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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Maybe my idea of paying down $2000-3000 on everyone’s credit card is looking like a hail mary pass to get this economy stimulated from the bottom up this time.
Since, Nothing else is working, and even the spammers are not replying to my resume anymore.
Welcome to Obama-World. Businesses must drastically cut their number of employees due to increased taxes, charges, regulation, fees, etc. He stands for everything I despise: free-loading, racism, entitlements, rewarding bad behavior, partying and spending sprees with money taken from people struggling to survive, massive goverment, interference with the markets ignorant of the consequences (or in some cases immoral intent), etc.
You’ve got to be kidding. Read “This Time Is Different.”
Knowledgable people who are against Obama blame him for trying to do something about the economic disaster, because it’s hopeless, not for causing it.
You believe regulations hurt the economy? One of the biggest ones that increased our labor costs was put through by the first Republican President. He outlawed slavery.
Have you even read the financial reform legislation? It dramatically hinders the ability of banks to hedge risk and efficiently take advantage of changing market situations. In case you take the position, screw the banks, please note that all fees and charges are being passed down to the borrowers, chilling new American investment. Have you read the new definitions of interest and increased costs being placed into loan agreements recently, especially by Wells Fargo, Citi and BoA, which does just that expressly? This is true even in the 100 million plus range where the borrowers have bargaining power and are represented by competent counsel. Not all regulation is bad, but inefficient regulation targeted to please the angry masses who don’t understand finance is horrible.
Let’s just say I have reason to know all about the financial reform legislation.
And it didn’t go far enough.
I strongly suggest you not do business with Wells Fargo, Bank of America, etc. It is really very easy to find another bank.
Lots of good ammo there why the big banks have to go:
1) They banks dump their risk off on the unsuspecting.
2) They take advantage of changing market situations to the detriment of other investors.
3) They’re passing on fees and charges to the borrowers; can’t cut back on the bonuses after all.
4) They’re so powerfull that even large borrowers have to bend over.
Thanks for the ammo Sarah.
simply put…there is good regulation and there is bad regulation.
Comment by Sarah; Welcome to Obama-World ??
Sarah Palin is in the house….
Yes, everyone that hates Obama loves Bush and Palin. I assume that Bush’s “you are either with us or against us” viewpoint troubles you, but that you dont realize you are using the exact same type of logic. I judge Obama on his actions alone. You do realize there are more than two viewpoints on controversial subjects don’t you?
Who’s paying you?
“Who’s paying you?”
Retards are cheap.
and here come the lefties, circling the wagons here and attacking an individual rather than discussing the content…
Here comes the blog hypocrite…. accusing everyone of ducking and weaving as he ducks, weaves and runs out the door.
We’ve discussed the content as nauseum. Repeatedly. And we’re tired of it.
No, there is no tiredness when you are spouting opinions. You are just piling on. this is just someone who is frustrated. So are all of us.
The problem with the big banks I do think, is that they have given influence money to our elected officials. The guy in the White House is one of the largest recipeints. It just cannot end well.
“…and here come the lefties..”
And here comes Mr. Holierthanthou, with more name calling.
Paid troll. Businesses aren’t hiring because demand has collapsed.
Ultimately, off-shoring of jobs and on-shoring of cheap international labor has come home to roost.
I have said for years, who do these companies think is going to buy their products when no one has a decent job any more?
Bingo!!!!
It has nothing to do with regulations, and everything to do with Americans having decent, stable, well-paying jobs that enable them to go out and buy all the products at higher prices…which enable companies to higher/keep workers at decent wages, which enable the workers to go out and buy things, which enable the companies to keep paying their workers, which enables the workers to…
Respectfully, you are wrong. Demand and output is ever so slowly increasing at the manufacturing level.
But the number of jobs to fuel manufacturing today are less than the number needed in 2000 - when productive output was 30% less than today ! (cheaper machine tools, software, and lean manufacturing principals). - Oh, and a better ability to use them.
And only manufacturing’s higher paid jobs will feed a proper housing recovery.
Ben - you should repost your last years housing statement. I think you have finally found someone in authority (Bufalo Judge) who is believing you - as much as all of us.
With your CC debt paid down there is the demand right there….
I think people just might surprise you and buy Pants shoes underwear a suit for a job interview get the engine light fixed…..buy a laptop instead of blowing it all on Lap Dances
Why reward debtors? F * * K T H A T !
dj you have crossed over to the dark side. You have been banging that credit card for several years and want the rest of us to pay the bill for you. If we paid off the balance, you want to “spend” that credit limit on stuff. Please, put down the credit card.
Silly rabit, taxes are for consumers, not corporations.
“paying down $2000-3000 on everyone’s credit card “
I know people who have no credit card debt. I have no credit cards period. What you propose won’t do anything for our spending.
Happy:
Yup and did QE1 23456 do anything either? Or Tarp or any of the trillions OH spent?
NO …well I got none of it either… so maybe a little bottom up help is the Change we need that will kick start the economy….
If not …at least we tried and whats another $200 billion on the national debt anyway? What should we spend it on more survival food stamps?
———————————
The article notes that in 2007, a total of 26 million food stamp recipients were costing taxpayers $33 billion a year. Today, 44 million Americans – nearly 15 percent of our total population – is receiving food stamps, and the total cost has skyrocketed to $77 billion a year.
Anybody taking advantage of bank REOs or having success at the courthouse auctions? Curios to see where cap rates are assuming there is positive cash-flow.
Anybody taking advantage of bank REOs ??
There was a Sacramento Bee article just a week ago or so about several active flippers purchasing at the court house steps…One, was a home-builder believe it or not…He said that he had purchased and flipped over 60 houses so far and that their goal was to make 20% on the flip..
The trouble with a lot of the Tucson flips is that the fixup work is cosmetic. New kitchen cabinets and appliances, carpeting replaced, fresh interior and exterior paint, that sort of thing.
Unfortunately, in a lot of these places, what’s really needed are a re-wiring of the electrical system, re-plumbing, and, hey, while we’re at it, let’s stabilize the foundation and replace the roof and the mechanicals.
That really eats into a 20% profit margin. So the flippers stick to the superficial stuff.
“The trouble with a lot of the Tucson flips is that the fixup work is cosmetic.”
That’s the same crap that was going on with condo conversions in San Diego at the peak of the bubble. Worn-out apartments were getting cosmetic upgrades, then put back on the market for sale at 2-3 times their equivalent rent.
Exactly, Slim!
Which is why I really hate flippers.
Not to mention the fact that they often buy up the fixers that many of us would like to buy and fix up **the right way** for ourselves…to live in!!!
They buy them at higher prices because they know they are going to granitize them and sell them to some unsuspecting fool with 3.5% down, and who just LOVES a granite kitchen!
For people like ourselves, even though our repairs would be the more valuable ones, if we don’t granitize things, we can sell for the idiot premium, so our offer price has to be lower than the flipper’s offer price.
Most of the flippers around here appear to be buying REOs. The auctions are more of a formality for the banks, since banks are bidding the amount of the mortgage (a way to substantiate their loss), and of course, most foreclosures aren’t worth the amount of the mortgage.
I’ve no idea what the cap rates and cash flow looks like, but there are several former-REO houses in my area that were “fixed up” and the flippers have been trying to sell them without success.
^^^can’t sell for the idiot premium…^^^
Can anyone tell what the payment is on a 420k loan at 6%?
A little over $2,500 assuming 30 years and level P&i. That does not include insurance or PMI set asides. Adding 1.5% property tax would increase it to over $3,100.
$2518.11 if the term is 360 monthly payments
Kathy, if you want to play with the numbers, there are a lot of calculators on line. Here’s a simple one from Bankrate:
http://www.bankrate.com/calculators/mortgages/mortgage-calculator-tool.aspx
If you want complex calculators for ARMs, re-fi’s, or weird payment schedules, go here:
http://www.mtgprofessor.com/calculators.htm
Hey sucker…..
There isn’t a house on the planet worth $420k.
Katherine Hepburn’s house is…
Katherin would not approve of you going into debt slavery for that bedroom with a view.
That would be $30,217 per year. Requiring, according to pre-bubble underwriting standards, a reliable income of $90,600 for an otherwise thrifty person to carry it.
33% of gross is pretty darn high. If I were actually underwriting that loan, I’d want to see a lot of info on their actuall take home pay and heck of a lot of other finanical data as well.
That $90K had better be “take home” pay too. It would be awfully difficult for someone to save anything for retirement (and any other future wants/needs) and carry that $30K/yr. mortgage (plus taxes, insurance, maintenance, etc.).
You have to assume at least 2k for insurance and 5k on average for repairs and updates (and I’m lowballing). With 1.5% property tax that puts you at almost $3,700 a month. I wonder how that compares to rent? I think you would need to make at least $150k for that to be comfortable, especially if you have kids.
I have noticed that Fannie and Freddie Homepath and Homesteps programs have attractively priced homes. Supposedly aimed at first time home buyers. The interesting thing is that I have called on several and have failed to get even a showing on them because; on the attractively priced ones at least; there is an offer on the home within minutes of it hitting the website.
One broker was even reported to the state board when our realtor found out he was not showing us a home that was actively listed; claiming to us that it was pending when the MLS said otherwise. This guy is still at it; told me when I requested a showing last week that if I hauled bootie I could get an offer in, but it would not be the first offer in any case. I told him no thanks and did not pursue a showing.
This is at 9:00A.M. the first day it hit the website. Sleazy guy called me back at noon saying “do you want to make an offer?” I responded, “You told me there already was an offer”. He said, “Yes, but I haven’t submitted it yet”.
???
So they seem to me to make an attractive BPO then sell it to a business associate that they are in cahoots with. Call me paranoid.
Also, how much longer are realtors going to be allowed to “offer” homes on short sales that the banks dont agree to? seems a colossal waste of time when investors set the price for realtors to set a fake price to solicit offers that wont fly w/ bank. or is it? Are short sales the way to go given the amount of time and patience they take.
So a buyer can either try to get one from Fannie or Freddie, or on a short sale, but its the luck of the draw whether the bank is even negotiating on the attractively priced short sale(price is just an illusion of a good deal cuz it’s nowhere near a clearing price in many cases)or even has the power to negotiate (when it’s servicing a loan that has been sliced up) on a short sale. Seems messed up.
The whole system seems full of dishonest realtors hoarding good deals on Fannie/Freddie homes; or dishonest realtors giving both buyers and sellers false hope with BS short sale prices. Of course I am talking entry level homes, don’t know about cutthroat competition on higher priced properties, as the pool of buyers must be much smaller.
I don’t know though. My wife got a mortgage for $300k even though she is a $10/hr grocery checker. Underwriting is another related topic and it’s good IMO that no-doc loans like the one made to my wife, based on fico/assets and not income, are no longer being made without at least income documentation to my understanding.
DTI and down payment requirements may still be unreasonably lax on loans being written.
If you come in with another realtor the agent has to split the commission. If it really is a good deal, he or she would much rather not show it, keep the price low, and steer it to one his investors. Repeat, repeat, repeat. Hell, he or she can even agree with his or her investors to split the profits on the flip. Not ethical, but done every day. If the listing Realtor has their eye on it for one of their investors, you do not stand a chance. Only the picked over properties actually have non-hand picked showings.
So how does an unconnected buyer get a fair shake?
Isn’t there so much shadow inventory that every eligible new buyer should be considered and given a chance?
Should a buyer who wants a good deal wait for the market to be flooded? Or will the banks ever let that happen; will they stretch it out to decades? (BofA has 625 auctions scheduled for this fall in Deschutes County, OR). Our entire market has only 3,500 properties for sale, give or take.
So BofA, and subsequently Fannie, will have a whole lot of inventory to dispose of when they resume their repo activity, that has been suspended since October 2010 till August 2011. Not a single auction. When will this new crop of 625 properties be ripe for the picking? How many are stacked up behind these(they seem to be adding about 5 a day; by August there could be 200 more sales scheduled at this rate). Seems too many to let out onto the market over three months or so to me. But won’t the banks have to proceed in earnest at some point? Or would that render them insolvent? Will they be able to keep the volume down and the prices from crashing indefinitely?
How many more NODs are waiting to be processed? Anecdotally I know of a few folks who have stopped paying and are not receiving their NODs in a timely fashion, seeing how no trustee sales have been executed (by Bofa) for most of a year, it makes sense that the banks are playing extend and pretend.
So Fannie owned stuff is rather picked over at this point; but fresh inventory is waiting in the wings. Foreclosure auctions by BofA thru Recontrust have been suspended since last October. Seems largely clogged up; our home has been rescheduled 4 times and we are not even trying to contest it! Wonder if the August auction on wife’s home, where we live but haven’t paid since last March, will be rescheduled again as well?
Seems to me the banks have an obligation to the taxpayers to follow thru and take ownership of these pre-foreclosures; and they have not been doing so. And the numbers of non-payers who are also stayers is growing and growing! Since the stigma is gone; less uhauls are coming and going in the night to leave props abandoned and neighbors scratching their heads. People are clued into the free rent aspect of not being able to afford their mortgages, so some are staying rather than leaving in shame.
Where is the end of this shadow inventory, when the price is the price, and everyone is given a fair shake?
Mike I wonder how many left then kicked themselves and moved back in….?
———–
so some are staying rather than leaving in shame
“So how does an unconnected buyer get a fair shake?”
Keep reporting the bad agents. If your agent won’t do it, do it yourself. Write letters to the sellers and banks if you are ever refused a showing.
You would think the banks would have caught on by now. On many listings I now see them refusing offers for the first 25 days on market. That probably helps. I figure it won’t be long before they’ll be listing the house with two different agents simultaneously (winner takes all) - that might help cut down the questionable antics.
I think you would need to make at least $150k for that to be comfortable, especially if you have kids.
Yikes. I pay half that in rent and I balk at that each month..and I have no children.
Is it legal for the zombie GSEs to offer foreclosure bargains to selected individuals without any open bid process?
Business
Sunday, June 19, 2011
Houses for $200: Foreclosure bargain but not for you
KEVIN TURNER/The Times-Union
This 956-square-foot house at 1142 E. 24th St. was bought for $200. In 2002, it was mortgaged for $37,000.
On March 8, a San Diego company purchased a group of foreclosed Jacksonville homes from government-backed Fannie Mae, getting two for $200 each and another three for $1,000, $2,500 and $3,500.
Last fall, Dallas-based Harbour Portfolio VI purchased at least six foreclosed Jacksonville houses, also all on the same day. The price for two was as low as $2,400. One of the six, at 3046 Columbus Ave. on Jacksonville’s Northside, which sold for $14,700, stood vacant and wide open March 30. The knob on its front door had been jimmied off.
A couple had bought the home in 2007 for $98,000, but lost it to foreclosure three years later.
“Homeless people are in there; they’ve busted the windows out and stolen the [air-conditioning] units,” neighbor Mike Turner said of the house in March.
Today, its windows are boarded up and the door is locked.
These are examples of local bank-owned houses, mostly on the Northside, that have been foreclosed on and languished on the market. They have sat empty, and many are in disrepair; the U.S. Census Bureau reported that Duval County’s home vacancy rate climbed from 7.8 percent in 2000 to 11.8 percent in 2010.
…
Gorilla Capital in our neck of the woods bought a home for 80k; not a deal available for me as I was watching that same house; and they got an offer in before I could conceivably have. Then they are marketing it as “not short sale” or “traditional sale”; and putting them back on the market for 120k. And selling it.
Makes me want to tell my mom “Stay away from the market. I can not in good conscience help you pick out a home to buy. It’s too corrupted”. Actually I told her that but she wants to keep looking. She has always been frugal so I am not too worried about her getting ripped off; just may be awhile before she buys the investment property she wants.
We have tons of those in our area as well.
I hate flippers!
I posted about this years ago. Only insiders will get the good bargains. Banksters are even screwing their own banks, shareholders, and employees. F***ing PIGS.
1) Is it legal?
2) If not, is there a way to send law breaking banksters to prison?
New report for discussion (Caution: Link to .pdf file)
Foreclosure: The Cost Communities Pay
By Corinne Wilson, Center on Policy Initiatives | June 2011
Foreclosure has a clear impact on the families losing their homes, but also touches all of us. The lack of regulation of the subprime market allowed predatory lending practices to flourish and banks to profit at the expense of communities. Wall St. recklessness is well documented and has had devastating consequences. Currently, the five largest mortgage companies in the U.S. are in negotiation with 50 state Attorneys General to pay a settlement of $20 billion for foreclosure fraud. However, this amount is not nearly enough to compensate communities for the harm, as this report documents.
…
What I don’t like about this article is that it treats bubble pricing as reality and says the price drops from foreclosure has resulted in lost tax revenue. My spin would be that the fraudulent home values that existed during the bubble forced existing homeowners to pay exhorbitant property taxes. Then the local government built those taxes, plus the future growth of the tax base, into budget projections and spent the money. Now the local government has an unsustainable budget when properties revert back to “normal” pricing.
I agree with Steamed Bean.
At the risk of sounding like one of Rush’s minions, DITTO.
P.S. For the record, Rush sux, AND he is a narcotics addict.
Exactly right, Steamed Bean.
The “crisis” what what happened when prices were going UP as a result of all the fraudulent lending.
Falling prices are a symptom of the corruption that happened during the bubble. Falling prices are NOT a crisis, nor are they a cause of any crisis.
This “foreclosure crisis” is not due to a cyclical downturn of the economy, but due to the enormous housing bubble that preceded and contributed to the economic crash. The crisis is not the foreclosures, but the largest ever bubble in housing prices that made housing unaffordable for most. The current foreclosures are a symptom of the necessary response to the real crisis in housing.
LOL! Just saw your post, SDGreg.
Local Observations/Realtor Pathology.
I have been watching a particular nearby piece of property for the last twenty years, using its fluctuating market valuations as a sort of tailing indicator of real estate prices in general.
It’s lovely; a developer-owned forty acres of lush spring-fed pasture, expansive lawns sweeping down to a picturesque three acre natural pond, all set in an idyllic valley surrounded by spectacular rock formations and oak forests. At one time it was used as a stage stop on the old Wells Fargo route from the Gold Country to the LA Harbor. Now it is the perfect setting for the major horse-breeding operation/bed and breakfast it, up until recently, was. A small, tight, architectural house, caretaker’s cottages, a huge state of the art breeding/foaling barn, a fully-equipped veterinary, stables and pastures for up to 80 horses– all with title to a 200 gallon a minute deep water spring– two hours from Los Angeles.
In 1995 the developer/owner offered the operation to me for $155K. I already had a place I loved, but thought it over long and hard before finally turning him down– I just didn’t have the time to run it. Over the years the asking price crept up. 200K, 250K, eventually reaching 1.4M around 2008. Still, to my survivalist mindset, a huge bargain even at that price.
Then the owner was killed in a mix-up with a drunken truck driver and her realtor husband decided it was time to get out. As the market tanked and his melancholy grew, the price went down, down, down. Most recently, it was in escrow for 350K– a price which alarmed me as it would likely bring in someone to subdivide and plant trailer homes around the pond. When it fell out, I was relieved.
Enter my friend. This woman manages hunter jumpers and polo pony rescues, has numerous and varied social contacts, wanted to turn the place into a horse retirement/bed and breakfast operation, and has the business acumen to make it work. She’s been eyeing the place for ten years now and finally decided to go for it. The last time she spoke with the owner a year or so ago, he quoted her 399K for the whole thing and implied that he would come down at least fifty thousand if she came up with cash. So, she’d gotten a group of her boarders together and could come up with 50% and a commitment to monthly boarding fees that would cover the cost of operation. She had the money. More to the point, she would keep the place intact and provide a much-needed service to the community by bringing in new business. I knew the guy was desperate to get out, so I encouraged her to give him a call.
She did.
“What price did I quote you last time?” he asked.
“399K” she told him.
“The price is now 550K” was his response. “I have an offer from some people in Temecula.”
Coached by me, she wished him good luck and hung up on him. “Realtors are liars” she said, shaking her head in disgust.
Which prompts my question:
Curious as to whether the market is indeed going up, I checked a few houses around the state of California that I’ve been tracking on zillow over the past few years; not for the prices– which are largely ridiculous– but for the trending. ALL of them were up nearly 20% over last month! (349K is now 477K, 3.4M is now 4.2M, etc.)
Then I checked the prices for my neck of the woods. Not only were they down at LEAST 20% (my place, which is comparable to the one I mentioned above, is now valued at 85K from last month’s 119K, which interestingly is also the “valuation” of my totally undeveloped north 20,) but all the foreclosed properties (and they are rife up here,) are no longer even ON zillow anymore. They used to have an estimated value for every house up here, now all you get when you type in the address is “there is no record for this property.”
So I’m wondering:
Is zillow now using a new, even-more-inaccurate algorithm, or is there some concerted double-secret conspiracy going on with the NAR right now? (More so than usual, I mean.) Or did this one guy just get sales fever at the prospect of a legitimate offer and revert to realtor-speak, thus blowing his sale?
None of the lying elements of the Housing Crime Syndicate can be trusted. Not Zilldoe either. Trulia is the most blatant distortionists of the truth.
I speculate the Housing Crime Syndicate isn’t so much attempting to inflate prices to profit…. no…. they are desperately attempting to keep prices inflated to hide the dead bodies of 1998-2010. They will fail. NARscum, lenders, appraisers, developers will all be exposed for their crimes. And have no doubt……. These monsters are criminals of the worst kind.
We’ve been told for the past two years that the recovery lives. Some are still betting on that, because they need to or they greed to. I’ll bet that financing for that trailer park might be hard to come by though.
i did some work on a zillow like site.
the data come from a variety of sources, in a variety of formats and much of these data are less than complete and less than reliable.
at this point in time i don’t think these sites could be accurate, garbage in garbage out.
The answer is………”B”, sales fever…….
“…….horse retirement bed/breakfast…….”
Dear God, I might as well shoot myself now……must be a “Chick thing”
Don’t shoot yourself, there’s a gentle gal out there that would like you for her retired mechanics program.
More robberies/wildings, I love this, to quote the immortal words of GWB, “bring it on”
http://chicago.cbslocal.com/2011/06/23/teen-mob-hits-walgreens-off-the-mag-mile-steals/
BWA HA HA HA HA HA HA HA HA HA HA
How’s all that Hope and Change working out now kidz?
You’re lost. This is the Housing Bubble Blog, not the Rush Limbaugh fan club.
the housing bubble has refused to deflate and the administrations policies, that hope and change - spread the wealth around is a big factor.
perhaps your lost?
Nothing here that Mayor Rahm can’t handle, I’m sure…