A National Mistake
The Nightly Business Report. “Susie Gharib: ‘Our guest tonight believes this new government plan could help end the housing crisis. Joining us now, Mark Zandi, chief economist of moodyseconomy.com. Gharib: Why do you think this plan is going to work this time? So many of the previous ones just didn’t work? Zandi:…’Up to this point, it has been about temporarily reducing the interest rate to get the monthly mortgage payment down, but not really doing anything about the fact that many of these homeowners are so deeply underwater, and many of the homeowners — they’ll take the modification if you give it to them but if anything goes wrong in their financial life, you know, even if they spring a leak in the roof and have to put some money in, they’re not going to do it. They’re going to default. Now with these changes, this gives incentives for mortgage servicers and owners to reduce the principal amount that is owed, and also get that monthly mortgage payment down. And I think the combination is very powerful and it will keep those homeowners in their homes and help solve this foreclosure crisis.”
“Gharib: But I’m sure you’ve seen the statistics of the government reports that have just come out where more than half of the people who got loan modifications on delinquent mortgages within nine months, they defaulted again. So it makes you wonder, is there a flaw in all of these attempts by the government? Zandi: Yes, and that’s what this is aimed at, at that very specific problem, Susie, that high re-default rate. Because, you know, people who don’t get any break on the amount of mortgage debt that they owe, if they’re so deeply underwater, they have a very high likelihood of re-defaulting in the future. But if you give them a hook, if you give them a little bit of reduction in the mortgage amount that they owe and they think they have a fighting chance to get above water again, then they are going to hold on and they won’t re-default.”
“Gharib: I’m sure you’ve heard that a lot of American tax-payers are angry over this issue. You know, they’re asking, why should we have to help out irresponsible bankers and borrowers and bail them out? You know, I just — why is it that these banks and borrowers should get a free ride?”
“Zandi: And a very reasonable concern. I mean, it isn’t fair…But here’s the point, that by helping these other stressed homeowners getting help with their mortgage and staying in their home, and not pushing that home on to the market and causing house prices to decline, you’re helping yourself. So helping your homeowner, it is — it’s distasteful, it’s not the greatest — helping the person that is distressed is… (inaudible)”
“Gharib: I get that argument, but the question is, is why do the tax-payers have to be part of the solution? Why not have the banks work this out? Why not all of the banks get together and work out a foreclosure solution? Zandi: Well, unfortunately, they’re not…So the problem is we have this massive foreclosure crisis with lots of homes on the market with prices falling. So with a little bit of tax-payer money we can solve the problem, get past it and get going.”
“Gharib: And I know this is really important, getting this housing crisis solved because it’s important for the economic recovery. Do you think that this will help the recovery? Zandi: Yes. I think this is necessary. I mean, it could be the case we could let the chips fall where they may and see what happens and house prices may not decline. But here’s the concern, that we could all be wrong. That we do — if we don’t do anything, the foreclosures will mount, the house prices will decline, and we’re back in recession. And we just can’t allow that to happen because the unemployment rate is 9.7 percent and we’ve lost 8.4 million jobs. We just can’t go back into recession. So I think with a little bit more help — and I think this is the right kind of help, that we can end this foreclosure crisis, bring the house price declines to an end, and get going here, create some jobs and we’ll be off and running.”
The New York Times. “The angry comments flooded in after the federal government announced it was expanding its program to assist unemployed homeowners, as well as borrowers who owe more on their mortgages than their homes are now worth. It made me think about what would be at stake if the government did nothing at all. A government should consider the greater good over the long term, of course, and not just the immediate question of what is fair.”
“Still, the commenters raised a number of valid questions about the mortgage assistance program. Is the government just propping up the real estate market? Shouldn’t the market just run its course? And why do renters always fall so low on the economic totem pole?”
“But, let’s not forget that many distressed homeowners were the victims of bad timing, poor understanding of the loans they were signing up for and a slumping economy. Many families stretched themselves too thin so they could buy into the American dream of home ownership — an idea supported by both Democrats and Republicans, not to mention the tax code. And some people simply had the misfortune to buy at the top of the market in precisely the wrong area.”
“‘It shouldn’t be something people should be punished for,’ said Robert J. Shiller, the Yale economist who helped develop Standard & Poor’s Case-Shiller Index of housing prices. ‘It was a national mistake. President Bush, in his weekly radio addresses, was extolling the benefits of homeownership. Implicit in this, he was telling people they were doing the right thing to take these highly leveraged mortgage loans. We can’t reasonably think people should be punished for doing that when there is a crisis that is not of their doing.’”
“‘It isn’t completely fair, but we are helping a large number of homeowners who got into this foreclosure nightmare through no fault of their own,’ said economist Mark Zandi. ‘The odds are just too high that if we didn’t do something like this, the housing crash would continue on and undermine the recovery.’”
“‘Nothing in our economy does all that well when house prices are declining,’ he went on, ‘because it’s still the most important asset in the family balance sheet.’ Beyond that, he said: ‘No one will extend credit while home prices are declining. Further declines will push more homeowners underwater, resulting in more foreclosures and more house price declines.’”
From Marketplace. “Mitchell Hartman: Earlier mortgage relief efforts tried to help victims of sketchy lending who were defaulting left and right. Now, says Nicolas Retsinas of Harvard University, the effort has shifted to victims of the economy itself. People who have been laid off will be able to temporarily lower their mortgage payment to a third of their monthly income — usually their unemployment check. But there’s a bigger problem looming, says Retsinas. Retsinas: ‘People are underwater, they owe much more than the home is worth. And that’s added a whole new lexicon, the language of ’strategic defaults.’ Why should I pay if I owe more than the house is worth?’”
“Michael Russell is so underwater on his house outside Minneapolis, he could use scuba gear. He’s already tried to get the bank to lower his mortgage payments. Now, he’s trying to sell, hoping the bank will take $50,000 less than he owes. I told him the new federal program to reduce his principal might actually help him hold on to his home. Michael Russell: ‘I’m just not sure how many hoops I have to jump through in order to actually get approved and how long it’s going to take.’”
“Nicolas Retsinas says if a lot of people do jump through those hoops and get to write down their principal, the administration could pay a different price. Retsinas: Political push back: The person next door saying, ‘Well, I played by the rules, I paid my mortgage, why can’t I get some relief in what I owe?’”
“Tess Vigeland: This week the Case-Shiller Index delivered a sliver of optimism. Home prices rose by a third of a percent in January, in large part thanks to a bump here in California. That news comes on the heels of an effort by the Obama administration to help more folks stay in their homes. But there’s still the question of whether any of this means much.”
“Ed Leamer, director of the UCLA Anderson Forecast. Thanks for joining us. VIgeland: First, let me ask you a question that I’m asking just about every housing expert that we bring on the show. Where do you think the market is right now? Is it in recovery? Is it still dropping? Leamer: I think that there has been a stabilization. There hasn’t been significant appreciation. This market isn’t going to get healthy again till we get the buyers back. It’s a chicken-and-egg problem, because the buyers are not going to come back until they’re confident that home prices are going to stabilize.”
“Vigeland: Or the very least, not go down. Leamer: Yeah. And normally, if you get a sale, a lower price, people will rush out and buy more. But when it comes to homes, when the prices fall, buyers are thinking, ‘Well, I think maybe another price cut could be coming around the corner here,’ and nobody wants to buy that property.”
“Vigeland: There have been all kinds of efforts to get the housing market going again, and none of them seem to have had much traction. What are your thoughts on this latest plan to reduce principal on mortgage payments for folks who are underwater?”
“Leamer: Yeah, I have mixed feelings about this, because we qualified individuals who don’t really belong in homes.”
“Vigeland: They couldn’t afford the mortgage.”
“Leamer: Exactly. So the right program is not to try to desperately hold those people in homes, but rather to encourage them to become renters, and facilitate the process by which these homes are turned from owner-occupied homes into rental units.”
“Vigeland: You know, part of the concern recently has been about adjustable-rate mortgages. You look at a lot of folks who took out, say, a 5/1 ARM back in 2005 or a 3/1 back in ‘07. Now it’s set to adjust, and the theory is it’s going to create a lot more homeowners who can’t afford the mortgage, but so far that’s not happening, right? Leamer: Yeah. Ben Bernanke has been very kind to those home owners by giving us these incredibly low interest rates, so that they are the basic and switch the adjustable mortgages adjust. That’s likely to exist for some time, but not that long. Home owners who have mortgages that are these adjustables, need to start thinking about what’s the right time to lock in the longer term mortgage.”
“Vigeland: Yeah, I guess it’s just hard to make yourself do that, because right now, your mortgage rate might actually be dropping. Leamer: Yeah, it’s very seductive. That’s what got us in trouble in 2004, 2005. The teaser rates didn’t come from Wall Street, they really came from Washington D.C. and the Federal Reserve.”
“Vigeland: And finally, you know this past week, the Federal Reserve stopped buying mortgage-backed securities from Fannie Mae and Freddie Mac. Give us a sense of why that is important, and what it means for folks who are in the housing market? Leamer: If no one wants to be a lender for the home prices that are declining or potentially declining, Federal Reserve widely recognizes that problem and became a lender, in effect by buying these mortgage-backed securities, hoping I suppose that the market would become regular again. I think there’s some considerable risk in the short run that the absence of that Federal Reserve support is going to be raise interest rates.”
“Leamer: And possibly discourage people from buying homes. But the thing to understand is that nobody’s buying a home, unless they have some feeling of urgency there, ‘If I don’t get it now, I’m not going to get it.’ And that urgency comes, because you think home prices are going to go up. But it can also come, because you think mortgage rates are going to go up. So it’s not crystal clear what the threat of increased mortgage rates will do to the housing market.”
From CNN Money. “Attention shoppers: You have barely a month left before the homebuyer tax credit expires. First-time homebuyers may qualify for up to $8,000, while those who are trading up could get as much as $6,500. But either way, buyers have to ink sales contracts by the end of April and close before July 1 to see the refund.”
“There is little sentiment for continuing this program, especially because many consider the latest iteration’s results to be disappointing. Even the Senate’s biggest proponent of the homebuyer tax credit, Johnny Isakson, R-Ga., is ready to let it end. ‘He has no plans to introduce legislation to extend the credit,’ said Isakson’s spokeswoman. ‘Part of the benefit of the tax credit was the urgency its sun-setting generated.’”
“That urgency was less pronounced after the latest extension, which was enacted last fall. While the first version, which just covered first-time homebuyers, netted huge sales jumps, the real estate market slumped over the winter and early spring. That may be because some people believed that Congress would just keep adding time to the game clock, according to Nicolas Retsinas, director of Harvard’s Joint Center for Housing Study. ‘The credit’s influence and impact has waned considerably,’ said Retsinas.”
The LA Times. “A national index of home prices rose unexpectedly in January, with California cities posting strong gains, but some experts warned that the nation’s struggling housing market could be headed for another fall. But expectations about housing’s direction remain mixed as a series of government initiatives intended to bolster sales and stabilize values begin to expire.”
“‘Forces that will bring home prices back down are mounting,’ said Patrick Newport, an economist for IHS Global Insight. ‘Our view is that despite this report, prices have further to fall — about another 5%.’”
“The Case-Shiller index, which covers three months of data, was influenced by a sales surge in November, when buyers rushed to take advantage of a federal tax credit for first-time purchases before its initial expiration. Sales fell in December and January, even though that program was expanded and extended through April. Though many economists expect the extended tax credit to give sales a further boost, they also expect another fall once the government incentive ends.”
“‘It is way too early for this market to have rebounded the way it has,’ said Christopher Thornberg, principal of Beacon Economics.”
“‘What people are seeing in the stock market, and what people are feeling, is the beginning of a real recovery,’ said Karl E. Case, a professor at Wellesley College in Massachusetts and co-creator of the index. ‘Now that the economy is starting to come back, I think the psychology has changed,’ Case said.”
“Richard Green, director of the USC Lusk Center for Real Estate, said Southern California was showing strength because it was one of the earliest markets to get hit and is rebounding now before other areas. ‘We fell first, we fell deeply and we didn’t overbuild the way other parts of the country did,’ he said. ‘And if you look at the long-term horizon, the amount of housing built relative to population was less than other places, and it is still really hard to build new houses here.’”
“Thornberg attributed the gains primarily to the federal government’s programs and said most of Southern California’s housing gains were a result of fewer foreclosure properties on the market. The falling number of available foreclosures is pushing prices up on lower-end housing, though prices continue to fall in more-expensive neighborhoods. ‘The bottom has been surging up,’ Thornberg said. ‘It really is about the low end.’”
From News 10. “The monthly increase for the San Diego housing market was 0.4 percent. Prices jumped 5.9 percent between January 2009 and January 2010, according to the report. San Diego’s price index of 156.95 reflects appreciation in value of nearly 57 percent in the past 10 years.”
“In Los Angeles, the monthly jump was 0.9 percent, and the annual hike was 3.9 percent. The index now stands at 172.98, or appreciation of nearly 73 percent during this decade, the second-largest behind Washington, D.C.”
“‘The report is mixed,’ said David Blitzer, the chairman of the Standard & Poor’s Index Committee. ‘While we continue to see improvements in the year-over-year data for all 20 cities, the rebound in housing prices seen last fall is fading.’”
“Fewer cities experienced month-to-month gains in January as did in December, and prices in four cities reached new lows, Blitzer said. He also said housing starts remain extremely low, the numbers of home sales show the market is still difficult, and there are still concerns about future foreclosures and a large ’shadow inventory’ of unsold homes.”
The Washington Examiner. “While housing prices aren’t where they were during the peak of the boom, they have recovered from their lows. Over the past few months, Mary Bayat, a broker in Alexandria, said she has seen both sales and prices increase. ‘D.C. and Virginia are really going fast,’ she said. ‘We have a lot of foreign investors buy in D.C.’”
‘Prince William County, which was inundated with foreclosures several years ago, is showing signs of recovery; the median sale price for a residential home, including condos, was up 31 percent in February from February 2009, according to Metropolitan Regional Information Systems Inc. Still, despite the apparent minirebound in some areas, analysts remain wary about the region’s housing prospects.”
“‘Housing starts continue at extremely low levels, recent reports of home sales suggest the market remains difficult, and concerns remain about further foreclosures and a large shadow inventory of unsold homes,’ said David Blitzer, chairman of the index committee at Standard & Poor’s.”
“The shadow inventory and its potential effects is difficult to quantify, he said, but ‘one expects that it will be impactful.’”
“Gharib: I get that argument, but the question is, is why do the tax-payers have to be part of the solution? Why not have the banks work this out? Why not all of the banks get together and work out a foreclosure solution?
Zandi: Well, unfortunately, they’re not…So the problem is we have this massive foreclosure crisis with lots of homes on the market with prices falling. So with a little bit of tax-payer money we can solve the problem, get past it and get going.”
Communist.
P.S. In case you missed my weekend post on this item, the figure the MSM are tossing around (which is likely an underestimate, given the way these programs tend to expand if they involve giving away free money) has been ‘10 to 21 cents on the dollar.’
Note that ‘21 cents on the dollar’ for a $700,000 underwater California mortgage translates into $147,000 in your tax dollars to be split between the lender and the underwater home owner.
Did you really believe the bankers would ever be on the hook for their stupied mistakes? Remember they never”saw the bubble coming”. Perhaps Greed, easy money, fees, bonus etc might have clouded “common sense” as they always knew the government [taxpayers] would be REQUIRED to cover all their mistakes in judgements.
‘with a little bit of tax-payer money we can solve the problem’
I don’t see how these guys get away with statements like this. If a ‘little bit of money’ could ’solve the problem’, we wouldn’t be talking about this today.
I’ve posted this yesterday in the comments, September 2006:
‘Indications are a growing number of high-end properties in Jackson Hole are no longer vacation or second homes, but purely financial investments that sit empty. It is a trend noticed by one agent, Ray Elser, when he sees a ’spec home’ change hands ‘three, four, and five times before construction is ever completed.’
‘You can get a new appraisal and borrow against the property and then go buy more properties. And when you borrow the money back, a lot of people don’t realize when you go get an equity loan it is not a taxable event. So you’re better off pulling a million dollars out of a property, tax-free, and buying more with that.’
Consider that this happened on an individual level, hundreds of thousands or even millions of times, in the US alone, and you begin to understand the scale of the housing mania.
Tax-payer money is the magic elixir to fix any ill. A little dab applied directly to the area affected makes red numbers magincally disappear. For really big problems, use X-tra strength Fed-money taken orally (but also available in giant suppositories) in massive doses. Use only as directed by lobbyist-corrupted congressmen. Side affects may include nausea, dizziness, headache, anxiety, rampant hyperinflation, more corruption, communism, depression, loss of savings, welfare, weight-gain, job-loss, violent behavior, loss-of-appetite, and suicidal thoughts. Avoid interaction with the articles of the Constitution when using this product.
LOL… good job.
I am in Toronto and caught a little bit the HGTV in Canada, there is to be a show on about “flipping”, I don’t know what they have in the water up here, however I think they need to check out how the US housing market did with the flipping….
And the stories keep mentioning the high number of investors STILL buying property!! Just as high, if not higher than the peak.
How can part of what caused the problem, the high quantity of investors, solve it? The answer is that of course it won’t.
The real problem is simply too many homes for too few people.
Ben just a late posting:
I think first at the top of the list should be people who helco’d their homes for life or death medical expenses for their kid or loved one.Forgive the money..write down the mortgage and let them live in their homes.
Second people with good intentions, like you found out the wife was having triplets and you heloc’d the house to add 2 bedrooms…..ok justifiable.
Third if you took in an aging poor parent, writing down the mortgage will be far cheaper then stashing the old guy in a nursing home.
I really don’t think there are too many other scenarios we could almost all agree on who should be helped.
Why?????
Why should any of the above reasons be used to steal money from me and give it to them? I had this happen, that circumstance, these problems…..blah, blah. It will translate to FRAUD.
People are always do-gooders with other people’s money.
Forgive this. forgive that. forget that.
I have always been forced to pay my bills. NO ONE gave me any free money for acting foolishly. Or for that matter, for acting prudently.
LET THE FORECLOSURES PROCEED. Get over-extended borrowers out of mansions and into trailers where they belong.
Then pricing can get back to afforable levels. Propping up prices by any means is a BAD idea.
“Consider that this happened on an individual level, hundreds of thousands or even millions of times, in the US alone, and you begin to understand the scale of the housing mania.”
What’s really scary is the amount of money they continue to try to throw at the market, all in an effort to prop up prices which are not affordable to the population as a whole. It’s like they truly don’t understand that it was a mania, and how unsustainable it was/is. Zandi is a criminal, and I’m not sure how he continues to avoid being labeled as such.
“So with a little bit of tax-payer money we can solve the problem, get past it and get going.”
Riiiiight Mark, you can apply that type of bullsh!t circular logic to damn near everything. Why not use a “little bit” of taxpayer money to bailout all the folks losing their cars,boats,planes etc. to repossession? That way we can “get going” in those industries again, also.
I just can’t wrap my brain around some of the continuing nonsense that these so called ’smart’ guys come up with.
Why not use a little bit of tax-payer money to reduce rents for those who were priced out of the housing market by greater fools buying homes they could not afford?
P.S. My BIL just paid $250K for a 4000 sq ft home along the Wasatch Front. If I have my math right, that comes out to $62.50/sq ft. Score!
We sold a 3000 sq ft home on the Wasach front in August 09 for 290k. $90+/sq ft, score! Just to get it sold at close to $100/ft was a relief. Wanted to sell it sooner because we bought it to live in for 350k, in 06, unfortunately we did not blend in with the LDS population well.
Then had a rent to own tenant in there who did not work out when it came time to purchase. His down payment stipends on top of rent added up to 20k and that did help pad the loss though.
“Well unfortunately they’re not”??? What kind of questing-dodging handwaving malarky is that?
Government: Why don’t you guys get together and solve the BK crisis among yourselves?
Banks: Well unfortunately we’re not going to do that.
Government: Why not?
Banks:
Government: No really, why not?
Banks: You know, we are disappointed. We “were your friends” in the last election. We had hoped that you would “remember” us.
Government: Oh look! A little taxpayer money, maybe we can move on and get past this.
The poor banks….*whimper*….. dear martha the poor banks.
I just love how my tax dollars would be used in an attempt to ensure that I overpay for a house. Even more entertaining is the idea that a recovery in an economy tied closely to consumer spending depends on Americans as a whole overpaying for houses, which of course reduces the amount available for consumer spending. If we have more important current priorities as a people than propping up real estate for the benefit of bank balance sheets, I’m not aware of them.
Off topic, but I want to thank this blog’s “Bawlamorons” for turning me on to shrimp steamed with Old Bay. Good stuff!
Crabs and Old Bay…..a Chesapeake favorite.
It was in the Cat’s Eye Pub where I had my first Bloody Mary with a glass rimmed with Old Bay. I have not looked back. Bodymore, Murdaland. In a way, I miss you, even while watching The Wire.
I married well above my fair “station” in life. That means Mrs. Zeus should have married someone richer, smarter and better looking than yours truly; therefor, Mrs.Matuze is “underwater” as to the wealth and lifestyle that she is entitled.
All it will take to resolve this unfairness, and to better the common good, is to send a “little bit of tax dollars” to ease her burden caused by gambling on the wrong hoss.
Dear Mr. Zandi:
After you are done tongue washing Mr. Geitner, could you please send a little pile ($2.3 Million) of tax dollars to:
Ms. Juice Matuze
c/o Zeus
Athol, Idaho
Thanks.
Zeus
LOL. My sidekick says the same about me. I tell him, I’m sticking around to punish him:)
Johnny Isakson, (r)-Ga. ‘Part of the benefit of the tax credit was the urgency its sun-setting generated.’”
There it is. And now Mr. I-Suck-Son concedes it doesn’t work anymore.
Of course old Johnny boy is a real-a-tor so he knows all about creating “urgency”. I am sure he’s still trying and hoping for an extension or increase in the buy a house now tax credit.
Anyone else bothered by this blatant attempt to fool buyers into “feeling this sense of urgency”?
They are publicly admitting that they are trying to trick buyers into overpaying, IMHO.
Exactly right CA. Further to the point… it is our own government endorsing this.
“The shadow inventory and its potential effects is difficult to quantify, he said, but ‘one expects that it will be impactful.’
Ah, yes the shadow inventory
So interesting that the Banks are overwhelmed & can’t handle all the Shorts & Foreclosures
But someone at the Banks are slowly, carefully trickling out REO’s to sell (at least in DC/NoVA) making sure that no other homes are For Sale in the same neighborhoods, etc.
Someone is coldly calculating the release of the “Shadow Inventory” so as to not crash the local RE markets…
Banks appear to be holding out for better bailout deals, and by the look of recent developments, this strategy may pay off handsomely for them.
Gotta keep housing unaffordable because that’s what makes ‘merika strong!
Yep, it is planned. And as long as those houses sit, crumbling, on the bank’s books, they can value them at their 2005 prices and appear solvent.
Reading through these arguments it should be clear that this economy breeds moral hazard. Heads I win, tails the tax payer gets to bail me out. We will be faced with an ever increasing tax and debt burden until the entire system collapses. Along the way the government will resort to many measures unthinkable to hold off the final collapse. Tax increases, raising retirement age, confiscating retirement accounts, money printing, bank holidays, creative accounting and any other aspect of Ponzi economics conceivable.
I don’t see a way to collectively fight it, just be prepared.
Well, I noticed ‘moral hazard’ wasn’t a term used in these reports. Nor was housing bubble or mania. We are at a strange point in this; many economists prefer to gloss over what really happened, and advocate quick fixes, etc. But what if they are just in denial? What if they are making things worse? IMO, if this is so, we haven’t seen anything yet.
‘What people are seeing in the stock market, and what people are feeling, is the beginning of a real recovery,’ said Karl E. Case, a professor at Wellesley College in Massachusetts and co-creator of the index. ‘Now that the economy is starting to come back, I think the psychology has changed.’
Housing prices aren’t based on psychology. History shows they are related to incomes. This isn’t beanie babies we’re talking about here Case.
“But what if they are just in denial?”
Yes.
‘What people are seeing in the stock market, and what people are feeling, is the beginning of a real recovery,’
What people are feeling is the effect of 10+% of GDP borrowed and printed money gushing into the economy. This will work great for a while until it doesn’t. Any Ponzi scheme under skilled management can create the illusion of prosperity for a while, maybe for a long while. It is not that hard to spot a Ponzi scheme; it is extremely difficult to predict the exact point of its inevitable demise.
They are denial.
The history of the Housing Bubble in Maryland according to the sheeple is an example of this. First, in never happened - no matter how absurdly expensive houses became, it all made perfect sense. Then, as we know, things crashed, but the belief around here is everything is still fine and we’ll be back to “normal” (Bubble mania) soon enough. If you confront most people with the facts, they perform all sorts of absurd mental twists and turns to deny reality itself so long as they can continue believing in the eternal Housing Bubble, which naturally wasn’t a Bubble at all, but the way things should be thanks to “new math” and “entirely new economic models” and so on.
Took the words out of my mouth.
Bingo, PTM.
——————
According to the masses, the housing bubble wasn’t reallly a bubble at all. See, those were **normal** prices in 2005/2006, and they declined because of the “credit crisis,” not because housing was overvalued or anything silly like that. So, once we get back to “normal” (peak) prices, all will be well. Certainly this justifies the spending/guaranteeing of trillions of dollars, no? Surely you’re not advocating for the govt to let housing prices fall to historical norms (and affordable prices for real working residents) and let the world collapse, are you?
/sarcasm
You get you dad’s rifle and pistol out of the closet and go get some ammo. Oh, you mean Brady and that bunch of communistic do gooders won’t let you buy any !!! Basic law to solve government oppression.
“‘It shouldn’t be something people should be punished for,’ said Robert J. Shiller, the Yale economist who helped develop Standard & Poor’s Case-Shiller Index of housing prices. ‘It was a national mistake. President Bush, in his weekly radio addresses, was extolling the benefits of homeownership. Implicit in this, he was telling people they were doing the right thing to take these highly leveraged mortgage loans. We can’t reasonably think people should be punished for doing that when there is a crisis that is not of their doing.’”
Did lenders put guns to these people’s heads to force them to sign the mortgage papers?
No. But they were led to sign as a result of the culture at that time.
Their decision; their consequences.
If real estate had continued going up, as many of the smartest guys in the room seemed to think it would, then I doubt many fence sitters would be trying to claim their ‘fair share’ of the gains that all the ’smart home buyers’ and those who loaned them the money to buy homes they couldn’t afford were enjoying.
Why should others be forced to share in the losses incurred by the greatest fools on Wall Street and Main Street?
Those poor people couldn’t help but sign the loan papers. They were pure victims, all of them.
So when people are not responsible for their own lives, their own decisions, then what? Is that a ‘greater good’?
A general lack of responsibility for their own decisions makes it easier for Wall Street to fleece the populace. Remember that the whole purpose of our financial system is to funnel your money into the hands of Wall Street banking interests and this will all make much better sense to you.
Exactly. My family lives in the same culture as everyone else and we made the decision not to buy in 2005 and have been renting ever since, waiting for this to settle out. So, clearly, it was possible to make an intelligent decision in the face of prevailing culture.
I had more respect for Shiller before I read this. Looks like the libs at Yale got ahold of him. Whatever reason borrowers had they are responsible for their own decisions. Don’t tax me to bail them out. I didn’t get a cent of their windfall from appreciation.
Shiller & Case haven’t been objective for a while now. They remind me of how Christopher Thornberg was, before he gained his freedom from UCLA Anderson School. Now that he owns Beacon Economics, he is now able to say what he really thinks. Don’t forget these Business Schools are funded by a lot of Fortune 500’s including R E interests. I once looked this up.
They made the bad decision, they should pay for it.
Or, are we now going to advocate an insane society where the population as a group pays for the stupidity of each person.
Base on that logic, the taxpayers own me a few hundred million dollars since I “foolishly” decided to go into an honest field of work vs. becoming a bankster!
Ding! Ding! Ding! Ding! Give that man a cigar. A society that rewards greed, stupidity, and laziness, and punishes prudence, diligence, and resourcefulness will soon find itself upside-down.
But one could reasonably argue that the bubble IS due to many people (especially in CA) agreeing to a price that required a series of mortgage payments that they had no reasonable expectation of being able to afford.
Zandi: And a very reasonable concern. I mean, it isn’t fair…But here’s the point, that by helping these other stressed homeowners getting help with their mortgage and staying in their home, and not pushing that home on to the market and causing house prices to decline, you’re helping yourself.
As a homeowner with no intention of selling, higher prices help me not one bit.
Ditto as a renter.
Look, you all know my leanings here. I think there is value to making sure that there is a job to match most education levels, and a house price (or rent) to match most income levels. That, along with some sort of merit-based level playing field and some temporary help to get people back on their feet, should be enough to result in an acceptable standard of living even near the bottom of the ladder.
[of course the current economic system has very little of this.]
But I see no reason to keep people at a standard of living beyond their worth. Especially if that standard of living is higher than mine.
Let me edit a bit:
And a very reasonable concern. I mean, it isn’t fair…But here’s the point, that by helping these other stressed homeowners getting help with their mortgage and staying in their home, and not pushing that home on to the market ,[thereby helping to move market prices towards alignment with affordability], you’re[not] helping yourself[,that is, if you want to buy a home].
:notices how awkward my draft reads:
You know, this implies that BUSH should be on the line for funding all the bailouts. I’m fine with that. And we can hand Obama the bill for the idiocy going forward. Heck, let’s apply a 50% net-worth tax to everybody in congressional and executive branch from the last 20 years or so, everybody who’s a registered lobbyist, and everybody at the VP level and above (or on the board of directors/etc) of any company that sent a lobbyist to DC.
THEN we can talk about using taxpayer money.
Great idea!
“‘It is way too early for this market to have rebounded the way it has,’ said Christopher Thornberg, principal of Beacon Economics.”
…
“Thornberg attributed the gains primarily to the federal government’s programs and said most of Southern California’s housing gains were a result of fewer foreclosure properties on the market. The falling number of available foreclosures is pushing prices up on lower-end housing, though prices continue to fall in more-expensive neighborhoods. ‘The bottom has been surging up,’ Thornberg said. ‘It really is about the low end.’”
Low end inventory has disappeared, thanks to the various first-time buyer incentives. Now what we have is a dearth of affordable housing, and an excess of homes on the market that few can afford. Sounds like ripe conditions for further declines in the price of high-end SoCal housing, which will eventually get priced into the low end as further price declines.
“Leamer: Yeah, I have mixed feelings about this, because we qualified individuals who don’t really belong in homes.”
“Vigeland: They couldn’t afford the mortgage.”
“Leamer: Exactly. So the right program is not to try to desperately hold those people in homes, but rather to encourage them to become renters, and facilitate the process by which these homes are turned from owner-occupied homes into rental units.”
Sounds like Leamer approves of America’s march on the road to serfdom.
What happens to the homes when the owners ‘become renters’? Are they just added in to shadow inventory?
“What happens to the homes when the owners ‘become renters’? Are they just added in to shadow inventory?”
My guess would be yes. On my street alone there are 4 vacant homes with no lock boxes, no for sale signs, and no sign of activity.
And each of them is still “worth” its 2005 price according to the banks!
That’s right. A non-performing asset is still an asset on the bank’s books.
“It isn’t fair, but….you’re helping yourself”.
This stuff make me mad enough to start throwing heavy objects at the TV…….and my week was starting out so well……
If they wanted to be “fair” about giving money away, they should be writing $50K checks to every one who filed a tax return. That way,some of the money might have been put to productive use, like starting a business, or buying gold, or hell, buying a new car (and God knows I could use one about now…..).
Nope, can’t do that. So let throw another 75 gazillion dollars down the stucco-box crapper. Non-appreciating “assets” for the forseeable future, at best.
OTOH, they were interviewing Micheal Lewis on C-SPAN……the interviewer kept asking Lewis “Why aren’t these guys in jail????”
Maybe some people in high places are starting to wake up, and finally we’ll see a few Perp Walks/RICO investigations/Class-Action suits.
I am pretty sure I am not helping myself when my tax dollars go to support housing prices or bank losses.
I am pretty sure it will not help me if scapegoats go to jail.
I am pretty sure it would help me, and hundreds of millions of others, if the bold thieves in DC were put out along with the corrupt system that owns them.
“I’m sure you’ve heard that a lot of American tax-payers are angry over this issue. You know, they’re asking, why should we have to help out irresponsible bankers and borrowers and bail them out?”
Older generations of taxpayers have not been willing to pay for anything, and they are not paying for this. Future generations of taxpayers, and people who will face old age in poverty as social support is cut back, will pay.
“Zandi: by helping these other stressed homeowners getting help with their mortgage and staying in their home, and not pushing that home on to the market and causing house prices to decline, you’re helping yourself.”
The only way younger generations can strike back is by paying older generations less for their homes. But according to Zandi, older genertions are “helping themselves” yet again.
So following that argument a bit further, the one obvious recourse open to the younger generations is to hold off buying houses altogether, no matter how long it takes for prices to revert to the mean.
Some generations sacrificed on the battlefield, others sacrificed on the frontier, and still others sacrificed in protest marches and prisons. Maybe these younger generations will sacrifice in rental apartments?
My teenage kids won’t pay these prices at the salaries they are likely to get minus the taxes they are likely to pay if I get my way. They can live in the basement until their own kids are teens.
Older generations of taxpayers have not been willing to pay for anything, and they are not paying for this. Future generations of taxpayers, and people who will face old age in poverty as social support is cut back, will pay.
———————
Have to disagree with you there. The “older generations” have been trying to live on fixed incomes and interest from bonds, savings, etc. The Fed’s War on Savers has hit the older folks very, very hard. Not to mention that little dip in the RE and stock markets which wiped out a good portion of their accumulated wealth that was built up over decades.
Still I agree with you about not overpaying for a house in order to fund someone else’s retirement.
Here’s what I don’t get….the FB’s living in House “A” get a reduction on their loan balance, a little bit each year and then it becomes permanent if they stay current for 5 years.
How does that stabilize neighborhood values? Even the gov’t has stated this program will only help a small number of borrowers, so the vast majority of defaults & short sales & foreclosures are still going to happen. As for non-distressed sales, unless we see a return to exotic financing, it seems that prices will continue to weaken as interest rates rise, unemployment stays high, federal/state credits expire, etc.
Exotic products don’t need to happen again. We could see runaway inflation push prices back up. Frankly with the supply problem that we have though, even with runaway inflation we’ll have a hard time seeing a recovery in housing prices.
The ‘Ten Year Bond went over 4% today. Better buy now before interest rates,prices, go up. hahahahahaha
Mark Zandi should be in Prison in solitary confinement for life and his firm should be shut down. Indict the entire bunch of them and get it over with. AND that hysteric Gharib should double up on her meds. Paul Kangas must be embarrassed by them all.
Jail Zandi. Do it NOW.
Right on. I had to shut C-Span off when Zandi was testifying to CONgress. Here’s how I see him: a bloodless, sanctimonious prick who works for Moody’s E-CONomy, a fraudulent organization that put out tons of propaganda. Before that, he was at Wacholevia. With a resume like that, he shouldn’t be hired for anything financial. Or listened to for any reason.
Fully agree. I used to adore Paul Kangas. He was pretty impartial and was obviously serious about the value of the free market, but he somehow conveyed what a silly enterprise the whole stock market thing was.
The moment Paul left, they dumped any substantive content, sexed up the graphics, and brought in that smarmy Tom Hudson whom I can’t listen to for more than 10 seconds. I may as well watch CNBC. I don’t watch NBR anymore; now I just wait for Jim Lehrer.
Zandi sold his firm to Moody’s.
Hello! I am a long time reader (since 2005), but this is my first posting. When I had friends who told me “if you don’t buy now, you will never own”, I found refuge here. I read and learned and laughed and cried (RIP Oly). My circumstances are now in place that it is possible to buy a place, so I would like to pose the scenario to you, my trusted HBBers.
My husband and I have a sizable down payment (up to $200K, and if we wait until the end of summer $250K) and we would like to buy a duplex or multi-unit in the East Bay of SF, to live/possibly work in one unit and rent the other(s). We are specifically looking at Emeryville, Oakland, El Cerrito and Richmond Annex…Berkeley’s rent control and zoning laws are just too strict for our needs.
Check out this beauty that I saved from back in the day!
http://www.oftwominds.com/blogmay06/shiller-housing.html
I think the prices have come down to a reasonable level, but would like to know what is the tipping point….is it ok to take the plunge or would it be better to wait a bit longer. We are a bit concerned about interest rates rising and a crashing stock market, and, as we are both self-employed, the real possibility of low incomes over the next few years. If we do go for it soon, is there any way around using a buyer’s realtor (especially since we are doing so much legwork ourselves? we hope to find a foreclosure or short sale).
With gratitude,
lucky girl
lucky girl
I think the Online Broker Redf*n is in your area. They give the buyer a rebate of the Buyers Commission of 50%(1/4th total commission paid by seller) for people like us. We do our own due diligence. I don’t work for them, I just love their business model. Transparency is their honor. They get paid based on our satisfication. They get raving reviews.
Redfin (at least in our area) doesn’t show short sales, because there is only a very small chance you’ll get it. I believe they will show REOs, however.
IMHO trying predict the exact bottom of the market is probably as difficult and fruitless as the exact top. But here’s MY thinking.
1.) High transaction costs mean that only in crazy bubble manias does purchasing for less than 5 years pay off. Since there is considerable uncertainty in the current market, don’t purchase anything that you won’t be happy living in for AT LEAST the next 10 years.
2.) Prices may continue their decline, they may stabalize, or heightened inflation may even drive them higher. But the consensus around here is that there is NO chance that we will see sustained appreciations in real (inflation adjusted) prices anytime soon. So there’s no real hurry. In fact, since you HAVE a significatn down-payment, I don’t think buying until the various first-time buyer assistance have disappeared makes much sense.
3.) Feel free to start looking, if for no other reason than to see what’s out there, and get a good handle on asking prices. With the market as unsetteled as it is, you might well find some bargains. If you find a place that you love, feel free to bid on it, But if a further decline of 20% from the price that you’ve paid for it will leave you disconsolate, you’re not ready to enter the market yet.
Lucky,
Jim A is sharp thinker here. The two things I might add is that the market won’t magically reverse course (irrespective of what real-turds say). It’s a bullet the REIC likes to use to get you to make a decision you’re not ready to make.
Also…. I’m an east coaster but it seems CA metro area prices are beyond grossly inflated. I you sure you want to sign up for 30 years of bank slavery?
That cash cushion you have is far too valuable to throw away on housing…in any market.
it’s not being thrown.. it’s falling to the ground through a hole burned in their pocket.
a hole burned in their pocket.
I very nearly posted that exact phrase.
I agree. If you were modest about it you could live on that with very little income for a lifetime, especially if this downward trend continues for a decade or more.
Buying a duplex is double foolish.
Essentially, what you’re proposing is to buy income property. To make money on income property and pay for upkeep, mortgage, property taxes, insurance, etc. - rents should at the very least pay for all that plus some income. If the property doesn’t do that, then you’re gambling on appreciation and/or getting very stable renters.
Given that the economy is in such flux and you yourself stated that income from your self-employment may decline - wouldn’t you need some of your reserves for food and the necessities of life?
If interest rates go up, you could invest some of that money in interest bearing CDs, MMs or bonds and use the interest to help pay expenses.
IMHO - too much risk and too little reward.
Oh, if you decide to go ahead - Nolo Publishing has some excellent books on landlord/tenant law. If you’re not up on the legalities, you’re adding even more to the risk side of the equation.
There’s a movie called “Pacific Heights”. Please watch before proceeding.
Thank you all for the great feedback, and the idea for Redfin. We only want to buy into a situation where the mortgage, taxes, and costs are comfortably covered by tenant rents. We’ll keep looking and keep you posted!
ps. Hears to hoping we never have a tenant like Michael Keaton!
Give me your reasoning…Why a duplex and for how much ??
A duplex or multi-unit because we travel light and would rather spend our money on other, fun stuff. We found one mult-unit that would gross $3500, not including our unit. My hubby, the numbers guy, thought the yields were good, better than anything else he could invest in now. Downsides not our own house, tying up all that cash, and, of course, if values drop another 20%. We will probably wait, there is no huge rush, but starting to get at least slightly encouraged.
Well…This is what you need to be concerned about…”Operating Costs”….For some time now, I have not seen any small multi-family units that make economic sense…Unless you are a handyman, and can multi-task I would think twice about this…The bottom line is that these small multi unit properties have “run up” along with the housing market and they have a way to go before they would make a sensible investment…Now, If you were going to buy a duplex along with another person or going to put your MIL in the other unit then it could be a good alternative…
Point well taken. We are going to crunch the numbers, see if it works, and probably wait. There is plenty of time, and the market will probably drop. But I don’t think it hurts to learn as much as possible, about transaction costs, upkeep, tenant law, etc etc. Eyes wide open.
thank you all again for the fabulous advice!
lucky girl
Hi Lucky Girl. In California the sellers pay the commission to both brokers and their agents. They agree to do that in the listing agreement. So doing the Redfin thing will earn you a fourth of the commission - you’re doing more work but get to keep the commission that the agent usually gets, while Redfin gets the other 3/4s. I’ve never worked with them, but the deal sounds good, especially for the more-expensive house you’ll be buying in the Bay Area. The only things that worry me are how open they are to lowballing and whether they’d push you to their own listings. The other thing you might want to check is if they want you to sign an exclusive buyer’s agent agreement with them.
I like Oakland, and it looks like there are some nice houses in the $400,000 range. Lowballing multiple houses might get you down another $20-30K. If you could buy in a good neighborhood with a $200,000 10-year mortgage, it would be worth it, since Bay Area rents are so high. I don’t know about the duplex thing, though. Do you really want to share a wall with your tenant?
REhobbyist & Lucky Girl
Redfin has physical agents in different areas, and they come in handy to get into homes, do paperwork, another set of eyes. They aren’t paid like other agents, but on performance. They don’t push you, they actuall do real estate right.
In Ca a 6% commission paid by the seller is split:
3% to listing broker
3% to buyer broker
and then the agent on each side gets 1 1/2%. I’m going to use them to buy. The regular brokers do too much dual agency, and I don’t believe they can be objective. Regular brokers only have $ signs in their eyes. My friend who used Redfin to buy was elated. Great people, service, and not pushy.
“More than half of the people who got loan modifications on delinquent mortgages within nine months, they defaulted again. So it makes you wonder, is there a flaw in all of these attempts by the government?”
Did you know that 100% of all people who go to a shaman, wiccan, health clinic, hospital, doctor or quack, this year; will eventually DIE anyway?
Maybe the flaw is in thinking the government should be in the house price-fixing business in the first place; because it is just as stupid an idea as being in the guaranteeing immortality business. Neither can work; because people just don’t pay bills they cannot afford, and people just don’t live forever.
“Zandi: And a very reasonable concern. I mean, it isn’t fair…But here’s the point, that by helping these other stressed homeowners getting help with their mortgage and staying in their home, and not pushing that home on to the market and causing house prices to decline, you’re helping yourself. So helping your homeowner, it is — it’s distasteful, it’s not the greatest — helping the person that is distressed is… (inaudible)”
“From each according to his ability, to each according to his need” –Karl Marx in his 1875 Critique of the Gotha Program.
What about each according to his want, or each according his desired bragging rights? That’s what this is all about, not need.
“‘It isn’t completely fair, but we are helping a large number of homeowners who got into this foreclosure nightmare through no fault of their own,’ said economist Mark Zandi.”
He is absolutely correct, in opposite world.
…”homeowners who got into this foreclosure nightmare through no fault of their own .”
Doesn’t that statement imply that there is fault somewhere ? The real estate market was a fraudulent market in that the MBS’s were rated
in a false manner in order for the investment firms to get their hands on other peoples money and play irresponsible lenders with this massive Ponzi -scheme . The brain-washing of borrowers was so intense that they would forgo all logic in order to get on the real estate get rich quick bandwagon .
For me I look at where the fraud started ,and that was the obtainment of the funds for lending under false pretenses and models to begin with . Not that the borrowers can be excused because if they had rejected the stupid sell to a greater fool idea and debt is good BS and refused to pay absurd prices for real estate than the scheme could not of continued . Some innocent borrowers got caught up in the collapse of this high leverage scheme also.
But that is what happens when crimes are committed ,people get
hurt . Look at the Enron story .
You can’t bail it out ,its as simple as that . Money should be directed to that which will be productive . The Banks have always taken the tact of waiting for bail outs . Everything that they have done did not solve the problems of the aftermath of a fake market and mania .
Personal responsibility for ones actions - that’s like so old fashioned. Our government is looking into permanently reducing the mortgage balance for all homeowners who are underwater as well as unemployed homeowner mortgage borrowers? I suppose putting their reduced mortgage debt into a deferred account to be repaid later is not charitable enough? So much for the bible stuff about paying your debts. I’m back to watching the food stamp exchangers buying deli counter shrimp cocktails and sirloin. I’m hanging with fish sticks and ground beef on my fixed income, but then I pay all of my debt obligations. Gawd I pity the younger generations without good earning potential. It’s going to be nasty paying our countries debt obligations.
@Lucky girl,
I’m somewhat in the same boat as you. Looking in the Northbay(Marin/Sonoma).
My big concern is the sudden increase in foreclosures, which started very abruptly about a month ago, and really is starting to mushroom.
It tells me that we might be entering a capitulation phase, and I really do not want to be buying if this becomes a trend.
My advice is to keep close tabs on foreclosures in your neck of the woods. I use foreclosure.com which is expensive($50/month) but I think is well worth it.
Foreclosure.com is OK. You can also look stuff up on the county recorders site, and find a broker or two who track REOs and short sales on the MLS and they’ll probably email you a list each week for free.
“I’m somewhat in the same boat as you. Looking in the Northbay(Marin/Sonoma). My big concern is the sudden increase in foreclosures, which started very abruptly about a month ago, and really is starting to mushroom.”
I’m in the same boat, sold in Marin in 2004 and have been happily renting ever since.
Keep in mind about 2/3 of purchase & re-fi loans during the bubble heyday were adjustable products, and everyone I know who bought past 2001 stretched their finances to do so, because prices were more insane by the year.
I’ve been watching westside Petaluma cottages, and they are down a good $100K in the last year alone.
I don’t believe for two seconds we’re near the bottom. There are still too many FB’s in houses they can’t afford long term.
We’re not even close to the bottom until my Ex-wife gets thrown out of her condo.
All good advice. It is nice to know that there are reasonable peeps out there who aren’t going to pressure us to buy.
“the victims of bad timing”
Let’s see if I understand that logic: If I lose money in the stock market, I am a “victim of bad timing”. Therefore, the taxpayers have an obligation to bail me out!
I bought a pair of shoes, and the next week they went on sale. Where’s my cramdown?
Yeah, some of these home “owners” were victimized into buying a fugly McMansion. Maybe it’s that 5th bedroom for all the crap they were buying on QVC that put them underwater… So, why is it that these people deserve principal reduction? They need to move and live within their means.
Whatever we’re going to do, we need to do it fast. There are a lot of homeowners who are very delinquent on their loans, but haven’t been foreclosed yet. The majority of those can’t be fixed at all - the owners are just living there for free because the government has bought them time.
We’ve got to quickly save those that can be saved and let the process get back on track for those that are going to be foreclosed anyway. The sooner we can get rid of this shadow inventory, the sooner the market can recover.
“The majority of those can’t be fixed at all - the owners are just living there for free because the government has bought them time.”
What do you have against free rent for deserving home owners, Comrade?
Can I get my house payment paid?
Roidy
I bit the bullet two weeks ago and bought a house in Coral Springs
Florida. I’m 55 and have been wanting a house for 10years. It’s a really nice house and I hope to live here at least 10 to 15 years.
I had 20% down, but have heard that a lot of buyers picking up the foreclosures and short sales are still using fha and only have 3% down.
Renting is cheaper, but this house significantly improves the quality of my life. Only time will tell if I made a mistake.
Fl_renter,
Most people who are in trouble bought a house for too much money and did not intend to live in it. A number of other people have lost a job or have health problems and are now underwater or bankrupt. If you bought a house with a proper down payment and a reasonable monthly note for a term of 15 years? You did well.
Good luck.
Roidy
Fl_renter
When you hit your 50’s, let’s face it, you have more time behind you than in front of you. Enjoy your new home, and don’t worry about it. If you live there for 10-15 years, and can afford it, enjoy it in good health. We’re buying this year too, and in So Ca, our timing isn’t at going to be at the bottom. There is a premium for enjoying life, and those who are young can afford to wait for the bottom. We can’t rewind time. Best of luck and health in your new home.
That makes me sad, awaiting.
We’re in the same boat, but with kids. They aren’t getting any younger. It seems the govt is forcing us to either buy and overpriced home or live out our childrearing years in a rental (not that there’s anything wrong with renting, it’s just that we would have been able to buy our own family home if not for this stupid, freaking bubble).
Also, I just told my DH this weekend that we will have to get a shorter mortgage now (less than 30 years) because the govt has stolen years of our mortgage-paying years with this infernal propping up of the bubble.
Buyer Credit Drives February’s 8.2% Rise in Pending Home Sales
Apr 5 2010, 12:15 PM ET
More Americans signed contracts to buy homes in February, as the National Association of Realtors Pending Home Sales Index rose by an impressive 8.2%. That brings the index to 97.6, just below where it stood in December at 97.8. What’s caused February’s steep rise?
According to NAR, the home buyer credit’s April 30th expiration is a big part of the cause. Pending home sales are forward-looking. These sales haven’t actually been completed yet but signal more buyers in the market deciding to make a purchase. That’s why February home sales were quite weak, but pending sales were much stronger.
…
Free rent while you fret about being a deadbeat. Seven years of wrecked credit and start searching for the next freeload. This forgiven debt stuff is as lulu as the Christian concept of doing very, very bad stuff and praying for forgiveness to wipe your morality slate clean. This country that sold the pet rock scheme continues to baffle me.
I have been told that the credit ding for Chapter 7 only lasts for about 2-3 years.
Don’t most homebuyers realize that higher interest rates plus the phasing out of government life support of the housing market will likely result in lower home purchase demand (and prices)?
The Associated Press April 5, 2010, 2:19PM ET
Shares of homebuilders climb on jump in home sales
NEW YORK
Shares of homebuilders climbed Monday after a report showed that pending home sales rose sharply in February to beat expectations as buyers took advantage of government incentives before a deadline at the end of this month.
The National Association of Realtors said its seasonally adjusted index of sales agreements rose 8.2 percent from January to a February reading of 97.6. That far exceeded estimates by economists surveyed by Thomson Reuters, who had expected the index would fall slightly to 90.3.
The index is considered a barometer for future sales activity because there is typically a lag of one to two months between a signed sales contract and a completed deal.
First-time buyers can get a tax break of up to $8,000 if they sign a contract by April 30. Lawmakers also added credit of $6,500 for existing homeowners who move.
Buyers may also be motivated by worries that mortgage rates will climb later this year.
…
“Don’t most homebuyers realize that higher interest rates plus the phasing out of government life support of the housing market will likely result in lower home purchase demand (and prices)?”
You have to remember that these are the same people who believed that prices would keep on rising.
Another gov’t and bank fraud. Lets say you have a $4,000 a month mortage and it gets reduced maybe to $ 3,200. Okay the bank just got another 38k in payments from you in a year and most likely these people will default in a years time anyway.
Look people if you are in a black hole why throw more into it, just walk away and when enough do this you will see special loans for these people to buy again shortly.
Leave the cash in your pocket, not in the banks coffers okay gang.
Lucky girl.
I’ll give you the same advice I gave my kids….(they were in essentially the same condition) I was a realator at the time and would never have given this advice in a “normal” situation, but the situation was not normal. Prices were stupid. No other term necessary. Stupid. Call it a bubble. I call it stupid.
Use whatever means you can to avoid any down payment. Keep your money in a local credit union. NO BANK. Credit union. Buy whatever you want, but make certain it’s a non-recourse loan. Be prepared for when prices fall (and they will) enough to put you underwater you will be able to simply walk away from the loan, and you still have 200G’s drawing (small but certain to increase) interest.
Neither of my kids followed my advice either.
Might not be a bad idea to buy a couple of bags of pre ‘65 dimes, either. They might be a nice item to have around in a few years. Cost is about $13,000 right now….that’s about $1.30 for a dime!
The eclectic skeptic.
“The trouble with dumb bastards is that they’re too dumb to realize that there’s such a thing as being smart” –Kurt Vonnegut
Atlanta Business News 2:10 p.m. Monday, April 5, 2010
Foreclosures dragging home improvement spending
By Rachel Tobin Ramos
The Atlanta Journal-Constitution
Even though the housing market is in a “choppy but sustaining recovery,” sales at Home Depot and Lowe’s, the nation’s largest home improvement stores, are not likely to grow robustly until 2011 or 2012, according to an analysis released Monday by Colin McGranahan, an analyst with Bernstein Research.
He believes there’s a one year supply of foreclosures in a shadow market that hasn’t hit the housing market yet. This “shadow inventory” is made of 1.7 million homes in foreclosure and another 3 million to 5 million homes with mortgages in delinquency that haven’t hit the housing market yet.
Foreclosures are “a persistent issue that is suppressing home prices,” he said. “Our view is that home prices are going nowhere in a hurry.”
That in turn negatively impacts home improvement spending, because about 50 percent of home improvement expenditures are on big ticket remodels and additions, he said.
Remodels typically have been funded through home equity lines of credit, which banks have made much harder to obtain, he said. In addition, about 25 percent of mortgage holders have negative equity in their homes, McGranahan said.
…
That in turn negatively impacts home improvement spending, because about 50 percent of home improvement expenditures are on big ticket remodels and additions, he said.
God forbid a buyer should buy at a much lower price so they could use CASH to fix the place up.
Nope, gotta be credit…all day, every day.
WSJ Blogs
Developments
Real estate news and analysis from The Wall Street Journal
* The Housing Blowup: Did You See It Coming?
* How Many Will the New Mortgage Modification Programs Reach?
* April 5, 2010, 12:30 PM ET
On Home Sales, Curb Your Enthusiasm
By Dawn Wotapka
Today’s data from the National Association of Realtors sure makes it seem like housing has hit the much-awaited bottom: Pending-home sales showed a surprising gain of 8.2% in February, as buyers responded to improved weather and the federal home-buyer tax credit.
Sales of homes entered into contract jumped by the largest margin in more than eight years, Weiss Research notes, with broad-based regional strength.
The excitement is understandable. Housing has been so bad for so long that it’s easy to get giddy over a great statistic. But, while this is good news, proceed with caution.
Much of the bump comes from the federal tax credit, which expires at the end of the month. “Cheap homes and cheap financing are gradually bringing out buyers,” Mike Larson, real estate and interest rate analyst at Weiss Research, wrote in a client note.
While there might be strong data in future weeks, industry experts have long said that softness could follow once the incentive - essentially free money - to buy is taken away. (Few expect the credit to be extended.) “Activity likely picked up further in March, and we expect buyers to act with even more urgency in April, although this brief surge will likely be followed by a lull in activity similar to the drop-off in late fall/winter,” noted Credit Suisse builder analyst Dan Oppenheim.
And, we’ve warned about other headwinds: Foreclosures remain a stubborn issue that drag down neighborhood values. The amount of shadow inventory, homes that haven’t made it to the market, remains anyone’s guess. Lenders remain strict, making buyers jump through hoops to secure a mortgage. This all comes as the Fed has stopped buying up mortgages, which some fear could result in higher interest rates that cut into affordability.
“I don’t expect a vigorous market resurgence or a sharp, new rise in home prices. Foreclosure inventory will continue to be doled out into the market over the next year or two, taking some vigor out of this recovery,” Mr. Larson said. “But it will be a recovery nonetheless, one warmly welcomed by battered home sellers, banks, and home builders.”
Indeed, investors in home builders look to be giddy Monday: Standard Pacific is up 6.03%, while Beazer has gained 4.38%. No major public builder is in negative territory.
… But , but, I don’t want to give up a little more taxpayer money. I’ve been grabbed so much I’m starting to think I’m a door knob.
No more.
Roidy
P.S. No more for that Pimp at Pimpco.
The various ways that the Government has chosen to contort the entire economy to try to prop up a fake RE market and fake borrowers has taken it’s toll on everyone . Our Society is now crazy because of it .This crazy attempt to bail out gamblers and the higher up thieves was the wrong decision IMHO . I can only hope that sanity will prevail eventually ,but it’s not looking good right now ,they are stuck on stupid .
Very true, Wiz.