Coming Back To Haunt Them
The Houston Chronicle reports from Texas. “In 2007, Pulte Homes announced its first Del Webb age-restricted community in the Houston area. Even though the local housing market was already seeing signs of stress, the Bloomfield Hills, Mich.-based builder was anticipating a spring 2009 opening. Now, the company is conducting a market study to determine when the community can be restarted. ‘There was a considerable amount of interest, but what we were finding was that people want to shop but are still in situations where they’re struggling to sell their existing home,’ said Valerie Dolenga, a spokeswoman for Pulte, which owns the Del Webb brand.”
From KTRK. “Homeowners who want to lower their tax burden have some important deadlines facing them. This year, most property values are either down or unchanged. Harris County Appraisal District officials say most homeowners will see their appraisals lowered or stay the same this year. Changes in the law could help you get that appraisal even lower. ‘For the first time, foreclosures can be used as evidence in a hearing, and there is not a neighborhood in this town that does not have at least one foreclosure in it,’ said property tax advisor Paul Bettencourt.”
“He says foreclosed properties generally sell for 30 to 40 percent less than a typical home’s value. Using that information in your protest could result in big reductions in assessed value. ‘If you get an offer on i-Settle, know that it does not use the foreclosure information that you can get from your Realtor or tax agent,’ said Bettencourt.”
The Austin American Statesman. “The average value of single-family homes has dipped in Travis County, probably for the first time since the recession of the 1980s, Chief Appraiser Patrick Brown said. The average value of a single-family home in 2010 fell 2.8 percent to $279,763, Brown said. Last year’s average was $287,732. That’s a small drop compared with what’s happened in many other areas, particularly once-hot real estate markets in California, Nevada and Florida, where home values have fallen sharply. ‘Our bubble didn’t burst to the same degree as theirs did,’ Brown said.”
“Commercial foreclosures in Central Texas are running 16 percent ahead of last year, according to Foreclosure Listing Service Inc. George Roddy Sr., president of Foreclosure Listing Service, said land speculators and developers ‘were on the front line of battle during this economic crisis.’ As money to develop the land dried up, they were left with no way to generate income to pay off debt.”
“Real estate experts said it’s too early to tell whether that signals a new wave of postings or a one-time blip.”
The Austin Business Journal. “The number of homes foreclosed in Austin last quarter was also about 20 percent higher than the fourth quarter 2009. A total 2,908 Central Texas homeowners filed last quarter. ‘That’s the bad news, but the good news is that we think we have hit bottom and are coming out of a horrible standpoint,’ Texas Mortgage Bankers Association VP W. Scott Norman said.”
The Hays Free Press. “According to preliminary numbers, average single-family home values decreased in nearly every jurisdiction, the first time most homeowners will see a drop in property value in a decade. In the city of Kyle, the average home value is expected to decrease 3.67 percent since this time last year to $127,305 for 2010. In the city of Buda, the decline is projected at about 0.6 percent since 2009 to $158,876. Dripping Springs ISD decreased about 2.79 percent to $267,899 for 2010.”
“The city of Kyle is seeing higher rates of home value decline because the market here was overbuilt and became even more saturated with a high number of foreclosures in young neighborhoods, said Steve Flynn, a San Marcos-based appraiser who teaches on the subject at Texas State University. ‘A lot of those builders had their own mortgage companies and they were getting these people into homes and qualifying them for a loan without any regard for whether these people could afford those mortgages. That’s kind of coming back to haunt them,’ Flynn said.”
The Brenham Banner Press. “Brenham home prices have held steady throughout the housing crisis and the market is not overbuilt or overpriced, Coldwell Banker owner Lindi Braddock said. ‘Texas is one of the best places to be in the real estate market,’ Braddock said. ‘We have some areas that are over built like in North Dallas, but on the whole the housing market is stable.’”
“Braddock thinks Brenham is a buyers market, but there are few houses available. ‘There are 176 active homes for sale in Washington County, and the buyer has few to select from,’ Braddock said. ‘The price will narrow the pool even more, but it is still a buyer’s market.’”
“‘The interest rates are the best in 30 years, and Uncle Sam will let you write off the mortgage interest,’ Braddock said. ‘Any one who doesn’t own a home should own a home. If you put a good down payment on it and get in while the interest rates are low, then the mortgage will be lower than what you can rent the house for. And the appreciation value in homes have gone up over the years.’”
The Dallas Morning News. “Homebuilder D.R. Horton Inc. reported its second quarterly profit in a row Friday. The strongest activity was in the builder’s South Central region, which includes Texas. Horton CEO Donald Tomnitz warned that the U.S. housing industry – which is recovering from the worst downturn in decades – still faces challenges. He cited the growing number of foreclosures, high inventories in some markets and tougher mortgage qualification standards.”
“He said the builder’s houses are priced to compete with resales of foreclosed properties. He said the builder has invested $200 million in additional home lots. ‘We have been actively contracting for finished lots to supplement our existing land positions,’ Tomnitz said.”
From D Magazine. “If you’ve been perusing the listings of commercial real estate transactions in recent months, though, you will have noticed that deals are not being done. Despite the fact that many market indicators point towards a period of rapid sell-off, it’s extremely quiet in the marketplace. This has to do, in part, with tight debt markets. But stingy banks only tell part of the story. What we’re really experiencing is an artificial market, says Sam Kartalis, president at Henry S. Miller Realty Services.”
“Good deals are out there, but until distressed real estate owners are forced to sell at discounts, properties will not be put on the market. Banks will force owners to sell if they slip into foreclosure, but many banks are softening their loan requirements just so owners don’t go down that path.”
“‘There is an artificial market in that so long as properties are meeting debt service, lenders are not foreclosing, even though the properties are not meeting debt service requirements’ Kartalis says. ‘For example, according to a bank’s loan agreement, debt service coverage may call for 1.25 of net operating income. But if it’s only actually 1.0 of NOI, lenders are satisfied for the moment.’”
“The result is a stalemate. Property owners who don’t have to sell, won’t. ‘This can’t go on forever,’ Kartalis says. At some point banks will not be able to shore up all the distressed properties in their portfolios. ‘When that happens, foreclosures will increase and make more properties available for sale at current values.’”
The Associated Press. “Real estate agents are working seven days a week, builders are staying open late and homebuyers are scrambling to get their offers in as they rush to take advantage of tax credits that expire at midnight Friday. In Houston, transit mechanic Stan Henderson, 51, is buying his first home, a three-bedroom, $104,995 house from builder KB Home that is still under construction. Affordable prices and low mortgage rates were part of the draw, he said, but the tax credit ‘was the straw that stirred the drink.’”
“Still, the housing market seems finally to be regaining its footing after the worst downturn since the Depression. Numerous government measures have helped. They include: the tax credit, the Obama administration’s $75 billion foreclosure prevention plan, the Federal Reserve’s $1.25 trillion program to drive down mortgage rates, and about $126 billion in taxpayer spending to stabilize mortgage finance companies Fannie Mae and Freddie Mac.”
“The Obama administration touts its efforts to stabilize the market as a success. ‘For most Americans, their house is their most important financial asset,’ Treasury Secretary Timothy Geithner told lawmakers on Thursday. ‘As the financial crisis wreaked havoc on household wealth, the administration moved to protect this critical component of stability.’”
“Skeptics say that these measures are an attempt to manipulate market forces and that they are leaving housing vulnerable to a dangerous double dip. And many economists say the main effect of the first-time buyer tax credit was to bring would-be homeowners into the market sooner. ‘Most of the benefits went to people who would have bought a home anyway,’ said Patrick Newport, an economist at IHS Global Insight.”
North Texas E-News. “Dr. Kimberly Winson-Geideman, an assistant professor in the University of North Texas’ Department of Finance, Insurance, Real Estate and Law, has been studying the impact of the tax credit on the real estate market and the possible repercussions that might result after the credit expires this week.”
“Winson-Geideman says that the credit has stimulated the market by providing potential homebuyers additional financial incentives to purchase homes, but she also emphasizes that the credit can be dangerous to the economy, especially in cases where homebuyers are allowed to monetize the tax credit to cover the down payment and closing costs for their new home.”
“‘There are significant dangers to allowing consumers to mortgage 100 percent of the cost of their home. Buyers with no equity stake are more likely to default on their loan. This was one of many problems that helped contribute to the market collapse in 2007, so it is rather unusual that the government should allow the credit to be used in that way,’ says Winson-Geideman.”
“She also warns that demand for real estate may suffer after the credit expires on Friday, just as the demand for cars decreased upon the conclusion of the ‘Cash for Clunkers’ promotion. ‘The month following the ‘Cash for Clunkers’ program was one of the worst in the history of the auto industry. Credits, be it for cars or homes, effectively cannibalize future sales,’ says Winson-Geideman.”
The Star Telegram. “Troy Pickering had all but given up trying to land a house before Friday’s deadline for an $8,000 federal tax credit for first-time home buyers. Then his iPhone lit up. A deal he had been working on for weeks had fallen through that morning, and he was en route to Joe T. Garcia’s to celebrate his 23rd birthday. But real estate agent Ruth Story told him to postpone the party and drive to her office pronto.”
“Another house, one he had originally been keen on, became available Thursday afternoon when a buyer pulled out over an inspection-related squabble, said Story. After frantic e-mailing of documents back and forth during the night, the deal was ‘receipted’ at a title company Friday morning, making the deadline. ‘It was like a whirlwind,’ said Pickering.”
“With his parents’ help, Pickering is putting down at least 10 percent and may use the tax credit toward a second bathroom in an otherwise well-kept and updated, three-bedroom, 1,600-square foot house in the TCU area. He plans to have one or two roommates whose rent will go toward the mortgage payments, although he says he could conceivably squeeze by on his own if necessary.”
“Elsewhere in Fort Worth, a 26-year-old real estate agent named Will Northern had brought to fruition a deal with a young couple that only began house hunting exactly a week before. Again, the tax credit was the motivation. There was no time to get an idea what they were after or for him to explain how the process works. It was done on the fly as they toured eight homes the first day, he recalled.”
“In the end, they settled for a three-bedroom house in the Arlington Heights neighborhood of Fort Worth — without a garage, but with a second living area. It will be used as the music and recording room for the husband, a member of a rock band. And the $8,000 tax credit will go toward its transformation, the agent said. ‘I’m a new agent, only 26, so this tax credit has helped me a lot,’ Northern said. But even without it, he added, ‘I believe the surge will continue.’”
“According to the Internal Revenue Service, some 1.9 million buyers had requested the credit by February. In September, the National Association of Realtors said the same number, 1.9 million, had qualified for the first-time credit, and estimated that 350,000 had entered the market because of it. With 1.9 million buyers getting $8,000 each, it works out to $15.2 billion.”
“But Kimberly Winson-Geideman, an assistant professor in the University of North Texas’ department of finance, insurance, real estate and law, figures that if you divide those billions by the 350,000 people she estimates were actually motivated by the tax credit, it ends up costing Washington a whopping $43,000 on each of their transactions.”
“She also expressed concern that some buyers will use the tax credit as their down payment — which is permitted under FHA mortgages. This means the market again will have buyers putting no down payment in the deal, like the 100 percent mortgages that were part of the mortgage meltdown, she said. ‘People with little stake are more likely to walk away than others.’”
The Arizona Republic. “During the real-estate boom, bubble, etc., mortgage down payments ranged from zero to 3 percent. Pick-a-Pay mortgages allowed borrowers to choose their monthly payments for the first three years of their loan. These creative mortgages financed granite countertops, 3,500 square feet, and shattered normal lending standards. Once the boom busted, mortgage risks emerged with a vengeance. Wall Street nearly collapsed. We clicked our tongues and blamed greed. Yet, where would we be if creative mortgages hadn’t happened? Better yet, where would we be if there had been responsible mortgage borrowers?”
“Ethical analysis looks at this question: How did you get in this situation in the first place? In the words of the not-so-great Bob Dylan, ‘When you got nothin’, you not nothin’ to lose.’ In the words of the great University of Texas-Austin economist Stan Liebowitz, ’skin in the game’ is the single most important factor in determining default. If you had a little down payment and no equity to speak of, as creative borrowers do, you walk when your mortgage is more than your property value.”
“USA Today headlines read as if innocents were robbed of their underwater homes by Bush, Bernanke, Barack, et al. Facts reveal otherwise. One underwater fellow, who was but one year from retirement, confessed that he took a second mortgage of $100,000 on his $642,000 home to put in a theater, fitness room and bathroom in his basement and expand his living room.”
“He now faces foreclosure because his payments are going up (he signed at a 3.25 percent rate that goes to 5.85 percent) and his house value has dropped to $590,000. He cannot get another second mortgage to pay off the first second mortgage for the remodeling lollapalooza.”
“One borrower, grinching about his ineligibility for government foreclosure aid, bought a $1 million home with $4,400 monthly payments, over 50 percent of the net income of this single-wage-earner family.”
“Of the foreclosures in the second half of 2008, only 183,447 resulted from the loss of employment. Other foreclosures? Negative net equity: 283,305; a 3 percent or less down payment: 130,014; low initial interest rate going higher: 60,942; and poor FICO score: 148, 697. So, 624,958 foreclosures for financial folly vs. 183,447 for loss of employment.”
“The 12 percent of the homes with negative equity are responsible for 47 percent of the foreclosures. Pick-a-Pay repeat default rates are 55 percent. If you refinance the mortgage-challenged, the default rate is 55 percent on their refinance.”
“Yet there are economists, largely those who still believe Keynes reigns, who say the walk-away is the smart thing to do because business does it all the time. What would things look like if everyone just walked away? Well, dear readers, you are living through what happens. The market is glutted as prices, even for the above-water mortgage folks, fall further. The drop is about 50 percent in Phoenix, Atlanta and even Chula Vista. Detroit has homes for sale for $7,000.”
“If you’ve raised a child, you know that consequences for poor choices modify behavior. Keep buying a new bike for your kids each time they leave it outside and it is stolen will find you mortgaging your home to buy replacement bikes. Make them earn the money to pay for their own new bike, and that bike will be inside and securely locked, probably to their wrists and beds. Moral hazard does result in economic sensibility and produces long-term prosperity.”
“So, howl about Wall Street and the failure of executives who walked away unscathed from their companies’ collapses. Apply the same standard to those who took out mortgages that put them in over the heads in even the best of economies. They have left messes in neighborhoods, cities and lenders with their abandoned homes and unpaid mortgages. Accountability and responsibility apply on Main Street, too.”
Great article from the Arizona Republic, Ben. Finally, somebody tells the truth.
Yeah the morons mentioned in that article are real brain surgeons. 12 months from retirement the one asshat puts his house up for collateral to…….. add a theatre to the collateral? There are so many retarded things about that. Last time I was at the movies it cost me and Mrs. $40 for tickets, big honkin popcorn and a big honkin coke for me and the moron in the article borrows $100k to watch a movie?
The retirement fantasy implodes one more time.
‘in the second half of 2008…624,958 foreclosures for financial folly vs. 183,447 for loss of employment.’
‘The 12 percent of the homes with negative equity are responsible for 47 percent of the foreclosures. Pick-a-Pay repeat default rates are 55 percent. If you refinance the mortgage-challenged, the default rate is 55 percent on their refinance.’
‘young couple that only began house hunting exactly a week before. Again, the tax credit was the motivation. There was no time to get an idea what they were after or for him to explain how the process works. It was done on the fly as they toured eight homes the first day, he recalled’
This is what I find maddening about what the government is doing. Even as the statistics show how these foreclosures happen, the govt is paying people to buy houses using low, to zero down loans! And since we did have this little thing called a housing bubble (which is rarely seriously mentioned in DC), many of these folks will find themselves in that dreaded ‘negative equity’ position, and hello jingle mail!
How does that solve anything?
A week or two, I was listening to VP Biden on NPR. He got asked about strategic defaults, and he went off saying something like this;
‘most of the people in foreclosure didn’t have subprime loans. Someone on their block had subprime loans and that drove down the value of the neighbors house. Or they refinanced to pay for a student loan…and you know, that was a perfectly rational thing to do’
I clearly recall the rational statement, and this is where these guys don’t get it. Refi’ers were mostly gambling that prices would go up. They never intended to pay off that loan, the house (or houses) would do that for them. And I’d like to see the stats on how many refi’ed multiple times.
They GOT THEIR MONEY. Actually, they got top dollar for these houses. And if they want to keep it, why don’t they just give the money back?
They GOT THEIR MONEY.
———————————————————-
Ben, I beg to differ. They got OUR money. The mini Goldman’s got OUR money.
Have you checked your bank account this morning? We won’t understand what did happen or what is happening unless we get the facts straight about this victim thing.
OUR money meaning taxpayer money. IMO govt is throwing OUR money down the toilet with the housing credits. The govt is trying to halt the housing avalanche but even the govt will not be able to tame the free market try as hard as they may try. But it appears to me that after reading a certain article I would tend to agree that our economy is, to a large degree, based upon fraud.
But our taxes don’t cover much more than the interest on the debt run up prior to the housing bubble. This govt had over $50 trillion in liabilities back in 2005. Somebody is paying, but it hasn’t been me.
A while back, I came to believe that the federal govt isn’t me, and I’m not the govt. I have a lot less stress since then.
“A while back, I came to believe that the federal govt isn’t me, and I’m not the govt. I have a lot less stress since then.”
Ah, another voluntaryist! I like that point. It’s another variation on the idea that the occupants of the government buildings in Washington over several decades have been enemies of America. Does not matter which of the two parties. They are the same.
Ben,
If you consider purchasing power, one might argue that our (savers’) purchasing power has been greatly diminished. IMHO, THIS is how “we” are paying for the deadbeats choices: artificially low interest rates on savings, AND high prices which are caused by the inflation via govt money/low rates/easy credit, etc.
What more could we buy (think houses, stocks, commodities, etc.) if interest rates were allowed to float freely and if they were not printing money/guaranteeing debt that is being directed at the housing, stock, and bond markets.
Don’t get me wrong; there are many wrongs coming out of the various government policies, and no one is more critical of that than me. But I do think we need to get our complaints straight. We have a duty to fight measures that drive up deficits. However, let’s be clear about those; like what the FDIC is doing with banks and shadow inventory.
For example, most of the harm done by the GSEs was done over decades, not just in the last few years. So we should argue against their very existence, not just recent policy.
I have a lot of problems with central banks. But they don’t set long term rates. IMO, this situation is a by-product of an overall deflationary environment. It’s hard to get traction blaming the CBs for deflation. (Hell, they’ll tell you they are doing us all a favor by fighting deflation). This is getting into larger issues like globalization, global overcapacity and Austrian theories on the fiat-money end game.
Ultimately, we do still have options. You can earn interest in other currencies, buy precious metals, etc. You can even throw off your SS#, opt out of the system, and remain in this country. My main point is, this is basically USA Inc. debt, based in Federal Reserve Notes, and I don’t consider myself part of those corporations.
Maybe you don’t consider yourself part of those “companies,” but they consider you part of their “solution” to their problem, and when they start taking everything we have to pay for their mistakes, a well-reasoned argument that you were not part of the problem won’t keep them at bay.
How do they get those stats? Do foreclosures have some sort of “reason given” data?
I agree - they got their money and they bragged to anyone that would listen how savvy they were. AND they got their money tax free. They didn’t think they would have to pay for it and still don’t think they should - it was their money. They don’t get it was a loan against perceived equity.
One underwater fellow, who was but one year from retirement, confessed that he took a second mortgage of $100,000 on his $642,000 home to put in a theater, fitness room and bathroom in his basement and expand his living room.
I hate to tell this guy but if you cannot consider yourself “one year from retirement” if you have ANY mortgage on your house, much less a large second mortgage to boot. Paying off your mortgage should be a foundation of a retirement plan.
I built a perfectly good home theater - with a 110″ projection screen no less - for about $2,500. How the heck could this guy blow $100K on one?
I like the way you framed that. I go to the movies nearly every week. I buy Harkins discount passes at Costco, making the admission price $7.50. So, let’s see, a $100K home theatre at that rate would be paid for in… oh, why bother doing the math. I’ll be dead, and so will everybody reading this. Yes, the guy is truly a moron.
The INTEREST he’s paying on the $100K would probably keep him in movie tickets.
No you missed the point He runs a swingers club and the home theater was to run porno movies and a disco type sound system was his after retirement income plan..
12 months from retirement the one asshat puts his house up for collateral to
My DH and I watched Vince Vaughn’s “Couples Retreat” last night, and after the credits, there’s a short scene with the following dialogue:
{ROMANTIC SONG PLAYING}
{PEEING}
You know,
the Federal Reserve
is a pimp.
They want you
to be in debt.
That’s how it works.
They give you
these credit cards
you can’t pay for,
HD, motorcycles.
it’s all a pimp game.
Oh, that feels good.
http://www.script-o-rama.com/movie_scripts/c/couples-retreat-script-transcript.html
Just thought that was funny!
I guess Ron Paul attended the premiere.
http://www.ronpaul.com/2009-10-07/ron-paul-attends-premiere-of-vince-vaughns-new-movie-couples-retreat/
“So, howl about Wall Street and the failure of executives who walked away unscathed from their companies’ collapses. Apply the same standard to those who took out mortgages that put them in over the heads in even the best of economies. They have left messes in neighborhoods, cities and lenders with their abandoned homes and unpaid mortgages. Accountability and responsibility apply on Main Street, too.”
Great! So when are we going to start applying that same standard to Main Street? Just as soon as we start apply ANY standards to the Wall Street Criminals?
Roidy
Main street screwed main street!
Congress, Barney,Dodd, Raines,Johnson, Maxine screwed main street with Freddy and Fannie and the ‘Community Reinvestment Act’.
Mainstreet screwed themselves. They participated in the craziness and they are who vote or don’t vote their representatives. Why would anyone expect a corporation (a thing) to meet the same standards as a person (human being)? Apples & oranges.
Apples and oranges you say? The Supreme Court has declared corporations as persons.
So, there can be criminal, immoral, stupid people, then there can be criminal, immoral, stupid corporations.
If corporations can walk way then people can walk away.
It works both ways and is certainly not apples and oranges.
Your turn.
Roidy
“‘The interest rates are the best in 30 years, and Uncle Sam will let you write off the mortgage interest,’ Braddock said. ‘Any one who doesn’t own a home should own a home. If you put a good down payment on it and get in while the interest rates are low, then the mortgage will be lower than what you can rent the house for. And the appreciation value in homes have gone up over the years.’”
“The definition of insanity is doing the same thing over and over again and expecting different results” –Albert Einstein
Ooops!!
“But stingy banks only tell part of the story. What we’re really experiencing is an artificial market, says Sam Kartalis, president at Henry S. Miller Realty Services.”
People have “disappeared” for saying less than that Henry.
Hello…Henry ?
Has anyone seen Henry ?
For those that don’t know HS Miller is a big RE firm, pretty well known in Dallas anyway. When I was studying RE at UT Arlington, the dean of the school was a HSM VP. Smart guy, and about that time the firm got bought by Grubb & Ellis.
When I was studying RE at UT Arlington . . .
OMG Ben Jones is a REALTOR.
While I did have enough college RE credits to take the UHS exam, I never wanted to nor did. The classes were really way above that stuff. RE law, finance, development, etc. I wanted to be a developer, but that went away as the market collapsed.
Then I appologize. You must admit your statement was capable of scaring the willies out of me.
As a member of the CA bar, I believe I was able to get “waived in” to a CA real estate license by only paying the fee and not taking the exam.
I never did that.
I am licensed (Sales) in Ca. and have completed my Broker’s education. I think the 30 units you need to become a Broker, should be the requirements for the Sales test. It would weed out the “challenged”. I too had R E law, finance, appraisal, loan brokering (laws and math) and a host of other topics (3 units each). I got to apply real college class credits, which made the process quicker.
Other than the military (still applies), has anyone heard the fed extended the $8K until July 2010? I uhs told me that yesterday. She was so perky about it.
(Evidently, she looked in mirror to practice her acting job.)
Don’t worry, by 2007, half of all American adults studied to be RE brokers.
It was a joke among California lawyers that those lawyers that got disbarred for ethics violations could easily just shift over and become realtors.
Albert Einstein - I am treading this hour, watching a Documentary on Einstein on hulu. Interesting life. I read the HBB during breaks.
I read the HBB during breaks.
Hah - I’m doing the same thing while catching up on TV shows…
“I read the HBB during breaks.”
The problem with that is that the hulu commercials aren’t long enough. Last night I went to the fridge to get another beer during the break. By the time I returned, The Simpsons was already back on!
‘In the city of Kyle, the average home value is expected to decrease to $127,305 for 2010. In the city of Buda, the decline is projected…to $158,876. The city of Kyle is seeing higher rates of home value decline because the market here was overbuilt and became even more saturated with a high number of foreclosures in young neighborhoods, said Steve Flynn, a San Marcos-based appraiser who teaches on the subject at Texas State University.’
‘A lot of those builders had their own mortgage companies and they were getting these people into homes and qualifying them for a loan without any regard for whether these people could afford those mortgages. That’s kind of coming back to haunt them’
I lived in Hays Co for most of the 90’s. I recall that in 94-96, I knew guys who were making 25-30k that were buying new houses in Kyle/Buda for around 50k. All the big builders were there, and they were doing the financing.
I would drive around and it seemed like every possible spot in the hill country was being developed (with houses crammed onto tiny lots). This is one example of what I mean about the housing bubble having gone on much longer than most realize. In central Texas, anyway.
Regardless of Texas’s LTV laws/regs, the Secondary Loans, MEW’s, refi’s and plain old consumer debt are still gonna catch up with them in a deep recession.
These loans are gonna really crush some of the midwest, Rust Bucket and flyover states that think they avoided the house price run-up problems.
Everyone got stupid and greedy with home equity withdrawals and DEBT.
I base my economic theories on the Doors.
“Nobody gets out of here alive — ”
“Elsewhere in Fort Worth, a 26-year-old real estate agent named Will Northern had brought to fruition a deal with a young couple that only began house hunting exactly a week before. Again, the tax credit was the motivation. There was no time to get an idea what they were after or for him to explain how the process works. It was done on the fly as they toured eight homes the first day, he recalled.”
“In the end, they settled for a three-bedroom house in the Arlington Heights neighborhood of Fort Worth — without a garage, but with a second living area. It will be used as the music and recording room for the husband, a member of a rock band. And the $8,000 tax credit will go toward its transformation, the agent said. ‘I’m a new agent, only 26, so this tax credit has helped me a lot,’ Northern said. But even without it, he added, ‘I believe the surge will continue.’”
I will be unavailable today, I will be out buying a house. I don’t want to miss the surge this genius is talking about.
Nice… no time to figure out what they want, and the husband is a wanna-be rock star… yeah, this won’t end in default or anything. Oh, well - just toss it onto the rest of the bill we taxpayers get stuck with and let The Surge continue!
Ben, I know that there has been some MSM stories that Texas learned from the last bust and that their state law/regs with LTV re-fi’s was suppoused to lessen the foreclosure rates. I wonder if this isn’t a little misleading. I know that Texas in general appears conservative in their debts.
I recall seeing an inter-active Debt Graph by state a couple of years ago that showed the run up and breakdown of housing/comsumer related debts and wages.
The normal boom hotspots were easily identified by inflated expensive housing, higher than median income and lots of suicide first/primary loans.
Many of the flyover and once considered “conservative” states seemed to have less run-up in house prices, lower wages outside of cities and less origionation or primary suicide loans and seemed to look prudent until one fact. They LATER went in big time for second loans and did major equity extractions.
The refi’s, mews and second mortgages. Some of these states, the Rust Bucket for sure, still went absolutely nuts with the refi’s and now the house value is all that these FB and GF have in some situations and the recession is going to crush them. The secondary loans are a bigger problem that most people realized.
I believe that the latent problem of these MEWS are gonna clobber both the coasts…and danged near everyone in between.
It’s just a matter of Time and Money.
Rant over
Disclaimer: it is obvious that mikey
…Ooops!!…never took economics, computers or typing.
Yeah, I saw those reports about Texas ‘missing’ the bubble. There are so many different regional aspects to this story. Back in 2005, DFW was being hammered by defaults and spec overbuilding. Now, they are relieved to ‘only’ have several thousand spec houses for sale, and foreclosures are still near the levels of the 80’s.
From the KTKR piece:
‘Fewer people have filed a property tax protest so far this year, and the lobby at the Harris County Appraisal District proves it; last year, a record number of owners protested their appraisals.’
But we are told that the Texas market is so strong, huh? And why are there all these stupid condos and commercial defaults in Austin, etc?
IMO, this is typical media sideshow stuff. And Texans aren’t that much more conservative. In the 80’s, plenty of them made asses of themselves. The thing is, many got burned so badly that acting foolishly comes a little harder these days. But look at the D mag article; there are some big time commercial foreclosures coming, and that looks a lot like the S&L days to me.
“But look at the D mag article; there are some big time commercial foreclosures coming, and that looks a lot like the S&L days to me.”
Wow…you nailed that one too. My thoughts exactly but I can’t put it all together and say it with the insight and choice titbits like you do !
I still have nightmares of a AZ broker years back trying to move a nightmare scenario. It was a combo res/commercial property deal on mortgage BO and nobody in the forum would bite, help him or point him in the right direction with this risky POS.
Finally some kind hearted big shot Account Executive came on and said “We can’t help you but I know this bank in Wisconsin and they will make a loan on anything…”
That was one of my banks…and History will be the Judge of this Insanity.
‘For most Americans, their house is their most important financial asset,’ Treasury Secretary Timothy Geithner told lawmakers on Thursday.
Here’s some evidence that Turbo Tax Timmy is unfit for the office he holds. He thinks a house is a “financial” asset. What a m-o-r-o-n! Methinks he needs to re-take finance 101…
Yeah keep repeating the lie Timmy and eventually lies become self-evident fact for the masses.
Well put, Vegas Bob.
I don’t know, it seems like its a comment on how some people live, hoping that their houses will be their retirements.
I know several peeps from SoCal that intend to sell out and move to the fly over area of their choice.
And that insane reliance on what should be a depreciating asset is what got us into this mess: no savings, people in debt over their heads, and the only “hope” for the future is that housing becomes increasingly expensive so one generation can cash out at the expense of the next. Long-term, eating one’s young doesn’t work.
He [property tax advisor Paul Bettencourt] says foreclosed properties generally sell for 30 to 40 percent less than a typical home’s value.
So this advisor thinks that a “typical home’s value” is NOT its “market price”.
(Excuse me if this turns out to be a double post — I have Java script issues).
I had my condo foreclosed in 1999. I’d bought at the peak of the market in Los Angeles in 1989, and ten years later went through the foreclosure the “traditional way.” By that, I mean that I’d put 10% down, paid my mortgage for all those years, tried putting a short sale together, had that fall apart, and finally given up and had the thing foreclosed. Then I had an $18K tax bill to pay for the imputed income.
So, my credit was wrecked, I was living in a 1 BR apartment, and even though I saw the ads for 125% loans and 80/20’s during the 2004-2008 period, I was very focused on saving and rebuilding my credit. I’d cemented the ideas in my head that I needed a good downpayment (targeted at 20%, but not mandatory) and that I needed a big emergency fund. So, by my standards (especially my internally mandated emergency fund), I could not afford even a “starter” half million dollar condo. So I sat this out, continued to save, and right now, I’m probably one of the people everyone wants to buy something. But I’m cautious and don’t feel the absolute need to own property. I’ve also adjusted quite well to living far below my means.
I don’t kid myself — I didn’t come by my “better” financial habits naturally; the foreclosure really taught me some hard lessons. I know to a certainty that many of the people being bailed out right now will learn the opposite lesson — risky and foolish behavior is not balanced by the fear of the financial consequences. Seeing these tax credits cause lower-income people to buy beyond their means doesn’t make be (very) angry — I just feel a little sad that there will be pain in their future, and we should not be encouraging them to mistakenly live beyond their means.
I bought in 1990 in Southern California and lost money but did not foreclose. It too, taught me a big lesson. People like us are in the cat bird’s seat.
If you are still in Los Angeles, renting is still far cheaper than owning. It’s probably going to stay that way for many years. So may as well rent a very nice ocean view place, no?
Just out of curiosity, Bill, what do you estimate a nice 2BR with an ocean view would rent for in LA or Orange County?
Thanks.
Hermosa Beach, 2 bedroom 1 bath Ocean View, “steps from the beach” $1595.
Can’t get much better than that. So why am I not there? Because I just renewed my lease. Doh!
mofo ,you paid for what happened to you in many ways and it wasn’t like you didn’t try for 10 years and you put 10% down ,unlike some of these loan borrowers thats didn’t have any skin in the game .
I things you are right about the moral hazard of what is going on now
with the bail outs and credits .
“Horton CEO Donald Tomnitz warned that the U.S. housing industry – which is recovering from the worst downturn in decades – still faces challenges. He cited the growing number of foreclosures, high inventories in some markets and tougher mortgage qualification standards.”
Remember this guy’s surprising candor a few years back? March 2007, I think:
“I don’t want to be too sophisticated here, but 2007 is going to suck, all 12 months of the calendar year,” D.R. Horton Chief Executive Officer Donald Tomnitz said at a Citigroup Inc. conference in New York.
When did the regulations change about down payments? I remember specifically NOT being allowed to use gifted moneys as part of my 20 percent down on my first house.
Man, am I old.
Well, chances are he is not going to disclose the source of the downpayment funds if asked. Lying to the banks is an art.
Okay, which poster is Kimberly Winson-Geideman and which poster works for the Arizona Republic?
“Accountability and responsibility apply on Main Street, too.”
It’s so rare to hear someone say this.
“She also expressed concern that some buyers will use the tax credit as their down payment — which is permitted under FHA mortgages. This means the market again will have buyers putting no down payment in the deal, like the 100 percent mortgages that were part of the mortgage meltdown, she said. ‘People with little stake are more likely to walk away than others.’”
No skin in the game = moral mail-in-the-keys hazard
After all we’ve been through.. the gov’t STILL doesn’t understand this VERY BASIC concept.
It’s extrememly frustrating to hear the gov’t talking head chant how the housing market is recovering while still pushing NO DOWN PAYMENT loans via FHA.
It’s like nothing has changed!!!
From their viewpoint, the market is “recovering.” People are again buying junk they can’t afford and getting in debt. Those 2 things are key to our modern eCONomy. Bankers are again getting rich, and Main Street is happy in the delusions that we can get back to super-duper unaffordable housing. Reality will eventually show up, but until then, the looting will continue.
it appears the nothing can take the optimism out of the developers and real estate people.
Here in Santa Rosa, we have about 3,500 approved units and about 1,500 waiting approval, and still the developers come forth saying how we need more housing!
And 3,330 on RealtyTrac foreclosure
and the City wants to lower the standards and build more!
Jack,
Your link is “forbidden”.
I still can’t get away from what made this crazy lending possible . You would have the Firms that marketed these CDO securities suggest that it was the
big Institutional investors that are to blame because they didn’t figure out that Goldmans and others CDO’s were junk ,while they were rated AAA investment grade ,based on these clowns faulty models to begin with that they bribed the Rating Agencies to endorse .
Toyota didn’t get away with the liability of marketing a car with a faulty break system . Does Toyota get away with saying that their prior cars were good therefore they have no liability when they screwed up ,or changed their models on the breaks that end up being faulty . Or,can Toyota say that they didn’t see it coming so therefore they are absolved,or the car regulators didn’t spot it therefore they are absolved ?
Where is the Market Maker Money Changers evidence to support that sub-prime loans weren’t high risk ,especially when there wasn’t skin in the game and
the loans were stated income loans on top of everything else . These jerk were just riding off the past low default rate with different lending
standards from the past . Does Wall Street Lenders get to just make up this stuff and say ha ha we fooled you we fooled you ,but we made a lot of money ? These creep middlemen created the greatest financial damage that has ever been done regarding lending . And these culprits get bail out ,and the liar loan borrowers want to get bailed out to . This has got to be some kind of joke .
“This has got to be some kind of joke .”
More like the real-life version of a bad dream.
Wait until you read the bottom of the posts in the bucket that talks
about how the jerks duplicated bad securities so they could be shorted ,while that would create more losses on the other side . They were making a clone of bad paper just so they could short it and increase the short gains late in the housing bubble . This article just came out . So, we bailed out manufactured duplicates of bad paper bundles
that the geniuses were shorting by credit default swaps to increase their gains . This has nothing to do with to big to fall . This is more like to insane to be called anything other than a financial scheme .
You know I always smelled a rat when it game to this insurance thing ,but this is just criminal . Didn’t see it coming ,yep ,right .
“‘For most Americans, their house is their most important financial asset,’ Treasury Secretary Timothy Geithner told lawmakers on Thursday. ‘As the financial crisis wreaked havoc on household wealth, the administration moved to protect this critical component of stability.’”
Secretary Geithner openly admits he is not an economist. Why do Treasury Secretaries dabble in financial alchemy? Is this really part of their duties? Has a housing price stabilization measure ever previously been employed in U.S. history? I doubt it…
The New Economy
Rebound in housing prices is over
US housing prices fall for fifth month in a row, according to Case-Shiller report.
A sign marks the lowering of a new home’s price in a development in Twinsburg, Ohio, earlier this month. The rebound in home prices appears to have ended as the closely watched Case-Shiller 20-city index fell in February for the fifth month in a row.
Amy Sancetta/AP
By Laurent Belsie / April 27, 2010
The rebound in home values is over, as residential real estate prices fall and the threat of a second dip in the housing market begins to take shape.
The latest evidence comes from the closely watched S&P/Case-Shiller home price indexes, which reported Tuesday that its 20-city home-price index fell nearly 1 percent between January and February, its fifth monthly decline and the lowest level since June 2009. Of the 20 metropolitan areas tracked in the index, 19 declined in February.
The new report echoes last week’s report from the Federal Housing Finance Agency, which also showed that home prices fell in February and were down 3.4 percent over the past 12 months.
By contrast, the Case-Shiller report shows a year-over-year gain in its 10- and 20-city indexes. But that’s a reflection of what was happening a year ago, not what’s happening now, writes Paul Dales, an economist for Capital Economics in Toronto, in an analysis.
“The double-dip in prices that we have been expecting has begun,” he writes. “Admittedly, the surge in demand associated with the end of the tax credit could well support prices for a few months. But thereafter, we think that prices will drop back by at least 5 percent by the end of next year.”
…
Case’s remarks regarding the recent dead cat bounce in SoCal prices seem to epitomize bubble era thinking.
Development patterns linked to recovery
Forum sees conflict emerging over infill
By Roger Showley, UNION-TRIBUNE STAFF WRITER
Sunday, May 2, 2010 at 12:05 a.m.
Urban America, post recession:
Armando Carbonell at the Lincoln Institute of Land Planning in Cambridge, Mass., poses the choices this way: “Will we return to business as usual and will it be re-established, or are we entering something new?”
The consensus at a Lincoln-sponsored forum last weekend, “Land and the Built Environment: The Reinvented City,” was that things will improve in the real estate world and new patterns will emerge — from more sustainable development to more adept handling of conflicts between developers and neighborhoods. Even shrinking cities are doing things that growing cities like San Diego might learn from, speakers said.
One new pattern is sure to please homeowners. Karl E. “Chip” Case, a Wellesley College professor who helped create the much-watched Standard & Poor’s/Case-Shiller Home Price Index, said the comeback scenario for housing is already in play, judging by the earliest signs of price rises in San Diego, San Francisco and Los Angeles. They saw the highest year-over-year home prices increases in the index a few days ago. Case said he is seeing more optimism in the latest housing statistics than he has seen for years.
But if development picks up, the fights between builders and not-in-my-backyard neighborhoods will surely flare up, particularly in nearly built-out cities like San Diego, where planners expect future growth to be accommodated through infill projects rather than master-planned communities of thousands of acres in rural areas.
…
Famine follows feast, as it has all the way back to Biblical times, when Joseph warned the Pharaoh about incipient famine.
VIEW FROM THE MARKETS from MARKETS
May 3: 800 years of financial crises
1:53 PM 800 years of financial crises - Carmen Reinhart, co-author of This Time is Different, talks about the history of financial crises and their patterns (4m 41sec)
Clearly, she does not understand:
Debt = Wealth!!!!