The Biggest Question Everybody Is Going To Have
The Daily Journal of Commerce reports from Oregon. “After listing a modest Portland home for $175,000 in a neighborhood with no other homes for sale, Keller Williams principal broker Nick Krautter thought he might have an easy sale. But only days later, a bank-owned sign popped up in front of an almost-identical house next door with a price of $100,000. Krautter knew, however, that the house hadn’t materialized from nowhere. It was part of what he and other real estate brokers have started calling shadow inventory.”
“Their concerns are based mainly on hunches and intuition, but finding concrete data is difficult. ‘…there’s no way to get the true numbers until the banks open their books,’ Krautter said.”
“He has tried to track shadow inventory, and has counted nearly 1,000 homes in Portland that are currently in foreclosure. But there are only 518 active and pending foreclosed properties on the Regional Multiple Listing Service. ‘There are two homes owned by (banks) to every home that is actually listed by them,’ Krautter said. ‘There are lots of theories on why it is taking so long for these homes to get to the market, and whether it’s purposeful or not, people need to be more aware that it’s affecting the market.’”
“Those who believe in the existence of shadow inventory offer several reasons as to how it started and why it’s flourishing. One theory, Krautter said, is that banks and other lenders are holding onto foreclosed properties and doling them out slowly, in an attempt to keep home prices stable by not flooding the market. But brokers like Krautter fear that strategy, if it’s actually happening, could end up backfiring on lenders. Robert McKean, CEO of Albina Community Bank, agrees that some lenders may be carefully timing when they reveal foreclosed properties to potential buyers, but he doubts they would ever be forced to flood the market with them.”
“‘Regulatory stress usually develops over time, so I can’t see an instance where a lender would have to put all (its) property on the market at once,’ McKean said. ‘Plus, regulated lenders are penalized if we hold a foreclosed asset on our books. Lenders don’t have an incentive to do this.’”
“Krautter, meanwhile, is continuing to track Portland’s shadow inventory. He has seen the number of actual defaults increase even as the number of mortgages that are 30-days delinquent has gone up, which he said is a sign that lenders may indeed be avoiding short sales and letting shadow inventories grow.”
The Washington Post. “Douglas Duncan, vice president and chief economist for Fannie Mae, raised a provocative idea this morning at a meeting of real estate journalists in Austin: Some of the misconceived housing developments built during the boom years might have to be torn down because they don’t make financial sense. Duncan agreed with Stan Humphries, chief economist at Zillow, who warned that a ‘tremendous shadow inventory’ of homes is poised to come on the market.”
“Said Duncan: ‘Some of that shadow investment could have to be torn down. It was not economically viable when it was put in place.’ That include some boom-time developments in California’s Inland Empire and central Florida.”
“Who would pay for tear-downs? What would happen to people who’ve hung on to their homes despite the foreclosures all around them? All unanswered questions. The idea is being discussed by economists, but Duncan said he doesn’t know of any policymakers who are considering it. ‘It’s un-American to think about tearing down housing,’ he said. ‘But we have a long history of ghost towns.’”
The Palm Beach Post in Florida. “Stan Humphries, chief economist for housing research firm Zillow, said today that Florida will take longer to recover from the real estate recession than other states hit similarly hard by the crash. The reason; the number of foreclosures mired in the court system. With an estimated half-a-million foreclosures bogged down in Florida’s courts and more home loans defaulting every day, Humphries said Florida’s improvement has stalemated.”
“‘Florida is still such a challenging market because foreclosures are not being processed very quickly,’ Humphries said. ‘Florida is still seeing monthly depreciation rates.’”
“‘The bottom is going to be a long and flat affair,’ said Humphries, who called consumers ‘overly optimistic’ in their beliefs on the economic recovery. ‘The myth out there is the housing slump is over.’”
“Real estate experts predicted this week that 3.5 million homes nationally will go into foreclosure this year as risky adjustable-rate mortgages written in 2005 reset and unemployment continues. That’s up from 2.8 million homeowners who faced foreclosure in 2009, and sets a pace that isn’t likely to plateau until late 2011, said RealtyTrac Senior VP Rick Sharga. ‘The second wave of toxic loans is about to hit,’ said Sharga.”
“Sharga spoke Wednesday in Austin, Texas, during the 44th annual National Association of Real Estate Editors conference. Sharga’s panel of speakers, which included a Bank of America representative and Arizona-based mortgage modification executive, painted a bleak picture for anyone who thought the worst of the real estate meltdown is over. Not only will unemployment and rate resets drive foreclosures, but the panel said more people may decide that strategic defaults are ‘hip.’”
“Starting this year or next, a new class of Floridians is expected to face foreclosure, said Brad Hunter, chief economist of MetroStudy in Palm Beach Gardens. ‘The new story is going to become it’s no longer people from the lower echelon of society that are having trouble keeping up with their adjustable-rate mortgages. It’s now people who might have prime mortgages that are middle class or upper middle class or even upper class members of society who are having trouble paying their mortgages,’ Hunter said.”
“Adding to the problem, Hunter points to something called a negatively amortizing loan. Florida is home to $97.5 billion worth of those option adjustable rate mortgages, Hunter said. Some borrowers are saying the risks are worth it to get out of a bad investment, said Travis Olsen, COO of Scottsdale, Ariz.-based Loan Resolution, LLC. ‘As those option ARMS adjust, people are going to realize it’s just not worth it,’ Olson said. ‘This has been an economic ice age.’”
From St Louis Today. “From where he sits, sifting through the reams of data and opinion out there on housing, Humphries thinks most consumers are ‘a little overly optimistic,’ thinking that the worst is over and that things are on the upswing. That thinking, he says, is based on four ‘myths’ that he’s hearing repeated a lot these days.”
“‘The first myth is that the housing recession is over.’ It’s not, says Humphrey. The second myth is that prices will rebound after they hit bottom, climbing back to historical appreciation rates of 3 to 5 to maybe even 7 or 10 percent a year. ‘We don’t think that’s going to happen,’ he said, predicting three to five years of basically no price gains. Why? Three reasons: The huge ’shadow inventory’ of more than 7 million mortgages that are seriously delinquent or worse but aren’t yet on the market. The nearly one-fourth of borrowers who owe more than their house is worth. And millions of homeowners who have put off selling their house until the market improves. There’s just too much supply to work through.”
“Myth #3: The foreclosure crisis has peaked. ‘That’s not true,’ says Humphrey. And, number four: The tax credits helped. Nope. Not that either. Maybe they drove some sales last fall, but even then research has shown that 80 percent of the people who used them would have bought anyway.”
“So, take that for what’s it’s worth. And for what it’s worth, sitting next to Humphries in this panel talk was Doug Duncan, chief economist for Fannie Mae. He pretty much agreed with everything Humphries said, predicting another 1 to 3 percent drop in prices nationally and another three years before things return to ‘normal,’ whatever that means.”
News 2 in Florida. “There is good news for Lee County’s housing market. Foreclosure numbers are the lowest they’ve been in years. And experts we spoke to say it could a sign of things to come. For Lee County, 830 foreclosures for the month of May is good news. ‘No, this is really good,’ said Marc Joseph, of Marc Joseph Realty.”
“It’s the lowest the county has seen in three years. Even areas like Lehigh Acres - an area that was hit hardest by the real estate bust. Southwest Florida’s real estate experts say the positive trend should continue. Foreclosure numbers are dropping and housing prices are climbing. ‘The magic number is zero. Everybody wants to see zero foreclosures and then we get back to normal - normal buyers, normal sellers,’ said Joseph.”
“But the numbers show Lee County is not out of the woods just yet. Lee County courts still have more than 21,000 foreclosure cases in the system - waiting to be worked out. ‘The biggest question everybody is going to have - what happens to the shadow inventory, the backlog of cases,’ said Joseph.”
“Joseph says buyers looking for foreclosures should make a move now. And sellers who are competing with foreclosure prices should hold a little longer. ‘I hope they all go so we don’t have any more foreclosures,’ said said Lehigh resident Dee Lalsiew.”
The Philadelphia Inquirer. “Economist Patrick Newport recently described home sales as riding ‘a two-hill roller coaster’ because of the now-expired tax credits. He and other economists, both in and outside the housing industry, say they believe that sales will lag awhile as a result of the federal credits’ pushing back to March and April transactions that might otherwise have occurred in May and through the summer.”
“So far, their assessment appears correct. Appointments to look at houses are down at many real estate offices - 44 percent lower, according to Long & Foster regional vice president Art Herling. ‘It sure made a mess of May,’ said Long & Foster agent Cheryl Miller. ‘Things just about ground to a halt.’”
“Among the results of the rush for the tax credits: competition for more-desirable homes, which helped accelerate median-price recovery. Though the national median is nowhere near the heady levels of 2004-06, prices have been slowly rebounding to what industry experts like to call ‘normal.’ The fact that prices have been rising means, according to Newport, a reduction in ‘the number of homes that will fall into foreclosure.’”
“The four-year price free fall pushed about 25 percent of U.S. houses ‘under water,’ meaning that more money is owed on them than they are worth.”
“‘Now that the tax credit is over, we are seeing record price reductions’ by sellers, Herling said. ‘These price reductions are three to four times more than the tax credit’ - $8,000 for qualified first-time buyers; $6,500 maximum for some repeat buyers.”
“Buyers who waited until after the tax-credit deadline might gain from these reductions. Sellers who held out for higher prices while the tax credits were in place are much more willing to negotiate now or lower their prices. ‘We are seeing hundreds of 5 percent to 20 percent price reductions,’ Herling said. ‘The buyers who waited until now may get the best deals of all.’”
From Bloomberg. “When Richard J. Bailes and his family paid $4.1 million in March for a four-bedroom apartment in the glass and steel Georgica on Manhattan’s Upper East Side, just eight of the building’s 58 units were occupied, he said.”
“Bailes and his family had plenty of places to choose from. About 8,700 new condos sit empty in Manhattan, with 75 percent not even listed for sale yet, said appraiser Miller Samuel Inc. Priced at levels the market no longer supports, they’re selling so slowly it would take as long as seven years to find buyers for them all, said Jonathan Miller, president of Miller Samuel.”
“‘On one side of the building at nighttime, ours are the only lights on,’ Bailes, a director at the Americas division of the architectural firm RMJM who moved to Manhattan with his family from Short Hills, New Jersey, said in April. ‘You have all the facilities and staff to yourself.’”
“Bailes, who didn’t need financing for his purchase at the Georgica, said he was attracted to the building in part because it hadn’t yet secured enough sales to meet Fannie Mae approval. It made the developers more willing to negotiate on price in exchange for a cash offer. ‘You get more of a deal,’ said Bailes, who purchased the unit at a 17 percent discount off the asking price. ‘The market is still not back,’ he said. ‘But we’re in it at least three years. We’re not looking to make any money any time soon on where we live.’”
“‘Most investors would be happy to buy apartments for operation as rentals, but most sellers and their lenders would not,’ said Susan Hewitt, president of a New York real estate investment and development firm that bought unsold condos in the last property downturn. ‘The original developer isn’t interested in any price below the value of his interest and the lender isn’t interested in writing it down until they’re forced to for regulatory reasons,’ she said. ‘That accounts for the paralysis right now.’”
“So long as regulators don’t force lenders to write down the value of their condo loans, they won’t, said Alexander Goldfarb, an analyst at Sandler O’Neill & Partners LP in New York. ‘Here’s the challenge,’ Goldfarb said in an interview. ‘At the peak, a for-sale condo in New York cost, let’s say $1,000 a square foot to build. To make it work as a rental — conceptually you need a pretty big haircut.’”
“The 8,700 unsold new condos in Manhattan exceed all residential sales in the borough in 2009, according to Miller. About 6,500 of those units are ’shadow inventory’ and have not yet been listed for sale, he said. ‘If you flush that all into the market you tank the market,’ said Daniel Alpert, managing partner of New York-based Westwood Capital. ‘So the only way you can effectively push that into the market is to bleed it out very slowly. Well, the lenders don’t really have the option to bleed it out slowly because they can’t hold onto it for six years.’”
“‘The bottom is going to be a long and flat affair,’ said Humphries, who called consumers ‘overly optimistic’ in their beliefs on the economic recovery. ‘The myth out there is the housing slump is over.’
And a myth it is, and yet the propaganda machine keeps right on trying to pump up the belief that we have turned the corner. We have a long way to go, and as of now the direction is still down. Wonder when we get “stimulus” 3&4, and what will it be? Direct deposits.
‘Wonder when we get “stimulus” 3&4, and what will it be?’
The “stimuli” we already have enjoyed thus far were supposed to have fixed pretty much everything wrong with the economy by now. Since they didn’t quite manage to do so, it gets harder to inspire faith among the electorate that another one will get ‘er done.
For all that I make some snide comments about Zillow, I gotta say, I like this Stan Humphries guy. There are a HUGE number of people who think that a rebound in the housing market is just around the corner. And the inventory of houses that they’d like to sell is anecdotally even bigger than the that on the Bank’s REO slowwagon.
Jim A,
Pffftt, we can’t even develop an appetite for RV’s! Let alone $300k homes? Over the weekend the local lenders ( mostly CU’s I presume ) had a grand Bank-Repo RV Show up at Portland Int’l Raceway.
Dude, I could have taken a NAP in one of those baby’s! Virtually NO attendance at all. Granted, given the sticker prices it’s not like they were ‘giving them away!’ ( where have we heard ‘that’ before? ) But there didn’t appear to be any more than 2 or 3 families window shopping at any given time.
But… bu they had “on site financing!”
I hope I never develop that old-fart motorhome fetish. Seems to be something that overtakes one around age 66.
“old-fart motorhome fetish” LOL!
We looked mostly at those “pop up” trailers as we don’t have a monster SUV to tow anything much bigger. Our daughters and SIL’s love… camping and Mrs. DinOR isn’t keen on using the bushes?
It just seemed like a reasonable compromise. It was fun though to watch the industry struggle to remain in step with the lack of MEW-funded purchases. The newer repo’s didn’t have flat panel TV’s and really scaled back as.., well, you know!
Our daughters and SIL’s love… camping and Mrs. DinOR isn’t keen on using the bushes?
Mrs. D is smart.
True story from my bicycle traveling days: I stopped at a highway rest stop in rural Mississippi. No restrooms. Just bushes.
I found the hard way, that in rural MS, the bushes have poison ivy.
Slim,
Ouch! Yeah, even leaving creepy crawlies out of it, contrary to popular belief, it’s not all that “appealing” to guys either?
After ‘Day 3′ it gets old. Besides ( much ‘worse’ things could happen to you at a Rest Stop ) I must say though, there certainly wasn’t any lack of repo’d RV’s! We just didn’t want to trudge thru all that wet weather to see them all.
The scariest thing about monster RV’s is that most people old enough to have the time and money for them are also too old to drive ‘em.
I hope I never develop that old-fart motorhome fetish ??
people old enough to have the time and money for them are also too old to drive ‘em. ??
Well lets see…
Bought my first Motor Home when I was 29 years old…Kids were 4,3 & 2 at the time…More stories and picture albums then I could even attempt to tell…The Motown singing, laughing and time together are priceless…We wore the first one out and bought another…Wore that one out also…When they got to around 14 or so they lost interest…10+ years of bonding that still keeps giving back today…
So the Mrs. and I moved on to the next Chapter…Bought another one that suited just us two and the dogs a little better…Wore that one out…Finally, treated ourselves to our ultimate dream…To buy a new one perfect for us…For our time together…
We have spent Thousands of hours in Motor Homes..Year 30 and still going strong…San Diego this month and then the Kite festival in Oregon in July…
Old Fart ?? To old to drive ??
scdave,
Great story, thanks for sharing that. It’s what mom & I are trying to recapture after all the years we missed out w/ our OWN kids!
We went down to Hornbrook, CA ( Yreka area ) to check in on membership at the R-Ranch. Some of the guys in my reserve unit recco’d it. But it doesn’t make much sense if you don’t have ’some’ kind of an RV?
We thought it was important for our grandkids to develop some good rec. habits at an early age, other than X-Box etc. The ranch sells memberships for 5k ( orig. TEN K in the 70’s! ) but you can find them on Craigslist for $1,500. It’s about as big of a commitment as we’re willing to make at this point the Wreckovery?
Your welcome DinOR…This was our philosophy regarding a Motor Home vs. time share or cabin or just taking a vacation somewhere…
We did not want to be a “prisoner” of a place…We wanted the freedom to stop & go as we pleased and to be completely random some times…
Here is one page of the scdave family book of Motor Homeing…
We were leaving for a 10 day trip…We were not quite sure where we wanted to go…It takes a couple of days to prepare loading up the rig and getting all the bicycles or motor bikes, camp fire wood etc., on the trailer since we are doing all this after work…
Well the day we were leaving I was behind and it took me into the early evening to get done…The kids were stoked to go and so dead ass tired dad said “lets roll”…Kids in their PJ’s in the back watching a tape…I was not even a dozen blocks from home and they were all asleep…I pulled into a parking lot that had a pizza parlor ordered a pizza to go, came back to the Motor Home, ate the pizza and crashed…
Next morning around 5:30 or so, I fired up the Motor Home, Mrs. scdave put on a pot of coffee and we were on the road to wherever…The kids woke up around 8:00 or so and had no clue that we spent the night around the corner from our house…
Just one page of a wonderful book…
By the way, I think your idea of a pop up trailer is a good one also…Lots of room and fairly inexpensive…Good luck…I hope you do it…
scdave,
( You are one sneaky Dad! ) LOL
Actually, I don’t believe the wife nor myself have any great sense of ‘adventure’ left in us? So choosing multiple/endless destinations isn’t really what we’re about. Just finding some decent weather in the Spring and Fall.
Oregon has had a disaster of a Spring. We’d reached our avg. monthly rainfall even before the 1st weekend in June. The other thing that we kind of liked about Hornbrook is that it is quite literally ON I-5! In fact the interstate runs right thru it. So all but about 13 miles would be on a freeway.
Neither of us are exactly what you’d call “horse people” so having someone else take care of all of that was a plus too. Anyone that’s been there will tell you it’s really more like the ‘resort’ in the movie Dirty Dancing, kind of stuck in time? They have a “teen dance” and prime rib for $10, a band on Saturday night etc. That’s all fine and well but what really appealed to us was that it’s generally -much- sunnier and warmer there than OR.
Well scdave then you weren’t an old fart, were you?
I think motor homes are great for contractors and other itinerant workers. But the cost of those things just blows my mind. Then the mileage, the maintenance..
My folks bought a pop-up tent trailer when my brother turned 13 and could no longer stay free in motels. For gas and camping fees we had wonderful vacations all over the west - Black Hills, Yellowstone, Rocky Mountain National Park, Mesa Verde, Bryce, Zion, Grand Canyon.
It was especially fun watching Dad learn to back up the trailer.
scdave,
What great memories you and your wife made with your kids.
Buying an RV has been in the back of my mind for a few years.
What brand do you like? What brand did you and your wife buy?
But the cost of those things just blows my mind. Then the mileage, the maintenance ??
Well, if you read my first post on this you will see that I have owned four and “yes” the initial investment is somewhat expensive… Maintenance not so much because you usually don’t put that many miles on them..You are parked most of the time you are using them..Only one that I purchased was purchased “new”…The last one….The others, were all 3-5 years old, meticulously maintained and I bought them for 50 cents on the dollar or less…You can buy a very nice used Motor Home today for $20,000. or less…
What brand do you like? What brand did you and your wife buy? ??
All of the Motor Homes that we have owned have been Winnebago’s…I did not know any better but over time I learned of their dependability so I continued to buy them over the years…
The New one that we purchased is a Winnebago Class “A” 29R (meaning 29 Ft.) gas with Ford running gear…It has two pop-outs both the bedroom and the living room…We had it custom built at the factory so we could add some of the things we wanted like surround sound, duel air conditioners and many other items that I won’t go into…
We “carefully” choose the 29R to fit our own needs…We were not interested in anything any bigger since many campgrounds now limit the length of your RV to 30 ft…We enjoy the remote campgrounds along with the more plush RV parks that they have nowadays (Google; Sunland RV Resorts to see what I mean)….
Think of Winnebago as being the “Honda” or “Toyota” of the Motor Coach Industry…
Although they do make some high end Coaches their market target is the mid-range and dependability…They are the biggest Motor Coach builder in the world…
Happy2bHeard,
Damn that is funny! ( You sure we’re not related? ) Sounds like ‘my’ folks line of thinking.
Truthfully, what I’d really rather have is a houseboat. Preferably a “trailerable” one. For my money, it’s just so much more cleaner ‘camping’ on the water. Nothing to track in but little wet footie prints.
The same holds true for HB’s as other RV’s, once you’ve found your spot, you shut it down or weigh anchor or whatever. I’ll be honest, I’ve just reached a point where I don’t think we’ll see enough of a price correction going forward in desirable areas to even make it worth our while?
Sure, the Motor City will have $10k houses, but I’m not looking for Rancho Palos Verdes to become “affordable” any time soon? At least not in my lifetime. Time to get real!
“I found the hard way, that in rural MS, the bushes have poison ivy.”
You’re not supposed to sit in the bushes, silly!
What brand do you like? What brand did you and your wife buy?
SFBAG….I responded to your question but it has not posted…If it does not appear soon I will re-post…
You’re not supposed to sit in the bushes, silly!
I didn’t sit on the bushes.
I positioned my, ahem, posterior near them. Alas, I was way too close. The poison ivy vapors got me.
You know what I like about RV’s? The floor plan. Now, THEY know how to design for efficient storage and small living! No clutter, neat as a pin.
Homebuilders should take a cue from RV’s designers.
“Homebuilders should take a cue from RV’s designers”
Here here. That’s what I kept thinking as we were touring during the RV show. Nearly everything serves multiple purposes and/or “stows” away neatly when not in use!
I tend to think I’d take a pass on just about any sound system though. I like my music -loud-. A lot louder than most would find comfortable? Those speakers would be ragged in 6 mos. of use.
In my case, that’s something I’d install myself. Ahem, btw most of the “pre-wired for sound surround” done on McMansions during the boom were an absolute JOKE!
In my case, that’s something I’d install myself. Ahem, btw most of the “pre-wired for sound surround” done on McMansions during the boom were an absolute JOKE!
I agree. And, speaking of sound systems, I’m in the market for a new one for my computer. Any suggestions?
scdave,
Thank you for your post. Do you also haul a smaller car with your RV?
heheh, and with a boat on top, and kids’ bicycles in front?
Okay, I admit it, I have trouble backing up my little Hyundai 3 feet in a straight line. If it was meant to be driven backwards further than that, it would have come with 3 reverse gears with an overdrive plus really, really huge mirrors and 360 degree RADAR.
Hey, one of the primary reasons God gave me an older brother was for backing up large things that could bend, break, squash or damage other large things anywhere near me or behind me.
Think the HP Gulf spill is a bad, plop me in some 40 foot RV and turn me loose with loud quality music plus a regular coffee and this country would have real disaster on it’s hands.
Old folks? Sheesh. We bought our first motor home decades ago and have never
regretted doing so. We’ve had several and
our newest one is another Country Coach
with three slides and a CAT for power.
We really loved our BlueBird Wanderlodge’s but they just didn’t have the head room I needed so we went to CC.
Owning a coach? Sure. Ours cost new close
to $500k but I buy used. Ours is a 2005 with
only 12k miles on it and I got it well over a
$100k under book. The owner needed out.
We leave in two weeks for a 2 month trip around the states with a long stop over in
DC to take in the Smithsonian. Then on up to Maine and then home along the northern
route.
Advantages: A custom bed to ease my back
which means I don’t have to worry about bed
bugs.
No eating out. Home cooked meals and snacks while traveling.
No motel rooms.
We can take our dogs.
We can park the coach anytime and take the jeep and explore.
With the big diesel, we get around 8 - 8.5 mpg which is reasonable.
So, no $100 a night motel bills, no bills from
restaurants which all adds up to around $200 a day. Our costs are fuel and not much
else.
So we travel in style, sleep well, eat well,
enjoy our pups, and don’t have to worry about what the motel maid skipped.
We figure our costs are about $300 a week more than if we stayed home because sometimes we elect to stay in a park with full hookups.
Our last coach we sold for exactly what we
paid for it after two years of use. You just
have to buy smart. Quality always wins.
Our last major trip was to Yellowknife, NWT, and on to Fairbanks and Anchorage
and home, about 8k miles and $8k damage
to the rigs. Thank God for insurance.
One more aside. I’ve driven just about everything that has wheels or tracks, from
D-9’s to logging trucks and I’m over that
line in the sand at 67 years of age.
Of course, I’m the exception to the rule.
LAUGHING.
Rancher,
So you drove the Alcan highway I suppose. I did that in 2001 and it was the coolest. If I did it again, I would use some sort of camper (you can rent them for a lot less than rooms/meals up there and it looked like more fun). I tell people they should make that trip at least once in their lives.
One year National Geographics did an article about the Alcan highway. Ever since then it’s a road I would love to drive.
Can’t you just RENT an RV to go on one or two trips a year? Why own?
Sounds familiar doesn’t it.
And the inventory of houses that they’d like to sell is anecdotally even bigger than the that on the Bank’s REO slowwagon.
I think I found an example over the weekend. Was a house in the Sam Hughes neighborhood. It was on the market, oh, two or three summers ago, and then the “for sale” sign vanished.
Looked to me as though the place had sold.
Well, wrong-o. It’s been owned by the same couple for many years. Which means that what I recently saw was an attempt to sell. And, to their credit, the couple’s asking price is about $100k less than it was before.
I’ve been seeing that a lot here, too. For sale, then for rent. Then multiple cars in the driveway. Then nothing, then empty again, then for sale again. Then more renters.
Hubby insists it probably sold, but you know the Realtwhore would slap a big Contract Pending sign on it if it did.
Reality makes Stan Humphries a believer. Simple at that!
“And a myth it is, and yet the propaganda machine keeps right on trying to pump up the belief that we have turned the corner.”
This morning one of the commentators on a business channel was noting w/dismay that the consumer was still overspending when we should instead be doing the “heavy lifting” of saving and paying down debt. I jumped out of my chair talking to the tv saying “yeah as the government rolls out program after program to ensure that’s exactly what we keep doing.”
Has anyone heard even one statesman (except for Ron Paul) suggest Americans need to start saving?
“Stimulus 3 and 4″
Maybe someone in Congress will introduce the “Move the Decimal Act”, where taxpayers are allowed to move the decimal point on their total debts 2-3 points to the left, or 2-3 points to the right on all their cash balances.
To be followed by the “New Homestead Act of 2015″, where all the homes owned by TARP banks/Freddie/Fannie can be owned free and clear, if you agree to occupy the place for 5-10 years.
100 years. Early penalty for withdraw: the serialization of all your descendants.
“It was part of what he and other real estate brokers have started calling shadow inventory.”
There was a time a while back when it seemed that only bloggers called it shadow inventory. Glad the real estate brokers and financial journalists have decided to get with the program.
“Their concerns are based mainly on hunches and intuition, but finding concrete data is difficult. ‘…there’s no way to get the true numbers until the banks open their books,’ Krautter said.”
Don’t banks have a legal requirement to keep their books open?
While not a bank, Fannie Mae discloses the number of houses it owns, how many sold, etc. But what they don’t disclose is how many are for sale. In N AZ, according to tax records, it looks like about 10-20% of properties the lenders are paying taxes on are for sale.
And this isn’t counting the many houses I know for a fact are abandoned and in some stage of pre-foreclosure.
I don’t see how this house hoarding by lenders can work.
Yeah, especially when untended houses have a tendency to deteriorate.
‘Plus, regulated lenders are penalized if we hold a foreclosed asset on our books. Lenders don’t have an incentive to do this.’
That might be true if the regulators in question didn’t offer a far more generous standard of forbearance to lenders than said lenders offer their customers.
Of course, there is really no way to make forbearance fair across the board to delinquent borrowers; for instance, if most indebted homeowners believed they could stop paying their mortgage with no risk of ever losing their homes, I am sure many would try living rent-free. Eventually, some of them would lose their homes to foreclosure proceedings, while others would continue their spell of good luck.
“But there are only 518 active or pending foreclosured properties”
Uh-huh, sure. I believe you.
What exactly does that mean? Are they saying that banks don’t have a shadow inventory, that they have ‘declared’ all their losses? Its only the lenders who are not regulated who now have the shadow inventory?
This dude is talking out of both sides of his mouth:
‘I can’t see an instance where a lender would have to put all (its) property on the market at once,’ McKean said. ‘Plus, regulated lenders are penalized if we hold a foreclosed asset on our books. ‘
So do they ‘have’ to put the property on the market, or are they penalized if they don’t?
‘Lenders don’t have an incentive to do this.’
That’s the point we’ve been making Mr McKean; why are you doing it?
“… consumers ‘overly optimistic’ in their beliefs in the economic recovery.”
Keep the hope alive. If consumers were to suddenly stop consuming then our seventy-percent-consumer-based economy would suddenly freeze up.
It would be the end of China as we know it.
Lol. Good one.
Well they can always fall back on the backyard iron furnaces and concentration camps of former years.
i contend it would be the beginning of china…organized labor…increased wages so they can sale their on crap to themselves.
A lot of consumers have no other choice than to be optimistic.
With summer here I’ve been having lots of interesting talks with friends and acquintances that I haven’t seen much of over the winter. The household “plans” of some of these people leaves me floored. Wow!
The household “plans” of some of these people leaves me floored. Wow! ??
Purchasing plans ?? Building plans ??
No, life plans, financial plans, “getting by” plans. Or, should I say the lack thereof?
Okay got it…
I wonder how printing of physical items will play into the future. There are machines (Makerbot, reprap) that print plastic objects. The reprap prints parts to build another reprap. While they are in their infancy, in the future they could have an impact. Cheap rapid prototyping, printing physical objects at home, etc.
I suspect that 3d printing will be similar to 2d printing, in that economies of scale, and quality will keep it out of some markets. If it is a common enough object that it is available at the corner store, for most of us it woule be quicker and cheaper to drive over and buy it than it is to print it out ourselves. And of course the materials that you can put through a 3d printer are pretty limited. So you can’t really print out rubber washers or wood screws.
“… consumers ‘overly optimistic’ in their beliefs in the economic recovery.”
Many consumers think of the economy as an unattached entity; they don’t seem to grasp the concept that they are part of the economy and any recovery depends on them spending money. It’s like being surprised that a store in which you have never spent a single dime goes out of business.
Doug,
Believe it or not I have a good friend that’s the perfect example of that! The only… time he’s been to many stores is when they had their Going Out OF Business Sale!
For perhaps the first time in our history, we’ve gotten gun shy as consumers. All of a sudden we’re actually ‘thinking’ before we make another useless purchase.
Caught “King Of California” over the weekend ( Michael Douglass was wonderful ) and they coyly brought out our rampant consumer habits. You’d have to ‘be’ frugal to actually get a lot of the jokes.
Talk about a gun shy consumer. That’s me.
And, amazingly enough, something is going to happen in my life that seldom happens. I have a date tonight. Yes, me. The ultimate “non-going out with other people” person.
It’s an old college friend, and I’m in charge of selecting the restaurant. And, since it’s been a few years since college, I’m bringing the I-pay-it-down-to-zero-every-month credit card to be ready for the possibility that this adventure will be dutch treat. Yours Truly is such a non-consumer that I’m seldom seen in restaurants.
I’m nervous, people. This whole dating thing gives me the willies.
Whoo hoooo! Good luck, Slim!!!
“Believe it or not I have a good friend that’s the perfect example of that! The only… time he’s been to many stores is when they had their Going Out OF Business Sale!”
Hey, I resemble that remark! Seriously, though… when I webnt to Circut City’s going out of business sale, I was looking for accessories for my video camera and their “sale” prices were higher than Wal-Mart and Target’s regular prices. I had better luck when Linen’s N Things closed. DH and I bought their display bed frame for our daughter, sanded it, painted it, painted decorations on it, and now it’s a one of a kind and the envy of all the other kids who have seen it.
Kim,
The truth is, my friend is on disability, tech guru/flirting w/ hoarding tendencies ( among other baggage ) but he’s a great guy!
As Doug mentions above, The Consumer… works off the assumption that ‘other’ people’s actions make up the economy ( and they’re just doing what they feel is necessary for their own survival/benefit! )
The Onion had a great faux “article” on “One Trillion Dollars now have been spent on “looking cool” and some of us have just NOW figured out a lot of our consumption habits are totally out of control. ( However if you need a stylus needle for RCA phonograph I’ll check w/ my crazy buddy, I’m sure he has one! )
You seemed to have charmed the people at hbb, slim. I’m sure you’ll be just as charming on your little adventure. Enjoy!
Yeah…good luck Slim.
I trust that he’s a nice guy but I would have thought cooking him a meal at home would have been the better plan.
Could get a little messy and embarassing if you suddenly decide to rope, keep and hog tie him in front of the other diners with little kiddies present.
You know, the whole rope burns, branding, screaming and flying glass thingies.
“So long as regulators don’t force lenders to write down the value of their condo loans, they won’t, said Alexander Goldfarb, an analyst at Sandler O’Neill & Partners LP in New York. ‘Here’s the challenge,’ Goldfarb said in an interview. ‘At the peak, a for-sale condo in New York cost, let’s say $1,000 a square foot to build. To make it work as a rental — conceptually you need a pretty big haircut.’”
Doesn’t a failure by regulators to enforce time-honored accounting requirements for lenders to write down the value of loans tend to foster and perpetuate distrust in the banking system?
Doesn’t that amount roughly equate to $10k/mo rent for a 1000sf unit?
“conceptually”
What’s that supposed to mean? As opposed to “actually”? I think this guy might be trying to trick us a little.
He sounds like he had a long weekend with hallucinogenics.
“Goldfarb said in an interview. ‘At the peak, a for-sale condo in New York cost, let’s say $1,000 a square foot to build. To make it work as a rental — conceptually you need a pretty big haircut.’”
What a concept!! If only builders and developers would have thought about this before driving the price of land and buildings through the fricking roof. None of this crap ever penciled out.
“About 8,700 new condos sit empty in Manhattan, with 75 percent not even listed for sale yet, said appraiser Miller Samuel Inc. Priced at levels the market no longer supports, they’re selling so slowly it would take as long as seven years to find buyers for them all, said Jonathan Miller, president of Miller Samuel.”
It sounds like Manhattan is turning into down town San Diego!
Are prices moving down in Gas Lamp yet? I would assume if prices of nice units with views fell below 200k, it could be a vibrant area.
“…it could be a vibrant area.”
You mean like the vibrant part of Galveston discussed in yesterday’s bits bucket, where the loft owner thought it unfair that the noisy cantina below his loft played music at a volume that kept him up at night?
Yeah — I could see that…
I thought the cantina was across the street? I kind of felt sorry for the guy.
I currently live downtown and love it. I am a night owl and like to eat and shop at 2:00 am. I didn’t expect it to be dead at 10:00 pm or that I could, or should be able to, exchange existing zoning because I am so special.
At 2:00 am I have about an hour and 45 minutes more of sleep. then I wake up to do a two mile swim, then eat breakfast, surf the net, and get to work.
For years I thought I would be dead long ago if I was out at night clubs to the wee hours of the morning in some large city.
Not quite: remember, 8,700 housing units is just a drop in the bucket for Manhattan. That being the case, however, it’ll be interesting to see just how long it takes some of the more ludicrous developments to sell out.
What is a “monthly”? Is that the monthly payment, or the HOA fee? They’re selling 2-bedroom condos for $500k, and advertising the “monthly” as $330. I guess that has to be the HOA payment. How can a tiny apartment possibly cost that much?
Plus, for the next five buyers:
* Custom California Closets, or
* One Year Free Parking
Even though I live in California, I have no idea what a “California Closet” is. But notice that “one year free parking” means that after a year, you have to pay extra for that. So these people are paying Palo Alto prices per square foot, and have to pay for parking and “monthlies,” and apparently in such an undesirable location that nowhere on the web site is the property address listed. Just “steps to the A & 1 trains.”
I will admit that the 2-bedroom units, at over 1000 square feet, are a lot bigger than most Manhattan apartments I’ve ever been in.
Yeah, I guess 1,000 sq ft isn’t really “tiny” for an apartment. It’s just regular, really. When I lived in a 1-bedroom apt in college, it was 700 sq ft. I started off paying $475/mo in rent, then after a couple years my rent went up to $500/mo. I lived there 7 years, from 1996 to 2003. This was in San Diego.
And I guess the closet was “Californian”.
Free parking.
I gave up on ever buying in San Diego and rented in a newer building next to Petco park. On the weekends when there aren’t ball games I walk around J street and K street, totally empty. Just empty street level retail, empty offices, my favorite is a place that has a sign on the sidewalk that says “Daily Foreclosure List” I have some errie pics of San Diego East Village I would love to post for you guys.
Don’t you worry though, even though its a ghost town down here, prices aren’t falling. San Diego is total madness. Up 14% year over year, multiple offers on far out junk, I said forget it. I’ll rent for awhile and move to Boise and pay cash for a place and leave this maddness behind.
“Buyers who waited until after the tax-credit deadline might gain from these reductions. Sellers who held out for higher prices while the tax credits were in place are much more willing to negotiate now or lower their prices. ‘We are seeing hundreds of 5 percent to 20 percent price reductions,’ Herling said. ‘The buyers who waited until now may get the best deals of all.’”
That’s why I said all along that taking the $8K stimulus credit as incentive to buy anywhere outside of Detroit was risking a full loss of the credit at the moment of purchase — rather like the new car buyer whose shiny new automobile enters ‘used car’ status the moment it is driven off the dealer’s lot.
For instance, a five percent ‘price reduction’ on comparables would suffice to wipe out $8K worth of value on any home with a credit-inflated sticker price anywhere north of $8K/5% = $160,000. A 20 percent price reduction would kill off more than $8K worth of value on any home selling for above $40,000.
I suspect that one of my longtime clients falls into the “hoping for a tax credit-driven buyer, but didn’t find one” category.
The house that she and her husband were trying to sell since late last year doesn’t look like it’s changed hands. This despite the “sale pending” sign that was hangin’ out in the front yard back in April.
Our county assessor’s online records still have the place listed in my client’s husband’s name. These days, the assessor’s office is pretty prompt about updating the ownership records.
The 8K credit was definitely a force multiplier, IMO. Not only was the 8K immediately baked into the price, but it also was the down payment or most of the down payment for lots of folks who would otherwise not be able to afford a house in the lower range, which no doubt affected houses in trade-up range as well. Gee, didn’t we already learn how no skin in the game turned out?
How exactly was this $8k tax credit used as a down payment? Can somebody please walk me through that process? Lovely Polly?
“The four-year price free fall pushed about 25 percent of U.S. houses ‘under water,’ meaning that more money is owed on them than they are worth.”
The journalist got that one bass-ackwards. It was crazy loans made before the bubble burst that pushed prices way above fundamental value. Now that prices are reverting to levels in line with local incomes and rents, it just looks like a ‘free fall’ is pushing them ‘under water,’ when they really were effectively under water already when absurd sums of money were loaned out years ago to fund their purchases. Of course, nobody except a few bloggers and a motley assortment of other gadflies called attention to the problem back when it was created.
PB,
Wow, so true. Your fate was sealed the very moment you SIGNED the damned closing doc’s! What happened was -bound- to happen as it was only a matter of time before that folly ( read fraud ) was exposed.
And how can any reversion to the mean can described as a “free fall” is beyoned me? Kind of like describing the end of a week-long bender as a “free fall” into sobriety?
Well, it does feel like you got smacked into pavement at terminal velocity when you wake up that monday morning after A) binge drinking all weekend or B) spending the weekend watching comparable houses not sell at 40% off what you paid.
So there’s SOME kind of free fall involved. But it’s the person who drank the spiked kool-aide that’s doing the falling.
sfbb,
LOL, yeah believe it or not we actually have an Oregon-based microbrew called “Terminal Velocity” ( but how could you have known? )
Bad enough when you buy a six-pack but when you got a 30-Party Pack ( for a Party Of One ) how can it not end badly? The hangover assured when you popped the first top!
I spent the weekend at a wedding in Napa Valley, CA. I made sure I didn’t ‘indulge’ like I would have in my twenties. It’s a good thing, too, because even though I don’t feel like I hit pavement at terminal velocity, I definitely got roughed up by a few bricks upside the head.
I shudder at the thought of drinking a beer named Terminal Velocity. I suspect they push the edges of reasonable alcohol content per beer.
The hangover assured when you popped the first top!
That’s an excellent description of budget-beers like MIlwaukee’s Best
sfbb,
What could be nicer than a wedding up there? It’s practically an industry unto itself in that area.
lavi d,
Funny you’d say that? When we visited Hornbrook, CA the local store only had a handful of selections. I settled on Milwaukee’s “Beast”. ( I’ve been trying to get rid of them ever since! ) The last of it went after our gd’s b’day party. Rough stuff. The wife and I were kidding calling it “Hornbrook’s Best”!
“Not only will unemployment and rate resets drive foreclosures, but the panel said more people may decide that strategic defaults are ‘hip.’”
Financial savvy is the new black.
“Now that the tax credit is over, we are seeing record price reductions’ by sellers, Herling said. ‘These price reductions are three to four times more than the tax credit.”
No one could of seen that coming. I never understood the rush to overpay. Who was that Lender that used that has that sarcastic motto “people are smart”? It is intriguingly creepy and true.
“People are smart” was a slogan of Ditec, which was part of GMAC, which was financial arm of GM, which ended up being bailed out by U.S. taxpayers.
Lol. You just can’t make this stuff up.
“People are smart…. unless they bought stock in us.”
“People are smart.” Such a self-congratulatory phrase that played right into the hands of the HELOC candle shop-based economy.
“No one could of seen that coming.”
Another pat on the back for the HBB! Its been said here many times that the expiration of the tax credit would reduce prices by $40,000, once leverage was factored in.
For me, the decline isn’t a surprise, but I am surprised at how quickly it’s occurring following expiration of the tax credit.
It suggests to me there was already a decline in buying activity or buyer interest even before the tax credit expired. Those sellers that couldn’t find a buyer then finally realized they were going to have to relent and lower their asking price.
“…but I am surprised at how quickly it’s occurring following expiration of the tax credit.”
I’ve posted on this a few times already, but the effect of $8K could be greatly magnified by leverage. For instance, a household that was having a hard time coming up with a downpayment might be able to work out some kind of creative financing with the availability of a future $8K credit to help. If they financed with a 3 percent FHA loan, an extra $8K on the margin might effectively result in an addition to the home buyer’s purchase budget of $8K/3% = $266,667. Conversely, taking away the credit would tend to reduce purchase budgets for cash-constrained households by a similarly large amount. And then there is the drop-off effect in purchase demand due to people who accelerated purchases to qualify for the credit before it expired. So not only am I not surprised by how quickly the effect of the tax credit expiration was felt, but I fully expected it.
BTW, so far as I am aware, the CA state-funded $10K home buyer credit is still in force. Even though the state is too broke to pay its public school teachers, it some how has enough spare change to help first time home buyers catch themselves falling knives.
P.S. The sudden withdrawal of a subsidy results in what is known as a “negative demand shock.” A sudden drop in the equilibrium price is the predicted effect. Since the housing market is decentralized (there are no indexes of housing prices posted on a minute-to-minute basis so you can see if Fat Finger Boy is wreaking havoc on the current market value of housing), price discovery can take a long time, and is typified by many clueless sellers who price their homes at levels where they will never find a buyer, coupled with a few savvy or desperate sellers who are willing to face accusation of “screwing up the comps” by lowering their asking prices to levels at or below current market value which will attract buyers.
“typified by many clueless sellers who price their homes at levels where they will never find a buyer”
I don’t think sellers are clueless at all. They know full well what they’re asking is grossly over-priced in many, many instances.
Given early retirement is every American’s birthright and single-minded obsession.., they’ve simply gone down their personal bal. sheet and figured X is what they need to tide them over until Y and they are -both- getting full SS etc.
Younger couples are carrying out the same math only, as applied to being able to walk away debt free! For everything that’s happened, my house is still special, house = retirement and I’m not giving it away!
For everything that’s happened, my house is still special, house = retirement and I’m not giving it away!
You’ve got that right. We just made an offer on a place built in 70s that needed about 100K in renovations to bring it up to date. Well, the lady (who’s moving into a retirement home) wasn’t going to “give it away” and didn’t even respond to our offer, which admittedly was 150K below wishing price (and probably about 80-90K below what some fool will actually pay her for it if this dead cat bounce holds out.)
“built in the 70s”
“needed about 100K in renovations”
“didn’t even respond to our offer”
Sounds about right! Correct, macro-economics/jobless recovery be damned.., I -need- X to fill the hole in my otherwise thought-free ret. planning hence.., my house is ‘worth’ X!
Sure, they’ve ‘heard’ about this housing bubble thing and all, but it has no bearing on ‘them’. At least in this regard, denial is alive and well. The best part is that we get to deal w/ all of their anxiety as expressed on SO many different levels, but they’re still holding the line on prices!
Cuzz’ to not do so would lead to CHAOS! ( Uh… hello? )
I’m enjoying the fall in the upper and middle end houses that’s happening. Last spring a young couple I was representing made a low offer ($399K) on a house that was listed initially at $449K and then lowered to $425K. After a couple of counteroffers, the sellers rejected our highest offer of $407K and took the house off the market. They re-listed it this spring at $415K, then lowered it to $400K. It went pending last week. It will be interesting to see the final sales price.
I remember going to an open house sometime last year. It was a new build, and the agent appeared to be related to the builder. We were getting the hard sell until I pointed out that the house was priced $50,000 higher than what another brand new home (bigger and with higher end finishes) one block away sold for several months prior. Well, we got the cold shoulder after that.
Fast forward to now, the asking price on that house is now $100,000 less that the asking price at the time DH and I viewed it ($50K under the “comp” I mentioned), and is under contract.
Plenty of potential sellers (because really at this point they’re just listers) are engaging the market on a long stern chase. Like the pot of gold at the end of the rainbow, they’re going to spend a long time looking for it.
I remember going to open houses last month. Every Realtor I encountered mentioned that tax credit was expiring and interest rates were set to rise. When I responded, I guess you are right and those of us with cash should wait for all that to happen before we go under contract, looked at me as if I was insane. Those 10% that continued to speak to me got the “leverage and buyers always have a max net they will pay thus any excess always goes to the seller” speech, but none of them ever really understood what I was talking about. It amazes me that it is called a profession.
“leverage and buyers always have a max net they will pay thus any excess always goes to the seller”
Please explain to us.
With respect to leverage, it just means that since the tax credit was allowed to be credited against the down payment, it gave ppl the ability to qualify for more house. Thus, the market distortion was greater than 8k. With respect to the “max net”, rational buyers set a maximum amount of mortgage they will enter into to buy a house, this can also be viewed as the max monthly nut. Assuming a competitive market and a rational seller who knows how to negotiate, the seller should be able to capture any outside monies coming in to be reflected in an increased purchase price, despite the fact that such money outside monies are in fact being paid to the buyer. With respect to interest rates, the more you are putting down, the more you are better off in a higher interest rate environment because it limits competition from over-leveraged morons.
Well yes, there are generally three constraints on house buyers: down payment, monthly payment and availability of credit. They’re not completely independent contstraints, especially during the bubble when people with high FICOs didn’t really need downpayments, and people with bad credit could simply pay higher interest rates.
Well said Jim.
A smart agent would have tried to get you and your friends as clients from the moment you opened your mouth, Natalie. Their loss.
Where area do you work in? I would recommend you.
I have to say you deserve a lot of credit for not getting angry at all the anti Realtor statements made on this board.
I believe that REhobbyist is a doctor. And, as much as I fear/loathe going to doctors, I’d make an exception for REhobbyist.
” It amazes me that it is called a profession.”
Yeah…me to but then it’s a very old profession…wait, I always get those two all mixed up.
I still sense that the National Association of Realtors is going to feverishly lobby for homebuyer tax credits in time for the 2011 Spring selling season.
I also sense that this year’s election campaigns are going to be especially ugly.
Okay MSM, we need interviews with “incentive buyers” this summer and fall. Go out there and get ‘em!
The Inquirer article misses a crucial point; since many were putting almost nothing down, they may already owe more than the house is worth. And we’ve seen what people do once they become significantly underwater.
Yes, Ben. And the idiots in Congress couldn’t even raise the down payment rate to 5%. Everybody makes decisions based on what will help them immediately, instead of for the long run.
The 5% down payment wasn’t the whole story- in its own way the amendment was a giveaway to Wall Street:
The Senate today rejected a proposal by Sen. Bob Corker, R-Tenn., to impose a minimum 5% down payment for virtually all home mortgages. The amendment to the broader financial regulatory overhaul bill, which failed 42-57, would have required income verification and an assessment of borrowers’ ability to repay as well.
Corker’s proposal also would have stripped out a provision that required financial firms securitizing loans to keep a 5% portfolio risk.
‘the idiots in Congress couldn’t even raise the down payment rate to 5%’
This is setting up all sorts of problems down the road. Right now, the federal govt is the housing loan market, and you hear talk about reestablishing private lending. But as long as the govt insists on keeping downpayments low, these lenders are not going to finance these purchases. More foreclosures from current low down loans are almost a certainty, which should drive prices even lower (and put more banks into trouble). Unintended consequences indeed.
“And the idiots in Congress couldn’t even raise the down payment rate to 5%.”
I believe the new financial reform package making its way through Congress prohibits 0% down. So Congress has essentially taken the position that 5% is too much and 0% is too little. That range is the sweet spot going forward, which means very little has changed.
Why can’t we have a bill that requires both the 5% down payment, -and- that financial firms keep a ‘5% portfolio risk’? Good for the goose, good for the gander, eh? Let’s get everyone to put some ’skin’ in the game.
Might be an easier bill to pass, assuming that was actually the intention, which I doubt. Just another talking point.
“More foreclosures from current low down loans are almost a certainty, which should drive prices even lower (and put more banks into trouble). Unintended consequences indeed.”
More claims that ‘no one could have seen it coming’ from Wall Street and K Street when foreclosures on govt-sponsored-and-guaranteed mortgages turn out ‘higher than expected,’ indeed!
“Okay MSM, we need interviews with “incentive buyers” this summer and fall. Go out there and get ‘em!”
What we really need is more MSM Horror and Sob stories of poor Jack n’ Jill Equity Strippers Extrodinaire , under big time deficiency judgements, their latest debt dodging adventures and their newly discovered enterprise in Mom’s basement, Underground Identity Factory, Inc.
“Everybody got their stun guns and chains ready? …Auh…Good”
“Smithers, Release the Hounds !”
“I never understood the rush to overpay. ”
Just shows you how *impossible* people find it to save a pathetic little down payment on their own. When you live week to week, $8,000 seems like sooo much money. Imagine how much $220k or whatever the going price must seem to them? That was some strong Koolaid.
That’s the thing, 220k and 450k are so distant that they look exactly the same from that perspective, the only things that matter are the monthly nut, the downpayment, and whether the bank will give ‘em financing. The problem was that during the bubble, the banks were all about writing suicide loans ’cause they figured that they’d just sell the loans to those making bond from ‘em anyway.
Prospective CA home buyers are advised to wait until the dust settles on the expiration of their state home buyer tax credit before getting into the market.
WSJ Blogs
Developments
Real estate news and analysis from The Wall Street Journal
* Rapper Chamillionaire Ridin’ Into Foreclosure on Houston Mansion
* Real Estate News: Detroit’s Black Flight, ‘Real Housewife’ Foreclosure in N.J.
* June 4, 2010, 6:40 PM ET
May Home-Buying Activity Looks Worse Than Expected
By James R. Hagerty and Nick Timiraos
How will housing sales fare without the benefit of big tax breaks for home buyers? The early indications are that sales are down very sharply in recent weeks, worse than most brokers and analysts expected.
Of course, economists and real estate analysts expected home sales to slow after the tax credit, of as much as $8,000, expired at the end of April. But early data from real estate brokers indicate that the sales declined as much as 25% to 30 from the year-earlier levels in some markets.
Without the tax bait, “consumers just don’t have that same sense they have to move quickly,” said Patrick Lashinsky, CEO of ZipRealty Inc., a big brokerage firm.
The May slump is ominous, but it’s too early to tell whether it portends another serious downward lurch in a market that has generally been leveling off over the past year.
…
California’s state tax credit of as much as $10,000, which ends Dec. 31, has helped sustain sales there. Contracts signed in May in the Los Angeles region were up 16% from a year earlier (but down 9% from April), while San Diego was down 3% from year-ago levels. San Francisco’s East Bay was up 2%, while the Napa Valley region posted a 15% gain from one year ago (but a 14% month-over-month decline).
In Florida’s Miami-Dade County, home-sale contracts signed in May were up nearly 5% from a year earlier, according to EWM Realtors. Many buyers in Miami are foreigners attracted by huge price cuts there over the past couple of years, said Patrick O’Connell, a senior vice president at EWM.
It’s the dirty little secret that the $10,000 Ca Home Buyer’s Tax Credit is a Non-Refundable (no check) credit, that is worth no more than $1,000- to most Ca State Tax payers over 3 years. It’s such fraud and a scam, but the sheeples bite.
Seriously? That flat sucks. More REIC-manipulation.
“That flat sucks.”
No — it’s really a great thing. Those who go for the sucker bait will help keep the housing market afloat for the near term, and will help the state’s budget situation by paying taxes on high assessments which their $10K-stimulated purchases helped inflate. And CA is broke, so it is quite prudent to require the $10K credit to be repaid down the road. And the program is voluntary, so anyone who goes for it will be willingly accepting the Joshua Tree suppository they will get to enjoy when the credit has to be repaid and the credit-induced bounce in home prices has fizzled.
“People are smart” - should be the name of a rock song parody for the housing bubble.
“Adding to the problem, Hunter points to something called a negatively amortizing loan. Florida is home to $97.5 billion worth of those option adjustable rate mortgages, Hunter said.”
OMG! Does anyone have the comparable figure for California? I am guessing it must be north of $100 billion worth of negatively amortizing option ARMs?
I don’t have a figure, but I’ve often read than roughly 50% of the Option ARM mortgages are (were) in CA. If that number is true, it’s probably safe to say that CA’s exposure is at least 2-3 times greater than FL.
Certainly the AMOUNTS in CA are probably bigger, even if the number of loans isn’t.
The greatest number of ‘Option Arms’ were in California.Pismoclam made a lot of money, buying PUTs on WaMu and Downey Savings. Will Wells Fargo provide a similar opportunity? Probably not as the Manchurian president and turbo tax timmy have said that WFC is too big to fail.
“Douglas Duncan, vice president and chief economist for Fannie Mae, raised a provocative idea this morning at a meeting of real estate journalists in Austin: Some of the misconceived housing developments built during the boom years might have to be torn down because they don’t make financial sense. Duncan agreed with Stan Humphries, chief economist at Zillow, who warned that a ‘tremendous shadow inventory’ of homes is poised to come on the market.”
Since American taxpayers are pretty much getting forced against their will or even awareness to help prop up housing prices at above-equilibrium levels that stimulate a massive amount of overbuilding, shouldn’t they have a say in whether housing developments should get summarily ‘torn down’ versus, say, sold to private investors like Ben Jones who might be able to figure out how to market them to end users at an affordable price? After all, Fannie Mae’s mission is to create affordable housing; bulldozing homes tends to drive prices to less affordable levels, thwarting Fannie Mae’s success to achieve their objective.
Few things would make me happier than firing up the bulldozer. In addition to being grossly inappropriate for future that will be defined by expensive energy and less shopping by an order of magnitude, almost nothing built during the bubble was beautiful or inspiring or helped instill a sense of community or culture. We got oversized, garish, and ultimately useless monuments to a people who believe themeselves to be richer, smarter, and more powerful and blessed than they really are. And it wasn’t just Americans; it happened, or is happening, all over the developed world and in China too.
Ghost towns historically haven’t been actively “torn down” as a matter of policy. The just sit there and quietly rot away. Often squatters move in and make do with informal living arrangements. IIUC the government hasn’t hassled such folks in the past so long as they don’t cause problems (e.g. start a forest fire).
Spanish Town was once a mining suburb of New Almaden south of San Jose CA. Pretty much nothing much is left there, as is also true for the town of Drawbridge north of San Jose. New Almaden is now a cutesy “historic” preserved district.
Idaho City was once the biggest city in the PNW, larger than Portland or Seattle. In 1864 it had a population of 7,000 but it’s now down to only 450. Teardowns weren’t required since Idaho City burned down 4 times: in 1865, 1867, 1868, and 1871.
Silver City ID is still a living ghost town in that a handful of people live there year around to maintain the century-old hotel - still in use during the summer for adventuresome people.
DennisN,
Interesting. Have you ever been to ghosttowns dot com? What dedication! Extensive Nevada “collection”. I’d like to visit each and every one of them in time. Great photo-essays.
According to the author, technically Hawthorne, NV qualifies. With a current Pop. of around 2,000 he claims it is a mere shell of it’s former self. Can’t wait to see how many NEW ones The Boom created.., and IS Bend a potential ghost town?
IS Bend a potential ghost town ??
Oh my gosh I would not think so…We may have a bad economy but the beauty of that area has remained unchanged…It just got to bubbly…As the prices adjust people will continue to go there…
scdave,
Oh I suppose I intended that mostly in jest, but let’s not sugar coat ( they’ve got issues there ) I’m sure former residents of formerly “bubbly” areas worked off the basic assumption it was just a speed bump too?
There’s been some real damage there and it just strikes me that once you’ve gone down that path.., it’s an economic -gutting-! What lender in their right mind would extend credit to… ‘another’ micro-brewery? Another B & B?
Being surrounded by natural “beauty” can only overcome so much.
DinOr;
Yeah I understand…It has had massive growth for basically a destination location.. Developers carving up every piece of land they could find because if we build it they will come…In that regard they did a lot of damage to a beautiful area…I blame the city planners and councils as much as anyone…Money was the driver…
scdave,
Even though it’s but a short distance and I’ve followed the BendHBB for years, it doesn’t qualify me as an expert. What went on there defies description. When they came out w/ a LOTR’s themed development, do you need any further proof they collectively lost it?
Looking forward I wonder if I could buy my very ‘own’ subdivision and become it’s sole occupant? That way our grandkids wouldn’t have to wait their turn to play on the swings etc. Dirt bikes when they get older.
“Country Living In The City” is after all what the local REIC Chapter promised?
Here’s a link to the 1863 Idaho Hotel in Silver City for you adventuresome types.
http://www.historicsilvercityidaho.com/idahohotel.html
Is there any way the future ghost towns in Riverside county could be turned into a similar tourist attraction?
Might as well tear down anything built with Chinese drywall.
Don’t they tear themselves down?
They tear down the occupants’ lung tissue.
Stop being such wimps! I eat Chinese-made drywall for breakfast!
To quote Templeton the rat: “Crun-chy”
Several years ago, I stated that at the end of this bubble, it would make economic sense to tear down excess housing. Everybody thought I was nuts.
As an aside, historical pics in google maps can show the rapid construction during the bubble. The proportions are truly staggering.
Anyways, housing is like food. You simply can’t hold on to it indefinitely, it will spoil.
And sadly, yesterday I read about a long-term investor who is planning on making $$$ thru long-term equity appreciation.
*sigh*
The weird thing is that it makes sense to pull down the most recent construction. The houses are too big for the tiny lots, materials and workmanship are shoddy. In Sacramento, old houses are pretty solid by contrast.
Wasn’t it Ben who told us about unsold developments that were torn down after the Texas real estate boom of the 1980s? That was along I-35, wasn’t it?
SMF,
Well you never heard ‘me’ say you were nuts! In the end, it was the only logical conclusion I could seem to draw? If we can’t get the banks to own up to the fact there IS a shadow inventory ( how the hell you think we’re going to get them to take CARE of it! )
Well, maybe not everybody was against me!
Google Earth has been my friend lately. In Sacramento, there is a good range of maps showing how quickly most new developments went up. Most were up in a mere four years!
How, with all that information available, someone can’t think that teardowns will happen is beyond me.
SMF,
I think Ben had some video links from a guy doing teardown coverage in the IE. Seeing that loader bucket rip into homes was as terrifying as it was entertaining!
But they looked perfectly ridiculous, out there in the middle of NOwhere as he panned the camcorder around. Hello… hello… hello……
Now, why would a property owner choose to demolish the property rather than sell it? A sale would minimize the owner’s losses, whereas a tear-down would maximize them.
The only thing I can see happening is partially-built edifices that, after sitting in the rain a sun for a couple years, are rotting due to fungus and insects. Even in that case, however, the cost of tearing down the old building is an expense that might as well be forgone.
Many factors could go into determining this.
The person responsible for demolition is probably not the original owner. After any building has been abandoned for a few years, remodeling costs would skyrocket. Remodels are easier when done from studs up.
Location as well plays a good part. I know there are several locations where I wouldn’t accept any type of building at any price, even free.
SMF,
True, and as frustrating as this all is ( for the right price in the right place you’d be -surprised- what I could live with! )
Of course when Mel Gibson’s character or whomever lives in a rickety shack on the Cali beach it lends “grit” and a certain excentricity to the character. When you or I do it, we’re just cheap azz loosers.
Ah, the beach…
…had a chance to witness what salt air does to a house after a few years…
…can’t even really keep mirrors in the house because of this.
Seen too many times people who build in front of the beach who don’t take account of this simple fact.
Would love to see what salt air does to electronics, specially those beautiful big-screen TVs located near that window facing the ocean.
BTW, does anyone have information on whether Douglas Duncan ever purchase a home? I recall from a few years back when he worked at the MBA that he was planning to ride out the bubble as a renter; would be curious if he is still renting or not?
We’re going to try and interview Mr Duncan and ask this question if possible.
You the man, Ben!
BTW, sorry to say I cannot make the DC meetup; too many other irons in the fire (and not enough cash in the bank) this summer.
That’s OK, PB, we’ve all got our commitments. An HBB trip out east is way overdue. But you guys can pitch in with the push for the petition and keeping the discussion alive while I’m on the road. We are planning more interviews and I’ll be posting about the housng bubble as I see it, mobile, across the country.
“Who would pay for tear-downs? What would happen to people who’ve hung on to their homes despite the foreclosures all around them? All unanswered questions. The idea is being discussed by economists, but Duncan said he doesn’t know of any policymakers who are considering it. ‘It’s un-American to think about tearing down housing,’ he said. ‘But we have a long history of ghost towns.’”
So let me get this straight - You tore down the 20 year old 2,000 square foot house that I WOULD have bought to replace it with a 5,000 square foot house that is now vacant……and now your gonna tear THAT down and replace it with nothing just to keep a low inventory/high prices on the market? Freaking rediculous!
Here in the DC Metro area I’m having a hard time just finding a normal sized house. Either it’s 1,100 SF or 4,000 SF - barely anything in the middle.
Well, if they changed the zoning the 4,000 square-foot house coulc become two 2,000 square-foot houses.
“So let me get this straight - You tore down the 20 year old 2,000 square foot house that I WOULD have bought to replace it with a 5,000 square foot house that is now vacant……and now your gonna tear THAT down and replace it with nothing just to keep a low inventory/high prices on the market?”
Broken window economics at its worst…
Yep.. Churn, churn, churn - keep creating problems and then “solving” them with new problems to make money off the transactions.
“So let me get this straight - You tore down the 20 year old 2,000 square foot house that I WOULD have bought to replace it with a 5,000 square foot house that is now vacant……and now your gonna tear THAT down and replace it with nothing just to keep a low inventory/high prices on the market? Freaking rediculous”
Of course it is rediculous but you CAN’T expect us to allow them to just fall into the hands of those hords of common American Socialist renters…could you ?
Depends on where you’re talking about. In some areas houses are just too far from… anything. Houses in a development that is a 2-3 hour one-way commute to any real jobs could easily be a tear-down. There aren’t enough locals to actually occupy them. Google “drive until you qualify” to see what that phenomena is all about.
“Some of the misconceived housing developments built during the boom years might have to be torn down because they don’t make financial sense.”
There is a readily-available solution for these problems that don’t make financial sense to closet communists: Let the free market decide what these homes are worth. There is no need to tear them down unless nobody is willing to purchase and use them (including at a price of $0 if necessary). Why should American tax payers be forced to pay fees to bulldoze the remnants of some private developer’s financial folly?
And the taxpayers will be on the hook for the solution/teardowns that will benefit the banking industry.
Do you see a pattern here? Solutions like the bulldozer alternative are promoted in the MSM as helpful for fixing the problems in the housing market, when in fact they represent a stealth wealth transfer from the U.S. tax base into REIC coffers.
“For Lee County, 830 foreclosures for the month of May is good news. ‘No, this is really good,’ said Marc Joseph, of Marc Joseph Realty.”
I guess all good news is relative? 830 foreclosures in one county over one month sounds pretty high in absolute terms.
“‘Now that the tax credit is over, we are seeing record price reductions’ by sellers, Herling said. ‘These price reductions are three to four times more than the tax credit’ - $8,000 for qualified first-time buyers; $6,500 maximum for some repeat buyers.”
That this would happen was obvious to anyone with a basic understanding of math. Therefore, anyone who bought a house to get the tax credit should seriously think about canceling the deal before closing. Let me think, is $24-32,000 greater than $8,000?
Maybe these people voluntarily made a concious decision to use their own funds to bailout banks and speculators.
That’s just hysterical.
The tax credit might have brought sellers out of the woodwork, sellers who are now desperate as they feel they have missed the boat.
The unsold condos are a drop in the bucket compared with the demand for housing in New York City. The problem is what article idenifies — that demand drops from massive to near zero at the price required for developers and lenders to get their money back. They could get high prices, or high rents. But it is a long way down to merely high in New York.
And of course the idea of “merely high” prices is anathema to developers, lenders, and current landlords.
WT:
I waiting for Astoria/Sunnyside 1 Bedrooms to be back at $99K (in 1999) which would finally be affordable.
Jeebus Christi! This bubble has legs…
The Fannie Mae National Housing Survey - “Home is Safest Investment”
By A. Singh
A survey was conducted by Fannie Mae during the months Dec 2009 - Jan 2010 and 3,451 telephone interviews were conducted of Americans in various age groups i.e. 18 years and above. 887 of the respondents were homeowners, 1,100 were mortgage buyers, 908 were renters and 338 were underwater borrowers. The survey indicated that home ownership is still considered to be a “safest” investment in U.S. The survey highlighted household finances, housing finance system, confidence in homes as investments and overall confidence in economy.
The survey found that “despite the previous year’s downturn, U.S. investors still consider homeownership as a good financial investment option. “The president and CEO of Fannie Mae, Mike Williams said, “Many Americans believe homeownership is more than just financial investment.”
The survey highlights Americans renters and homeowners are more cautious buyers than they were before downturn and Americans paying fixed rate mortgages are more satisfied than other mortgage types because the payment is predictable. The VP and Chief Economist at Fannie Mae, Doug Duncan said “Buyers still want to own houses but there is an increased cautiousness in every aspect of home buying and renting.”
The consumers believed that owning a house is now tough as compared to the previous years, and the condition may get further difficult for future buyers. The Vice President of Fannie Mae, Doug Duncan said “Consumers are rebalancing their attitude on mortgages and are focusing on long term effect and risks of homeownership.” He said, “Sustainable housing is good for economy, housing market and also for the families owning the houses.”
There are many illustrations in the survey about the attitude of buyers towards housing and homeownership, renting, borrowing, mortgage, and the impact of being the underwater borrower. The survey also compares the findings to the 2003 study on housing.
Key points of the survey
1. 80% believed homeownership was important for economy.
2. 31% felt economy is on track and 44% believed their personal finances will improve in the coming year. 63% of delinquent borrowers believed their financial position will be strong in the next year.
3. About 64% of the respondents felt “this was the good time to buy homes” and 31% believed “it is a very good time to buy a house.” The number of respondents matches the number in 2003 when housing market was booming.
4. About 73% believed that housing prices will be up or same in the next year. About 37 % believed the prices will increase.
…
4. About 73% believed that housing prices will be up or same in the next year. About 37 % believed the prices will increase.
…
I’ve had some real fun with such people.
I started out gently by citing things like historic metrics of incomes and rents as they relate to median house prices and sale prices of investment properties, and noting that very few housing markets are in line with those metrics. Then I move in for the kill by asking about the current jobless recovery and how that bodes for increasing house prices.
Talking to people about the current house market is like talking about cancer survival rates, with someone who has terminal cancer.
Sometimes it’s just not worth being “right”. So you try to be supportive as you can, and give them hope.
You are spot on! The denial phase of the housing bubble stages of grief is in full swing for most of America. Beware the anger stage which lies ahead…
“About 73% believed that housing prices will be up or same in the next year. About 37 % believed the prices will increase”
“If you believe it, it is not a lie” George Constanza
In addition to finding the “back on the market” house and the “looks like the client’s husband couldn’t sell it” house, I found another gem during yesterday’s bike ride.
It was the “unintentional open house” foreclosure. This gem was a duplex that had been bought by a real estate agent/investor who has since left town. To take a job at a brewery.
Any-hoo, his former Tucson residence is missing the locks on the front security door. Which means that anyone and everyone can just walk right in, sit right down, and make themselves at home. The front door was also left ajar. And the front gate is unlocked.
Oh, the NOTS is still on the front security door. Sale was scheduled for this past May 25, and something tells me that no one was willing to pay the $375k that was (I think) given as the reserve price.
You should rent it out to someone, Slim.
Hmmmm, that’s an idea.
After all, it’s on one of the main bike routes over to the University of Arizona. (That would be the Third Street Bikeway.) It’s also in an area that’s close to public transportation and shopping at such urban wonders as Walgreens and Whole Foods (aka Whole Paycheck).
I’ll just have to look more landlord-like when I go over there to, ahem, take possession. (I was dressed as a bicyclist yesterday.)
It sounds like it’s in a prime location to put a coin meter on the front door and a sign that says “pay toilet.”
Lee County courts still have more than 21,000 foreclosure cases in the system - waiting to be worked out.
…
Joseph says buyers looking for foreclosures should make a move now.
Yeah! Buy a foreclosure now before the 21,000 still in the pipeline force prices down even further…
We were right then and were roundly ignored then and now by the “no one who could see it coming” set.
I suspect that in a couple of years from now, once “they” start openly acknowledging the shadow inventory which “no one could have seen coming,” the fact that we jumped up and down and shouted about it off stage will once again be conveniently ignored.
That may be, but I’m going to DC to try and do something about it this month. I’ve sent out a press release, so readers can contact their local media and help drum up support. At any rate, I don’t think this thing is going to stay under the radar for much longer.
I don’t expect it to stay under the radar, either, but I do expect the usual CYA ‘no one could have seen it coming’ mantra with respect to the ’sudden appearance’ of shadow inventory.
Really? I remember a few interviews of regulatory agencies, conducted by this very blog, where the intervewies all said there are NO regulations that would penalize a lender from holding foreclosed assets on their books. Now, why would a guy make up a fake regulation, and then use that fake regulation as a reason to argue that what’s happening can’t happen? Why would a guy do that?
I have been comparing houses marked as “for sale” on Zillow to houses shown as being owned by major banks on county sites. By this method, it appears that maybe 20% of REOs are actually listed for sale. I feel sorry for anyone purchasing a foreclosure today, and thinking they’re gonna see appreciation over the next 10 years.
Yes, especially when you consider that some of those foreclosed houses are so trashed that it’ll take 10 years to fix ‘em up.
How code language makes it feel so much better IE:
Theatre of war = battlefield?
Short sale= feel better foreclosure?
eminent domain= Gov’t seized property?
shadow inventory= foreclosures not on market?