Weekend Topic Suggestions
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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
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How about how Realtors are Liars?
They’re out there advising the public to buy housing while prices are falling, attempting to create a sense of urgency by suggesting sales increasing rapidly when in fact they’re at 14 year lows and flat.
These people just lie and lie and lie yet whenever their corrupt behavior is mentioned, the issue is redirected onto “banksters”.
Why is that?
Because the Realtor® lies only steal 6% at a swipe from the sheeple loanowners while the banksters steal millions.
Also the “nesting instinct” which leads sheeple to commit financial suicide just so they can paint the walls any color they want.
Sheeple love what they perceive as success/confidence, see also the furry-eyebrowed Realtor® in the movie “American Beauty”.
I don’t know any banksters….. they’re hiding. I know plenty of reaItors….. and they’re liars.
The squad is a former bankster. I got paid $8/hour plus commissions slinging HELOCs for TARP bank back in 2004-2005.
So its your fault then?
LOL… Bankster wannabe, maybe. $8/hr plus commissions does not a bankster make.
If you don’t get a six- or seven-figure bonus, you are not a bankster.
I know some people at the top of bankstering. From my perspective, these guys are very stoic. The very few times I bring somthing up which crosses into the territory of their specialty I never get a straight answer. It’s usually some cute little quip that is supposed to signal they’re not going there.
This shouldn’t be terribly surprising.
Why would anyone tell someone their original ideas? It’s IP in the best sense of the word, and should be carefully conserved.
It’s not restricted to bankers. In fact, it’s more surprising that there are professions that actually tell you stuff quite freely.
“… it’s more surprising that there are professions that actually tell you stuff quite freely.”
Had a Prof. tell me one time that every profession was a conspiracy against the common man.
I would like to see a post about this for the same reasons. We never hear about the realtors and all the non-banker people that are lying about real estate. Whenever you buy or sell a home, there is a long line of people demanding their cut for overpriced or completely unnecessary services. These things are borderline if not outright fraudulent. There’s no movement to go after them so they will still be around long after the bankers are gone.
This is from my realtor could it be a lie ?
“I’m super happy to say that we have some feedback from the lender on XXXXXXX. Believe it or not, this is lightening speed for a lender in a short sale…
As in every short sale, the lender completed their own value assessment of the property. It appears that their assessment came back at a much higher value than the $399,000 list price. This can be considered great news for any buyer of this property when looking for an opportunity to purchase a property with existing equity.
Fortunately, the lender is not requiring that the list price be increased for approval, but they have countered your $XXXXXX offer price. In a nut shell, we will need to increase your offer a bit in order to secure an approval. This does not mean we need to go over the asking price, but we need to be closer to the $399,000 list price.”
In all fairness this is a BANK lie being passed on to me by a Realtor like I am so stupid to think I have intstant equity in a possibly still falling market and can’t use the internet to find what similair homes sell for which is about 400K except “as is” foreclourses they are about 380K because they are trashed.
In all fairness this is a BANK lie being passed on to me by a Realtor
Liars lying for liars, you mean?
So what was your reply?
So what was your reply?
Have to see the house again and decide if I want to increase offer. Its empty now so I can see it better.
I can also use a home inspection report to drive price back down again if there is anything wrong. Don’t know what the bank will say to that but I don’t want to buy a house that’s got problems.
NO need to reply too quickly to a bank in any case
Seriously, how can ANYBODY be dumb enough to believe in “instant equity.”
It appears that their assessment came back at a much higher value than the $399,000 list price.
You do realize that normally what the bank gets on these properties is a BPO—a “broker’s price opinion.”
In other words, it is just a number that one particular realtor thought would be a good value to put on the property.
It is not the same as a good appraisal showing multiple recent sales as comps.
In all fairness, the Realtor is likely lying to you about what the bank has said. They don’t have anything in writing to show you I’ll bet. The Realtor is not acting as an agent of the bank to sell the property. They decide to do this as a way of fishing for offers, and then they make the bank an offer. In this case, the bank is not paying the Realtor a commission. The Realtor subtracts what they want from your offer and presents that lower amount to the bank, or rather tells them what their take is going to be. At least that is the way my deal looked to play out.
The Realtor subtracts what they want from your offer and presents that lower amount to the bank, or rather tells them what their take is going to be.
If they presented a different, lower offer to the bank than the one that you made, and tried to pocket the difference, that would be fraud.
The one SS that I saw up-close, the realtor’s commission was standard and included in all of the escrow documents.
I didn’t mean they were somehow trying to cheat the bank, rather that they were adding their terms to my offer and presenting their deal to the bank as an offer to broker a sale.
I kind of had the feeling that it was fraudish for them to list a property for sale (even with a disclaimer) when they hadn’t first negotiated a list price that the bank would accept. They were taking an educated guess. My attourney says even once the bank accepts the offer, they are not actually required to go through with the short sale, up to the last minute.
Gotcha.
Yeah, short-sales are strange beasts, because everyone knows that the listing party (the nominal “owner”) is not the party that will have to approve the sale in the end. I mean, the owner COULD sell at a below-mortgage price, assuming they were willing to bring lots-o-cash to closing. But since they don’t have the means, the listing price is kind of a strange fiction.
I don’t think it’s “fraudish”, but it’s definitely different from a normal sale where a full-price offer would presumably get an acceptance. But since everyone knows that it is different, and they make sure to explicitly list it as a “short sale”, I think it’s ok…
But that is a constant and therefore unlikely to be part of the explanation for the RE bubble. It is NOT the case that every salesman is a lying sack of sh!t. But it IS a very useful working assumption. And always has been. Frankly weren’t we supposed to figure that out at the age of 8 after watching Saturday morning commercials?
It appears that their assessment came back at a much higher value than the $399,000 list price.”
CAR salesman stuff its value is about 399K at this time based on comps. However this house appeared to be in better shape than others when I looked at it a month ago, new windows new floor, but old air conditioning so its not perfect. I need a better look. Now that its empty I can do a smell test not covered up by candles or cookies or whatever. So much junk out there right now it takes me 5 seconds to decide its not worth my time.
do you know how long it takes the smell of cat spray to leave a house ? my rental after 2 years still smells of cat spray in the 3rd bathroom. I don’t think it will ever go away. worse than cigarettes I bet.
From what I have heard, it takes at least more than one lifetime for the smell of urine to leave wood.
Is $5 gasoline on the way? And how do the Republican presidential candidates plan to blame it on Obama? I’m guessing they will just state that it’s Obama’s fault, because Obama is the president, and everything that ever goes wrong is obviously the sitting president’s fault. Does that sound like a sufficiently convincing argument to convince the average Amerikun voter?
More drivers than ever may pay $5 per gallon
By Gary Strauss, USA TODAY
Updated 9m ago
More drivers than ever could soon be paying $5 for a gallon of gasoline. And the national average, up sharply in recent weeks, is likely to top out at about $4.
Rising oil prices, lower refining capacity, Middle East tension and speculators are propelling prices. The spike in crude, now at nine-month highs, has driven regular gas to a record February high of $3.65 a gallon — up 42 cents over a year ago.
…
Yeah but NY Fed bankster William Dudley said that iPads are cheaper now so this doesn’t matter.
Also, SmartMoney has a story “Four upsides to higher gas prices” linked from MarketWatch.
People are smart
It comes from this absurd American trait of wanting to put a positive spin on everything.
I mean if a drugged up woman decapitated her twins with a hatchet and botched it completely to the point where the kids suffered endlessly before the head came off, someone somewhere out there would come up with an argument that it was “all for the best.”
Seriously, it’s like Candide is a recipe book not a satire.
Blame the President? Same tune different key.
The President could do us little folk a few favors: Announce that we have absolutely no intention of fighting Iran, period, and that we are going to get our azz out of Afganistan and Pakistan, say by next week. The other 138 countries by Christmas.
Just as a tiny extra gift for the American family, make it a felony for any American or American Company or company doing business in America to bid up (speculate on) the price of food or energy commodities and so impoverish the American family.
Do something, save your Presidency.
Are you calling for regulation and government intervention, Skye?
Are you calling for regulation and government intervention, Skye?
It looks that way, doesn’t it?
Wow! I did it! I actually created an emoticon graphic on the HBB!
Truth be told: I copied and pasted the emoticon from further up the thread.
I’m not an anarchist. I am just picky.
Announce that we have absolutely no intention of fighting Iran, period,
You wouldn’t make a very good poker player, Blue. No ‘Busted Flush’ for you.
Some of the things I want are unrealistic, some are not. Permission to come aboard denied.
And yet it is the neocons doing most of the saber-rattling with Iran which is probably the biggest CAUSE of the speculative increase in oil prices.
Meredith Whitney on the Mortgage Market
and so forth
http://video.cnbc.com/gallery/?video=3000074615
Two things:
She’s advocating moving beyond the 30 year fixed and going w/adjustable only loans. I can ony imagine that would only have the exact opposite effect on housing.
Businesses are moving away from the coast? I knew Texas had it going on but she mentioned there were so many other options.
You gotta watch this video. This woman is always provocative if nothing else.
Very interesting interview. Texas? You think?
One of the regulars was kvetching on here a day or so back about the need to use “real statistics.” Suppose I wanted to get “real statistics” on the size of the shadow inventory; varied reports suggest it lies anywhere on the range from 1m to 10m or so, depending on the definition and data used.
Where would one find such “real statistics” on the size of the shadow inventory if one wanted them?
Wednesday, January 11, 2012
Michael Olenick: 9.8 Million Shadow Inventory Says Housing Market is a Long Way From the Bottom
By Michael Olenick, founder and CEO of Legalprise, and creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha). You can follow him on Twitter at @michael_olenick
“Shadow inventory,” the number of homes that are either in foreclosure or are likely to end up in foreclosure, creates substantial but hidden pressure on housing prices and potential losses to banks and investors. This is a critical figure for policymakers and financial services industry executives, since if the number is manageable, that means waiting for the market to digest the overhang might not be such a terrible option. But if shadow inventory is large, housing prices have a good bit further to go before they hit bottom, which has dire consequences for communities, homeowners, and the broader economy.
Yet estimates of shadow inventory, and even the definition of what constitutes shadow inventory property, vary widely. For example, the Wall Street Journal published a Nov. 11, 2011 article, “How Many Homes Are In Trouble?” where values varied from 1.6 million (CoreLogic), to “about 3 million” (Barclays Capital), to 4 million (LPS Applied Analytic), to 4.3 million (Capital Economics), to LPS Applied Analytics, to between 8.2 million and 10.3 million (Laurie Goodman, Amherst Securities).
Why do these numbers vary so much? Even though CoreLogic is generally considered to have one of the best databases of loans, its estimates of loan performance and odds of default are based on credit scores, which is a badly lagging indicator. Laurie Goodman is seen by many as having the most carefully though out model, even though industry insiders are keen to attack her bearsish-looking forecast.
I have a large database of my own, and am familiar with housing and mortgage information sources. I’ve come up with my own tally of shadow inventory and have also tried to analyze — OK — take a stab at – what I call “shadow liability,” meaning the amount of money taxpayers, investors, banks, will be lose if those homes are liquidated. Assumptions using those terms are also in the attached spreadsheet. My analysis comes up with a total close to that of Goodman’s range, 9.8 million using a narrower definition than Goodman’s of what constitutes shadow inventory.
Put more simply, things are actually worse than any of the prevailing estimates indicates, although Goodman is very close to the mark. Current loss experience suggests that this figure is staggering, easily in the $1 trillion range.
…
Definition of ‘Shadow Inventory’
A term that refers to real estate properties that are either in foreclosure and have not yet been sold or homes that owners are delaying putting on the market until prices improve. Shadow inventory can create uncertainty about the best time to sell (for owners) and when a local market can expect full recovery. Also, shadow inventory typically causes reported data on housing inventory to understate the actual number of inventory in the market.
Investopedia explains ‘Shadow Inventory’
With the unprecedented number of foreclosures stemming from the subprime mortgage meltdown of 2007-2008 and the overall housing market collapse during that crisis, lenders were left with significant real estate holdings. Many lenders were slow to put their inventory up for sale for fear of flooding the market and further driving down prices, which would in turn lower their potential ROI.
Would you guys stop misinterpreting what I was saying? Jeff claimed that a newspaper article confirmed his previous claim that people living in their houses without paying mortgages had had a significant impact on Black Friday sales volumes. His original claim had no evidence other than him figuring out that two people interviewed in a newspaper article were not current on their mortgages. The newspaper article didn’t show any direct connection either. Colorado and I told him that anecdotes weren’t enough to support his claim and said that if he wanted to prove it he would have to provide numbers that actually did prove his point.
That is it. He seems to have taken it as a challenge to attack the idea of statistics. I don’t deny that good stats are hard to come by when you are trying to prove something that hasn’t been specifically studied. That isn’t the point. The point is that personal experience isn’t always generalizable. Anecdotes can’t be extrapolated if you want to know what it really going on. And anyone with even the slightest familiarity with mathematics in general and statistics specifically, should know better than to conflate the two.
I expect more brains from the people who hang out here.
“conflate”
Is that the same as confluse?
Would you guys stop misinterpreting what I was saying?
I thought that PB’s comment was directed at me, and my suggestion that Darrell use the real stats on FDIC-insured deposits in his analysis (as opposed to all deposits at FDIC-insured institutions, not all of which are insured deposits).
Not that I had any luck finding good stats on that myself either…
anecdotes weren’t enough to support his claim
I call it Right-Wing Personal Anecdote Syndrome. Every right-winger I know is regularly, for example, in line at the store behind someone who is talking on an iphone and using food stamps to buy t-bones (even thought most live and shop in lily-white suburbs).
I can’t decide if it’s a psychological disorder wherein they mistakenly perceive what most angers them as constantly occurring wherever they go, or if God just has an odd sense of humor, and likes bothering right-wingers. Or else they just make it up.
Turns out I owe some taxes this yr. I want to pull a TTT, any advice?
Use Turbo Tax.
Don’t answer all the questions correctly.
Expect to get caught.
Why are we still faced with grossly inflated shelter costs 10 year later?
Because we’re following monetarist economic theory, which says we won’t have a depression if we keep the banking system (ie the rich) flush with cash, thus avoiding a ‘credit crunch’ and ensuing firesales of assets.
The people benefiting the most from it have convinced everybody it’s a Keynesian bailout of the deadbeats, when it’s really of Friedman/monetarist bailout of the 1%.
Keynes’ theories have yet to be tried. They will, after all else fails.
I totally agree, alpha.
The sad thing is that while we may technically avoid a depression, we’re going to have a long, drawn-out affair that is just as effective or possibly more-so at inflicting pain on the masses.
“…just as effective or possibly more-so at inflicting pain on the masses.”
Bailing out the 1% while letting the 99% bear the full brunt of job losses coupled with massive home equity losses has the practical effect of creating an unprecedented reverse-Robin Hood wealth transfer from poor to rich.
We should have a post about what will be happening to commercial real estate.
Bankruptcies like those of Borders and Circuit City have left large amounts of commercial real estate empty and with the economy in its current state, all that real estate will remain empty for the foreseeable future. Technology makes the long term prognosis just as bad. It’s not like Amazon or other online retailers needs a bunch a stores. Even AT&T will be unloading a lot if real estate soon because its transition to an all IP network means less equipment and less buildings to house that equipment ( http://vcxc.org/att/ ).
Between the economic downturn and technology, commercial real estate is going to get hammered with all of the problems that we currently see in residential real estate. Long term I think commercial real estate could be in worse shape because people always need a place to live whereas stores aren’t needed for to sell certain types of products.
Boulder (where everything is different) lost two prime location big box electronics stores (CC and Ultimate) next door to each other in the last couple of years and both buildings are still empty as far as I can tell.
But houses are still expensive.
I suggest the subdivision of larger suburban homes into multiple rental properties as a topic. As noted, it may provoke opposition from local homeowners and communities and may violate zoning laws, but once the price of housing gets low enough speculators can factor the cost of legal battles into their P&L.
Consider the fate of many neighborhoods in Brooklyn two generations ago. Brownstones built as one family residences were subdivided into apartments and even rooming units, often by those who had grown up in them who were now living in the suburbs. These houses were passed down to the poor, before the onset of genetrification.
Subdivided houses have been far from unknown in the New York suburbs, particularly were multifamily housing for the young and old has been zoned out. I spent my first 10 years in the downstairs portion of my grandmother’s house, in a division that was apparently off the books. When my wife’s grandmother followed her children from Brooklyn to Long Island, she lived in an illegal basement apartment. So did my sister-in-law when she was starting out. Friends liked in a subdivided big old Victorian in an affluent Westchester town for a while.
I noted that Shilling’s overview of the housing market Part II didn’t mention the possibility of subdivision, though it did mention the multi-generation household possibility. Here is part III. It doesn’t mention subdivision either. But look at the picture.
http://www.bloomberg.com/news/2012-02-24/why-renters-rule-housing-market-part-3-commentary-by-a-gary-shilling.html
“Rental apartments should continue to be an interesting investment area for years, as rising rents provide attractive returns. Single-family rentals may also be fruitful if the problems related to large-scale management of houses can be resolved.”
The real estate market is divided between big operators and mom and pops. It is the mom and pops who do the subdivisions. I could see a young couple buying an oversized house, living in part of it, and renting the other parts to other young couples. Of a family renting part of a house to a senior. Or a senior renting part of a house they can’t sell to a family or two. Etc.
Subdividing McMansions into smaller rentals units. Because spending money to create even more housing units in the face of an oversupply of housing is a solution? I would suggest that it makes more sense to allow house prices to fall until people start moving out of their parent’s basements.
People can’t afford the operating costs. And household sizes are not large enough to use the buildings.
The big old Victorians had the same problem a century ago. Many became the semi-abandoned neighborhood “haunted houses” as modern houses sprouted around them.
I can remember riding the school bus past a haunted house. It was an old Victorian that had been abandoned for decades. Place was well known as a place that kids like us should avoid.
So we did.
No one got off the bus anywhere near that house. I don’t know if the school district planned things that way, but I just remember us going by it twice a day.
If the price was low enough, I’d bet somebody could be found to afford the operating costs. I’d argue it’s just that the REIC and the powers that be don’t want to contemplate prices falling that far. I’d argue that the problem is that far too much “high end” housing was built. So now there’s more luxury houses than people that can afford luxury homes. Some friends of my parents bought a ginormous Victorian house outside of Boston decades ago. Servant’s stairway in the back, a carriage house in the back with stalls for horses, the whole nine yards. Heating that thing WAS very expensive, but the price reflected that. Even for big houses there IS a market clearing price. And upkeep is a factor in that price. But any of those oversized McMansions went on the market for less than 100k they would be sold instantly, even if the upkeep was 20k/year, and if you’re willing to drain the pool and turn the AC up to 80 and the heat down to 62, I think you could keep the costs less than 20k/year.
People just prefer to say “I can’t afford the upkeep” or “my commute costs to much” rather than “I agreed to pay more than I can afford.” The price will fall until the total monthly nut if affordable.
Developers are more likely to buy up a block of old houses, demolish them, and build yet another condo tower.
One of my co-workers is gung-ho on the idea of condos and dense-packed urban living because it’s the most efficient and environmentally friendly way to house humans. I disagreed, telling him that some workers in China rented cages for the night and maybe we should just all live in those, like industrial pigs and chickens.
I just don’t see the McMansions as having been set up in a way that is condusive to subdividing. I guess the extra bathrooms help, but I open floor plans don’t easily translate to minimum expectations of privacy.
I don’t think we’ll separate apartments in a commercial sense where strangers live in on separate floors. We’ll see more group home/commune living. I’ve heard that some houses have a sign-up sheet on the refrigerator for when each family has use of the kitchen.
I see a difference on the two coasts. My East Coast friends think I’m crazy to have strangers living in my house. But out west, it’s more common or at least commonly accepted. We share a kitchen and bath, and otherwise keep to our separate floors. I like having housemates for many reasons. And my house is only 1,100sf, so a McMansion is definitely doable – sort of like what is done in the old Victorians in SF.
I have been living the other side of this for the past couple of years, taking a room in town when the boat is on the hard. Both times there was another boarder in another room of the house. In both cases, I’ve shared the kitchen and in one case shared the bathroom (that’s a downside). In both cases I’ve had my own refrigerator, but mostly used the house utensils. Making pizza once a week, enough for all to share, gets a reciprocal dinner offer from the lady of the house.
McMansions are perfect for dividing into little efficiencies, since each bedroom already has a bathroom. Throw in a little fridge and stove and voila. Most have finished basements with bathrooms, and often kitchenettes, already- that’s another apartment. Or you could make them into rooming houses, and the big kitchen would actually serve a reasonable purpose. You could easily cut off the great room and make it a studio. Everyone still gets a private bath.
Of course, most aren’t built worth a crap, but whattayougonnado?
I learned a long time ago to never ask a Barber if I needed a haircut. If they were a deacon’s son or a born liar, the answer was always the same …..You could use a trim. {I would probably say the same thing if I were he and my kids needed shoes}
Bank of America Breaks With Fannie Mae
http://www.nytimes.com/2012/02/24/business/bank-of-america-breaks-with-fannie-mae.html?src=recg
Bank of America said Thursday that it would no longer sell new mortgages to Fannie Mae, underscoring tensions in a fight between giants of the home loan market over billions in losses in the housing bubble.
The latest move represents a major escalation in a protracted legal battle over how many defaulted mortgages Bank of America will have to buy back from Fannie because the original loans had not conformed to proper underwriting standards, market experts said.
etc.
I saw a mention of that yesterday in the press; it’s a pretty interesting development. Apparently BoA and FNMA are not seeing eye-to-eye on the push-backs, and BoA’s reaction is not to place any new mortgages with them.
My guess is that this is a preemptive strike, and that FNMA was likely to suspend their ability to place new mortgages with them anyway, due to BoA not honoring the mortgages that were being pushed-back according to their existing contracts. That’s just a wild guess, though.
http://market-ticker.org/akcs-www?post=202483
Stunningly, the WSJ has called BS on Zimbabwe Ben’s monetary polices (as Obama lamely attempts to deflect any blame from soaring oil costs fueled by trillions in .025% Fed gambling money to bankster speculators), which ordinary Americans are paying for at the pump.
http://www.marketoracle.co.uk/Article33305.html
Fed conflates inflation with growth.
I think it’s time to talk about living well.
We were right, we called it, and now all of the cogs in the machine are doing everything they can to slow it down. So be it. At the end of the day we each have to cope and move through this in our own way.
I’d like to know what you’re idea of living well means. I know from years here that for many of us, it’s living within your means and accepting reality, quickly.
What are you doing? What have you changed? How did it ding you? How did you cope? We’re all worse off (o.k., not all, but, you know, it’s a big chit sandwich and all…) but life goes on.
Me?
- I am spending more time to my family
- I make it a point to watch a movie a week (from the library) with the wife
- We play in the sand at the beach. Sometimes we put it in buckets, sometimes we just grab a handful and throw it into the air.
- I tease my son with little mind games. At 4 he is already substituting values. He has floaty numbers in the tub — when I held up the #8 and asked him what it was, he said, “seven!” with a smirk. I realized what he was up to, so I held up a 4, and said, “if that’s a seven, what’s this?”
“Three!”
- I yield to everyone in my car now. Everyone. It’s not worth it.
- I forgive everyone at work, and quickly. I don’t care if it’s done incorrectly the first time. Let’s fix it and move on.
- I’ve started avoiding sources of stress when I have a choice.
The bubble has helped me realize that there is no script… for… anything.
Cook good food DAILY. Fresh from scratch.
Eat with the family. Converse.
No freakin’ teevee, no BS video-game devices, no Apple and no interruptions!
Afterwards, books and music but no teevee.
This suggestion may be a bit late for this weekend, but how about a weekend topic on health care finance in the US?
In my not so humble opinion, the health care industry is financially screwing this country one patient at a time. The system is set up to generate maximum revenue.
You can’t get a straight answer from a doctor when you ask how much a procedure will cost. They always hem and haw and say it depends on your insurance. To me, that’s practically the same as answering the question with “how much do you have?”
The entire health care finance racket gets me angry.