Obvious Signs Of The Bubble
The Denver Post reports from Colorado. “Prompted by changes in the real estate finance environment, two of northern Colorado’s biggest residential developers are combining their assets into one package being marketed for $177 million. Windsor developers Martin Lind and Jon Turner are shedding 5,000 acres of residential and commercial properties. The properties are in Fort Collins, Loveland, Greeley, Windsor, Timnath, Berthoud, Johnstown, Mead and Severance. Lind said he’s liquidating non-core assets because federal regulators have crippled the ability of small community banks to finance development projects. ‘I’m reading the tea leaves, and it’s going to be a different game for developers,’ he said. ‘I think us small guys are toast. This economy is horrible, and it’s creating defaults all around, and I don’t want to be that guy.’”
The Greeley Tribune in Colorado. “On the surface, the banking picture by the end of the year looked rather grim for five area banks that have been struggling all year. Four of those are now under agreements with regulators to improve their practices. Working through problem assets, or bad loans and real estate the banks wind up with after loans are foreclosed, will be the tenor of 2010, bankers said.”
“All banks ended the year with millions in other real estate owned and loans that were so late they no longer accrued interest, as they’d been building all year. ‘You just keep moving it through the pipeline,’ said Bank of Choice president Darrell McAllister. ‘You take that bite on the front end, it goes to nonaccrual and eventually goes to OREO. They just keep moving on through. Everyone’s working through problems.’”
“While loans that were 30 to 89 days late have been dropping, it’s likely because fewer bankable customers are getting loans. ‘Qualified loan requests are just down, just so dramatically,’ said Byron Bateman, president of Cache Bank and Trust. ‘We don’t have the answer. Our calling programs are more aggressive than ever. So we’re talking to more prospects and more people. A lot are qualified prospects, just there’s still that apprehension out there about banks, the economy, and all those things.’”
From AZ Biz. “The incoming CEO of the Tucson Association of Realtors (is) already thinking about the tough times still ahead as the Tucson real estate market copes with foreclosure-related barriers. ‘The term we all should become very familiar with, that we’re going to see more of this year, is strategic default. People who are able to pay are handing the keys over to the banks because they are so far underwater. They are actually making the decision to walk away from the house,’ said Philip Tedesco, who takes office March 1.”
“No one knows how to truly fix the housing crisis, he explained, ‘because there is too much still to be played out on the foreclosure front.’”
The East Valley Tribune in Arizona. “A growing trend among homeowners with upside-down mortgages is simply walking away from their homes without even trying to get a loan modification, according to local mortgage brokers.”
“‘People have gone from buying a house to raise their family in to buying a house as an investment,’ said Eric Bowlby, president of Amerifirst Financial in Mesa. ‘We see customers all the time who come in and they’re letting their home go on purpose to the bank, and they act like the bank screwed them because it’s now upside down in value. But they pulled a line of credit out. They bought themselves an RV, a new truck, a new boat, and they think that it’s the bank’s fault that their house is upside down.’”
“‘Experts’ tell people ‘well, if you’re upside down in your house $100,000 and you make $40,000 a year, you should walk away from your house,’ Bowlby said. ‘When you feel like it’s OK to walk away from something you committed to, the banks, because of the losses, have to start walking away from things that they committed to … and the company that you work for may lose the ability to fund their own business, which means you’re now out of a job.’”
“The consumer sits back and says ‘OK, let’s look at it this way: I owe $400,000 on a $300,000 home. If my credit (score) was perfect, they’re not loaning me any more money, so what difference does that perfect credit mean,’ said Kevin Hardin, director of the Mortgage Mediation Group at Valley-based law firm Thomson Conant.”
“When purchasing their east Mesa home nearly four years ago, Justin Albrant said he rushed into signing a loan agreement that ended up allowing both the monthly payment and balance to escalate over time, and the monthly payment already has increased from about $1,100 to $1,450. ‘When the mortgage reaches $1,600, I have no choice,’ he said. ‘It could be next month or it could be in six months. This is my dream home and I don’t want to walk away. It’s not something I can do and just shrug it off. It would make me very upset.’”
“A year ago this week, President Barack Obama was at Dobson High School in Mesa to announce federal initiatives to help distressed homeowners and reduce foreclosures. Albrant hoped the program would help him but was told he isn’t qualified for a modification. ‘I don’t qualify under their specifications, which means I haven’t had a hardship like losing my job or stuff like that,’ he said. ‘The hardship I have, and it is a hardship, is my monthly payment gets bigger … it’s an unsustainable loan and I’m going to lose my home if they don’t do anything.’”
“Kevin Hardin, director of the Mortgage Mediation Group, said the modification program is simply a failure. ‘There isn’t anything working,’ he said. ‘Out of several million eligible homeowners … they only finalized 66,465 modifications,’ Hardin said, adding the growth rate of foreclosures in 2009 continued to far exceed modifications.”
“A reasonable person starts to say ‘obviously the government is talking, but really doesn’t want to help homeowners. They’re just trying to squeeze every payment out of the homeowner they can before default occurs,’ he said.”
“‘I think there’s been progress,’ said Dan Huss, president-elect of the Arizona Association of Mortgage Brokers. ‘I think you’d probably say the government statistics maybe don’t bear that out, but I think that’s more of a bearing of there was just so many loans done for people who absolutely could not afford it in the first place and so you can’t even get them qualified (for a Home Affordable Modification) versus banks just not wanting to keep people from foreclosure.’”
“Huss said principal reduction may help more homeowners stay in their homes, but it could be a hard sell. ‘Four years ago when you owed $300,000 and the house was supposedly worth $600,000, had the bank come to you and said ‘OK, let’s split this equity, let’s make your note now $450,000 and we get some of that equity’, people would have said, of course, ‘no way,’ he said. ‘And in the future when properties appreciate, these same people who are saying they want banks to write down the principal balances are going to be saying ‘look at all this equity I have in the house’, and if the bank came and said, ‘let us have a piece of that equity’, they never would.’”
The Salt Lake Tribune. “Are FHA lending standards — tightened in recent weeks because of increases in problem loans — still too loose? Has FHA become the new subprime lender of record? Some predict coming loan losses are going to reach alarming levels. Although the number of homebuyers taking out mortgages insured by the Federal Housing Administration had been on the decline as recently as 2006, ‘today, FHA is pretty much the only game in town,’ said Salt Lake City real estate agent Scott Colemere. ‘It’s the loan most people qualify for.’”
“Paul and Jennifer Anaya of West Valley City, who have three children, wanted to buy a home in 2008. But not until last year had they saved up the minimum 3 percent down payment the FHA required at the time. The $8,000 tax credit for first-time buyers and a low mortgage rate tipped the scales further in the Anaya’s favor. ‘We wouldn’t be in our house if we would have had to put 5 percent or more down,’ Jennifer Anaya said. ‘It’s hard to save up $10,000 to put down on a house.’”
“Loans with small down payments are especially risky in housing markets where prices are falling because it doesn’t take much for a homeowner to be ‘underwater,’ owing more on their mortgage than they can get by selling their home. Generally, the more underwater a borrower, the more likely a default.”
“Home values in the Salt Lake area have fallen about 13 percent from a peak about three years ago and are expected to decline another 3 to 5 percent in the next year or so. That could effectively wipe out the down payment of those who bought homes in the past year and put down only 3 to 5 percent, raising the risk of more defaults.”
“But others want to see the FHA tighten up even more. In addition to Congressman Scott Garrett’s call for larger minimum down payments, former Fannie Mae executive Edward Pinto, a mortgage industry consultant, has floated the idea of a 10 percent minimum. Certainly, fewer loans would be made under those scenarios. And although no one can say with certainty whether that might be a disastrous move for the already fragile economy, some in the industry are fearful.”
“‘If we go even to a 5 percent down payment, it will really hurt, the effect on our economy and jobs would be tremendous,’ said mortgage lender Julia Borst, president of the Utah Mortgage Lenders Association. Utah would be especially hurt because ‘we have a large first-time homebuyer population that is younger and doesn’t have as much of a down payment.’”
“Utah homebuilder Clark Ivory agrees, arguing that raising the required down payment ‘would slow down the time frame for purchasing, which is something you don’t want to do when you’re trying to stimulate the economy.’”
The Las Vegas Sun in Nevada. “During his visit to Las Vegas on Friday, Obama noted Nevada’s foreclosure rate, which has been the highest per capita in the nation, and said there were ‘too many brown lawns and for-sale signs.’”
“The president said there was plenty of blame to go around for the housing market collapse, pointing to lenders who were ‘focused on making a quick buck instead of acting responsibly,’ borrowers who took on mortgages they couldn’t afford and regulators and lawmakers who ‘turned a blind eye’ to the actions of Wall Street.”
“During a town-hall meeting at Green Valley High School on Friday, he said the goal of his plan is to ‘help families who’ve done everything right stay in their houses.’ ‘During these difficult economic times, we will work to help responsible homeowners stay in their homes and stabilize the housing market so home values can rise,’ Obama said.”
‘we will work to help responsible homeowners stay in their homes and stabilize the housing market so home values can rise,’ Obama said.’
I don’t know if this stuff is humor or tragedy. If the white house really believes bubble prices can return and hold, they are first rate fools.
We have to find a new way to pay the bills, and the housing bubble economy is going away, not to return. I didn’t figure this out on my own, we learned it (painfully) after the Texas bubble:
‘Arizona has lost almost 300,000 jobs during the current recession — something that noted economist Bill Greiner said reflects how people feel about the recovery. ‘A lot of folks believe that, whether we’re out of a recession or not, depends on whether they have a job,’ said Greiner of UMB Asset Management in Kansas City.
‘While visiting the Valley, Greiner said Arizona has more going for it than a lot of states — climate and a lot of houses on the market. ‘A lot of land, too,’ he added.’
‘Greiner said Arizona’s economy is very sensitive to construction trends and the state needs to move beyond that and its reliance on tourism. He said it might take a lesson from Texas, once heavily reliant on the oil industry.’
‘Over the last 20-30 years, Texas has spread out to other areas,’ he said.’
‘we will work to help responsible homeowners stay in their homes and stabilize the housing market so home values can rise,’ Obama said.’
Is it so hard to believe that our government should be working towards affordable and unaffordable housing at the same time? Behind Obama is a Goldman Sachs alumni at every turn. Just look for the hand in his back. Bush and Cheney were awful and this guy is even worse.
We have bankrupted our country in the name of housing. It makes you want to cry.
By opposing affordable housing, Obama is locking out poor people (which includes mostly minorities and young families) from home ownership. What happened to the principles of his own party? I thought O-man told Joe the plumber that he wanted to spread the wealth around from the productive (wills) to the lazy (will nots).
The words “Obama” and “principles” in the same sentence just seem wrong somehow.
This housing mess is like the GF and FB stumbling blindly into a deep hole of liquified quicksand.
You panic, struggle and wiggle and you could end up dead.
Keep your head, relax, float, breath deep, lean backwards and slowly work your way out with your arms and you’re cool.
I really like the panic, struggle and wiggly bit best as it always makes a good movie.
Neil…pass the popcorn please.
LOL
“The words “Obama” and “principles” in the same sentence just seem wrong somehow.”
yeah of course it does. he was against the iraq war. he’s ending the iraq war. he ended torture. he is closing gitmo. he’s trying to get people to the doctor. he’s trying to reduce pollution and hold back climated change will making our air healthier. real unprincipled guy, is that what you’re saying?
btw- what broke nation borrows for 30 years at 5%?
He’s “trying” a lot. He’s “succeeding” at nothing. He’s this generation’s Jimmy Carter.
All talk and no performance.
Only success counts, sweetheart!
He’s “trying” a lot. He’s “succeeding” at nothing. He’s this generation’s Jimmy Carter.
Life is full of stuff to ponder. Alexander Haig Jr. just passed away. I found in my books and started reading his “Inner Circles, A Memoir.” 1992
“(Jimmy) Carter was certainly the most morally consistent President the nation had known since Wilson, and his ideals inevitably let him into political difficulties.” p. 532.
If Obama and the ship of fools he calls his administration would stop their ill-conceived meddling and let the natural consequences of reckless lending and speculation play out, “affordable housing” would arrive on its own. Of course, if you can’t afford a 20% down payment on your own resources - rather than some gov’t program - you have no business buying a house anyway.
That young family in Utah couldn’t save up $10k but bought a house. Job loss, health problems, furnace needs replacing and this family is sunk. If you can’t save up $10k you have NO business buying a house.
True, though in Bold, New Future, they take the $10k from those who save it, skim some off the top, offer it as $8k for a tax credit so some fool can then “buy” a house and leverage that $8K 5x into an extra $40K in price. Then, they lose the house.
The only person who benefited from this transaction was the one taking the money and skimming off the top… bankers, etc.
“By opposing affordable housing, Obama is locking out poor people (which includes mostly minorities and young families) from home ownership.”
This is truly the most amazing part of the Democratic party platform. How these long-time champions of the poor and the oppressed believe that pumping up housing prices still further into the stratosphere is going to help their favored constituency is a deep mystery to me.
I am also curious what the Democrats have in mind regarding specific measures to make homes less affordable (i.e., stabilizing “stabilize the housing market so home values can rise”). Does anyone know how they intend to do this, or is the plan a carefully guarded secret? And if it were possible for them to do this all along, shouldn’t we blame politicians for ‘allowing’ housing prices to crash by, what, thirty percent already off bubble peak price levels?
Golly gee, not a soul has bothered suggesting a response to my suggestion after several hours. I guess no Dumbocrats read or post here.
How these long-time champions of the poor and the oppressed believe that pumping up housing prices still further into the stratosphere is going to help their favored constituency is a deep mystery to me.
Perhaps their actual favored constituency isn’t what everyone always thought it was.
PB,
It’s just politics. 65-70% of people have an interest in higher house prices. Those with paid-off houses and want to believe they have a windfall profit, and those underwater who want to believe they are on their way to windfall profits.
“The only politicians with principles are the ones out of power.” - someone
Also, higher home prices just concentrate more wealth in the FIRE sector. That’s all. The current crop of politicians is well funded by that sector. That they’re harming the rest of the economy seems to be lost on them.
It’ll continue until something really breaks.
I can guess that there are a good amount of FBs who voted for Obama and want the U.S. out of the Middle East, want socialized health care, want to rob Peter to pay Paul, and don’t give a rat’s a$$ about affordable housing.
I recall the Clintons sent their daughter to private school when “they” were president - or whan Hillary was President
Of course they would not send Chelsea to a public school because it’s a “colored school.” But that’s socialist hypicrosy for you.
“It’ll continue until something really breaks.”
Here is where HBB views diverge. I maintain that it is already broke, but the brokenness is not yet common knowledge.
“Behind Obama is a Goldman Sachs alumni at every turn.”
Below is a post from Rolling Stone Political section. It is a continuing story from Matt Taibbi about the shenanigans on Wallstreet and their cozy relationship with our “government”.
It is the BEST read I have seen on the saga of Government bailouts for Goldman and Friends. You should read the whole thing.
It would cause a revolution of most Americans knew how the system is rigged for Wallsteet buddies via the FED. I used a pejorative remark in past posts of Goldman and buddies, but will not so you this post isn’t “deleted”. Read it. Then let’s go after Paulson, Bernanke, and Geithner. They should be in prison.
http://www.rollingstone.com/politics/story/32255149/wall_streets_bailout_hustle/print
Matt Taibbi is telling the story the MSM propagandists wouldn’t dare, for fear of offending their corporate owners and advertisers. What’s cool is that mostly younger people read Rolling Stone. They will have their eyes opened to the collusion between our current political “leadership” and the Wall Street plutocrats who are sticking their generation with the bills.
They will have their eyes opened to the collusion between our current political “leadership” and the Wall Street plutocrats who are sticking their generation with the bills.
But Joey says they are just doing what we want them to do.
Comment by joeyinCalif 2010-02-20 18:40:45
Be it by vote or by campaign contribution, we put successful pressure on our representatives and, from our point of view, they do as they are told.
i remember back in the day.. The Rolling Stone.. the Berkeley Barb..
Hippies used to own and write for them. Who does these days.. hippies in their 60’s?
lemme see.. wikipedia.. The Barb was gone in the early 80’s.. RIP.
But the other.. Rolling Stone was founded in San Francisco in 1967 by Jann Wenner (who is still editor and publisher)
Jann Simon Wenner (born January 7, 1946) is the co-founder and publisher of the music and politics biweekly Rolling Stone, as well as the owner of Men’s Journal and Us Weekly magazines.
That makes her 64.
“Us Weekly” is a celebrity gossip magazine, founded in 1977 by The New York Times Company, who sold it in 1980. It was acquired by Wenner Media in 1986.
This Rolling Stone Wenner chick is a CEO of some media company .. and it does celebrity gossip magazines?
———
Nicest things about the net is you never know where something will lead.. if i cared at all about any of it, i’d go deeper just for kicks.
Jann Wenner is a man.
Who cares if The Rolling Stone is past its hey day? They seem to be one of the few journalistic outlets which stick to principles instead of whoring for Wall Street. What do you have against journalistic integrity, Joey?
Someone missed out on “Almost Famous”, definitely a flick worth watching.
yeah? Why’s he got a girl’s name?
you forced me to go back to wiki.. They have a page on Wenner.
early life..
..born in New York City… parents divorced in 1958..he and his sisters, Kate and Merlyn, were sent to boarding schools to live.
..attend the UC Berkeley…wrote a column in the student-run newspaper, The Daily Californian.. dropped out in 1966..
..landed a job at Ramparts, a high-circulation muckraker.. worked on the magazine’s spinoff newspaper.
——-
..Wenner Media, which consists of Rolling Stone, Men’s Journal, and Us, is a private company owned by Wenner and his wife, Jane (from whom he is separated, but “with no plans to divorce,” as the company officially phrases it), worth somewhere between $500 million and $750 million, with earnings in the $40 million-to-$60 million range. Wenner Media has no outside investors and no debt. This is a kind of personal and business perfection that, in the age of venture capital, technology-infrastructure costs, and IPOs, does not exist anymore. Indeed, Wenner Media may be the last surviving closely held independent midsize publishing company in America.
http://www.jannswenner.com/Press/Checkout_Clout.aspx
He is one rich hippie..
Jann isn’t a girl’s name. Like Wenner, it is a Scandinavian name. I presume it’s equivalent to Ian / Iain / John.
wiki..
Personal life
Wenner and his wife separated in 1995, though Jane Wenner still remains a vice president of Wenner Media. She and Wenner have three sons, Alexander Jann, Theodore Simon, and Edward Augustus.
Since 1995, Wenner’s partner has been Matt Nye, a fashion designer. Together, Wenner and Nye have three children.[12]
Matt and Jann have three children.. Matt?
——
OK. Now i admit this name business has me completely befuddled..
It would cause a revolution of most Americans knew how the system is rigged for Wallsteet buddies via the FED.
Right on Dio! But Joey said otherwise yesterday.
Comment by joeyinCalif 2010-02-20 18:40:45:
Whatever connections exist between our government and big finance / big business are known, acknowledged and approved of by most of us.
i stick by what i said, Rio.
Ask people if they “know for a fact that the system is rigged”.
It doesn’t matter what system you’re referring to. The answer is always yes.. since time immemorial.
But be prepared when “Will you join us and fight the revolution?” elicits a completely different response.
If you went into every living room and kitchen in America and laid out the full scope and details of the scam to them, the sheeple would merely shrug, then go back to watching whatever mindless fare was on the TV. They are too stupid and complacent to do otherwise.
“If you went into every living room and kitchen in America and laid out the full scope and details of the scam to them, the sheeple would merely shrug, then go back to watching whatever mindless fare was on the TV. They are too stupid and complacent to do otherwise.”
+1 Exactly!
Comment by joeyinCalif 2010-02-20 18:40:45:
Whatever connections exist between our government and big finance / big business are known, acknowledged and approved of by most of us.
i stick by what i said, Rio.
You are underestimating or are not familiar with the history of the American character, slow to anger but possessing limits that when exceeded are most assuredly exceeded.
America may be slow to rise to a challenge. But our history has shown that once we make up our minds to really do something, nothing can stand in our way.
Carrie P. Meek
“He who is slow to anger has great understanding, but he who has a hasty temper exalts folly.” Proverbs
Is it in the PTB’s interest to have us constantly bash ourselves, to constantly put our fellow Americans down? Is this another way to promote division?
Sammy,
People might be complacent because they realize that if they protest too loudly, they will be discredited as members of some crazy militia group or something.
Notice what all our protesting against the TARP got us…
In the late 80’s I worked (indirectly) for a company that is often referred to as “The Little Berkshire Hathaway”. The company was quite profitable and the principals were wealthy men.
We are riding in one of the company cars to a dinner meeting and one of the bankers in the car asked why they used such non-descript vehicles instead of limos. One of the prinicpals replyed “when the people figure out what’s going on you don’t want to be in a limo”.
I have never forgotten the comment. I knew by the way he said it that he was serious.
“we will work to help responsible homeowners stay in their homes and stabilize the housing market so home values can rise,’ Obama said.”
Responsible people don’t need government help.
“During a town-hall meeting at Green Valley High School on Friday, he said the goal of his plan is to ‘help families who’ve done everything right stay in their houses.’ ‘During these difficult economic times, we will work to help responsible homeowners stay in their homes and stabilize the housing market so home values can rise,’ Obama said.”
Virtually none did everything right, even if they tried, and virtually none will be helped by these measures. Many, many more will continue to be harmed by having to pay artificially high prices for housing. Meanwhile, bankers that did everything wrong have been kept in their banks and rewarded with the usual massive bonuses.
..‘we will work to help responsible homeowners stay in their homes and stabilize the housing market so home values can rise,’ Obama said.’
I sure don’t take that statement at face value.
My interpretation is:
Prospects for a survivable landing are greatly improved by convincing as many of you clueless FBs as possible to pay that mortgage as long as possible.
I concur; this is no more nor less than a political effort to keep households whose most rational move would be to walk away from unrepayable debt obligations from doing so in droves. It is important for the future of U.S. prosperity to help convince knifecatchers to ride those falling knives all the way to the ground.
“A reasonable person starts to say ‘obviously the government is talking, but really doesn’t want to help homeowners. They’re just trying to squeeze every payment out of the homeowner they can before default occurs,’ he said.”
He nailed it.
Oh, then learn to love the NAR.
The NAR is spending their (declining) membership’s dues for ads trying to convince folks that now is a great time to buy.
For this sacrifice they have my blessing.
Don’t the NAR dummies realize that by pricing out potential buyers, higher home prices are reducing the number of sales transactions? This organization seems to practice cannibalism.
While I don’t wonder what truth-telling NAR ad-copy would sound like, I wonder how they can afford to eat in the aftermath.
“Folks, real estate is way overvalued. Excess inventory pressure is such that nothing short of Divine Intervention can prevent property prices falling to conventional measures of affordability.
You should hang onto your money until prices bottom out.”
“Folks, real estate is way overvalued. … You should hang onto your money until prices bottom out.”
Joey –
I think you may have discovered a future calling in life, working at the NAR. Your approach to increased Truth in Used Home Sales could help drive the U.S. real estate market towards rationality, which would eventually result in a stable market and increased home sales. You would also help reduce the amount of typing required by HBB posters to get the job done.
I remember seeing some footage of Obama in late 2008 in Chicago shortly after he was elected. I think it was in a restaurant. Somebody asked him if he was going to sell his Chicago home, and he off-handedly said to him, “Now’s not the time to sell.”
It was a casual comment that probably wasn’t mentioned in the media anywhere, but it worried me to hear it.
Interesting comment…
“…they are first rate fools.”
Lord, what fools these mortals be!
– Shakespeare’s Puck –
‘we will work to help responsible homeowners stay in their homes and stabilize the housing market so home values can rise,’ Obama said.’
I guess I’m an irresponsible homeowner because I don’t need help?
Also, cramdowns, a part of his proposal, are EXTREMELY unfair. Cramming down someone’s principal by $100,000 is the same as giving someone $100,000. And this will be a TAX FREE gift.
In California, I have to earn $200,000 to clear $100,000.
When “main street” cries, I’m always astounded by the TRILLIONS of dollars of giveaways they get.
Our middle class is now on welfare every bit as our underclass is. But for some reason, it’s a socially acceptable form of welfare.
The Prophet of Change will not let “change” come to the housing market… no, no… we must have unaffordable housing and reward people who cheated on their mortgages to get into “their” homes. What a waste of money - our money!
“‘We wouldn’t be in our house if we would have had to put 5 percent or more down,’ Jennifer Anaya said. ‘It’s hard to save up $10,000 to put down on a house.’”
How do we as a society benefit from subsidizing the purchase of a home by someone who does not have $10,000 available to her? I don’t think this insanity is going to stop, short of a full blown depression.
It’s not about “WE”. It is all about “THEM”. The THEM of this world don’t have to pay for their mistakes. WE do. That makes the game very painful for WE and very delightful for THEM.
Remember that whole thing about 2 wolves and a sheep voting on what’s for dinner? Well, the responsible people get to play the role of the sheep in that little episode, while the greedy crooks are the wolves.
‘Home values in the Salt Lake area have fallen about 13 percent from a peak about three years ago and are expected to decline another 3 to 5 percent in the next year or so. That could effectively wipe out the down payment of those who bought homes in the past year and put down only 3 to 5 percent’
I’m sure we’ll be treated to FBs blaming FHA for ’screwing’ them in the years to come:
‘We wouldn’t be in our house if we would have had to put 5 percent or more down’
In Victim Nation everybody is a victim.
It’s great for Democratic policy makers though. Making, then helping victims is their primary occupation.
I’d have to nuance your statement, PB. The Democratic Party can only perpetuate its own expansion by the creation and maintenance of vast entitlement classes. In return for setting up corrupt, bloated, inefficient bureaucracies to service these “needs,” the Democrats are able to build up a system of patronage and graft that allows them to literally buy elections.
Republican sleaze, on the other hand, consists of doing the bidding of the banksters and corporate moguls, while trying to frighten or mislead the sheeple into voting for them due to false perceptions that they are somehow less corrupt and more committed to better, leaner government than the Democrats.
They both suck.
SIL and hubby are sure to be bitter. They took the $8K tax credit bait and bought themselves an overpriced condo in West Bountiful.
By my reckoning, a five percent loss off $170,000 is $8500 — enough to more than fully offset the tax credit.
When I tried to discuss the SLC housing market with her over the holidays, SIL quickly and politely changed the subject…
Don’t the Mormons have prophets? How ’bout some practical prophecies for a change?
You mean like “avoid debt”?
Those General Authorities may not get all their prophecies exactly right. For instance, most educated humans these days tend to doubt that all the land on the surface of the planet literally was recently, even within a few thousand years of the present day, inundated in a Great Flood. But I think they have done a very good job on the “avoid debt” front.
Oops — my hand slipped, and I accidentally posted the wrong article. Try this link. I don’t personally claim to understand how paying ten percent of one’s income to a church helps reduce the risk of bankruptcy; ask an LDS church member if you want an explanation of this mystery.
“I don’t think this insanity is going to stop, short of a full blown depression.”
That’s why a depression is baked-in, IMHO.
But I’m sure she was able to send $10,000 to the California “Yes on 8″ campaign!
Bowlby is right in his chain of reasoning where jingle mail will lead to. But the situation will be bad for the economy as a whole in any case. I am for “walk-aways” because they will speed up the pace of the economic collapse. That means the recovery will arrive quicker when artificial supports are removed. And houses will become affordable. Got T-bills?
sorry.. but i can’t help but envision a car wreck analogy when someone suggests speeding up the pace of collapse is beneficial.
The higher the speed at which you hit the wall, the sooner they will release you from the hospital? Not necessarily.
Energy is required to slow a car. Likewise, energy is required to slow an economic fall. That “energy” is money.
“Wasting” money by way of “artificial” economic support means less economic damage will be done on impact, and recovery should then be easier, and happen more quickly.
‘economic support …less economic damage will be done…recovery should then be easier…happen more quickly’
That’s a nice fantasy, but I don’t see much in the real world to back it up. IMO, this stuff has already made things much worse. What’s that saying about what you do first when you realize you’re in a hole?
‘not until last year had they saved up the minimum 3 percent down payment the FHA required at the time. The $8,000 tax credit for first-time buyers and a low mortgage rate tipped the scales further in the Anaya’s favor. ‘We wouldn’t be in our house if we would have had to put 5 percent or more down,’ Jennifer Anaya said. ‘It’s hard to save up $10,000 to put down on a house.’
So more foreclosures by people that have kids and can’t save a few grand is going to help? I guess you are all for ‘cushioning the fall’ for these people:
‘If we go even to a 5 percent down payment, it will really hurt’..said mortgage lender Julia Borst, president of the Utah Mortgage Lenders Association. Utah homebuilder Clark Ivory agrees, arguing that raising the required down payment ‘would slow down the time frame for purchasing, which is something you don’t want to do when you’re trying to stimulate the economy.’
Yeah, let’s do what the mortgage and shack-building people want, they wouldn’t lead us astray.
Here’s an idea joey; take out YOUR wallet and help these poor brokers and builders with some of YOUR money, and get back to us on how much good it did.
..take out YOUR wallet and help these poor brokers and builders with some of YOUR money..
I don’t plan on contributing any of my money, and I’m fairly certain I can continue to avoid doing so. I might somehow be forced to pay…
In any event, that an economic free-fall will do more damage, and require more time, money and effort to repair than would a controlled decline seems to be self evident.
We’re all in a hurry to see property prices fall. I believe nothing can prevent that from happening, and I that the RE market can decline without grossly affecting other markets.
The time to buy property will come.
From the owners’ point of view, what sort of world do we want to see when we look out of our windows? I think it might be nice if that world were not too different than what’s out there today.
In any event, that an economic free-fall will do more damage, and require more time, money and effort to repair than would a controlled decline seems to be self evident.
———————-
Joey,
Some would argue that the damage will be far worse, and that the damage will be spread out to those who truly are innocent in all of this. If they had let it crash quickly, we could be more assured that the greatests consequences would fall mostly on the guilty. With the bailouts, the damage will be inflicted upon a much greater portion of the population, including generations that had nothing to do with the bubble.
I’d rather see a quick crash, then a healthy rebuilding based on the much more productive and useful sectors of our economy, not housing and finance. The sooner those sectors shrink as a portion of our economy, the better off we will all be.
If they had let it crash quickly, we could be more assured that the greatests consequences would fall mostly on the guilty.
Yes.
The longer this drags on, the more money is wasted and the more time the crooks have to jump ship and get away.
how about you, Peggus?
You got your down payment safely tucked away in a bank? Got your job? Got your retirement or some fall-back money secured behind some stocks, mutuals, bonds or something?
Suppose we just stand back and let it all go.. Suppose we just let the banks fail. The FDIC can’t hope to keep up. Poof. Your d/payment just evaporated.
No banks, no business loans, so there goes your job.
Investments? Well, wall streeters have been in a panic and bailed out en mass, so any value you may have had there slipped away down the tube.
—-
On the bright side, property prices are easily affordable for someone who has two dimes to rub together. Unfortunately you won’t qualify.
You do realize that most of this is going to happen anyway, right?
As this crash takes forever to play out, the crooks running the game are NOT looking for a way to make things end well: they are instead looting everything in sight. The crash will be just as painful in the end, but they’ll have safely escaped.
“What’s that saying about what you do first when you realize you’re in a hole?”
Let me guess: ‘Try to dig your way through to China’?
‘If we go even to a 5 percent down payment, it will really hurt’..said mortgage lender Julia Borst, president of the Utah Mortgage Lenders Association.
Translation: It’ll hurt realtors’ and mortgage brokers’ ability to make a fast buck by writing loans for fools who are manifestly unable to afford those properties. But no worries, that’s what the taxpayers are for.
Thank you, Obama Administration. Thank you, Republicrats. Thank you, retards who continue to vote for politicians who are in bed with the Wall Street con men who are stealing us blind.
My anology is a bit different… throwing money at the economy before housing resets is like building a dam to hold off this 100 or more year flood with a finite number of trees (national debt)… each time the government stacks more trees (public money/national debt) in front of the floods, more people move into town behind the dam, thinking everything is A-okay.. problem is, the government will eventually run out of trees and this flood (which represents personal / household debt and a stalled economy) continues to build behind the dam and will take out more people when it does let go….
government should get the hell out of housing and let this 100 year flood pass and take out all those who moved into the town with it.. they will land down river in another town and can rebuild then..
Great analogy, matthew.
I don’t think that analogy works. Prolonging the movement to market prices just leads to more malinvestment, more perverse incentives and more transferring of wealth from the population to the FIRE sector.
A better analogy is that prolonging the adjustment is like letting a wound fester, rather than taking strong action to repair it as soon as possible. Strong immediate leads to less pain and better healing, in the long run, but can lead to more pain in the short run. Right now, it’s as though the patient is just being given morphine, and nothing is being done about dealing with the actual wound.
Stay in a home that is “underwater” $200,000 ? Many are and more today. To keep your perfect credit, paying a high mortage on a home with negative equity would be insane. Go rent the house like yours down the block for 50% less with no RE taxes, etc to pay. Paying your present mortage with high negative balance for 15, 20, years what have you really accomplishment? You can never “catch up”. Walk and learn your lessons.
I don’t want T-Bills. When Uncle Sam repudiates his massive, unpayable debts - as he will - I’d rather have something more tangible than printed paper now worth a fraction of its original value.
they aren’t that unpayable. that’s a common meme. the US’ debt to gdp ratio isn’t that high. others have done worse and haven’t had hyperinflation.
What makes people think the government will permit the economic collapse & deflation which results from this ponzi type shell game? With zero interest rates, $750 billion in TARP funds, and god knows what else, Obama and company propped up the banksters. Sooner or later, the populace will realize the 11+ million jobs are not coming back in any appreciable numbers, at least at anything close to previous income levels. That is when things really get ugly.
Deflationists think the government will just tell people to deal with their predicament, live in a cardboard box as housing prices collapse. Inflationists think the government will hand out bigger and bigger checks.
I don’t know what is the “best” course of action. I just doubt our political leaders have the courage to tell citizens their social security benefits will be cut, medicare benefits be capped, unemployment benefits stop (after what, 2 years of extensions?). The checks will get larger and larger.
Bill, have you changed your mind on walkaways?
The latest in the saga of my former co-worker and her house in Lost Vegas.
- Bought in 2005: $340,000
- Present suggested retail price: $130,000
It’s going to take one huge Band-Aid to deal with that, especially since she probably put most of that purchase price down at the time of purchase. Walking away isn’t so painless. Of course in 2005 she was too smart to listen to anybody. It is funny how many victims start out as savvy investors.
Even at 130K its in that blast furnace. Without easy money, who would want to live there?
Libertines such as myself
I don’t live in Vegas but have visited there many times, I did live many a years in Denver, I’ll take 100 degrees for 4 months any time over daily barrage of weather changes.
Don’t we just love to shovel 10 inches then watch it melt and then you do it all over again, again, and again, the short summers ain’t know bargain either?
Buy a Denver house that faces south and never shovel. Just drive through it in the morning and it’ll be gone by the time you get home.
The “buy a house with a south facing driveway” was the best advice I got when I moved here to Boise. I probably wouldn’t have thought of it coming from the SF bay area.
I learn new things every day here at the HBB.
For CARenter:
If you are buried in an avalanche and don’t know which way is up to dig yourself out, just spit on your lips and dig the opposite way the spit runs.
An here’s one my mother told me:
If you ever find yourself sentenced to death in the gas chamber, hold your breath when the first pellets drop, then finally take one deep breath when majority have dropped. Much faster and less painful that way.
“Don’t we just love to shovel 10 inches then watch it melt and then you do it all over again, again, and again, the short summers ain’t know bargain either?”
Please think about those sun-belt RE investors that you’re helping with your tax money while shoveling that snow.
It’s like the investment in a beater 1990 white 2 door Nissan Sentra 4 cylinder with hand crank windows or a 1.25 milloin dollar Bugatti Veyron.
They both have 4 tires and a steering wheel and the speed limit is still around 65 mph in most places.
The rest is all about your ego and what you can afford to pay going from point A to point B.
A house is the same, basically 4 walls, a roof and a place to lay your bed…and of course, back to that ego and affordability thingy.
Uhhhhhh. How many guesses do I get on which of those two cars you own?
Try doing an 1800 mile trip in two days in a 1990 Sentra. Or a 500 mile trip. Then try it in a 5-7 Series BMW, or hell, even a Cadillac STS or CTS.
I’ve done it several times. That’s why you will never see me in a Japanese/Korean/Chinese econo-box.
What makes sense to some on this blog doesn’t work for others, and last time I checked, this was a free country. What most of us agree about is that people (or companies,governments, whatever) spending more than they can afford on anything cannot end well.
X-GSfixer,
Maybe it’s a sense of priorities. I’m sorta a cheapsake when it comes to some things like cars and houses.
The 1990 Sentra was years back and a commuter car for a 16 year HS kid that had a good part-time job and he later used it for college where it sat 95% of the time in the college parking lot…next to a bunch of new expensive, hot student foreign cars. He used that car and worked 5 years while in college. Now that kid is grown and up to his ears in hock on a high priced foreign car. He has, however, an engineering degree and no other debt. The Sentra did it’s job and he sold it to another student for a good price.
As for what I drive myself, I drive a Buick. In fact, yesterday. I was working on a deal on for a special order Buick Lucerne CTS with every gadget known to man. My ego was on a roll, it’s a tinted window black on black leather pimp mobile with warranty and I would look great with grubby jeans, a white T-shirt, shades and a gold Rolex heading for Monterey. Just 4 tires and a steering wheel, point A to point B.
It’s the owners personal car and he lost his Buick dealership but he still has his silver Lucerne down in Florida, but he can’t play in it because his other dealership is in trouble. He was running his dealer plates on it as an untitled demo to save the warranty.
I talked to his saleman, used car sales manager, his new car manager and the dealer himself several times. We are down to $500 difference and it’s a matter of principal and what I think the car is worth to me. Not what they, the owner Kelley, Edmunds, NADA or even the wholesalers Black Book price think. You will always leave money on the table when dealing with car dealers or there will be no deal.
They called me 3 times and I dealed and walked 3 times. Will I lose this tricked out piece of depreciating GM junk ? Will they call a 4 th time ?
Who cares in the Hell cares? I will probably drop my offer another $250 because I’m fed up with both them and the car already.
I can cut a cashiers check Monday and buy a brand new Lucerne, a Cadillac or an over-rated BMW if I want it, should I be so stupid to do so. Hey, I’m a renter.
Don’t ya worry about mikey !
The newest car I ever bought was a left-over demo from the previous year and I didn’t get burned…to bad.
My current car is an older consevative Buick Regal LS with 38,000 miles, it works fine and I’m not that old and crippled up that I couldn’t hit the gate at 98 to the west coast and back in it…if I wanted to, but then I hear that’s what jet engines and rental cars are made for…
It may be a ‘free country” as you say but we all have to pay our dues… just to be here.
rant over
My relatives sold a shack in the Bay area for $800k near the peak, having purchased in the 1960’s for next to nothing. But Uncle Sam took a big bite of that profit, and they put down cash for a $400k house in Vegas that is now worth $150k at best. So much for the windfall profit.
Ouch.
Lind said he’s liquidating non-core assets because federal regulators have crippled the ability of small community banks to finance development projects. ‘I’m reading the tea leaves, and it’s going to be a different game for developers,’ he said. ‘I think us small guys are toast. This economy is horrible, and it’s creating defaults all around, and I don’t want to be that guy.’”
“Us small guys”? Lind is one of the richest guys in Northern Colorado. Or at least he used to be. He’ll be taking a huge hair cut on those properties he’s trying to unload.
Good luck finding a knifecatcher for those 5000 acres. The employment base in Larimer and Weld Counties has been permanently destroyed while HP, Agilent, Intel, AMD and other “quality” employers continue to lay off employees here at a brisk pace.
I wonder where they were planning on getting water for those thousands upon thousands of new homes that were supposed to be built? We’re already cutting it close here, with droughts and water rationing always dangling over our heads.
“The president said there was plenty of blame to go around for the housing market collapse, pointing to lenders who were ‘focused on making a quick buck instead of acting responsibly,’ borrowers who took on mortgages they couldn’t afford and regulators and lawmakers who ‘turned a blind eye’ to the actions of Wall Street.”
He then pronounced proudly, “my Administration is going to make sure that none of them are held accountable”.
LOL. In reference to the last paragraph, you are joking, right?
No joke, over a year and no perp walks, no pecora commission, no re-regulation, no jail time, just some finger wagging and the bankster bonuses keep on.
Academic blunder noted: Interpreting what a politician says as some kind of a genuine expression of underlying principles…
Get it into your erudite heads that politicians are bought, owned and operated by Wall Street and what they say will make a whole lot more sense to you.
The Conscience of a Liberal
Paul Krugman
February 10, 2010, 10:59 am
Clueless
I’m with Simon Johnson here: how is it possible, at this late date, for Obama to be this clueless?
The lead story on Bloomberg right now contains excerpts from an interview with Business Week which tells us:
President Barack Obama said he doesn’t “begrudge” the $17 million bonus awarded to JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon or the $9 million issued to Goldman Sachs Group Inc. CEO Lloyd Blankfein, noting that some athletes take home more pay.
The president, speaking in an interview, said in response to a question that while $17 million is “an extraordinary amount of money” for Main Street, “there are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well.”
“I know both those guys; they are very savvy businessmen,” Obama said in the interview yesterday in the Oval Office with Bloomberg BusinessWeek, which will appear on newsstands Friday. “I, like most of the American people, don’t begrudge people success or wealth. That is part of the free-market system.”
…
But…but…but Obama called the banksters to the White House and gave them a stern lecture. So now they feel really bad about themselves. And will mend their ways.
“So now they feel really bad about themselves. And will mend their ways.”
Oh right — I forgot what a fragile and sensitive lot they are.
“No joke, over a year and no perp walks, no pecora commission, no re-regulation, no jail time, just some finger wagging and the bankster bonuses keep on.”
Laws are for little people.
No kidding, rms.
Doesn’t this sound a bit condescending, like the “little guys” on Main Street just don’t understand how important these big-money guys are. See, they’re just sooooo much smarter than we are we simply can’t comprehend it! We’ll never understand why they “deserve” all this money because we just too poor to understand. (sob, sniff)
/sarcasm
The president, speaking in an interview, said in response to a question that while $17 million is “an extraordinary amount of money” for Main Street, “there are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well.”
Most of the blame should be pointed at him. He believes banks should be bullied into giving questionable loans to people with bad credit. ACORN was his life.
you need to read a few economic journals.. Obama wouldn’t even make the list of the top 100 most wanted in this disaster..
I agree with your statement, but, today, that is quickly changing. Obama certainly didn’t play a big role in the run-up of the housing bubble. But now he’s in a position to fix it and isn’t doing anything to help the market finally bottom and recover (which, incidently, is basically to just leave it alone).
I don’t blame him for the run up. But I do blame him for this come down, he could have saved this country a TON of money and put most of us in a better place had his decisions been more sound as this bubble unwound (and even today, he continues to make bad decisions).
Drop the tax credit. Let interest rates normalize. Raise the limits for FHA (slowly). Heal the market, don’t get it drunk again!
Amen, Michael. Totally agree with your assessment.
He still doesn’t state the problem correctly… too bad.. Housing crisis my ass… the crisis ended in 2007 Mr. President.. the crisis started in 1998 or so.. the only crisis going on in American right now is one of denial regarding our real economy and real standard of living.. we’ve borrowed all we can to sustain both and now must puke it up … it’s about fricken time, is all I can say..
“He sold two homes in January in The Ridges at the edge of Red Rock Canyon for $500 a square foot.”
Whoa! In January of 2010?! If so, prices there have a LONG way to fall. $100 a square foot (OK, $150/sf tops) sounds a lot more reasonable.
Another sign of the bubble - we received our 2010 tax valuation from the assessor yesterday (Ottawa County, Michigan). Its down more than 30% this year from 2009. We’re not complaining as we’re not planning a move any time soon nor is our mortgage underwater - but I cannot think as to what the school board’s reaction.
There’s a spec house that a developer built around the corner from us that fronts on the Grand River - 3 acres and about 3500 square feet - also built on fill. Original asking price was $1,395,000 in 2007 -never sold - now $795,000 and in foreclosure…
Holy haircut, Batman! Even at $795,000 you can get an ocean view house in Cayucos, CA. It is far enough from smog and gangs of central L.A. and it never snows there
Ah, Cayucos. Spent a spring break there at a ranch up in the hills. Has it been ruined yet?
Spring break up in the hills - was it wild (lots of people of the opposite sex and hormones wild) or is this a Las Vegas moment - whatever goes on in Vegas (or Cayucos) stays there?
My spring break was living at home with my parents. As moral as a church mouse of course, although I was an atheist back then as well as now. My college was CSU, Fresno. We had a “Vintage Days” fiesta at the college. It’s a farm school, and the theme was always wines and grapes. So there were fraternities and sororities with team names such as “VD Friends and Lovers,” “Gang Grape,” In those days Fresno County produced the most amount of wine grapes of California, albeit not the best. I was not into wine, let alone beer. I was straight arrow. My father was into Jack Daniels in coffee - nuff said. Funny, back in the late 1970s the coeds would wear halter tops to class, some very skimpy and a very few covering the areolas and showing skin of their umm…large bumps between shoulders and belly button. They became conservative soccer moms in the late 80s. By the mid-1990s they made darn sure their daughters would not go to school as naked as themselves. I had a class with a coed who had a ta5too of a butterfly on the underside of one of her um…bumps and she would wear a very very tiny halter. May as well have been a string bikini top - to her classes. I had a chance with her once - we had a study session in one of the outdoor unknown balconeys of one of the distant buildings - few students know about - but I did not take the opportunity. She would talk about her boyfriend in the army. That killed the moment.
Sheesh…I took a cute chic up on a local hill with 2 bottles of “Blue Nun” rot gut wine one school night.(it was the only thing my buddy would sneak out from behind the bar) Sooo, here we are making out like two happy little white rabbits and suddenly she kept saying my name in this strange voice.
“mikey”
“yeah”
“mikeyyyy”
“Oh yeah” I thought I was really thrilling this girl at this point.
“mikey….we’re not alone here !”
“Huh!?!”
About 20 college stargazer freaks from some astrology course, a professor and her cousin were standing around watching us perform the nasty. I should have charged them all admission.
I ran them all off the hill in the dark with curses, threats and rocks for spoiling that moment. The whole freakin’ university knew about our midnight escapde by dawn and the rest by the end of that day.
My new campus name was now “The Friar” because of the cheap wine. That was just a regular week night. On weekends, I’d have 2 beers and really get wyld.
“…but I cannot think as to what the school board’s reaction”
How about…”YOY Enice, prices are down again…Raise the mil rate in isle 5 ” ?
Our neighborhood just got the property value news and I can imagine the horror for these people who saw the value drop over 40%.
Denial is a good word in these times, most people still believe that in early 2011 all will be back to normal in this area.
Where they get this hope from I don’t know, I have been the bearer of bad news for some time in this development and now most folks turn their back to me. As I said before most can’t stand the truth, so bury your head in the sand people, like you did when you over paid by 40%?
That should be good news. Their property taxes should decline 40%.
Unless, of course, like most areas of the country, their tax assessor’s took the no-money down, no income, no interest loan “purchases” and used them to re-assess the tax base as the new “revenue” stream that the governments are now hooked on like heroin.
I sense a shift in MSM spin re: strategic defaults - the immorality of walking away theme just didn’t resonate when there was no hiding how the big boys played the game. Now there’s a growing focus on collections on deficiencies. It’s almost like the puppet master realized that appealing to the higher moral ground of honoring one’s obligations wasn’t working, so the focus has shifted to threats - walk away and you’ll be hounded by collection agencies forever.
It’s almost like the puppet master realized that appealing to the higher moral ground of honoring one’s obligations wasn’t working, so the focus has shifted to threats
That’s a good point. I’ve seen that shift too in the past month especially.
It is also causing a greater hostility towards the bailing out of banks.
People are noticing banks got bailed out, payed bonuses and are now going after the underwater walking homeowners.
I think it will be another on of their strategic mistakes.
When I work out at the local YMCA, they typically pipe in a local radio broadcast, which features some timely advertisements for the state of the economy we currently enjoy. My favorite is for a local financial advisory firm which does household-level debt restructuring. The tagline for their ad is a classic: “Banks got their bailout; shouldn’t you get one, too?”
Definitely seeing that MSM shift, too. They are trying to threaten people into paying their mortgages.
Morals don’t come into play, survival is the new key word of 2010 and beyond, you do what you have to do.
Bank of Choice president Darrell McAllister. ‘You take that bite on the front end, it goes to nonaccrual and eventually goes to OREO.
I never heard it called OREO before. To me an OREO is another word for an Uncle Tom.
OREO = Other Real Estate Owned
I guess the “O” is so accountants don’t confuse property the bank owns with other property the bank owns.
“To me an OREO is another word for an Uncle Tom.”
The SF East Bay’s Don Perata is an OREO.
“Obvious Signs Of The Bubble”
denial <=
anger
bargaining
depression
acceptance
Is it just me, or does it seem to others as though many of the inside-the-beltway crowd live on in housing bubble denial, or at least with an unflagging belief in the potential for hair-of-the-dog housing bubble reflation measures to work?
Now that we are almost four years into the post-bubble-collapse phase, I am wondering how long denial can live on in the minds of many near the top of the policy hierarchy? I can’t help but think about those Japanese soldiers discovered living in Pacific Island caves years after 1945, perpetually existing under the delusion that WWII had not yet ended…
“Now that we are almost four years into the post-bubble-collapse phase, I am wondering how long denial can live on in the minds of many near the top of the policy hierarchy?”
It’s easier when the policy hierarchy doesn’t live like the rest of us. It’s kind of like the elected politicians in the city of San Diego that didn’t care about the impacts of condo conversions because none of them rented and were forced to relocate.
I think another factor is we may need to be using a much longer timeline for the bubble expansion and hence the unwinding that follows. For the early housing bubble areas, we’re about 4.5 years post bubble. If housing we’re the only issue, one would expect we’d be nearing stability assuming about as much time to unwind the bubble as to run it up. However, if one uses the much longer timeline of the associated expansion of credit, going back to the 80’s, this unwinding has a long way to go.
It would appear from events that continue to unfold, often on a daily basis, that we are quite far from fully unwinding the impacts of the bubble(s) and moving along the course of a new normal, whatever that might be once we get there. It doesn’t take much imagination to think that could take another 5 or 10 years, maybe longer.
Thanks for straightening me out. I keep forgetting we are governed by people who have not yet discovered the existence of super market checkout lane scanner technology.
“…one would expect we’d be nearing stability assuming about as much time to unwind the bubble as to run it up.”
Run up period: 1997-2006
Run down period: 2006-2015
Nine years up, nine years down…
Or is FPSS’s time line more on target? (Please correct me if I messed this up!):
Run up period: 1982-2006
Luge run period: 2006-2030
Twenty-four years up, twenty-four years down, then SPLAT!
P.S. I believe I am being unduly pessimistic, as the bubble has so far unraveled much more quickly than it inflated… these events have a way of snowballing to the downside.
Splat tends to be faster than run-up even counting for psychology. Just look at Japan!
Still splatting!
…as the bubble has so far unraveled much more quickly than it inflated…
——————
It definitely started out that way, but now with all of the govt manipulation, I’m thinking it might take much, much longer than it should have.
Maybe it’s time to think of the Challenger again…something strapped to gigantic booster rockets on the way up comes back down relatively slowly. Perhaps someday people will think of bubble casualties and wonder if they died in the explosion or if they were alive during that long long fall back down…
What if someone on Facebook or Twitter starts a campaign that June 1 is ‘Don’t Pay Your Mortgage Day?’ Things can go viral overnight these days,’ he said.”
*quickly logs in to facebook*
There’s no telling what goes through an FB’s tortured mind day after day, but they’ve had to convince themselves there’s good reason to stay put and keep paying.
Cyber-default is one thing. Real world default is something else.
“‘People have gone from buying a house to raise their family in to buying a house as an investment,’ said Eric Bowlby, president of Amerifirst Financial in Mesa. ‘We see customers all the time who come in and they’re letting their home go on purpose to the bank, and they act like the bank screwed them because it’s now upside down in value. But they pulled a line of credit out. They bought themselves an RV, a new truck, a new boat, and they think that it’s the bank’s fault that their house is upside down.’”
Eric, I couldn’t have said it better myself.
Make a couple hundred thousand brass plaques of this and hang it in every lending institution.
Preach it brother! Amen.
So many of these people just blew the money of toys and vacations and now want a bail-out for their foolish behavior.
Meanwhile, people who lived within their means get nothing - except higher taxes to pay for these fools.
“Meanwhile, people who lived within their means get nothing - except higher taxes to pay for these fools.”
+1 Exactly!
And 0% rates on savings!!!
“People have gone from buying a house to raise their family in to buying a house as an investment,’ said Eric Bowlby, president of Amerifirst Financial in Mesa.”
And just who was pushing this idea? It wasn’t the people that just wanted housing for shelter. Why should I be concerned in the least if these lenders are now being forced to deal with the consequences of their actions?
How does bailing out subprime mortgage lending kingpins force them to deal with the consequences of their actions? I see great potential for a replay of this bubble as soon as Wall Street manages to reload their subprime securitization sump pump. The moral hazard created by the bailouts is just too enticing to pass up.
To be fair, even though many in Arizona did plenty of the new car, etc. buying noted above, one can easily be underwater in Mesa, Arizona without having HELOCed if the house was purchased at market prices as early as 1999ish. Even buying before the late 2005/early 2006 peak, people there would still be underwater with substantial down payments.
I ran the numbers on a family member who bought another house in 2002 in another Phoenix suburb. She bought a fairly new house - a foreclosure (there were some even back then) - and put 20% down. The purchase price was about 5% below comparable 2002 sales prices in the subdivision. As of today, she would be about 14% underwater had she not sold in 2005, at my strong suggestion. An evaporated down payment, plus a nice chunk underwater, almost seems worse than the situation for 2006 nothing-down purchasers.
“An evaporated down payment, plus a nice chunk underwater, almost seems worse than the situation for 2006 nothing-down purchasers.”
This is why the Alt-A and Option-ARM bust will drag out longer; it’s going to be “the trail of tears” walking away from the down payment. However, the job losses should keep the foreclosure process from becoming constipated.
..Prices peaked at $285,000 in 2006 and then dropped to $120,000 in August. ‘Again, intuitively, if you look at this graph, a 10-year history of prices, you tell me if something in your gut doesn’t tell you it’s undervalued today,’ he said.
New-math 101
“OK class… class.. Be Quiet!.. SIT before I…
Now. Look at that graph.
For today’s test you must tell me if this market is undervalued. No pencil or calculators. Just look at the graph.
Use your intuition. Go with your gut.”
Something in my gut tells me that falling knife has plenty of downside momentum left in it.
“The president said there was plenty of blame to go around for the housing market collapse, pointing to lenders who were ‘focused on making a quick buck instead of acting responsibly,’ (,the same lenders who contributed $4 million dollars to my campaign and who continue to dictate my economic policies) borrowers who took on mortgages they couldn’t afford (and who voted for me because I said I’d bail them out) and regulators and lawmakers (like Chris Dodd and Barney Frank) who ‘turned a blind eye’ to the actions of Wall Street.” (Or like my economic team, who are actively aiding and abetting Wall Street firms as they enrich themselves at the expense of Main Street. )
Awesome!
Excellent, Sammy!
“The consumer sits back and says ‘OK, let’s look at it this way: I owe $400,000 on a $300,000 home. If my credit (score) was perfect, they’re not loaning me any more money, so what difference does that perfect credit mean,’ said Kevin Hardin, director of the Mortgage Mediation Group at Valley-based law firm Thomson Conant.”
ComboTechie — you out there? I am trying to think of a phrase which the above passage suggests; the initials are C-I-K, but I can’t quite recall the exact words.
Could you please help me out if you are reading today?
C-I-K = Credit Is Kaput
Dang –
Here I thought it was yet another sign that Cash Is King…
“‘And in the future when properties appreciate, these same people who are saying they want banks to write down the principal balances are going to be saying ‘look at all this equity I have in the house’, and if the bank came and said, ‘let us have a piece of that equity’, they never would.’”
Does anyone besides me find it utterly bizarre that there appears to be an army of real estate ‘experts’ out there desperately clinging to the mantra that ‘real estate always goes up, in the long run,’ and that every one of them appears to have a journalist friend who is willing to quote their idiotic statements verbatim in the MSM?
Surely you realize the truth of that statement. Real estate has to go up, or the tax man can not get enough money to pay the politicans, can he!
No politican can ever let prices drop so that the politican can not get paid by someone, or something, or somehow.
In 1970 I was telling brokers that you should not be telling buyers that realestate would always go up, and that was about as successful as it is now telling them they have a way to go on the down side.
Until we get to the 3 times the salary , prices will drop!
And, here in Santa Rosa, I was looking at the bonds coming in for payment and visualizing what it will do to the budgets in the next 5-10 years.
They all borrowed money to build things with bonds, and they all assumed 3% inflation and they would have no trouble with the budgets.
I guess they were wrong!
JackO
“Realtor Rob Jenson said home prices are ‘unbelievably low.’ Many homes are selling for well below replacement costs in all sectors of the market. Pricing bottoms are clear when looking at sales in specific neighborhoods, Jenson said. He sold two homes in January in The Ridges at the edge of Red Rock Canyon for $500 a square foot.”
$500 a square foot — unbelievably low — Las Vegas — prices dropped to $120,000 in August —
What is wrong with this picture???
Here is one possibility: Perhaps the homes around Las Vegas are unusually small, as they are running out of land? If either of the homes Rob sold back in January featured 240 square feet of floor space, then their sale price could be $500*240 = $120,000.
Does this seem reasonable?
“Does this seem reasonable?”
No more than the actual existence of Vegas seems reasonable.
Here it cost about $30,000 to get the city to permit a building to built on your lot.
that is what I paid for my house,in 1966!
JackO
What do you do if you live in Los Vegas, your family gets bored and you want to take the wife and little kiddies on a day trip somewhere new for some wholesome fun, excitement and entertaiment.
Do you mosey over to Death Valley and just sit around watching the sun set on a bunch of old wild burro skulls ?
Hell, the place is so remote and boring that the Army detonated it’s atomic bombs somewhere else.
Another obvious sign of the bubble: The bloated cost of conducting a census when more than 18 million U.S. housing units sit vacant and something like 12 million undocumented immigrants (four percent of the current U.S. population) roam the landscape.
The Ballooning Price of the Census
The 2010 Census will cost an estimated $14 billion—far more than any in U.S. history. “The cost nearly doubles every 10 years, and it’s just unsustainable,” says Robert Goldenkoff of the Government Accountability Office (GAO). “Projecting to 2020, we could be looking at a $30 billion Census.”
Census figures are used to determine Congressional representation and the distribution of more than $400 billion annually in federal aid, and the Constitution requires that everyone be counted. While it’s easy enough to collect data from households that promptly mail in their forms, it costs between $65 and $75 to tally each unresponsive household. This year’s effort will be complicated by the foreclosure crisis, which has left many homes empty, and by an estimated 12 million undocumented immigrants who may avoid being counted, according to Kenneth Prewitt, a former head of the Census Bureau who is now a professor of public affairs at Columbia University.
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