency said in the proposal.”
“Federal rules introduced Tuesday to tighten mortgage requirements will squeeze the purchasing power of the average Metro Vancouver buyer by $40,000 to $50,000, market observers say. Finance Minister Jim Flaherty said buyers who want insured high-ratio mortgages will need to meet tougher requirements. However, Flaherty said, the changes were not meant to stop a possible housing bubble, as some warned was looming unless Ottawa was prepared to act.”
“‘There’s no clear evidence of a housing bubble, but we’re taking proactive, prudent and cautious steps today to help prevent one,’ Flaherty said.”
“FortressInvestment Group LLC, whose Intrawest ULC owns Olympic skiing venue Whistler Blackcomb, agreed with creditors to postpone a foreclosure auction set for tomorrow, said a person with knowledge of the agreement. The lenders, which include Lehman Brothers Holdings Inc., the investment bank liquidating in bankruptcy, have sought control of Intrawest since it missed a final payment in December on a US$1.4 billion loan.”
“Fortress bought the company in part for its real estate, said Hayley Wolff, an analyst at Rochdale Securities LLC, a Stamford, Connecticut-based brokerage. ‘Intrawest has a lot of real estate at the base of its mountains, with several projects having been in development at the time of acquisition, and much of it properly zoned to build out condos,’ Wolff said in an interview. ‘In a good real estate market that had a lot value but in a bad times it’s an albatross.’”
“Why is Fortress Investment so close to losing the keys? Karen Petrou is with Federal Financial Analytics. She says Fortress built a bunch of swanky slope-side condos at Whistler, just before the bottom fell out of the housing market. People who had planned to take out a home equity loan to buy a second home at Whistler had to change their plans.”
“Petrou: ‘The first homes have been ATMs for seconds, and the money just fell out of the machine.’”
“The new president climbed aboard Air Force One a year ago for a trip to Phoenix to reveal his strategy for attacking the housing crisis. It was a signal moment in the buoyant early days of Barack Obama’s administration. The plan, Obama told a cheering audience of high school students, would keep as many as 9 million people in their homes by lowering their monthly mortgage payments. Ambition, though, got far ahead of reality. The numbers show a program that failed to deliver.”
“‘We were attempting to set realistic expectations, but I think we failed to do so,’ Michael Barr, an assistant Treasury secretary, said in an interview.”
“The dismal results of Obama’s mortgage aid program now raise doubts about whether the government can fix the housing crisis. Joseph Romanski of Coram, N.Y. had been trying to get a modification from Bank of America since July. He relies on rental income and unemployment to pay as much of his $2,200 a month mortgage as he can afford. He has been looking for help since work at his brother’s roofing company dried up due to the recession. Romanski was initially told he would qualify for Obama’s program, but then waited several months for an official offer. None came.”
“‘It seems like they want me to just forget about it and give up on it ,’ Romanski said.”
“‘President Obama is finding that, well, it actually is pretty hard’ to fix the foreclosure mess, said Phillip Swagel a Treasury official under President George W. Bush. ‘It’s very easy to say ‘you need to do more.’ But it’s very difficult to find something that is more — and can be done.’”
“‘Realistically, we still have massive problems. When exactly are we going to deal with it?’ said Christopher Thornberg, a Los Angeles economist who long warned that the housing bubble would burst.”
‘The plan, Obama told a cheering audience of high school students, would keep as many as 9 million people in their homes by lowering their monthly mortgage payments. Ambition, though, got far ahead of reality. The numbers show a program that failed to deliver. We were attempting to set realistic expectations, but I think we failed to do so,’ Michael Barr, an assistant Treasury secretary, said in an interview.’
DC has failed because they refuse to see the situation for what it is; a bursting asset mania. And the first conclusion one can make upon seeing this truth is that prices will fall much further. Therefore, most of what the government is doing will create even more foreclosures and oversupply.
‘we still have massive problems. When exactly are we going to deal with it?’ said Christopher Thornberg’
IMO, the real issue we face is dealing with a post bubble economy, and we are wasting time and resources.
“We are wasting time and resources”. Couldn’t agree more. We’re literally funneling billions of dollars in an ultimately futile effort to prop up unaffordable, unsustainable housing prices. The only practical, large scale idea that would have helped ameliorate the situation was “cramdown”: allowing bankruptcy judges to reduce the principal on primary mortgages. Instead, we’re just transferring all the bad assets to public entities (Fannie/Freddie) and creating billions more in bad debt (FHA).
We are wasting time and resources”. Couldn’t agree more. We’re literally funneling billions of dollars in an ultimately futile effort to prop up unaffordable, unsustainable housing prices
Worse we are funnelling billions of dollars that will directly contribute to increasing the oversupply.
“After 25 years of saving for his first home, Kevin Gehle bought a townhouse in Coral Springs for $189,000. This was a home he was going to live in for 30 years. ‘All your savings and everything goes to, you think, your home, and you think it’s going to hold price,’ he said. ‘Well, it did for about a year.’”
For new readers to this blog, may I suggest there are 3 types of markets.
1) Sellers
2) Buyers
3) Renters
We are still in 3), moving slowly towards 2).
Yo!! Cereal, you left the FB’s off your list.
let’s not be too mean calling them FBs…how about “hopers”.
What about ‘greater fools’? Are they one-and-the-same with FB’s?
i may be moving into category 4…builder (pretty soon).
just really not interested in buying a used house. i wouldn’t mind buying one that’s only a few years old…but most of them are crapshacks and too big.
these house building companies mottos were “build em cheap and stack em deep.”
90% of housing stock built in the last ten years is crap.
(That’s in my neck of the woods). I’d love to build my own place as well, but for two things: inflated land price and
extortionate property tax on new construction
X-Philly is right. Being in the construction business and seeing what I’ve seen. i wouldn’t buy anything built from 2000 onward unless I looked at it real carefully. A lot of craptastic houses were built.
where you been?
(i used to post as phillygal). What’s the shore situation, waaahoo?
Wait, remind me again why the plan was unveiled to a group of high school students? I was once a high school student. There wasn’t a one of us that had a clue on the workings of the real world. And the only thing about economics we knew was that if you could reliably throw three keggers at $5 a cup without the cops showing up; it was profitable. Anything less and the loss of the deposit on the keg and tap would wipe out your profit.
Wait, remind me again why the plan was unveiled to a group of high school students?
Maybe it was a meeting of the Future FBs of America.
Most high school students will cheer for anything. I don’t think there’s a crowd left in the US that would cheer for Obama announcing another govt program, except maybe realtors.
“We’re out of class all day tomorrow.”
“Why”?
“I dunno man.. I think some politician is gonna talk to us.”
“What’s his name?”
“Bamana or Obannana or something. He’s supposed to be some real big shot.”
“I never heard of him.. but damn.. no classes? WOOOohooo! Yeaaaaaay! [clap clap clap] Horray! Youy rule Bommana! Way to go!”
LOL!!!! +100
Oh, they know who he is.
“Bamana or Obannana or something. He’s supposed to be some real big shot.”
Obama, we wanna, banana-fanna-fo-fana,
me-my-mo-mamma,
Obama
The Arizona media noted that Obama’s speech drew applause in unexpected places. I seem to recall that he had something to say about not rewarding flippers, and that wasn’t supposed to be an applause line. Well, it got cheers anyway.
A cheering audience of High School Students? Really?
The ‘NEW’ President can blame the Obama idiots in 2013-14-15 for the continuing mess in the Obama’s housing bubble.
“The plan, Obama told a cheering audience of high school students, would keep as many as 9 million people in their homes by lowering their monthly mortgage payments.”
Are these fairly typical LV home owners?
Now I can’t remember what I wanted to say!
It was about that couple in Coral Springs, I think.
“‘They asked for $4,800 upfront, and the desperate homeowner sent them $2,200 dollars,’ says Petra Tuomi, policy director at a network of nonprofits that provides services for housing counseling. ‘They told him to stop paying the mortgage to the lender, and then he was stuck with them.’”
Yes, this was it. I have a friend who has got caught up in something like this, but with credit card debt. Sad, sad, sad.
Late to post; in my garden all day. The article is mistaken, very few students in the crowd. Mainly pols and party hacks from around the state, maybe 500 general public. Students acted as ushers, though.
Dobson H.S., Mesa
Goal of the program should be to get people into homes they can afford, not keep people in homes they cannot afford.
“‘I’m a highly educated woman who has been taken advantage of by mortgage lenders and banks.’
She now has a degree from the school of hard knocks to go along with the quality education she received elsewhere.
“‘I’m a highly educated woman who has been taken advantage of by mortgage lenders and banks.’
She deserves her money back from the college(s) she attended.
Listen lady, it’s not like what they bank is selling is a difficult product to understand. You borrow 100K, you pay them X amount in interest. If it’s an ARM, the rate can go up and down, sometimes dramatically (ARMs are really for the wealthy, so you likely shouldn’t be looking at them in the first place).
I’m so sick of this “I’m real smart, but I was duped” line. No, you’re an idiot if you don’t understand interest rates and payments and STILL, without getting an accountant/laywer to look it over, signed the paperwork. You might be educated, but you are real-real-dum..
Sorry to be the first one to clue you in this fact.
Hey all. I’m a dumbsh*t but even I learned in high school that buying a house would be the largest investment made in my life. If a person is buying a house and is too f*cking cheap to hire a real estate lawyer to read the mortgage contract terms then tough t*tty.
Even having a lawyer wouldn’t have helped you during the boom. Esquires are not necessarily beneficial prognosticators.
I don’t know about this business of hiring a lawyer. I’ve never hired a lawyer to read anything for me, because I don’t trust anybody (lawyers, CPAs) to do the right thing for me. It’s not like they take on any liability anyway. I just read things carefully - mortgage papers aren’t that hard to read, and residential purchase contracts aren’t either. I’ve had legal insurance through my employer for years, but haven’t had to use it except to make my will/trust.
i think most of these idiots need a tiny “simon cowell” they can carry around with them in their daily lives.
Wasn’t Simon Cowell in debt up to his eyeballs at one point (like in the 80’s)?
“‘I’m a highly educated woman who has been taken advantage of by mortgage lenders and banks.’
Highly educated = highly debatable.
Not much smarter = someone banked on that.
IMO, “highly educated” does not translate to smart or intelligent.
In fact, in this society, “highly educated” translates roughly into “overeducated fool utterly lacking in common sense.”
And up to their neck in school debt…
It’s possible to be highly educated and have common sense. Come on, guys.
Like REhobbyist, mikey steadfastly clings to his sheepskins that proclaim that he’s “highly educated” while attempting to protect and defend his common cents.
We must keep people in “their” homes or else prudent people who can afford those houses might buy them. How horrible!
It is surreal that this idea was introduced in front of a group of high school students. It is as if the entire scope of our crumbling economy has been reduced to some sort of trite debate between high school class president candidates, as each contender makes even more outlandish promises while the crowd cheers on, happily buying into the lie since to face the truth would be to lose their dreams of an easy future.
Man it seems like these new credit card laws are doing more harm than good.The govt jumps in thinking they are helping people and now all of a sudden people are getting screwed left and right.What a joke these new laws are.I find myself wondering if this wasnt another ploy by the govt to help banks make more money off the backs of people in real need right now.
The laws haven’t gone into effect yet. No, the CC’s malice is entirely their own. The government “has” to enable this crap behavior because the banks are Too Big To F*in Fail.
Let’s have a Public Option bank for us little folk to get checking accounts, mortgages/car loans under $417K, and maybe treasury direct. GS can trade its paper among its employees without involving us.
It was simple, I had to choose between my wife’s health and our homes.’
Ain’t that America!
We all know he should have sold the Florida home when they moved.
Home(s). To be exact.
Never did say which one he chose?
Fannie Mae and Freddie Mac would no longer be able to rely on subprime mortgages to meet their government-mandated goals for helping lower-income Americans obtain home loans, according to proposed regulations.
What are they supposed to use, man? Harsh language?
but seriously, how can they fill a quota with only low-risk loans, when there are not enough low-risk buyers out there?
Why does lower income = subprime? Subprime is what you get when you don’t pay your bills on time. Lots of people are lower income and have excellent credit, and lots of people make 200K a year and have horrible credit.
The 2 have nothing to do with one another.
And yes, there are so few low risk borrowers left that the only option (if you want to originate lots of loans, IMHO, a faulty basis to start with) is to keep pushing down the credit ladder.
I keep asking the question, but nobody ever seems to know the answer. There’s about 40% of this country that doesn’t already own a home. Of that 40%, how many:
A) Have credit scores over 720
B) Have a 20% down payment
C) Have a stable enough job to consider buying a house
D) Can document income to support 3X or less loan to income ratio
?
50%? 20% 10%? 2%?
I’d like to know how many people are really sitting on the sidelines with the money, income, and credit scores to jump into this market. That would be a very useful and telling statistic.
I’ve been asking that question for years too — how much money is really on the sidelines? They won’t answer because they are afraid to answer. I bet it’s close to 2%, or less. And I bet those 2% are able, but not willing.
Meanwhile:
Why does lower income = subprime?
Because reporters are lazy and have no critical thinking skills.
Lots of people are lower income and have excellent credit, and lots of people make 200K a year and have horrible credit.
Verifying income is too much work.
The 2 have nothing to do with one another.
But FICO is so easy to keep track of! You can reduce an entire life to just one number. Employment, insurance, financial…
• Households own $18.2 trillion of residential real estate, even after the value destruction of the past three years.
• Households own $18.1 trillion of equities, despite the vicious bear market.
• Households own a near-record $7.7 trillion of deposits and cash — earning next to nothing in yield.
• Households own $4.6 trillion of consumer durable goods.
• Households own $3.5 trillion of corporate bonds and municipal/agency paper.
• What do households own in Treasury notes and bonds? Try $800 billion.
Here is a big plus that is factored into figuring all 3 FICO scores that is not common knowledge or normally mentioned that a bank executive told me about.
The Duration of Time at your Current Address.
Although not specifically mentioned, it’s is automaticly detected and figured into FICO algorithum computations.
They’re all programed to find stability and payment dependability. At least they were 2 years ago.
We ran a full FICO pre-qual on me two years ago and he said that I had a better FICO than him. Then he laughed and also said that he had an elderly lady on SS that rented, had 3 credit cards and that aways paid her bills on time that had a great score yesterday. I asked how that was possible.
She lived in the same apartment at the same address for 23 years, used the same bank, same utility company, the same CC’s. the same Insurance companies and even though she was on SS and a pension. She hadn’t bought anything on revolving credit since her new car in 1993 but because of this, the FICO variables saw her as Rock Solid. She wasn’t wealthy but had a large down payment saved.
He said she looking at a senior condo complex and was 813 on her mean FICO score.
..“‘I’m a highly educated woman who has been taken advantage of..
There’s education, and then there’s education.
I hate to brag, but I would have never, ever owned two houses at once unless one of them was paid out.
I’ve had both kinds of education.
Roidy
BOHICA!!!
What does BOHICA stand for?
Bend Over, Here It Comes Again
Bubba knows!!
My brother did just that. His original house sat for 6 months with almost no showings. I told him to drop the price, but he “didn’t want to give it away.” He has an MBA and I reminded him that 6 months with no offers was Mr. Market’s way of telling him it was overpriced, regardless of whatever Suzanne had researched. I suggested he be aggressive and not chase the market down.
He heeded my advice an dropped his price 10%. It sold in 3 weeks.
Yeah. Mister Market can be a real hard-ass.
But he does play fair. Note that when MBA-bro came to his senses, Mr Market delivered a buyer within a short amount of time.
Having sold the two homes we previously owned each within the span of a week, I know first-hand how this works.
You are a good brother. I hope he appreciates you, but I bet he doesn’t give you credit.
I had an uncle member in a similar situation. He owned two homes and was renting one. He refused to lower the price for a couple of years and said he was “breaking even” on the rental. I talked with his son a couple of days ago and was told the second house was sold. Evidently he did something radical and lowered the price, the house sold in a month.
Experience keeps a dear school, but fools will learn in no other. (B Franklin)
I have to laugh about “Fortress Investments”. Over at Patrick’s the term “fortress” was used to describe those most-desirable SF bay area regions, such as Palo Alto and Atherton. People kept waiting until the fortress houses got back down to earth.
What appears to be a great lesson is that places dependent upon sport tourism - the poster child being ski resorts - are really a big gamble when purchasing houses. Whistler, Batchelor/Bend, Tamarack, et al. have all come a cropper in recent years. It would appear that older and more mature places like Sun Valley and Vail are hurting less.
I suppose one could say “they aren’t making any more mountains”. But there are quite a few mountains around the country, especially in the west. It’s been said that in central Idaho alone there are more than 80 named mountain ranges. That’s not individual mountains - but instead mountain ranges.
When shopping for a place to retire, I wanted to make sure that the region was not dependent on any one single economic factor. I chose Boise because its economy includes semiconductors, software, government, medicine, agriculture, and many other things. Time will tell if I chose wisely.
Hmm, that’s kind of counterintuitive. I would think that retirees want to go someplace that’s nice and bucolic but that has a crappy economy, ’cause then it’s cheap! =)
Unless your pension fund/401K/Social Security go belly up, in which case it is good to be somewhere with a diverse economy and access to large medical centers.
From the Fannie and Freddie article:
“The companies now own or guarantee more than $5 trillion in U.S. residential debt, and were responsible for as much as 75 percent of the new mortgages made last year.”
These are some scary numbers. The US government has a lot of ‘off balance sheet’ losses waiting, and a major leg down in the housing market when F&F retreat.
The US government has a lot of ‘off balance sheet’ losses waiting, and a major leg down in the housing market when F&F retreat.
——————————————————————————
If the govt and corporations have “off balance sheet” assets how long will it be before Joe Six Pack wises up and has lots of “off w2″ form income.
Lots of people I know already participate in the “cash economy.”
The question is how much of the old garbage is on their books and then add in the FED purchases. At some point they will be willing to let the prices fall but not until the banks have cleared the garbage off their books.
The ban on short selling being discussed is likely a prelude to this.
I’ve been to Cincinnati exactly one time in the past fifteen years, but my understanding is that the Over-the-Rhine neighborhood not only is characterized by drug dealing — I think it was portrayed in the movie “Traffic” — but it has had a relatively recent riot. How can the median house there be worth over $200,000? What would the median house in Over-the-Rhine be valued at if taxpayers weren’t propping up values?
I guess it depends upon what type of “income” people are using to buy these houses… hehehe…
That was the Over-the-Rhine nabe in the movie “Traffic.” It’s where the rich girl went to score some drugs (and other pleasures).
Oh how the my-tee have fallen. Just two years ago it was Olympics this and Olympics that, Spire this and Spire that, Trump Tower this and Trump Tower that. Now they have condoze up the ying yang and a smoking hole in the ground to boot! But hey, Nicky thinks it’s still a great time to buy - so it’s gotta be all good!
We’re having a bit of server problems apparently. I appreciate your patience with the comments, etc.
That’s okay Ben.
As usual, I didn’t have anything important or profound to say.
I’m just in it for the smiley faces.
No worries — I post and then do whatever. I trust you to keep anything I put up that is worth keeping…
‘We refinanced our first house and took $300,000. Buying the second house seemed like the ideal thing to do,’ he said.”
“Not long after the family moved to Texas, Chang’s wife was diagnosed with breast cancer. ‘We found out that we were not able to pay both the medical bills and the mortgage.
And the $300,000 went where???? You put in all in the second house??? Sure you did.
It’s not like we took the money and lost it in Atlantic City. All we did was refinance the house,’ Horoski said.”
And spent it on Hummers, European vacations, granite counter-tops and spa visits. See, it is different. And we don’t want to pay it back.
“Federal rules introduced Tuesday to tighten mortgage requirements will squeeze the purchasing power of the average Metro Vancouver buyer by $40,000 to $50,000, market observers say.
Olympics in Greece - Huge pop in RE bubble
Olympics in China - Huge pop in RE bubble (but has re-inflated)
Olympics in Canada - Hmmmmm
There’s something special about the Olympics evidently.
Montreal finally paid off the debts from the 1976 Olympics last year.
“Speaking of the housing industry. Membership in the Chicago-based National Association of Realtors is shrinking like the price of a South Loop condo. The trade group’s Web site has long claimed 1.2 million dues-paying members, though a recent report from its chief economist, Lawrence Yun, notes that membership in January was just over 1 million, down from its 1.4 million peak in 2007.”
Methinks that if online real estate sales ventures like Redfin and Zip Realty get going, the NAR membership will shrink much further.
And, a question: Why have the online services been so slow to take off? You’d think that, after what the Internet did to the travel industry in general and travel agents in particular, that real estate agents would meet the same fate.
I used to think the same thing. The iron grip over the MLS is one reason - once that monopoly is shattered, watch out below.
I’m rooting for the NAR. I want them to get their dues-paying membership back up, maybe even boost their fees a bit.
After 25 years of saving for his first home, Kevin Gehle bought a townhouse in Coral Springs for $189,000. This was a home he was going to live in for 30 years. With the housing bubble ready to burst, Gehle’s mortgage jumped from $900 to $1,400 – an amount he wasn’t able to pay.
Ok, now why would someone who saved for 25 years and intended to live there for 30 years be dumb enough not to get a fixed rate mortgage?
From what I can gather maybe he was saving $100 year for 25 years. If he had saved a serious amount of money for 25 years he should have been able to have paid cash for the house.
paying cash would have been a horrible idea too.
25 years.. $189K
that works out to…. $21 a day.
But with compounded interest? Probably closer to $15 a day.. maybe less?
“…that works out to…. $21 a day.”
I can help you out, pal.
4 years = 1461 days
30 years = 7.5 * 4 years = 7.5*1461 days = 10,957.5 days.
Monthly payment at 5 percent on a 30-year fixed mortgage of $189,000 = $1,014.59
Total payments over 30 years = 360*$1,014.59 = $365,253.43
Interest payments over 30 years = $365,253.43 - $189,000 = $176,253.43
Average payment per day for each day over 30 years =
$365,253.43 / 10,957.5 = $33.33 / day.
You were only off by 1/3 to the low side… of course, we are just talking principle and interest costs here. Throw in Mello Roos, HOA, insurance, taxes, furniture, etc and the picture worsens considerably.
Thanks for the math help.. but i think the question is:
‘How many dollars must you save in a piggy bank per day to save $189K in 25 years? (We’re paying cash for the house.)
25 x 365 x $21 = ~$191K
..but that doesn’t include additional savings growth due to compound interest “earned” (perhaps 3 or 4% ?).
I tried to use an online compound interest calculator but it kept spitting out different answers for the same entries…
Just use MS Excel:
=PMT(0.05/12,30*12,-189000,0)
And yes, I neglected to include the likely opportunity cost of making a falling knife real estate investment compared to investing in other (less bubblemogriphied) asset classes which are likely to yield higher returns over the next three or so decades…
We saved for 8 years and just bought our first house with cash. Yes, we are frugal but it isn’t as if we starved for 8 years. We still took vacations, ate well, etc… and also made max contributions to our retirement plans. It is all about setting priorities.
Are you sure it’s not about having two incomes? Perhaps Gehle had just one income…
One income. My wife gave up her career to raise the kids. It was supposed to be temporary, but she really liked it and will now home school as they enter school age.
But a wife staying at home can save a lot of money by sewing, knitting, garage sale shopping, cooking from scratch, etc…
Ah! The traditional way! Good for you guys…and thanks for tending to the tykes as they should be tended.
only if the wife prefers to do that sort of work.
I don’t. never did. never will.
doesn’t make me a bad mother.
sorry for the digression … back to bubble talk.
Agree completely. It isn’t for everyone. BUT the fact that we didn’t pay 10x our income for a house meant that she had the choice to stay home.
Congratulations, Groundhogday!
That must feel absolutely fantastic!
Good luck on the homeschooling (we’re HS’ers, too).
O I hope this is us in another 4-5 years. We’re on year 4 of saving now, averaging $15,000 a year. The goal is $300k max home, paid for by $120k cash aforementioned joint savings, $150k personal savings, and $30k 403b loan. I don’t even want to have to go to the bank except to get a cashier’s cheque.
Remember that line from Monty Python and the Holy Grail?
“I’m not dead yet.”
MarketWatch First Take
Feb. 19, 2010, 12:16 p.m. EST
Foreclosure troubles only hibernating
Commentary: Seemingly positive data doesn’t mean it’s spring time for housing
By MarketWatch
CHICAGO (MarketWatch) — You would like so desperately for our housing woes to end that you want to believe the latest numbers on mortgage delinquencies and foreclosures signal a turnaround in the fortunes of American homeowners. But the numbers just don’t ring true.
The Mortgage Bankers Association on Friday said the delinquency rate for loans on one- to four-unit properties in the U.S. fell to 9.47% in the fourth quarter from 9.64% in the third quarter, a sign the group said that the mortgage crisis is easing. The percentage of homeowners entering the foreclosure process also fell from the third quarter.
Both of those figures, though, were higher than they were in the fourth quarter of 2008. And even if you concede the MBA’s point that the delinquency numbers rarely show a fourth-quarter drop (the Scrooge effect, you’d suppose, of bankers liking to foreclose ahead of Christmas and have their books in better order for the new year), how much solace can you take in the fact that we still have more than 15% of all U.S. mortgages either in arrears or in foreclosure?
..
Home prices not rising anytime soon
Expiring tax credit for home buyers pressured home sales in December and then the credit was extended, so we’re in uncharted territory in terms of volatility, according to Trulia CEO Peter Flint, who says prices aren’t going up over the next six to 12 months. Stacey Delo reports.
…
Here comes the California bailout. Are you ready?
Sorry to say, the total dollar amount only represents 7.5 percent of California’s $20 bn budget hole, even before sharing it with four other states. It appears that only “worthy homeowners” will be able to take advantage of it.
Here is another way to look at it: If San Diego County had roughly 100 m housing units with a median value of $500K as of 2005, and they subsequently lost 30 percent of their value (conservative estimate there!), that would tally to an aggregate home equity loss of
0.30*$500,000*1,000,000 = $150 bn = 100 * $1.5 bn.
And that is just a rough estimate of home equity losses for San Diego County, only — there are lots more homes in California outside of San Diego County.
P.S. In defense of my very crude estimate, I steadfastly maintain that it is far better to be approximately right than exactly wrong.
Feb. 19, 2010, 1:43 p.m. EST
Obama targeting homeowners with $1.5 billion in assistance
Arizona, California, Florida, Michigan and Nevada likely to qualify for new aid
By Ronald D. Orol, MarketWatch
WASHINGTON (MarketWatch) — Facing millions of foreclosures and high unemployment, President Barack Obama on Friday announced a $1.5 billion fund to help unemployed homeowners and other struggling borrowers in a handful of states.
“What we can do is help families that have done everything right to stay in their homes and we can stabilize the housing market so that home values can begin rising again,” Obama said at a town hall meeting in Nevada.
As part of the program, five states — Florida, Michigan, Arizona, California and Nevada — have home prices that have fallen enough to qualify for the additional assistance.
Obama said that price declines in homes and high unemployment in these regions have created major challenges for families.
He argued that too many lenders were too focused on “making a quick buck than acting responsible,” that “too many borrowers acted irresponsibly by taking on mortgages they couldn’t afford,” and government regulators ‘turned a blind eye to the problem.”
…
“…we can stabilize the housing market so that home values can begin rising again,” Obama said at a town hall meeting in Nevada.
The cluelessness continues…
Much local crowing about the increase in local median home prices. It’s not a big increase, but there has been one.
I can’t thinking that it is like that little incline that the roller coaster ascends before it r-e-a-l-l-y goes downhill. Y’know, the descent where all the riders go, “AAAAAAggghhhh!”
I suppose nobody addressed all the shaky reasons for the “little increase” in home prices:
- $8K homebuyer tax credit
- Fed MBS purchases
- Massive substitution of federally guaranteed GSE and FHA loans for broke back private mortgage securitization
- Banks withholding foreclosure inventory off the market
- Anything I missed?
“…we can stabilize the housing market…”
And why do I suspect there is a massive influx of dough through the uncorked* GSEs to supplement the paltry $1.5 bn?
*Their combined $400 bn budget limit was eliminated on December 24, 2009.
The local fishwrap brings the following:
Local housing starts in Jan. nearly twice those of Jan. ‘09
Fun comments after the story. Such as:
“Why don’t we sell the overload of homes already on the market before building new ones?? There is a huge backload of existing homes for sale, too…sometimes more than a year’s worth…”
Hope for comeback starting to look real
More comment merriment, including:
“I have done art work for most of the Tucson home builders. I have had NO requests for new art in the last 2 years. The year before that I had builders go bankrupt before they payed for the work they ordered. I see no ‘hope’ at this time.”
Well, things are not so bad! Burbank housing is just starting a low-income project where the cost to build is only about $320,000 per low income unit!
LOL
Of course , they are a non-profit, I do believe,so I guess they don’t expect to make a profit. LOL
Ah the advantage of tax breaks for investors.
Jack0
buy now before the tax credit expires, again.
I don’t know why people sweat money/housing/financial commitments with they are fighting potentially terminal illness. I wouldn’t really care about much else at that point but my family and health. I mean, at a certain point you just have to prioritize, unless of course this guy is playing the “victim” card for trying to cash in. I wonder what his cover would be if his wife didn’t have cancer.
BTW, we’re looking at houses tomorrow. We may throw out a few offers at $90 sq/ft. At this point I may take the gubmint cheese and run. I can’t wait forever…
“Contagion” and “domino theory” are flippantly used by international bankers to describe the potential for the Greek problem to spread. I humbly submit that these metaphors are inappropriate.
I prefer “cockroach theory” or “termite theory,” not only to recognize that the perpetrators of these financially engineered disasters possess the moral compasses of insects, but also to reflect that when you see a single cockroach or termite, there is a very good chance there are hundreds of others hidden nearby. “Contagion” and “dominos” don’t adequately describe a situation which has already occurred, but which yet remains to be discovered. Think “Enron again,” but spread across the governments of the developed world wherever Gollum and its kin have sway, and I suspect you will be on the right track.
Sovereign-debt theories
Domino theory
Assessing the risk that Greece’s woes herald something far worse
Feb 18th 2010 | WASHINGTON, DC | From The Economist print edition
Satoshi Kambayashi
HOW far is it from Athens to America and which countries lie on the way? That may sound like an esoteric geography question, but it is being asked by investors as Greece’s debt crisis creates global jitters about the safety of sovereign debt. So far Portugal, Ireland and Spain, the other high-deficit countries on the periphery of the euro zone, are thought to be next in line. In most big rich economies, yields have been stable and well below their long-term average (see chart).
But nerves are fraying elsewhere. The cost of insuring against sovereign default has risen in 47 of the 50 countries for which these instruments exist. Dubai’s sovereign credit-default-swap spreads soared to their highest level in a year this week, amid concern about the terms of a debt restructuring by a state-owned conglomerate. There is increasingly shrill commentary arguing that Greece is the start of a far bigger problem. “A Greek crisis is coming to America”, blared the headline on a recent Financial Times article by Niall Ferguson, a financial historian.
The stakes are high. A sudden loss of confidence in all sovereign debt, and especially in American Treasuries, the world’s benchmark “risk-free” asset, would have calamitous consequences in a still-fragile recovery. Equally, an exaggerated fear of sovereign risk could prompt governments into premature fiscal austerity, which might itself push the world economy back into recession.
Neither the shrill nor the sanguine arguments can be dismissed out of hand. Fiscal pessimists point both to past experience and to the arithmetic of public debt for evidence that sovereign-debt crises could spread far beyond Greece. The lesson of history, as documented in a magisterial study of financial crises by Carmen Reinhart and Ken Rogoff, is that public debt tends to soar after financial crises, rising by an average of 86% in real terms. Sovereign defaults have often followed.
The arithmetic argument for pessimism is equally compelling. Virtually no rich country has a “sustainable” debt position, in the narrow sense that none is running a tight enough budget or is growing quickly enough to stop its debt burden from rising. The worst offenders on this count are the euro area’s peripheral economies, as well as Britain and America.
…
From a long term follower and occasional poster. I sold my townhouse in late 2003 in Valley Village California after it tripled in value in 7 years. Thought I’d have to sit on the sidelines for a couple of years and wait this out. I have moved 3 times since.Once seller sold home ,second time greedy landlord (large complex in Woodland Hills The Summitt)) landlord kept on raising rent but all kinds of deals for new tenants so I left and finally to a townhouse in Calabasas privately owned but cheap landlord who does as little as possible and recently declined my asking to lower rent. I pay $1900 a month for 2 bedroom 1300 square feet.
Decided in the last few days even though I know not best time to buy I’ve had it with being a vagabond and really want to have a permanent home for my 8 year old daughters. I started looking. I can truly tell you it is different here and the good deals which are few and far between are getting snatched up immediately and very low inventory in my price range which is 350,000 tops. Then I talked to a mortgage broker today and she told me I could only qualify for a 225,000 loan unless I put more down than 20% .6 months ago I was told I could qualify for 350,000. She said lending has really tightened up.
I’m just so frustrated as I thought I was being responsible and not getting in over my head in the bubble years when anyone would have given me a loan for any amount and now really wonder if I’ll ever be able to buy. I know some on this board have no problem with renting but I really would like to be somewhere and know that is where I’m staying.And every realtor I talk to tell me most of the “deals”which are really only what I could afford are being bought by people paying cash.
When is this insanity going to end ????Yet ,I know of 4 people living in expensive homes for almost 2 years not paying mortgages.
I know there are several posters from the general area wonder what you are seeing? I’m thinking other than the really lesser desirable areas such as Lancaster, Inland Empire etc….prices here will never get below 2003 prices.
Insanity does have an upside: Eventually, it ends (unless you live in California)…
“I know there are several posters from the general area wonder what you are seeing? I’m thinking other than the really lesser desirable areas such as Lancaster, Inland Empire etc….prices here will never get below 2003 prices.”
Why don’t you leave the state? You are directly centered in the Arizona, California and Nevada housing crisis. It will return to affordabilty eventually, but this is going to take years to unravel possibly a decade.
I’m a single Mom that has lived almost my whole life here. I’m also in my late 40’s . I have no support system elsewhere so not so easy just to pick up and go.
It would be different if I was younger and not a single Mom.
We’re also in CA and waiting. I think we’ve got another 4-5 years before it’s ready. The expensive areas are just now starting ARM resets in earnest like Inland Empire had in 2007. Keep remembering–we’re three years behind! Patience will (eventually) be rewarded.
Do most Olympics have this many housing-related stories?
* The Wall Street Journal
* PAGE ONE
* FEBRUARY 20, 2010
For Olympic Bobsledder, Real Life Is a Downhill Slide
Price of Bill Schuffenhauer’s Dedication Was Losing Family’s House
By KEVIN HELLIKER
PARK CITY, Utah—About 18 months ago, Ruthann Savage’s fiancé quit his job and left town, leaving her to raise their child and pay their bills—a hardship that, in December, resulted in the loss of their home.
“If we’d had his paycheck, we wouldn’t have lost the house,” Ms. Savage, a nurse, says as she weeps.
But she really isn’t all that angry at her fiancé, Bill Schuffenhauer. Last month, he returned home from his travels with something much rarer than money—a berth on the 2010 U.S. Olympic team. And he is promising, as he did before the 2006 Winter Games, that after leaving Vancouver, he will retire from athletics, this time for keeps. “He is a boy, a sweet boy,” Ms. Savage, 27 years old, says.
Mr. Schuffenhauer, 36, is a bobsledder. Bobsledders—who begin their competition this weekend on the same course that claimed a luger’s life—have an especially hard time calling it quits.
In America, where the sport gets little attention, few kids dream about bobsled careers. So the U.S. team recruits its bobsledders from among the vast pool of former college athletes who won’t—or can’t—stop chasing athletic glory. The 12-member U.S. men’s bobsled team consists almost entirely of onetime college football and track stars, who tend to possess the speed and strength needed for sled-pushing success. Their average age is about 30.
“For those of us who don’t want to quit competing, bobsled is the perfect sport,” says Brock Kreitzburg, a former collegiate wide receiver and member of the 2006 U.S. bobsled team. Although an injury kept him off this year’s Olympic squad, he’s considering the 2014 Games, when he’ll be 37.
Bobsledding doesn’t pay well. Even its medal-winning participants are too obscure to secure lucrative sponsorships. The U.S. team’s dues-paying members—typically young athletes who double as fans—number only 400, compared with 30,000 for the U.S. ski team.
…
These two are made for each other. He’s a 36 year old flake, she thinks of him as a “sweet boy”.
Lol.
twingirls-
I hear ya. We sold a long time ago too, and I can relate to your story. I grew up in Valley Village, and my widowed mother still lives there. I’ve been thinking about looking in Village Glen, by Valley College. (UFO-University at Fulton@Oxnard). What is your opinion of the area? What demographics and class of people will I find there? We want to have access to light rail, after living in Ventura County and living on the parking lot known as the 101.
Can you email me at awaitingwipeout@verizon.net
Maybe we can inform each other. I am an ex-board member, so I know lots of stuff. I go to the meetings to easedrop. Befriend your opponet, so to speak.I don’t do residential (but I know a lot about the business). I worked for a REIT.
twingirls-
I am not interested in taking you on as a client, so don’t worry. It’s great to be able to speed up each other’s learning curve, and maybe help each other.
I am very well versed on what’s going on, and I am as frustrated as you. It’s like being punished. BTW, I am the aunt of twin nieces, now 14, who reside in Woodland Hills.
Village Glen is an o.k area not considered as good as some of the surrounding areas but definately livable. One of the problems though is the schools. You could always try to permit into a better school but having already done that with LA unified having your kids on permit can be very stressful. Of course this is only relevant if you have children and they are school age.
I will e-mail you.
Wipeout - I currently live (rent) in Valley Village, close to Valley Glen. This neck of the Valley is currently an interesting mix of working class and entertainment aspirants/hipsters priced out of Studio City/Burbank/Universal etc. The Orange Line is quite handy for connecting to the NoHo Red Line subway terminal, and I find this is a good neighborhood inasmuch as it’s a pleasant place to be, affordable, but also quite close to Hollywood, downtown Burbank and even the Westside should you want to brave the 405.
Twingirls and Fish In L.A.
I just got home, and read both your very pleasant and informative emails.Thank you so much. You’re both welcome to email me.
We are older folks (fit 50’s). We sold our “Garage Mahal” in Wood Ranch and are renting in Thousand Oaks. T.O. is what the valley was in 1983, with a flood of illegals. We call it Van Nuys West. No joke.
We have always bought new, beige stucco, fugly two-stories with an HOA. Now we want a cute one-story “toe tag” home, close to the red/orange line availability. We love the concept of leaving the “V” cars at home. We just want a nicely maintained working class neighborhood w/ nice neighbors. We couldn’t even grow a garden in our yards, because of the HOA and CC& R’s. Screw that noise.
The east valley has some really nice properties, but I noticed the demographics has changed. I wanted some feedback (thanks you two). When I go to board meetings, I get so much BS and fluff, it makes my head spin. They even lie to each other, imagine that
My other half wants to live in So Pasadena, but we plan on 100% down, so I’m not sure we can even afford the best of the REO deals.
Meanwhile, my pile of data and papers could cause an avalanche. OMG, this market is so screwed up, you can’t take anything at face value. Lies, Damn Lies, and Statistics.
“‘I’m a highly educated woman who has been taken advantage of by mortgage lenders and banks.’ That’s how Scottsdale resident Cheryl Pace started her e-mail, and it got the attention of our 3 On Your Side unit.”
Those who live by grift, die by grift.
Cheryl Pace, were you taken advantage when you signed up for a $27,000 revolving line of credit on a Phoenix house in December 2005 or the one for $70,000 in May 2008?
Were you taken advantage when you signed up for a $108,000 loan on another Phoenix house in January 2007?
This lady has had at least one new deed of trust recorded every year in Maricopa County, AZ from 1998 through 2008.
She hired a sketchy loan modification company because it has been almost two years since her last fix, and she is getting impatient.