Taking A Gamble That Prices Would Continue Upward
It’s Friday desk clearing time for this blogger. “It’s the eternal question for real estate obsessed New Yorkers: should you rent or buy? Now, we might finally have an answer. The New York Times created this awesome, interactive graph that calculates common expenses of buying and renting, spitting out precisely at what year you would be better off buying your apartment. Economist David Leonhardt says that in these troubled times, most New Yorkers are actually better off buying. Home prices are still low enough that it’s still a bargain in places like New York and L.A., which Leonhardt calls ‘microcosms of today’s more nuanced real estate market.’ So, will you ever be buying your place, or are you a die-hard (bitter) renter?”
“Homeownership is in most cases a highly leveraged, undiversified, relatively illiquid bet, with a return that is highly correlated to local labour market conditions. But Mr Leonhardt sets most of that aside and suggests that, hey, maybe you should play around with the New York Times’ mortgage calculator, and think about buying. Problem one is that said calculator asks you to fill in the about by which ‘you expect home prices to go up each year.’”
“The correct assumption should be zero. Strikingly, the calculator gives you the option to estimate annual appreciation as high as 30%. It doesn’t let you enter an annual decline of value of greater than 10%, despite the fact that over the past year, several markets have seen price declines of at least that much.”
“What is the value of having the option to pick up and leave these metropolitan areas at no cost? Should we be encouraging people to chain themselves to labour markets like this for at least five to seven years? I would hope that most Americans would have more sense than to look at the enormous declines in home prices over the past few years and see a buying opportunity, rather than a cautionary tale.”
“The party’s over at the A Building, an East Village condominium built by mini-mogul Ben Shaoul and his partner, Rob Kaliner. Beneath the two-year-old building’s reputation for hosting raucous rooftop pool parties lies a reality worse than the most killer hangover — flooding, crumbling balconies, alleged mismanagement of the condo board’s funds and two unresponsive developers who have left owners banging their heads against mold-ridden walls, claim several residents who forwarded dozens of documents detailing these issues to The Real Deal.”
“‘This is dangerous for my daughter to be in, and we now have no running water in the kitchen as the island has been disconnected … I feel like I am squatting in my own home,’ resident Kim D’Amato wrote in an e-mail on March 25 to the building’s management company. Her $1.9 million garden-level apartment flooded after the heavy rainstorms in early March.”
“In 2006, Harry Penny thought he was living the dream. He and his wife bought a house in Coventry, Chenango County, and settled in to enjoy retirement. The $2,600 total tax bill seemed reasonable for three bedrooms and seven acres of land. Four years and two reassessments later, Penny has put the house up for sale. Taxes have virtually tripled, making it difficult for the couple to afford. ‘It’s been on the market three weeks, but we haven’t seen a soul,’ said Penny, who turns 72 this year. ‘I think I’m going to be here until I die, because I can’t sell it. Maybe I should just let the outside go to hell and hope my assessment goes down.’”
“New York’s taxpayers pay property-tax bills that are 79 percent above the national average, a 2008 state report found. Property-tax levies grew 60 percent between 1995 and 2005, more than twice the inflation rate, the state Comptroller’s Office said. The situation has become so unbearable for Todd Feuerstein, a 45-year-old sales manager from New City, that he has thought about moving to Arizona.”
“‘What are they telling me — that if I can’t afford these taxes I have to leave my home?’ Feuerstein said. ‘But who’s going to buy it? No one’s going to be able to afford moving to Clarkstown.’”
“Housing starts stayed strong through March in the Tucson area as builders pushed to take advantage of the first-time home-buyers tax credit before it expires. Once that tax credit goes away, local business consultant John L. Strobeck said, he anticipates housing starts will again drop off. Meantime, the median price of a home is the lowest it’s been since January 2004, Strobeck’s report says. ‘Builders are trying to meet the competition of resale and foreclosure homes so they’re pushing their prices way down,’ Strobeck said.”
“Homeowners who bought in 2005 who had ‘interest only’ mortgages will see their rates reset in 2010. Those loans were viable only if property values continued to rise, which they didn’t, so homeowners will see their monthly payments increasing, leading to more financially distressed properties, Strobeck said. ‘This verifies my concern that we are just at the height of the foreclosure problem and will not be out of the situation until 2013,’ Strobeck said.”
“Jim Watters, his wife and children were living the dream in their Gilbert house but with the current economy they found themselves needing to modify their loan and that is when they woke up to a nightmare. With their modified loan, the Watters started making their new mortgage payments. Jim explains, ‘Here are all my cancelled checks from September, October, November, December, February, March…right up until last week when we were told our home was being auctioned off.’”
“The director of the Arizona Department of Housing, Michael Trailor, says loan modifications are not going well in our state. ‘Most of the modification efforts today are ending in foreclosure,’ Trailor explains.”
“Democratic Rep. Dina Titus did not set out to create a housing counseling center in her Las Vegas office. Five staffers in Titus’ district office in Las Vegas now handle housing problems, in addition to the jobs they were hired to do. Critics may scoff, and some have, at Titus helping homeowners who had no business buying homes they couldn’t afford in the first place. Indeed, one family acknowledged they could afford no more than $800 a month when they bought their home in a gated community in Las Vegas with a loan that would cost them $1,200 monthly. The homeowners believed they could eventually refinance to a better rate.”
“With so many homeowners facing foreclosure in Southern Nevada, the economic damage that would come to entire swaths of the community if such a high volume of homes are vacated would be worse than the cost of helping keep families in houses they could ill afford, said Julia Gordon, a senior policy counsel at the Center for Responsible Lending in Washington. ‘Everyone’s in trouble: The borrower’s in trouble; the lender’s in trouble. How do we go through this with the least amount of damage?’ she said. ‘Yes, that does mean that some families that should have never been in that house are going to stay in that house.’”
“Titus will likely face a difficult re-election this fall, as she seeks to keep her seat in a district she won in 2008 with less than 50 percent of the vote.”
“Starting this month, the Treasury Department is paying companies that collect mortgage payments and examine pleas for assistance a $1,500 stipend for approving the sale of homes for less than the loan balance, known as a short sale. The servicers also get $1,000 for each completion under the government’s year- old mortgage modification program, and additional stipends over three years if borrowers stay current on their payments.”
“‘The incentives being offered by the government are small compared to the counter-incentive of foreclosure,’ said Diane Swonk, chief economist of Chicago-based Mesirow Financial. ‘The service industry has its own set of incentives, and you can’t tell people to do what’s not in their financial best interest, especially in an economy that is still struggling.’”
“About 7 million homes may end up in foreclosure in the next three to four years even with the government programs, according to Laurie Goodman, senior managing director at Amherst Securities Group LP in New York. Some of those properties will be homes owned by borrowers who re-defaulted after getting modifications, she said. ‘Clearly the program hasn’t been effective enough so far,’ Goodman said. ‘What it’s succeeded in doing is kicking the can down the road.’”
“A growing number of North Texas home foreclosure filings have nothing to do with the usual late mortgage payments. About 350 Dallas-Fort Worth area homes are facing a forced sale because the owners owe money to homeowners associations or home equity loan holders, local foreclosure filings show. The same factors that have contributed to record home foreclosures and late payments have also caused a jump in foreclosure postings for home equity loans.”
“‘We knew when those loans first came into vogue that it was just a matter of time before this happened,’ said George Roddy, president of Addison-based Foreclosure Listing Service. ‘People were borrowing to pay for a boat or a trip and putting the debt on their house.’”
“Hedge-fund king John Paulson didn’t have any direct involvement in the mortgages contained in the Goldman deal under scrutiny by the Securities and Exchange Commission. And the bets that Mr. Paulson placed on Abacus didn’t affect whether or not homeowners defaulted. Rather, he used Wall Street to help structure hugely lucrative side bets that homeowners couldn’t make their monthly mortgage payments.”
“Some of the people whose mortgages underpinned Mr. Paulson’s wager were themselves taking a gamble—that U.S. housing prices would continue to march upward. One mortgage in the Abacus pool was held by Ms. Onyeukwu, a 43-year-old nursing-home assistant in Pittsburg, Calif. Ms. Onyeukwu already was under financial strain in 2006, when she applied to Fremont Investment & Loan for a new mortgage on her two-story, six-bedroom house. With pre-tax income of about $9,000 a month from a child-care business, she says she was having a hard time making the $5,000 monthly payments on her existing $688,000 mortgage, which carried an initial interest rate of 9.05%.”
“Nonetheless, she took out an even bigger loan from Fremont, which lent her $786,250 at an initial interest rate of 7.55%—but that would begin to float as high as 13.55% two years later. She says the monthly payment on the new loan came to a bit more than $5,000. She defaulted in early 2008 and was evicted from the house in early 2009.”
“In May of 2006, a broker had approached Gheorghe Bledea, a Romanian immigrant, to pitch him a deal on a loan to refinance the existing mortgage on his Folsom, Calif., home. His broker told him the only one available was an adjustable-rate mortgage carrying an 8% interest rate, according his court filing. Mr. Bledea, who says he has limited English-speaking skills, was told that he’d be able to exit the risky loan in six months and refinance into yet another one carrying a lower 1% rate. Mr. Bledea agreed to take out the $531,000 loan on July 21, 2006.”
“The new loan never materialized. Within months, Mr. Bledea and his family were struggling under the weight of a $5,800 monthly note, says his son, Joe Bledea. ‘We were putting ourselves in a lot of debt,’ Joe Bledea says. By spring of 2009, the loan was in default.”
“Throughout my childhood, my grandmother Big Mama extolled the virtues of owning a home. When I dared to move out of her house and get a one-bedroom apartment a year after graduating from college, Big Mama harassed me about renting. When my lease was coming to an end, she declared that I had two choices: Move back in with her or buy my own home. I bought my first home - a two-bedroom, one-bath condominium.”
“Even though I was in my early 20s, I was ready for ownership. I had no debt. The monthly mortgage payment was well below 36 percent of my net monthly pay. My grandmother pushed homeownership, but not as an almighty way to increase my net worth. She taught me to view my home as a place to live and a way to stabilize my monthly housing expense. If your home appreciated in value, that was a bonus. When I sold my condo, it hadn’t appreciated in value. But I was OK with this. I lived in a great place for more than 10 years.”
“Homeownership in this country climbed for decades, peaking in 2004 at 69.2 percent, according to data pulled together by the Hoover Institution at Stanford University. Homeownership rates jumped significantly, according to census data, increasing from 43.6 percent in 1940 to 61.9 percent by 1960.”
“But as the number of homeowners increased, so did the belief - fueled by lenders and others working in the mortgage industry - that a home was a savings account. We were enticed by lenders to tap into our equity, secure in the belief that a house would always increase in value. We embraced the idea that draining the equity was a risk-free deal. We even took the Holy Grail of homeownership to a disastrous place by chastising people who didn’t have a mortgage. People were counseled to get a home loan for the mortgage-interest deduction.”
“However, that deduction was never intended to promote homeownership, wrote Dennis J. Ventry Jr., a University of California-Davis law professor, in the journal Law & Contemporary Problems. Ventry concluded that the mortgage deduction promoted overinvestment in residential real estate. We made renting seem so financially reckless that it surely encouraged people to jump into buying a home before they were ready.”
“The Fannie Mae National Housing Survey, conducted between December 2009 and January 2010, polled people with home loans and renters to gauge their feelings about the current state of homeownership, including whether they view a home as a safe investment. Turns out many still see owning a home as key to increasing their wealth. The Fannie Mae poll found that seven out of 10 respondents said buying a home is still one of the safest ways to invest.”
“However, the survey also uncovered a new trend regarding homeownership. Survey participants ranked a safe neighborhood and living near good schools ahead of making money on their home as a leading reason to become a homeowner. Twenty-three percent of renters said they have changed their plans and are putting off purchasing a new home. ‘Consumers are still committed to owning a home, but are showing increased cautiousness, regardless of whether they rent, own their homes outright or have a mortgage,’ said Doug Duncan, Fannie Mae’s chief economist.”
“It’s what Duncan said next that I think is a sign that maybe, just maybe, people now understand a home is not an ATM or a risk-free investment. It’s great that people are viewing homeownership with much more caution now. You are not a financial failure if you rent. It may be the smartest financial move you make until you are ready to handle a mortgage.”
Thank you for all your hard work Ben!
(ps when is the DC meetup again?)
That was a great read Ben…Thanks…
I’ve been planning on going to DC in early June. We should have a post here, a sticky post on the forum or both, today or tomorrow. So anyone interested can provide input on dates and locations, etc.
Ben meets up with Polly…..pictures at 11.
The weekend of the 12th is the only bad weekend for me right now….
I was thinking about the weekend before that. If enough people are interested, I’d like to go to Boston, NYC and maybe even Florida while I’m out east.
June is wide open for me, so far. I’ll make the 4 hour trip to DC.
I see a sticky post has been added to the forum under “General Discussion”.
When in early June? What’s the plan, the dates?
I’m planning a vacation for the first week of June. Originally wanted to go to Europe, now maybe will have to go to Florida (damn volcano)…
Cool - a DC meeting!
Where do we hook up at?
That’s what I’m looking for input on. I’ll have something online where we can discuss this more clearly soon, or you can chime in on this thread. I’ve never been to DC, NYC or Florida, so I look forward to some help on this.
Ben-
Do you wwant to be in DC proper or would outside of DC be Ok?
The way we’ve done these before is, find out who is coming from where, and make the traveling easier. Probably a place where getting in and out is not a struggle. It looks like some will be flying in, so perhaps picking something accessable to an airport would be a first start.
Isn’t Bink in DC ??
I’m in DC… until the end of May.
I actually may still be in DC until the second week of June if the Capitals make a Cup run. I know that sounds silly, but I’m a season ticket holder and can’t miss it if it happens.
We can put together a mini-meet b4 then. If you’re going to that bar before the game let us know. (now, how to do this without the lurkers and stalkers crashing the par-tay..)
Hi bink,
Do you post on Daily Kos?
Daily Kos??? Helllllll no!
Somewhere in downtown DC is probably best…easy access for DC, NoVa and MDburbs. Maybe Phillips on Water Street…a chance for some ES seafood (I know it’s not the best, but still good) but it’s large, on the water and could allow a waterfront outdoor event and if the weather is bad - plenty of indoor space.
Here is the forum post for the DC meetup:
http://forum.thehousingbubbleblog.com/index.php?topic=428.0
“In 2006, Harry Penny thought he was living the dream. He and his wife bought a house in Coventry, Chenango County, and settled in to enjoy retirement. The $2,600 total tax bill seemed reasonable for three bedrooms and seven acres of land. Four years and two reassessments later, Penny has put the house up for sale. Taxes have virtually tripled, making it difficult for the couple to afford. ‘It’s been on the market three weeks, but we haven’t seen a soul,’ said Penny, who turns 72 this year. ‘I think I’m going to be here until I die, because I can’t sell it. Maybe I should just let the outside go to hell and hope my assessment goes down.’”
So much say, so little time. I encourage everyone to read the article. Nowhere in it does it state where these people came *from* but this scenario is unbelievably typical for NY and VT. Starry-eyed sneaker wearing fools from elsewhere see “cheap” and strike only to find out how incredibly oppressive the taxes and weather is. I’ve watched this happen here for decades and it really is the rule of thumb.
The scuttle of living in NY is this…. if you’re not making substantial $$$’s AND saving it while delaying consumption here in NY, it makes NO sense to be here. And the only place you’re going to make money is in NYC and NYC suburbs. The rest of the state is doomed for the reasons stated in the article. It’s entirely dependent on govt subsidies and equity bandits. The latest round of equity bandits/sneaker wearing fools are getting a dose of reality as the article indicates and if it weren’t for the govt subisidies, the place would evaporate entirely. Keep in mind that this really is a repeating secular boom/bust cycle where the clueless natives(my family and friends) believe the very BS they’re foisting on the visitors. Stuff like “it’s gonna be great” and other assorted golden-sailed ship that never arrives BS. It happened from the late 80’s through early 90’s and here we are again.
For me and MrsExeter? We’re headed to the Delaware beaches this weekend to look at a short roster of houses.
PS-It’s amazing how realturds will dump the empty pockets and tire kickers in favor of a cash buyer.
I worked in Chenango county for nearly a year, in Norwich (a contrct job at the Pharm company there).
Norwich is the county seat and the largest city at maybe 15k people. Th county is in prime dairy land, where the cows outnumber the people 5:1. Nice old Victorian homes there, but the future does not look good.
I was living in Syracuse so it was an 1.5 hour commute. It was about 45 minutes to Binghampton. So it’s in the middle of no-where, with a limited economic future (at least in our life-times).
The concept of a retired couple moving there and then paying 7k/yr in property taxes (on top of the high state income tax and sales tax) just does not make since. No wonder you say that the state is completely doomed outside NYC.
And to make matters worse, dairy has been in decline for 3 decades now but people are still out there jerking cows try to make it happen and they too implode into bankruptcy. Being from a family of farmers, I can attest that farmers are great at what they do but they are *horrible* businessmen.
Being from a family of farmers, I can attest that farmers are great at what they do but they are *horrible* businessmen.
In one sentence, you’ve summed up a major problem with the state of Vermont’s economy.
I’m in Syracuse for work, earning far more in Medicine than NYC pays. It is possible to earn living outside NYC
“‘What are they telling me — that if I can’t afford these taxes I have to leave my home?’ Feuerstein said. ‘But who’s going to buy it? No one’s going to be able to afford moving to Clarkstown.’”
I’ll take the last train to Clarkstown and I will meet him at the station
No one is going to buy unless it is dirt cheap. The OVERALL cost of housing (P/I + taxes + utilities + upkeep) is what matters. If taxes go way up then prices have to come down.
You may thank your public sector unions (where the vast majority of your real estate taxes goes) for their great salaries, benefits and pensions.
..A large contributor to Proposition 13 was the sentiment that older Californians should not be priced out of their homes through high taxes.[4]
wikipedia
Agreed: I love how all the various tools think that the only cost of homeownership is paying some of the interest on the loan… maybe… if you feel like it. Not only did they not bother looking at the full price of paying off the house, they didn’t consider insurance, taxes, upkeep, etc. Unreal!
“‘This is dangerous for my daughter to be in, and we now have no running water in the kitchen as the island has been disconnected … I feel like I am squatting in my own home,’ resident Kim D’Amato wrote in an e-mail on March 25 to the building’s management company. Her $1.9 million garden-level apartment flooded after the heavy rainstorms in early March.”
$2 million for a place that has no running water in the kitchen?????
$2 million for a place that floods after heavy rainstorms??????
When money was hard to come by and you had to repay it - people actually did research before they spent it.
“Garden apartment” = “Floor-level apartment” = “Neighbors walking on your head day in and day out in exchange for $2,000,000.00 +interest +taxes +maintenance +HOA fees”.
These days it seems like I never stop shaking my head at these people. This is beyond incomprehensible.
$1.9 mil would buy a lot of sunshine, a little bottled H20 for brushing teeth and more than a few funny fruit drinks with those little umbrellas on a beach somewhere.
Heck, I’d still have money enough to send my g/f a postcard !
You could actually retire, pretty comfortably, on $1.9 million in most parts of the country.
“Jim Watters, his wife and children were living the dream in their Gilbert house but with the current economy they found themselves needing to modify their loan and that is when they woke up to a nightmare. With their modified loan, the Watters started making their new mortgage payments. Jim explains, ‘Here are all my cancelled checks from September, October, November, December, February, March…right up until last week when we were told our home was being auctioned off.’”
I (and many others) have said repeatedly that these “mortgage adjustment programs” are nothing more than schemes to squeeze the last few drops of money from people that would have otherwise went bankrupt or walked away much earlier in the process.
I only hope for him and other people in the same boat his experience hurts enough to teach him a life long lesson about living within your means, doing some research to make sure you are not overpaying based on historical ratios, and not trusting sales persons or the government.
I got something a bit different from that. The fact that they have paid all along and still got auctioned off! WTF?
Watters paid 6 months at ~$1650 a month then foreclosed. The bank did all that paperwork for less than $10K? They must be really hurting for cash.
Multiply by 500,000 and it adds up…
‘Here are all my cancelled checks from September, October, November, December, February, March…right up until last week when we were told our home was being auctioned off.’
What about January?
I really question people that think that when the financial system sets up a Ponzi-scheme riddled with fraud and faulty lending, in which people didn’t even have to qualify ,that the root of the problem isn’t the lending scheme to begin with .
The basis of the lending system was fraudulent lending and fraudulent selling or misrepresentation of risk of securities for starters . Add to that the side bets that eventually were made
,including the borrowers on their liar loans , and it was one big fraudulent mess . And don’t anybody try to tell me that
Wall Street Firms were innocent or that the borrowers should take the fall while the the TBTF go on their merry way with public bail outs .
Borrowers aren’t going to learn anything because they were gaming the system to begin with ,just like their lenders set them up to do . I know of a case where this lady took out 150k in cash from her home,knowing she was going to default ,and she just got hit with 15k in taxes . You do the math ,this lady is still getting away with 135k in cash in the final analysis ,
,which isn’t chunk change . How many people could make 150k in income and only pay that small of a penalty on one of three homes . What about people living in these joints for 1 to 2 years without paying their mortgage while they rent to someone else and pocket that sizable amount of money .
People are not going to learn anything if they come out ahead of the game ,and many are coming out ahead in spite of their deplorable greedy fraudulent acts , Just like the Wall Street middle-men .
And Congress dare question these CEO’s now as if these Kangaroo Court Senate hearings aren’t a little late in the game to be questioning these crooks . The moral hazard of the way
they handled the meltdown played out in the worse possible way
in which borrowers and their Lenders just have gamed the system more . The chips should of fell based on standing law at the time ,but “THE SOLUTION ” only made matter worse and wasted trillions of dollars .
The only thing that people should of learned is that Obstruction of Justice will corrupt and destroy a Society .
” A Society that does not render Justice in a fair a just manner is doomed to fail . ” (author unknown )
Wall Street’s know-it-alls can’t tell right from wrong
Lloyd Blankfein, chief executive of Goldman Sachs, second from left, with Gary Cohn, Goldman’s chief operating officer, center, and Al Sharpton, before President Obama’s speech on financial reform.
(Jin Lee/bloomberg News)
By Steven Pearlstein
Friday, April 23, 2010
I know you’ll all be comforted, as I was Wednesday, by the public vote of confidence from Steve Schwartzman, chief executive of private equity giant Blackstone Group, when he said that his firm would continue to do business with Goldman Sachs and that he’s never had a shred of doubt about the investment bank’s ethical character.
So let me get this straight. Goldman Sachs is now relying on the character reference of a Wall Street sharpie who notoriously snookered investors into buying non-controlling shares of a private equity firm at the very moment when a credit-induced takeover bubble was about to burst.
What next? An op-ed testimonial in the Wall Street Journal from Joe Cassano, the genius who made a personal fortune negotiating all those credit-default swaps with Goldman on behalf of American International Group? Or maybe a contribution to the Goldman Sachs legal defense fund from the entire gang at New Century Financial, whose subprime loans were so effectively packaged and peddled by Goldman? Or how about one of those “Just Thinking of You” cards from the investment club at some nursing home in Florida that jumped into oil futures in the summer of 2008 based on Goldman’s advice that oil was going to $200 a barrel?
…
In Steve Schwartzman’s defense, he only said a that he didn’t have a shred of doubt about the investment bank’s ethical character. In other words, he knows they are just as sleazy as him.
Ford Motor Company said it would stand by Goldman as well. I went to their website and told e-mailed their investor relations dept to tell them I would never buy a Ford product again, ever.
The Wall Street Con Gang could create a ‘vehicle” or “product” backed with a bag of falling dead cats and they’d still locate a bunch of GF’s scratching to get in before the 1st bounce.
It’s not only the fact that they are quite good but their sucker pool has been nearly endless until quite lately. (Keep low until the pressure is off and then it’s back to work Boyz.)
It’s like America’s longest running midway carnival and watching the suckers getting gamed and conned. It’s actually fun and I can see how it becomes addictive.
option arms chart..
http://www.shtfplan.com/wp-content/uploads/2010/01/second_wave.jpg
Fittingly, the second reset tsunami crest is scheduled for 9/11.
Do you have any data showing how many of those loans have already defaulted or been refinanced?
At that point I’ll have officially spent like $80,000 on rent since the start of following the bubble. Heh.
Looks remarkably like our old friend Credit Suisse. btw, does anyone have the non-updated CS chart, the one that shows both humps?
http://static.seekingalpha.com/uploads/2007/11/21/dslmtgresets.jpg
Is this the one you’re looking for?
Try this one - I think it’s the one that you want
http://bubbleinfo.squarespace.com/journal/2007/8/22/interpreting-arm-reset-chart.html
Yes, that’s it! Thank you! And check out all that subprime!
As for New York’s taxes and public services, for the past decade the state has been enhancing its public employee pensions and underfunding them at the same time. The consequences of that are going to explode.
The response: even earlier retirement for those over 50, in exchange for lower pay and benefits for new hires, for about the fifth time (the new pension plan is called Tier V). Government of the seniors, by the seniors, and exclusively for the seniors.
This has been going on in the Fed government for ages. My parents took and early retirement package at age 48 about 20 years ago. The package included 50% of their current income for life plus an annual cost of living adjustment, and free healthcare.
Wow. I know someone who took early retirement from the Forest Service about that time and moved to Hawaii. I always wondered what kind of deal she got.
And these measures were meant to cut costs, IIRC.
The government is all about window dressing. Same with hiring, they tell you who to hire before the process starts, then you have publish the job opening and have psuedo interviews. It’s all such a big waste of time of time and money. Creating meaningless oversight, and then developing ways to get around so that it is business as usual (except for the great benefits and salary - most studies show that government workers are grossly overpaid based on their performance and skill-set), is center piece of Obama’s job growth initiative.
The consequences of that are going to explode ??
Explode in my wallet maybe….
They will squeeze the private sector economy as hard as they can, stop hiring newbies, and cut back on everything else before they do anything to get their current labor costs under control.
Just like the UAW/GM. Path of least resistance. It’s easier to hose some unknown taxpayer/customer than it is to confront someone you have to work with every week.
This works (sorta), until your taxpayers/customers have a viable option to relocate/buy Toyota, BMW, or Honda.
Path of least resistance ??
Exactly….Thats how all the new taxes are going to come at us also…
The housing recovery is firmly in place. Buy now, or get priced out forever!
=============================================================Economic Report
April 23, 2010, 10:01 a.m. EDT
New-home sales surge 27% to 411,000 pace
By Rex Nutting, MarketWatch
WASHINGTON (MarketWatch) - Boosted by a soon-to-expire tax break, low mortgage rates and favorable weather, sales of new homes surged 27% in March to a seasonally adjusted annual rate of 411,000 after hitting a record low in February, the Commerce Department estimated Friday.
It was the largest percentage gain in sales since April 1963, the government said. It was the highest sales pace since July, and much stronger than the 335,000 expected by economists surveyed by MarketWatch.
Sales in December, January and February were revised higher. In February, sales were at a 324,000 annualized pace, revised up from 308,000.
It’s still the lowest on record, dating to 1963.Sales are up 24% compared with March 2009.
I simply do not believe these numbers.Why would people buy a new house when there are oodles of foreclosures and short sales out there that are way cheaper?Could be the same people buying stocks right now.A fool and his money are soon parted.How soon people forget.
Great, so now we can allow all the homebuyer encouragement gifts to expire…right? Hello? Is the NAR there?
“Why would people buy a new house when there are oodles of foreclosures and short sales out there that are way cheaper?”
Are those currently available on the market? If so, I am sure having a hard time seeing them.
Exactly.
The foreclosures and REO’s often show up AFTER they have begun to crumble (and thus any savings gained from buying them is offset by paying to restore them.) Or, they end up in the hands of flippers and insiders. A lot of effort is being made to give F’d buyers the appearance that their only choice is to buy a stupidly overpriced house.
“Or, they end up in the hands of flippers and insiders”
Yup seeing lots of that here. The one thing about looking at inventory year after year is you get to see which ones sold at the end of last year only to go back on the market this spring. Some homes didn’t even get improved. I could have sworn there were sold signs out in front of some of these. I’ve also heard of several owners that pulled their homes off the MLS in the slow months then jumped back in when they heard things were moving this spring. This time they were gone in days.
Here in Tucson, I know of many cases of “now you see it, now you don’t” houses for sale. As in, the sign’s out in front this week, and then it vanishes.
Now, usually, when real estate agents sell a house, they hang a big “sale pending” or “sold” rider below the sign. Not at these houses. All of a sudden, the sign just up and leaves.
I’ve noticed that quite a few of these houses become rentals of the accidental sort. Y’know, the ones with owners that say, “We’ll just rent it until the market improves.”
As we all know, the market is indeed improving. Prices are coming down. But that’s not what these owners want.
I predict that, within a year or two, a lot of these accidental rentals will return to the market is “sell it for what you can get” houses.
Why would people buy a new house ??
First, because its new….You can anticipate many years of maintenance free living….
Second, because there are likely games being played behind the reported numbers…Lots of ways to incentivise a sale without the “incentive” being exposed…One example; How about first year of payments made by the builder…
“…….maintenance-free living……”
Unless you have Chinese drywall.
Actually, that produces a new form of “maintenance free living” - the house falls apart quickly, so one doesn’t have to maintain it. Besides, black mold and toxic fumes are picky and will happily eat an old house or a new one.
I was just thinking. I’d take a “$500K” Chinese drywall McMansion for like $50K. How hard could it really be to replace the drywall and repaint.
It wouldn’t be……and you wouldn’t necessarily have to do it all at one.
At least as long as the EPA doesn’t start issuing commandments like they did with lead paint.
“maintenance free living”
You need to be dead to qualify for that in America.
Good One X-GSfixer…
In my area there are builders that are undercutting existing homes by $20-30K, and this is in an area where nice homes sell for less than $200K.
Also, these new homes have more square footage and larger lots.
“Also, these new homes have more square footage and larger lots.”
…and don’t forget folks, they ALL come with our wonderful Wisconsin Property Taxes included.
Hi MadBoy
You would not even believe the stupidity going around me right now. I can’t stand it. I may have to go into hybernation as I just cannot fake my response to how stupid these people are for much longer.
I feel the same way. I try to watch a few minutes of CNBC each evening just to get a sense of what kind of propaganda they’re shilling. Lies can be more revealing than the truth. And the great mass of people BUY their shilling hook, line and sinker. Reality is going to impose itself, but when?
How many will pay attention to this graf in the rest of that news account?
“What is the value of having the option to pick up and leave these metropolitan areas at no cost? Should we be encouraging people to chain themselves to labour markets like this for at least five to seven years? I would hope that most Americans would have more sense than to look at the enormous declines in home prices over the past few years and see a buying opportunity, rather than a cautionary tale.”
the option to pick up and leave ??
With massive amounts of appreciation in the past this option was not considered much of a impediment in the decision to buy due to the ease of selling and the increase in value absorbing the cost of the move…
Now we may have a “new normal”…Long term “flat line” in the appreciation of single family homes…If that in fact happens (and there are many signs that say it will) along with minimal principal pay-down in the first 15 years of a 30 year loan, the cost of a early move (5 years ?)
becomes very, very punitive…It could consume your entire down payment or more…
Those weren’t sales. They were signed sales CONTRACTS. An important distinction. Now we need the figure for how many people are going to back out of those contracts. I’m guessing it will be at least 25%.
The “regular people” homes may make sense to buy in NYC, but for some laughs, go watch the “Selling New York” show on HGTV.
For many of the high priced properties in the few episodes I watched, they were renting at 1/3 or less of the monthly mortgage of the asking price. And that doesn’t even includes taxes, insurance or HOA fees which I don’t know enough about the area to calculate.
Between not knowing how, where, or when government is going to raise taxes (a given, IMO, no matter who is running the show), and the unstable private sector economy, anchoring yourself to one spot in the next 5 years is a big mistake.
Just like Wall Street’s “models” that said real estate prices never decline nationwide, the “model” for J6P to prosper is changing rapidly.
A lot of the changes are “not for the better”, but whether I like them or not, they are happening. People need to wake up/smell the coffee/take their head out of the sand/deal with reality/(insert other metaphor here…).
No kidding, I was watching Selling New York the night before last and I was laughing so hard I almost peed my pants. The RE agent brought in a guy to cleanse the loft of it’s negative energy. He was waving an incense pot all over the place and mumbled some mumbo jumbo. What a great job! Must be hard to keep a straight face while you’re working though.
A former coworker went that route. She became a feng shui consultant. Been a long time since I’ve seen her, but, like Wickedheart, I think I’d have a “keeping a straight face” problem.
Feng Shui actually works, but not the way people think. Have you seen any picture books of good Feng Shui? It’s one sofa, one driftwood coffee table, and one vase with a single flower stem, etc. That’s so the chi can flow freely throughout the house.
In other words, in order for Feng Shui to make any difference, you have to throw out 90% of your crap. THAT’s why it works. Nothing stages a house better than tossing the clutter, but everybody has too much crap to pull it off. Feng shui is effectively a cleaning service. The good end justifies the silly means.
Yeah, it also encourages people to buy houses that are way to big for them. That way, they can still have one chair for every family member in the living room without obstructing their chi flow. Great sales pitch - increases commissions too.
I volunteer for a local organization that has its first floor restroom at the end of the entry hallway. If people don’t close the restroom door, you have a “you can see it all the way from the front door” view of the commode.
Well, the organization’s top guy said that one potential donor wouldn’t make a gift because she didn’t like the feng shui of the johnny at the end of the hall. To which he said (to me), “Well, give money so I can remodel.”
AFAIK, she gave nothing.
I filter my chi flow through my kidneys.
“‘We knew when those loans first came into vogue that it was just a matter of time before this happened,’ said George Roddy, president of Addison-based Foreclosure Listing Service. ‘People were borrowing to pay for a boat or a trip and putting the debt on their house.’”
George, I hate to break the news to ya, but a ragtag bunch of HBB bloggers knew it too. But, unlike the borrowers who’ve given up their houses so you can re-sell ‘em via your FLS, we didn’t borrow to pay for frivolous things like boats and trips.
‘Paulson didn’t have any direct involvement in the mortgages contained in the Goldman deal…the bets that Mr. Paulson placed on Abacus didn’t affect whether or not homeowners defaulted. Rather, he used Wall Street to help structure hugely lucrative side bets that homeowners couldn’t make their monthly mortgage payments’
I thought this was interesting, and something the media is largely glossing over (except the WSJ, of course). What these people were doing was simply, ‘I bet they default…I’ll take that bet.’ While it exposes goldman as not much more than a crooked bookie, I don’t see how it related to housing prices, one way or another.
So why the big deal in congressional hearing about these derivatives? There were derivatives that lured in billions to finance the big run up in prices. As I understand it, these were more of the ’slicing and dicing’ of risk, that Greenspan took so much comfort in. And of course, the problem arose when the counter parties couldn’t make good.
How about addressing the use of counter-party margins in mortgage derivatives? Why isn’t the SEC pressing charges that get more to the heart of the matter? And why is congress grandstanding on reckless side-gambling, at a time when serious reform of the GSEs, the Fed and wall street is on the table?
I think they are having a hard time finding anyone who profited.
Paulson was one of the few but as you note he just happened to pick the right lotto numbers and can’t be faulted.
Then there were the executives who got bonuses.. servicers and participants of various sorts who earned commissions and fees. Other than that, who made any money? People who got out at the peak.. ?
Makes little sense to even attempt to prosecute some entity that lost billions on their deals, imo… unless they know they can prove some law was broken.
Congress’s grandstanding.. i attribute that to pre-election pandering.. obscuring the root source of the despised bailouts and whatever other mistakes the public accuses them of.
“Paulson was one of the few but as you note he just happened to pick the right lotto numbers and can’t be faulted.”
It sounds more like he picked the bookie who knew how to rig the game to make sure he had the winning ticket. I suppose rigging the lottery is legal on Wall Street?
Get off that conspiratorial merry-go-round.. Take a walk down the midway.. toss a few darts at the balloons.. grab some cotton candy. Take in the view from atop the ferris wheel. Expand your mind.
Dude — what is conspiratorial about noting that the former CEO of Goldman Sachs is the very same Treasury Secretary who passed bailout measures that managed to kill off a couple of major investment banking rivals, while setting up the mother ship for ginormous 2009 profits? That’s not a matter of chance, but rather brilliant planning instead.
you talking about hank paulson and Geithner?
Lets see.. Paulson was Treasury Sec in July 2006.. jeeze.. that’s pretty late in the game. The bubble was just about to collapse by that time.
When did the evil banksters begin their reign of terror? Had to be around 2002-2003 at the latest.
But Goldman Sachs somehow predicted Pauslon would be there to bail them out in the future? And that Obama would be elected, keep Paulson.. and then appoint Geithner for round #2 of the bailouts?
It’s gonna be interesting to see how you adjust your theory to fit those facts.
Your missing the point.
They weren’t designed to “make money” for anyone. The important thing was the commission for doing the deal.
I just don’t see the logic in making bad billion-dollar deals for my company for the sake of a commission or bonus. I’m so clever that my personal reputation is ruined, my company is destroyed, I’m out of a job and the whole economy goes off a cliff.. since every other financial executive was just as clever as I was..
PB’s explanation for this is that they somehow KNEW ahead of time they would be bailed out (despite many of them not being bailed out and while ignoring the uproar and resistance to the various bailout proposals).
Conspiracies can be adjusted to suit any circumstances and will trump logic, facts and common sense every single time.
“KNEW ahead of time they would be bailed out”
Gollum hedged their bets pretty well by planting their former CEO in the Treasury Secretary post…
my personal reputation is ruined, my company is destroyed, I’m out of a job and the whole economy goes off a cliff….
…and I have millions of bucks to sneak out and sip mai-tais in Tahiti for the next 40 years while the economy falls down somewhere else. What do you think those CEO’s are doing?
oxide.. they already had millions.. The goose had been laying golden eggs for many decades.
Did they all conspire to have one last fling and bug out en mass? Was it by chance?
or did these execs partake of the KoolAid, believe the party would never end, and were as blinded to the realities of the bubble as everyone else?
Insteresting analysis by J Juback at MSN that ties the SEC charges to Basel III.
New Headline on Marketwatch.
“Biggest one-month gain since 1963″ New-home sales surge 27%”
The details
“Boosted by an expiring tax break, low mortgage rates and favorable weather, sales of new homes surge in March to a seasonally adjusted annual rate of 411,000 after February’s nadir.”
An annual rate of 411,000 is shockingly, historically low. Remember years back when people were worried that new housing unit starts had fallen from over 2 million to 1.5 million? I kept saying that 1.5 million was historically an average year, 2 million a big year, and 1 million a really bad year. And that we’d need quite a few 1 millions to work off all the 2 millions in a row.
Just 411,000 sold on an annualized basis? There as exactly one year since 1963 when fewer one-family homes sold. And that was 2009.
“An annual rate of 411,000 is shockingly, historically low.”
A further inconvenient truth: That rate is based on a massive and unprecedented level of government intervention to try to encourage home purchases (esp. by first-time buyers).
Bear, you are such a meanie!
Both government manipulation and MSM shilling on behalf of their corporate cartel masters are getting more and more bald-faced. Granted, the public are idiots, but the nakedness of the swindle never ceases to amaze me.
Just love the New York arrogance, let me clue them in the next bust will be NY. In a way I can see Cal with all it’s ill’s still standing, they have climate and landscape of desert,mountains,oceans that is hard to resist, what does NY have to compare, oh Elton John walking down Park ave I forgot?
If you are in the money on Wall Street please look in a mirror and say to yourself just a few of years ago many thought flipping houses and getting rich would never end, save your bonuses and move away count your blessings you don’t get further caught up or else you to are going to suffer like the many millions who played the fools game of thinking, ” we had it all had it figured out, what the heck happen”?
i dont need a morgage vs rental chart, i rent a 600,000 home in los angeles for $2000 a month.My child goes to a fine public school,i enjoy nice parks and a safe n-hood.My neighbors all own there houses and pay $4000-6000 a month to live there.The conversation always turns to how lucky i am to be a renter and nt saddled w/ huge debt…i have been a renter for 5 years..i want to buy but would never do so…BUT I AM GRATEFUL THAT I SOLD ON TOP OF THE BUBBLE, AND WILL BUY AGAIN AT THE BOTTOM..IF THE GOVT GETS OUT OF THE WAY AND LETS THE MARKETPLACE COREECT ITSELF…there is very little inventory in los angeles…
I sold around the same time and am waiting to buy. I’ve noticed inventory building here rapidly in the past month or so in this area (Westlake Village, CA). I think the option ARM bomb is starting to explode. Average sales prices are rising because some higher level inventory is starting to move (i.e., it’s not just your subprime crash anymore, you have option ARM/Alt As moving as well). I expect a flood of REO inventory in the 400-600K price range this summer and those to drop into the 3s by Q4.
There’s a ton of inventory. Try taking a walk in your neighborhood and see if you can find any vacant houses without any signage on them. You will probably end up living in one of those in a couple years.
We have a severe signage shortage in our ‘hood compared to, say, 2006. I am wondering if there is a more efficient means to keep tabs on vacant homes than the shoe leather approach?
They usually shut off some utilities, like the water, so you might try the CA dept of Water Resources..
Some records are exempt from public disclosure laws but a phone call should reveal if you can get a list of who’s got water turned on (or off).
Might help to be prepared with some plausible reason why you want the information.
You’ll need to show up in person and make copies at 10 cents a page.
http://www.water.ca.gov/publicrecords/
“Might help to be prepared with some plausible reason why you want the information.”
Would telling them that I am a real estate investor interested in buying homes in the area qualify as ‘plausible’?
P.S. Thank you.
or.. the info might be needed for a school report for your environmentally concerned child’s civics class.. whatever.
they might not ask any questions at all.. I just think it wise to prepare myself as best I can when confronting a bored, low level bureaucrat..
you’re welcomed..
City of San Diego Water Dept might be able to help me out:
http://www.sandiego.gov/water/gen-info/phone.shtml
You sound like you have a great deal.
I finally after selling late 2003 got a great place in Calabasas 1600 square feet ,3 bedroom townhouse for $2000 per month. 3 years ago same units were renting for 2400-2500. One for rent right now 2450 but has been for rent for 2 months. I rented the first day the ad came out and my landlord had no time without a renter. Luckily finally found a landlord who has owned for 20 years and not looking for a tenant to pay for a upside down mortgage.
I also just signed a 2 year lease when I moved in because I have no clue when this craziness will end.I would be paying at least 800 more a month with putting 10 to 20% down as an owner of one of these right now.
Member back in the day, when we all used to gather ’round the blog to cultivate our shared dream of for-sale signs falling over due to time and neglect? Well, it brings a tear of joy up into my little eye to inform you all that the time has come. My landlord’s for-sale sign has been tilting at an ange of about 45 degrees for months now.
‘Tis a thing of beauty, aye.
There’s a “for sale” sign that’s doing the same thing in Tucson’s Sam Hughes nabe. And it hasn’t been up for very long. I chuckle whenever I go by it, because it’s from one of our oh-so-hip boutique real estate agencies.
In my hood somebody has been going around knocking down FOR SALE signs. Teenagers are suspected, but I’m thinking their parents put them up to it.
Here in Vegas, some condo prices are now 85% off their bubble highs. I sold a place in 2006 for $172.5K. There’s an identical unit in that complex for sale at $52.9K. That’s a 69% haircut - big enough to get me thinking about buying.
But then I read today’s blog, and remembered about debt slavery, chaining myself to a pathetic labor market, condo association boards, special assessments for repairs, etc. etc.
I’ll keep renting, thank you very much!
Ready for a really depressing article? Just in case, I have one to share.
This shows how deep the foundation of the housing bubble goes. Rather than some newfangled, harebrained scheme cooked up in the last few decades, the housing bubble has roots that go back at least to the Great Depression, and perhaps much deeper, all the way back to America’s frontier days. Good luck at establishing rationality where insanity is so deeply ingrained in the nation’s collective consciousness.
Regarding the 1966 House Committee opinion referenced in this article, it appears in retrospect that they were way off the mark regarding the quality of assets in MBS!
The Way We Live Now
Cracked Foundation: Reforming Housing Finance
Andrew Phelps
By ROGER LOWENSTEIN
Published: April 19, 2010
Timothy Geithner, a man whose taste for Kierkegaard is usually kept under wraps, recently held forth to the House Financial Services Committee on the “central, existential question” that is facing America or, at the very least, that is facing its reform of housing finance. The Treasury secretary is bedeviled over what to do with Fannie Mae and Freddie Mac, the bailed-out mortgage giants that have cost the taxpayers upward of $125 billion with as yet no end in sight. Shutting them down is not so easy because — get ready for this — since their bailout, in September 2008, Fannie and Freddie have become more, not less, important to the U.S. housing market. At present, 9 of every 10 new mortgages are sold to, or guaranteed by, arms of the U.S. government, the majority of them to Fannie and Freddie. Which is to say, without Uncle Sam, it is not clear that the private market for housing would even exist.
But retaining Fannie and Freddie in their present form is unpalatable; government support of the mortgage twins was among the original sins of the financial crisis. It stemmed from the country’s affection for homeownership — a legacy of a frontier nation that subsidized homesteading for pioneers and encouraged later generations to homestead in the suburbs via the mortgage-interest deduction. Renting was disfavored; federal policy encouraged ownership. But the policy was wrapped around the fiction that federal support promoted self-reliance rather than dependence.
Fannie and Freddie developed as tools of credit enhancement; direct handouts offended laissez-faire sensibilities, whereas loan guarantees were nearly invisible. The practice of disguising government aid dates to the rescue of farmers and homeowners during the Depression. Mortgage capital barely existed and so, in 1934, the New Deal chartered the Federal Housing Administration to stimulate mortgage lending. Within a generation, the government was operating 74 separate programs to bolster credit through guarantees, insurance or outright loans, according to Sarah Quinn, a Ph.D. candidate at the University of California, Berkeley, who researched these programs. The point, Quinn says, was nearly always the same: “to camouflage, hide, or understate the extent to which [the U.S. government] actually intervened in the economy.”
No organizations epitomized the charade so well as Fannie and Freddie. Fannie was created in 1938 to purchase mortgages and allow lenders to write more loans. In the ’60s, when the mortgage industry sputtered, the Johnson administration began to use Fannie to sponsor securitizations — that is, to guarantee pools of mortgages and sell them to investors. A House committee in 1966 saw what was, then and now, the fundamental hazard with such guarantees: to investors “it makes no difference what the quality of these assets are.”
…
So why do we as a country prefer “ownership” to renting? Is it as simple as rent allowing small-time capitalists to make a living from their capital, while “owning” (renting from the bank) ensures that the big bucks go directly to the banks?
‘So why do we as a country prefer “ownership” to renting?’
Religious conviction?
For the sheep, sure. I mean why does our leadership try to force the money that direction? For them I doubt it’s religious.
“I mean why does our leadership try to force the money that direction?”
1) Religious conviction that the real estate recovery is a prerequisite for a broader recovery.
2) Historic utilization of mortgage securitization operations as a source of campaign finance, both from GSEs and from Wall Street investment banks who were the subprime mortgage lending kingpins who lined up the deals.
3) Pressure from K-street lobbyists representing REIC constituencies (National Assn of Realtors, National Assn of Homebuilders, etc).
‘Religious conviction?”
Nah…if we’re not chopping down trees, building houses and looking busy and self-important, the indians just might wander by and want their land back.
“Look out chief, you’re a boulder in my stream of progress…Timber !”
Comments:
1) One might argue the GSE bubble built for almost seventy years (1938 - 2007) before it blew up. Is the Fed trying to reflate another seventy-year bubble to aid the healing process?
2) If the Fed can figure out how to financially engineer “higher than expected” wage inflation for the next few decades, perhaps no significant further housing price declines will be needed to resurrect the bubble?
Again I say , F&F up to 2005 were not big players in the sub-prime
and their loans limits did not exceed 417 k . F&F was simply used as a dumping ground late in the game ,especially after Congress raised the loan limits to over 700k upon the urging of their Masters the Lenders.
When the Lenders of Wall Street discovered in the 1990’s that the lenders that took on sub-prime were making big money on sub-prime late charges and higher interest rates the Wall Street money changers wanted some of that action . So, the scheme was conceived to market this highly profitable stuff , (eventually mis-rating it) but then it got out of hand and created a mania with faulty lending/fraud on a massive scale . It was OK as long as real estate went up ,but the minute it didn’t …well you know the outcome when you give 100% loans to liar loan borrowers who can’t pay late charges or even the principal . As the mania progressed ,the money changers of Wall Street created even more absurd loan product with no concern for fraud or qualifying ,or duty to underwrite loans . Than as we see it became a game of keeping the Ponzi-scheme going and shorting the market by credit default swaps . This explains why the lending even got worse as the market faltered starting in late 2005 .
For Wall Street Lenders to destroy a Secondary market that had been functioning pretty well for decades and decades (while rated somewhat accurate ) is the crime of the Century .
Hi Ben,
I noticed on the front page of the housing blog the link to the HBB forum is missing.
Yeah, I took it down while we did some re-tooling and spam elimination. Posting links will no longer go thru as hyperlinks.
Home prices are still low enough that it’s still a bargain in places like New York and L.A.
I don’t know about New York, but from what I see of the parts of the LA market (Hollywood/Westside/South Bay/Orange County) that I monitor, house prices are still at least 3x what they were in the late 1990s. That’s no kind of bargain at all. Similar story is true in the Bay Area.
i agree prices are still high but as an active looker in the east san fernando valley of los angeles i can tell you that prices are down 100k from last spring the 600k are 500k the 500k are 400k,still way to high and out of whack w/ wages we make here,so yes the bottom still has a long way to go..i paid 230k for my home in 1991 sold for 645k in 2005,so yes there is still a long way down those homes will be 300k again….its all about wages and jobs and we have little to go around in los angeles that supports 500k homes…
People were counseled to get a home loan for the mortgage-interest deduction.
This has to be a joke. Are we supposed to believe that someone thought it would be better to pay discounted interest than to pay none at all?
Foreclosures Increase, Defaults Down
It’s hard to understand what’s happening in the local housing market. Bank of America reported a surge in local foreclosures last month. While a different report released this week, said default notices in the first quarter were down 40 percent from one year ago.
By Megan Burke, Hank Crook, Gloria Penner
Editors Roundtable | Friday, April 23, 2010
GLORIA PENNER (Host): I’m Gloria Penner. I’m joined by the editors at the roundtable These Days in San Diego. Today we analyze the numbers that are framing the current local housing market from home prices to defaults to inventory and foreclosures. We’ll also interpret the unemployment and job situation here, and figure out whether San Diego is really emerging from the great recession or preparing to hit bottom. And we’ll look into why the City of San Diego is not yet ready to commit to a downtown homeless center. The editors with me today are Scott Lewis, CEO of voiceofsandiego.org. Scott, it’s a pleasure to have you in the studio.
SCOTT LEWIS (CEO, voiceofsandiego.org): Always a pleasure to be here. Thank you.
PENNER: Thank you. Barbara Bry, co-publisher and Opinion editor for SDNN.com. Barbara, it’s good to see you again, too.
BARBARA BRY (Co-Publisher/Opinion Editor, SDNN.com): Thank you, Gloria.
PENNER: And JW August, managing editor for 10News. JW, welcome back to KPBS.
JW AUGUST (Managing Editor, KGTV 10News): Top o’ the morning to you, Gloria.
PENNER: And our call-in number is 1-888-895-5727, that’s 895-KPBS. The fluctuations in San Diego’s housing market are frequently used as a barometer for San Diego’s economic health, and during the last two years there have been increasing defaults and foreclosures, dropping home prices, a glut of houses on the market, and static construction activity as the economy slumped. And now the March numbers are in, and is that barometer signaling stormy skies or sunny weather? So, Scott, let’s start with defaults. I’ve seen some disparate numbers. MDA DataQuick says default notices were down 39% in the county from a year ago but the North County Times reports hundreds of letters from Bank of America to local delinquent borrowers warning of auctioning their homes. It’s up almost 70% in north county alone. So what does all this mean?
LEWIS: Well, nobody knows. I think that’s what so interesting about it. We’re all wondering if this so-called shadow inventory is somehow going to come out. What’s the shadow inventory? This is the worry that there’s a whole bunch of homes out there where people have either stopped making their payments or have made it clear that they won’t make their payments or have otherwise started the foreclosure process but haven’t actually formally been given foreclosure notices or gone through the actual steps that that process entails. And so there’s a worry that all of those homes then will somehow come flooding onto the market and that’s part of why that North County Times article was sort of breathless is because it was the worry that this is perhaps the signal that that has finally happened, that all of these homes are sitting there that are now going to come onto the market and they’re going to be lower priced and they’re going to drive down and tamper this rally that has been going on in the market. And so the question is, is it real? Now we found a guy the other day or heard about a guy the other day who hadn’t been making payments on his home since December of 2008 and here’s a situation where if he hadn’t been making payments but yet they hadn’t gone through the process to foreclose so how many people like that actually exist? I would ask your callers, do they know somebody or are they in that situation where they haven’t been paying but yet that foreclosure process hasn’t begun.
…
(Caller, Mobile): Hi. We have some friends who owned a home in North County. I believe they got their financing through Countrywide Mortgage, which went belly up and then the loan got assumed by Bank of America. They recently left town to return to a notice of auction on their door, and they subsequently lost the home and joined the renter class. My question is, how does Bank of America, what’s the legal standard for them to decide who gets kicked out of their home and who gets forbearance? And is there a potential class action lawsuit against them for arbitrary decisions about who gets kicked out and who gets to stay in their home rent free? How does that work?
AUGUST: I don’t know.
PENNER: We’ll have to get opinion on this because I don’t think any of our editors are attorneys and probably…
LEWIS: I think…
PENNER: Scott.
LEWIS: …that’s a great question. It would be a great inquiry as to what is the process, what is the formula that they use to decide which people they’re going to kick out. If there’s several people – You know, if they’re leaving people in condos because they know they can’t sell the condos but they’re kicking people out of nicer homes that they could perhaps sell for a better value, then is that really ethical? Is there – should there be more formulaic (sic)? Then again, do you want the government to intrude even more to decide how they should run their operations? It’s a very interesting question. I would love an inquiry on it.
PENNER: Well, it’d be interesting to do some enterprise reporting on something like that. Maybe one of our…
AUGUST: No…
PENNER: …journalists would be interested in that.
AUGUST: …that or if you’ve got a subpoena. If we could have some subpoena power as journalists, which I wish we had, we might be able to find out.
” is there a potential class action lawsuit against them for arbitrary decisions about who gets kicked out and who gets to stay in their home rent free?”
Unbelievable… Is there a class action suit to stay in an unpaid-for house rent-free? Can I join?
Thanks for the NYC reporting, Ben. My condo’s value is probably down 15% or 20% from Manhattan’s peak in 2007 and early 2008. That being said, it’s realistically worth today about three times what I paid for it in 1998. Will Manhattan revisit still lower values? Probably, yes, but everyone needs to live somewhere, and selling would mean paying heavy capital gains taxes and a selling commission. Selling would also mean paying over twice as much in rent, compared with my current ownership cost, to live in an inferior space. Yes, selling would provide a big slug of cash in my pocket, but that cash would need to be invested. Holding cash seems risky too.