March 22, 2012

A New Seat On The Foreclosure Train

The Herald Tribune reports from Florida. “Residential real estate may still be soft in some places nationally, but not in Sarasota and Manatee counties. ‘It’s as good as it gets,’ said Michael Moulton, a high-end agent with brokerage firm Michael Saunders & Co. in Sarasota.’The well-heeled are down here vacationing. ‘They are feeling that they have to act quickly and can’t wait till the end of the season because their choices might be gone.’”

“The Canadian buyers also are being driven by a currency that is now equal in value to the dollar. ‘It’s like a bloodbath at the online auctions,’ said Shannon Moore, the owner of GreenLionRealty in Port Charlotte. ‘New people are bidding and I don’t know if they know what they’re doing because they’re bidding so high.’”

“Moore said that one of her investor clients, for example, recently paid $130,000 for a house in North Port that would have sold for no more than $110,000 four months ago. She said that more properties also are being taken back by banks if bidders do not offer enough. ‘They just can’t get a crack at it,’ Moore said.”

The Miami Herald. “Home prices in Miami-Dade and Broward counties jumped for the third consecutive month in February despite flat or declining sales volume, as the inventory of listings dwindles, real estate figures show. The bulk of purchases continue to be from buyers who pay with cash, and many of them are international purchasers. Cash sales accounted for 68 percent of all residential sales in Broward in February, 47 percent of single-family and 84 percent of condominium closings. Patricia Delinois, president of the Miami Association of Realtors said the top countries currently for international buyers are Venezuela, Brazil, Argentina, Canada, Colombia, Mexico and France.”

“Inventory in South Florida is clearly declining, as banks modify loans or hold onto properties before putting them on the market. At the same time, owners whose property values have fallen are preferring to rent them out rather than sell them. ‘When you have a lower supply and higher demand, it becomes more of a sellers’ market. In [February] 2008, we had 46,000 properties for sale, and now we have only 13,610 properties for sale,’ Delinois said.”

The Sun Sentinel. “Florida has more delinquent mortgage loans backed by Freddie Mac and Fannie Mae than any other state, according to a new report. The Sunshine State had 292,000 delinquent loans by the government-sponsored agencies as of Dec. 31. Of those, 166,000 have been late on payments for at least a year. Experts say the disparity lies partly in that Florida foreclosures must go through the court system.”

“States delayed action while negotiating the $25 billion foreclosure settlement recently announced with big banks. And Florida cases were held up to clarify paperwork after the “robo-signing” scandal. ‘It’s staggering how much Florida is worse than the rest of the nation,’ said foreclosure attorney Roy Oppenheim of Weston.”

“The average number of days to process a foreclosure in Florida stood at 806 in the fourth quarter of last year, according to the latest data from foreclosure firm RealtyTrac. That’s more than two years and two months on average to process a foreclosure. That’s also more than twice the average time it takes to process a foreclosure nationwide.”

First Coast News. “Home sales on the First Coast are nothing like they were before the housing crisis hit but new home builders are optimistic the future is looking brighter. Chenita Clay is purchasing the 3300 square foot home from Lennar for $313,000. Clay says she decided to buy because of low interest rates and decided to ‘buy new’ because of builder incentives. ‘The closing costs. Taking care of all of the closing costs were huge. Being able to also negotiate the selling price I think that was also a selling factor,’ says Clay.”

“For the first two months of this year 514 permits were issued in Clay, Duval, Nassau and St. John’s Counties. That’s up from 369 or 71% from the same time last year. The last two years have only seen 3000 permits issued annually. Barbara Moore, President of the Northeast Florida Builders Association says a healthy market needs about 8-thousand.”

The Tampa Bay Times. “Tampa Bay’s already-depressed construction industry just crumpled to a new low. January’s dismal tally shows bay area construction employment down 14 percent year over year and a startling 55 percent from the market’s peak of 95,300 jobs in June 2006.”

‘Don Bartley, a cabinet maker who handles jobs from north Tampa to south Sarasota, said he isn’t surprised. Almost all his work now is warranty and remodels, with very little new construction. He blames the ongoing glut of cheaper foreclosures on the market. ‘There’s just too many foreclosures still going on,’ he said.”

“As you may have read, there was some recent bad news about foreclosures in the Tampa Bay area. In February, total foreclosure activity was up 64 percent compared to the same month last year and up 38 percent just since January. However bad RealtyTrac’s numbers were for the Tampa Bay area, they were much worse for Hernando compared to February of 2011.”

“How come foreclosures are down in many other counties and the rate of new filings here is far higher than in the rest of Florida? Because if builders all over the state built too many homes, they built way too many here. Because of an earlier, even larger wave of foreclosures we know how this will play out: distressed properties on the market driving down prices, stifling new construction, crippling the labor market and cutting property tax revenue.”

“Wherever we actually are on the foreclosure train, I think we can agree it’s time for a new seat.’”

The News Journal. “Flagler County has the worst foreclosure ratio in the state for the second time in three months. Bankers and real estate agents think the increase signals an attempt by lenders to ease the large accumulation of homes in delinquency. Jimmy Millhollin, broker and co-owner of RE/MAX Flagstaff in Palm Coast, said he’s noticed a recent increase in lis pendens, or new default notices, in Flagler County. The overall foreclosure ratio now shouldn’t be detrimental to the housing market if it continues, he said. But, the 132 initial filings is still too high, he said. Before the housing bubble of the mid-2000s, there were typically 50 a month. ‘But certainly if they dump everything at one time that would be devastating,’ he said.”

“Bruce Page, CEO of Intracoastal Bank in Palm Coast, said getting foreclosures processed and then out into the market is a necessity, even if it can be painful. ‘It’s just like everything in life. You have to deal with the problems. If you just push them to the side they only get bigger, and that’s what we’ve seen. That’s one of the reasons we’ve seen such lingering in this economic recovery, because we haven’t dealt with our problem,’ Page said.”

“A list presented by defense attorneys on behalf of defendants in the massive flipping fraud case shows Craig Whitehead helped flipping king Craig Adams and his associates get at least 20 loans from Washington Mutual during his tenure at the bank from 2002 through 2004.”

“According to Adams, who testified earlier in the trial, loan officers — and particularly Whitehead — were critical to his flipping fraud scheme. ‘I personally selected several loan officers at different institutions so they could help me inflate income and assets high enough so borrowers could get loans,’ Adams said.”

“In a tape recording obtained by wearing a wire for the FBI, Adams also is heard telling former title agent Lisa Rotolo that loan officers would simply fill out loan applications for customers without bothering to get accurate information from the borrowers themselves. ‘Did you ever fill out a loan application?’ Adams asked Rotolo. ‘I think I might have filled out one once.’”

Palm Beach Post. “The Obama administration’s landmark refinance plan for severely underwater homeowners became fully operational Monday after automated federal loan processing systems were updated during the weekend. But nearly five months after the program’s debut, and following what many hoped was the last hurdle to a wholesale start, mortgage brokers said wary lenders are still hesitant to refinance loans other than their own.”

“In Palm Beach County, about 43.5 percent of homeowners with mortgages were underwater at the end of last year. Boca Raton real estate attorney Marlyn Wiener said banks are uncomfortable with HARP because ‘it goes against the fundamental rules of good lending.’”

From CNBC. “Commercial lenders and the Obama administration seem determined to draw in any borrowers who haven’t yet refinanced their home loan. This month, Fannie Mae and Freddie Mac, the agencies that insure many mortgages, are rolling out automated underwriting in the latest version of the program for borrowers with no more than 20 percent equity, the Home Affordable Refinance Program, HARP.”

“The old rules required the property to be worth at least $75,000 for every $100,000 borrowed. The new version, dubbed ‘HARP 2.0′ by the public, offers something close to a ‘no-doc’ loan — employed borrowers don’t need to produce tax statements. They also don’t need a new appraisal, because this time there’s no ceiling on what lenders call LTV, loan to value.”

“Sound familiar? ‘We’re going to provide refinancing with no documentation against property that hasn’t been appraised. Isn’t this the very way we got into trouble?’ asks Keith Gumbinger, VP at hsh.com, a mortgage information website.”




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92 Comments »

Comment by Muggy
2012-03-22 05:34:02

Perfect timing. My littleman is sick, plus a Florida thread. It’s going to be a great day on the couch!

- My property manager called and said that she is waiting to hear from the owners. They don’t want to sell, but no word on what the rent will be. I feel a little better. We’re in two (yes, two!) good schools zones. I’d like to stay since we’ll be registering my littleman this time next year. Plus, I’m really freaking tired of moving. Go get some boxes, Muggy.

- A co-worker got a mortgage mod. I don’t know the details, but I overheard, “save about $700/mo.” So, wow, they must be all kinds of FUBAR. Sounds like they’ll be in default again in a few years.

- I post this yesterday: another co-worker stopped paying, and the prop. preservation guy is trying to cut a side deal. I wonder how much of this is happening? (Ben?)

- We have new neighbors to the left, but we are still flanked by three uninhabited homes. Our new neighbs seem alright. No cats so far, so we’re good there.

- Still going through cuts and reassignments at work, but my dept. has managed to stay clear of them.

Comment by Arizona Slim
2012-03-22 09:48:11

Sounds like they’ll be in default again in a few years.

I’ve read that a lot of modified mortgages go into re-default. Don’t have any percentages of mods that re-default, but will pass them on when I find them.

 
 
Comment by Jess from upstate SC
2012-03-22 05:53:05

Last weekend we camped at the SC state park at Calhoun Falls ,SC.Absolutely beautiful mild weather , a million $$$ lakeside view for $21 a night .
It is on the same tract of Lake Russell land there as the private monstrosity called ”The Sanctuary at lake Russell”, they share the same road in . We drove the several miles of completed streets and infrastructure there , a ghost-town with not a single house on it , and never will be. They wanted to lure the rich Yanks down , and sell them the tiny lots for 50K each and up . That the nearest real Towns are 30 rural miles away , as are the hospitals , and that the trees are all pine , and that you cannot even see the lake from most of the lonely lots , must have never mattered to the developers . And so it must return to nature , with asphalt deer walking trails. The sewer lines , electric & internet cables are at least underground , out of sight.

Comment by Insurance Guy
2012-03-22 12:19:31

Sounds like a great camping trip. The asphalt will make good biking trails.

 
 
Comment by Professor Bear
2012-03-22 05:58:35

‘New people are bidding and I don’t know if they know what they’re doing because they’re bidding so high.’

Sounds like a new generation Canadian investors is getting an education in life’s dear school for fools, eh?

Comment by Dave of the North
2012-03-22 07:03:24

No (Canadian) FB left behind…I know some people here spend 5 or 6 months down south every year, so it might (operative word: might) make sense to buy instead of renting (in a normal market, whatever that is these days) but I’m sure a lot of these people are still working so can only spend a few weeks in Florida each winter. I suppose they will be looking to rent out the rest of the time.

Comment by Muggy
2012-03-22 08:02:13

“I suppose they will be looking to rent out the rest of the time.”

I don’t know anyone that does this. Anyone.

 
Comment by polly
2012-03-22 14:55:10

You have to be careful with that 6 months a year stuff. There is a small issue of making yourself a “US person” for tax purposes.

 
 
Comment by Jerry
2012-03-22 09:03:37

Some people are getting “wacky again”. They just don’t learn. To hell with common sense!

 
 
Comment by Professor Bear
2012-03-22 06:01:30

‘We’re going to provide refinancing with no documentation against property that hasn’t been appraised. Isn’t this the very way we got into trouble?’

Where have all the flowers gone, long time passing?
Where have all the flowers gone, long time ago?
Where have all the flowers gone?
Young girls have picked them everyone.
Oh, when will they ever learn?
Oh, when will they ever learn?

– Peter, Paul and Mary

 
Comment by ProperBostonian
2012-03-22 06:08:33

“The well-heeled are down here vacationing. They are feeling that they have to act quickly and can’t wait till the end of the season because their choices might be gone.”

The amazingly stupid are down here vacationing. Just when the locals thought there might be some chance to get a decent price, idiots fly in from the rest of the world to keep the bubble going.

Comment by Lola
2012-03-22 09:05:57

“The well-heeled are down here vacationing. They are feeling that they have to act quickly and can’t wait till the end of the season because their choices might be gone.”

Florida realtors should enjoy the Canadian feeding frenzy while they can. That won’t last much longer if the OSFI (Office of Superintendent of Financial Institutions Canada) gets its way.

They’ve just released a draft of some tough new guidelines aimed at tightening up residential mortgage underwriting practices and procedures in Canada.

http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?ArticleID=4831

One highlight of the report that will dampen Canadian enthusiasm for purchasing second homes or investment property in the U.S., are the new regulations around HELOCs. The OSFI is proposing that banks apply a much higher level of scrutiny to HELOCs and that they be converted to regular loans or amortized after a period of 5 years, which will make them more expensive and difficult to obtain.

 
Comment by Steve J
2012-03-22 09:30:39

Just wait until the Canadian bubble bursts and all those Canadians have to sell at the same time.

 
 
Comment by Kirisdad
2012-03-22 06:34:27

My daughter goes to school in Sarasota so I was there in Jan/feb 2010 and 2011, it was dead. I was there this year and the place is booming. I attribute it to Canadians and stock market. Huge increase in hotel rates. Of course, a market drop and currency change could affect it dramatically.

Comment by Ben Jones
2012-03-22 06:47:40

How long was the wait at Applebees?

Seriously, it’s an election year and the economy has become yet another political football. But Florida housing prices have fallen a lot; that’s why these foreigners are there. But here in Arizona, they are paying too much IMO. This quote about the online auctions is true. Anyone of you can check these out. Plus they are rigged! I was following one the other day on a completely trashed out house in Tucson. They were asking $18k, which only means that’s the opening bid. By the time it closed, they had one bid; at $27k. Who would offer 9k more than asking on the first and only bid?

Then it shows up again a few days later with no time limit and goes under contract at $30k.

These foreigners really like the turn-key stuff. But even here there are games. One I saw the first day it was listed. The agent told me they had 7 offers at 9AM that morning. How does that happen? And it’s still on the market 2 weeks later with no contract.

The two big issues with the housing bubble have always been inventory and financing. Both are being distorted against prices finding their natural level right now.

Comment by Arizona Slim
2012-03-22 09:50:49

I was following one the other day on a completely trashed out house in Tucson. They were asking $18k, which only means that’s the opening bid. By the time it closed, they had one bid; at $27k. Who would offer 9k more than asking on the first and only bid?

I’d be curious as to where this house is, Ben. If it’s within easy bicycling distance, I could check it out for you.

Comment by Ben Jones
2012-03-22 10:43:16

It’s already sold, so there’s no point. Thanks anyway.

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Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-22 23:23:23

“The two big issues with the housing bubble have always been inventory and financing.”

Fraud was a third biggie (and suggested in your post).

 
 
Comment by Beer and Cigar Guy
2012-03-22 07:36:57

Kirisdad,

My youngest son is down there at New College.

Comment by Muggy
2012-03-22 08:06:13

Let me know what your experience with New College is. I love the idea, and it will probably be a good fit for my son.

My daughter is obviously headed for keg stands at UF. :grin:

Comment by Kirisdad
2012-03-22 08:22:14

LOL Muggy. Keg stands is exactly what my daughter didn’t want. The joke at the school is NCF football ‘ still undefeated ‘ .

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Comment by Muggy
2012-03-22 08:44:21

“NCF football ‘ still undefeated”

Lol.

When I was at UB the football team went D1, which really annoyed the research/academic contingent. The school’s paper had this clever headline: UB BULLS HIT D1

I’d worry that New College is too small, but what do I know.

 
Comment by Ol'Bubba
2012-03-22 16:07:08

When I was at UB the school brought back football after a long absence. I think they started as a Division III program. This was in the late 70’s.

 
 
 
Comment by Kirisdad
2012-03-22 08:10:36

Small world considering the size of the school. My youngest daughter is a freshman at New College. Does your son like it? What are your thoughts of the school? Are you a Floridian?

Comment by Beer and Cigar Guy
2012-03-22 09:31:32

Guys,
My youngest, Alec, is also a freshman. He is a very bright kid- as all of them must be in order to be accepted. The campus is small, eclectic and appears to be pretty safe. As you know, cell phone reception there is crap, so the boy is difficult to get ahold of- probably by choice on his part. He wants to study Econ (like his old man) and they appear to have some capable staff, but like all academics, they of tend to fall into the trap of believing their own BS. I am really trying to emphasize to him the importance of independent thinking and analysis as opposed to ‘running with the herd’. I push him towards this blog, MISH and ZeroHedge for reality-check material.
The ‘grading system’ (or lack thereof) has my brow furrowed, but I promised my bride that I would give it one year before I decided ‘whether I could continue to financially support this institution’. I know that other schools- including Harvard- have a similar evaluation procedure that does not award ‘grades’. I also know that this ain’t Harvard. We shall see.

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Comment by Kirisdad
2012-03-22 10:38:54

The grading system concerns me too. Their grad school placement is pretty good, so I’ll have to live with it. My daughter is very happy there.

 
 
 
 
 
Comment by palmetto
2012-03-22 06:55:20

“How come foreclosures are down in many other counties and the rate of new filings here is far higher than in the rest of Florida? Because if builders all over the state built too many homes, they built way too many here. Because of an earlier, even larger wave of foreclosures we know how this will play out: distressed properties on the market driving down prices, stifling new construction, crippling the labor market and cutting property tax revenue.”

Yep, builders built WAY too many homes in this area (Tampa Bay). More desirable areas such as Sarasota will always have better activity than, say, Apollo Beach (which is sort of a joke). However, since I have a part time gig that brings me into contact with “the public”, I can tell you that, on a purely anecdotal basis, homes are being purchased. Mainly short sales and foreclosures, and stuff that requires some work. Most people that I’ve spoken to bought because of the perception that they’re getting a good deal, and many are long time renters who finally pulled the trigger. These are existing homes and nobody is buying “new construction” and there was an article in our local weekly fishwrap yesterday about half-empty strip malls in the area, but they really stretched to put a positive spin on it.

Comment by Ben Jones
2012-03-22 07:01:38

‘half-empty strip malls in the area’

And wig stores. I never saw a wig store in my life until I went to Florida.

Comment by palmetto
2012-03-22 07:12:26

If you really want to get a taste of spin on a bad situation, read this. “Vacant plazas expected to encourage new business in South County”. That would be South Hillsborough County, the county in which Tampa is located.

http://www.observernews.net/thisweek/front_page/3885-Vacant_plazas_expected_to_encourage_new_businesses_in_South_Coun.html

Comment by Ben Jones
2012-03-22 07:27:49

It’s true, vacancies should mean lower prices which would encourage new entrants. It really is econ 101 that in a fiat money driven economy, every boom carries the seeds of the next bust and vice versa.

But the media doesn’t even understand simple supply and demand. Notice they will say, ’sales are up, but prices are down!’ Any item should see more sales as prices fall. These guys are so steeped in bubble logic they think we should buy more of things that are increasing in price!

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Comment by Robin
2012-03-22 19:18:08

How sustainable are new cupcake stores offering a $5 product at a 400% margin?

 
 
 
Comment by palmetto
2012-03-22 07:18:44

“And wig stores.”

LOL. Two reasons for this:

1) Lots of senior citizen females with thinning hair

2) Large number of cancer treatment centers in Florida.

Comment by aNYCdj
2012-03-22 07:35:48

3. Lots of people want to look like Amy Beehive Winehouse or Nicki pinko Minaj…….

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Comment by Steve J
2012-03-22 09:33:15

I thought they called them weaves now?

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Comment by AQIUS
2012-03-22 13:15:53

I was thinking ” Aunt Esther ” from Sanford & Son re the wigs.

Are there still boiled peanut stands by the road?

Now thats some REAL Florida flavor, boy howdy!

 
 
 
 
Comment by Kirisdad
2012-03-22 07:25:12

‘ mainly short sales and foreclosures’ Yes, everything else is wishing prices. I looked at a villa/condo in East lake (palm harbor) short sale 2/2 1100 sq ft. 22 yo. It needed a little work, not much. Bank approved $88,500 2/10/12. I checked price history, they were asking $69,900 0n 9/18/11.

Comment by palmetto
2012-03-22 07:47:03

LOL, during the aftermath of the peak bubble, I rented in a condo complex in Apollo Beach. At peak, units there were selling for $150,000.00 for a 2BR, 2BA built back in the 1970s. In 2007-2008, bank owned foreclosures were selling there for around $80,000.00

Comment by Kirisdad
2012-03-22 08:13:55

$80,000 is about what they’re worth. If it was a true villa w/a garage, I probably would have made an offer.

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Comment by palmetto
2012-03-22 08:37:42

Not a villa with a garage by any means. This is a three story “apartment style” condo complex, with a separate section that does have some “townhouses”. However, no garages. Assigned parking spaces. But hey, it’s waterfront!

I was glad to get outta there, it was OK at first and then went rapidly downhill in the aftermath of peak bubble.

 
 
 
 
Comment by Arizona Slim
2012-03-22 09:52:32

Most people that I’ve spoken to bought because of the perception that they’re getting a good deal, and many are long time renters who finally pulled the trigger.

The key word in the previous sentence is perception.

Comment by oxide
2012-03-22 10:09:30

I’ll play broken record: Even if a purchase doesn’t seem like a good deal, it actually is, compared to the alternatives.

 
 
Comment by rms
2012-03-22 20:41:29

…half-empty strip malls…

In the strip malls around Modesto, California, the anchor tenant folds first, and the rest of the small shops die within a few months. Then six months later you might get a Vietnamese business in one of the small spaces with hand-made paper signs hanging crooked in the front window, low enough to block the casual viewer’s curiosity; busy though.

These strip mall investors are likely dying like everyone else due to retail activity slowing to a crawl. No recovery in sight with “published” unemployment above 16% in Stanislaus county, and that’s in the better neighborhoods!

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-22 23:25:59

Are you in Modesto? I used to be an extra in their symphony orchestra, which was about 2/3 itinerant Bay Area musicians.

Comment by rms
2012-03-22 23:55:01

No, my wife’s extended family is in Modesto. I’m a former coastie, San Luis Obispo, CA; priced out by the FB’ers.

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Comment by turkey lurkey
2012-03-22 07:18:56

Wow. It looks like the market is all over the board, with the only real action coming from foreign buyers.

Comment by palmetto
2012-03-22 07:27:15

Lots of foreign buyers, yes, but as I mentioned above, I’ve also spoken with some young family types that finally pulled the trigger on purchasing a home. And that’s only if they feel they are getting a good deal. I’m actually surprised, but then again, when I’ve spoken with some of these folks, the relief in their voices is palpable. As Muggy illustrates above, renting when you’re trying to raise a young family can be very destabilizing and the folks I’ve spoken with just wanted out of the rental game so they could get on with raising their kids without worrying when they’d have to move.

I can’t help thinking, though, that there may be yet another wave of foreclosures or walk-aways as values fall below even what exists now.

Comment by Ben Jones
2012-03-22 07:31:42

‘young family types that finally pulled the trigger’

Using a govt backed, 4% loan? What would the rates be if set by the market? 8, 9% or more, with substantially more down-payment? And what would prices then be? Like someone here said, I don’t want a low rate, I want a low price.

Comment by palmetto
2012-03-22 07:40:22

It’s perception, really. These folks THINK they got a good deal and by comparison to peak bubble prices, it looks that way. I, however, can’t help thinking I’m looking at the next generation of FBs.

BTW, also anecdotally, there have been some entries into the market of investor groups buying up apartment complexes to get into the rental game. Interesting. One is called “Avesta” and I saw one of their want ads for leasing agents. Low income stuff.

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Comment by scdave
2012-03-22 08:04:33

And what would prices then be ??

Yep….You better be prepared to stay put for a very long time…They are not buying the house they are buying the payment because if interest rates were 8% they would/could never pay that same price…

IMO, Reckoning is coming if you buy now and need to sell anytime after rates move up…With that said, If your intention is to settle down long term, then locking in this type of financing can make some sense…

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Comment by b-hamster
2012-03-22 08:40:10

Well the manipulation of interest rates by the fed is what drove the bubble to begin with. As was mentioned, people are dwelling (no pun intended) on the payment versus the rate or principal amount. Keep the rate abnormally low and suddenly you have hugely inflated home values.

 
 
 
Comment by Muggy
2012-03-22 08:36:45

“As Muggy illustrates above, renting when you’re trying to raise a young family can be very destabilizing and the folks I’ve spoken with just wanted out of the rental game so they could get on with raising their kids without worrying when they’d have to move.”

It is frustrating, and I’m nearing my ‘event horizon’ (pun intended). There are two variables in play for me that may end up being a grandslam for my family if they settle in my favor:

1. My current LLs are the ‘not give it away’ types. This means that they’re happy to keep me while they wait for the ‘market to come back.’ If they figure out in 2-3 years it ain’t coming back, and they rent to me in the meantime, I win. I’ll send my kids to our current zoned school (a good one), then buy in 2-4 years in that zone.

2. We are also near a K-8 fundamental school, which has no zone, but gives preference to proximity and siblings. So, if I can get one more year at my current rental, and get my son into this school, I will know where my children will be going to school for prek-8 and then can rent ANYWHERE. That would be great.

If both of these settle in my favor (rent this for 2-3 more years, then have a shot at a cheap house + get into fundamental) I will have a chance at getting what GED, draft-dodging, pot-smoking Boomers got just for being born at the right time. :razz:

 
Comment by Arizona Slim
2012-03-22 09:54:41

I can’t help thinking, though, that there may be yet another wave of foreclosures or walk-aways as values fall below even what exists now.

I’m thinking that the same thing will happen here in Tucson. ‘Specially among the in-VEST-ors who buy SFRs to rent out.

They’re going to get very tough lessons in the realities of landlording. Even in the best of economies, it’s a much tougher business than those weekend seminars make it out to be.

 
 
 
Comment by Liz Pendens
2012-03-22 07:36:47

“The old rules required the property to be worth at least $75,000 for every $100,000 borrowed. The new version, dubbed ‘HARP 2.0′ by the public, offers something close to a ‘no-doc’ loan — employed borrowers don’t need to produce tax statements. They also don’t need a new appraisal, because this time there’s no ceiling on what lenders call LTV, loan to value.”

Its really happening here in FL. Last week I talked to a friend who hadn’t made a mortgage payment in over a year. He said through the HARP program he was able to refi (with principal reduction) at 2% for FORTY years with no documentation (he is marginally self-employed). He is WAYYYYY upside down on his house. He said it was pretty easy to get the new loan.

This is not going to end well.

Comment by palmetto
2012-03-22 07:48:20

“This is not going to end well.”

Sometimes I wonder if it will ever end at all. During my lifetime, anyway.

Comment by scdave
2012-03-22 08:08:25

Sometimes I wonder if it will ever end at all ??

A Black Swan will end it…

Comment by Beer and Cigar Guy
2012-03-22 08:20:54

Silly scdave! Don’t you know that in the Government-Mandated/Financially-Engineered-New-Normal, all swans are white? Risk has been decreed obsolete! We are Too Big To Fail! The Law of Gravity has been repealed!

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Comment by scdave
2012-03-22 08:24:00

+1…That is the mind set isn’t it….My goodness…What a mess we are in….

 
Comment by palmetto
2012-03-22 08:34:32

One potential Black Swan I’m watching is the multi-drug resistant TB that has developed in India. That’s a Black Swan that can’t be manipulated. One of the many blessings of globalization, doncha know.

 
Comment by Liz Pendens
2012-03-22 09:19:21

Quantitative easing is to black swans

what garlic is to vampires*.

*(Warning: May not be effective on squids)

 
Comment by Steve J
2012-03-22 09:37:23

Black Swans are the ones you don’t see.

All doctors are aware of drug resistant TB.

I’m predicting war some place like Spain.

 
Comment by scdave
2012-03-22 09:41:00

I’m predicting war some place like Spain ??

I am hoping nothing serious happens on our own soil….

 
Comment by palmetto
2012-03-22 10:25:28

“I am hoping nothing serious happens on our own soil….”

Me, too. But we live on the real estate of a country that has perpetrated so much violence around the world….

 
 
 
Comment by ProperBostonian
2012-03-22 09:04:51

“Sometimes I wonder if it will ever end at all. During my lifetime, anyway.”

I wonder that myself. Here in Cambridge, MA whenever something comes on the market that is even a bit of a deal, a developer swoops in and outbids and turns the SFH into condos, if possible, if not, does some renovation and puts on market at a ridiculous price.

One of the scummier developers bought a former school, a beautiful old building. He got permission to build based on his plans to keep it as a school; which was also the reason he got the price he did from the seller. When the inspectors went in to view the work, everything had been gutted and it was obvious he was turning it into condos. When he came to the planning commission meeting to tell us what he was really doing, he actually said that Cambridge doesn’t need good schools because when the kids are old enough people move away or send them to private school.

Here is an example of a 99% vs 1%. This 1% doesn’t even think our kids need good schools.

Comment by polly
2012-03-22 15:40:05

I hope they told him that his modified plan was not approved and he couldn’t sell or rent the units. No occupancy certificate for you.

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Comment by ProperBostonian
2012-03-22 16:54:25

Unfortunately, no, that’s what I would have expected. Long story, but someone on the Cambridge City Council is corrupt. To add insult to injury, he bought the property behind my house and was going to build a 15-car parking lot. This is a residential neighborhood. That at least was canned.

 
 
 
 
Comment by Diogenes (Tampa, Fl)
2012-03-22 09:04:28

Yes, but the goal isn’t long-term economic stability. The goal of these programs is to provide a “story” about how Obama helped save “home-owners” stay in their house and provided relief, thereby “saving” the housing market.
It also keeps lots of would-be foreclosures off the market, thereby reducing supply.
It’s all about election-year political maneuvering. The LONG TERM result will probably be disastrous. But that won’t matter.
It will be Bush’s fault.

Comment by scdave
2012-03-22 09:19:34

It will be Bush’s fault ??

Spot on Diogenes…I new you would finally come around…

Bottom line is, no matter what Obama does, none of this happens (housing & Wars) without the Bush 8 year Presidency…Period…

Comment by Beer and Cigar Guy
2012-03-22 10:55:42

Yes, just as NONE of it could have continued for the last 4 years without the COMPLETE support of Obama. Housing AND the wars. That is why he got a Nobel Peace Prize, right? For continuing the wars. And closing Gitmo. Despair we can believe in.

Let me be be clear: Bush was an idiot. Obama is ‘Bush Lite’. Both parties and the political system they have created are badly broken and are detrimental to the citizens of this country. Politicians of either party would like you to think that they are significantly different and the other party is ‘evil’. This political theatre keeps citizens occupied fighting amongst themselves while business as usual goes on in Washington. The two parties wear different colored masks, but they are both here to rob you. They are the two sides of the same coin. If you restrict yourself to only supporting either one, then you can expect more of the same shenanigans. The dealer may change, but the game and its rules will not change. Think differently if you want real change.

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Comment by scdave
2012-03-22 11:11:04

Think differently if you want real change ??

Okay…Here ya go;

Alan Simpson….

 
Comment by turkey lurkey
2012-03-22 13:35:54

I’ve been voting Green Party for years, but they are almost always denied a ballot.

I “mostly” agree that the Dems and Repubs are no different, but I seriously differ in the degree and fundamental, with the Repubs being the greater evil.

 
Comment by Carl Morris
2012-03-23 08:55:04

Bush was an idiot. Obama is ‘Bush Lite’.

So you’re saying Bush is an idiot…and Obama is a lightweight version of Bush? :-)

Anyway, I love Al Simpson. He’s from my hometown, I helped take care of his mom in the hospital/nursing home there when I worked there before I joined the army, and he’s bought me dinner before :-). I think I remember seeing him in Rotary Shows, too, when I was even younger. Those guys could get pretty bawdy back in the day…definitely not politically correct.

 
 
 
 
Comment by polly
2012-03-22 15:41:17

“he was able to refi (with principal reduction) at 2% for FORTY years with no documentation (he is marginally self-employed). He is WAYYYYY upside down on his house. He said it was pretty easy to get the new loan”

So…he’s renting.

 
 
Comment by Muggy
2012-03-22 08:14:08

Kirisdad, you mentioned North PInellas a few weeks ago. Were you looking in Palm Harbor, Tarpon, or East Lake area? I thought I’d share a few warnings I’ve repeatedly heard:

1. East Lake area: blow and go. A lot shoddy nailgun work in that area.

2. Palm Harbor: be careful if you’re buying a home for the high school. If your child will be entering after 9th grade you may not get a seat.

3. There are a few risky parts of Tarpon.

I’m trying to stay in the Western part of Seminole / Redingtons area, FWIW, but my wife has family in SPB, so she doesn’t want North Pinellas. I’d actually love to live near Brooker Creek Preserve in Tarpon, but that’s way out there. All, and by all, I mean ALL of our 20-something and 30-something friends that are buying are buying in St. Pete (Shore Acres, Old NE, 4th Street, Crescent Lake, etc.). I don’t get it.

At least the Kenwood/Gulfport hype is officially dead. Not enough hipsters and DINKS, I guess.

Comment by Muggy
2012-03-22 08:21:02

BTW, if any future retirees are lurking, my advice for retirees is entirely different. I would recommend and of the Belleairs and the Western edges of Largo. The West Bay corridor has a lot of restaurants, doctors, businesses, etc. and those areas are nice and quiet.

High and dry, too. I actually miss living in Belleair Bluffs, everything was very convenient.

 
Comment by palmetto
2012-03-22 08:24:33

“Shore Acres,”

We (ex and I) had some friends who lived in Shore Acres at one time. One of the worst, and I mean WORST areas for flooding. So I don’t get it either. It’s not going to get any better and if somebody would relish making an insurance claim every couple of years or so to remediate the water and mold intrusion into the home, by all means buy in Shore Acres.

 
Comment by Kirisdad
2012-03-22 08:50:52

Thanks for the info Muggy. My kids are out of school so that’s not a priority. My wife likes East lake area, it’s close enough yet far enough from my family in (Holiday NPR) and we won’t have to drive on hwy 19.

 
 
Comment by ProperBostonian
2012-03-22 08:31:49

“Moore said that one of her investor clients, for example, recently paid $130,000 for a house in North Port that would have sold for no more than $110,000 four months ago.”

How much you want to bet the investor client is a 24-year-old from Toronto just getting started on his real estate empire.

Comment by palmetto
2012-03-22 08:40:11

“recently paid $130,000 for a house in North Port that would have sold for no more than $110,000 four months ago.”

Wow, Northport is a joke. $75,000 is more like it. I mean, that was an area that REALLY got hit by the ugly stick in the peak bubble aftermath.

I think we’re in a sort of churning stage here.

Comment by Moman
2012-03-22 11:56:15

I cannot remember any industry in that area that would support the wages needed for that kind of house payment or even a rental payment. The whole area between Ft. Myers and Sarasota is kind of an economic netherlands in the state, similar to the PSL/Stuart region on the east coast. Drove through some neighborhoods in that area last year, I can’t figure out what they do for work outside of retail.

 
 
 
Comment by Muggy
2012-03-22 11:32:40

My Realtor told me something that unintentionally pissed me off: when I told him that a 2/1 closed at $115k down the street from me, he said, “yeah, my office just closed on a little beach house for $120k, but it was sold to an invester.”

O.k., so the money guys get the deals, and the end users pay retail?

Comment by turkey lurkey
2012-03-22 13:46:47

Always and in any industry. That’s how our great capitalist system (that’s sent our jobs to a communist country) works.

 
Comment by ProperBostonian
2012-03-22 14:15:19

Muggy, See my comment above. That’s what really ticks me off about the market here in Cambridge, MA. Deals for the developers and flippers; retail for the masses.

Comment by Muggy
2012-03-22 17:42:07

Just read your comment… that’s unbelievable.

 
 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-22 12:43:46

Here is something for the greater fool real estate investors to chew on: Beware of simple analysis that shows why you are likely to lose money.

March 22, 2012, 2:01 p.m. EDT
Beware of Housing Prices
By Thomas H. Kee Jr.

The recent frenzy in the housing market is very interesting, although somewhat counterintuitive, and deserves consideration. In my neck of the woods, and I am sure in others, certain people are getting caught up in the sudden change in interest rates, but those same people are missing a very important relationship in the “home value” equation that I hope to reveal here.

Of course, the most important aspect in buying a home is location, but right next to that is affordability, and when interest rates begin to increase, affordability ratios decline. Everyone knows when interest rates increase the monthly mortgage payment increases, so if prices are held the same and interest rates rise, then the affordability ratio declines.

However, the comparison above included an important assumption; it assumed that prices remain constant, and we all know that prices do not remain constant. In fact, the fluctuation in prices is a very important and dynamic variable in this same equation. I have argued many times that housing prices are a direct reflection of the amount people are able to pay, and nothing else. If that is true, the inverse relationship between price and interest rates that we all learned in economics 101 comes into play as well.

In school, we learned when interest rates increase, prices go down, but when interest rates decline, prices go up as well. This should be an eye-opening relationship given the direction of interest rates and prices over the past few years. Arguably, real estate prices would have declined much more than they have already if the level of interest rates was not declining alongside it.

There is not enough room in this article to include the findings, but the bubble was so exaggerated that even the steep decline in interest rates that we have seen since the bubble burst could not stop housing prices from falling.

Ultimately, housing prices are not a function of location, or interest rates, as much as they are a function of how much a person can afford. Of course, interest rates come into play in this determination, but people cannot change the amount they can afford at their whim, so that gives us a concrete starting point.

For example, if the average household could afford to pay $2000 per month (this is high), the maximum value of the home he could consider would fluctuate with interest rates. Assuming a 30-year rate of 4%, the maximum value would be $360,000 (CNN Calculator).

However, if interest rates increased from 4% to 5%, but the amount that person could afford to pay remained the same, the maximum amount that person could afford would be $320,000, or 11% less than he would have before. (I am including taxes and other related fees here.)

This relationship often plays a role in the affordability estimates, but when this is multiplied across millions of people, something interesting begins to happen. Assuming that people cannot change the maximum amount they can afford to pay at will — and assuming this is a fixed amount that can only fluctuate slowly over time — if interest rates increase, home prices will eventually need to decline, and that makes the future value of a home as an investment lower than it is today.

Comment by Moman
2012-03-22 13:12:11

This is all fine and dandy, but the catch-22 I see is rental rates will be sticky in the short run. It should take a couple years before this all washes out, especially when investors desperate for cash flow drop the rents to generate some flows. Renters are already transient and what would stop them from moving across the road for $200 less rent a month? I know I would.

Based on the number of multi-family residences in construction now, a perfect storm of real estate investing could happen. Apartments owned by big companies would be in direct competition with large numbers of SFH owned by investors for the limited pool of renters. This could easily be a race to the bottom. Rents are rising know, but this is such a cyclical indicator I put no faith in their ability to climb to the sky, outside of development constrained locations.

Always rising rents are the same fallacy as always rising prices.

Comment by Arizona Slim
2012-03-22 13:32:40

Based on the number of multi-family residences in construction now, a perfect storm of real estate investing could happen. Apartments owned by big companies would be in direct competition with large numbers of SFH owned by investors for the limited pool of renters. This could easily be a race to the bottom.

I predict that we’ll soon be feeling the consequences of over-building in the multifamily housing sector.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-22 13:40:27

All signs point to lower rents going forward, with inflation that might mask lower real rents the wild card.

Little known fact: Due to the substitution effect between rental and owner-occupied housing, lower rents are predicted to result in lower purchase prices.

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Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-22 13:39:01

“Always rising rents are the same fallacy as always rising prices.”

Does ‘higher than expected’ future inflation some how deserve a place in this discussion?

 
 
 
Comment by Professor Bear
2012-03-22 13:46:46

Since we are in a new era where real estate investments automatically make you rich, fundamental drivers of supply and demand, such as an abysmally low household formation rate, myriad Baby Boomers trying to downsize from their empty-nest McMansions, or builders lured by artificially inflated prices and government subsidies into adding supply on top of the extant glut, no longer matter.

Real estate always goes up! Buy now, or get priced out forever!!

March 22, 2012, 12:01 a.m. EDT
Housing is still ‘shadowed’ by supply
Commentary: Job and income growth needed for real revival
By Kathleen Madigan of Dow Jones Newswires

NEW YORK (MarketWatch) — Home demand took a step forward in February. But oversupply remains a problem.

Sales of existing homes dipped in February to an annualized rate of 4.59 million. But the drop reflected an upward revision to January sales, rather than a sign of weakness. Compared to a year ago, resales were up 8.8%. Read more about home sales.

The uptrend in sales over time has whittled down the number of homes for sale. According to the National Association of Realtors, the inventory of homes for sale is equal to a 6.4 months’ supply at the current sales pace, an improvement from 8.6 months a year ago.

But that doesn’t mean housing has overcome its oversupply problem. The market still faces a shadow inventory of millions of homes whose owners will put them on the market once conditions look more stable.

Mortgage information tracker CoreLogic calculates homes that are seriously delinquent, in foreclosure or already owned by lenders constituted a pending inventory of 1.6 million units in January.

What’s disturbing is that little headway in the number of homes just waiting on the sidelines. Although about 3 million distressed sales have taken place over the past three years, “the shadow inventory in January 2012 is at the same level as in January 2009,” the CoreLogic report says.

Some of those homes will enter the market during the upcoming important spring selling season. The potential overhang means more selection for buyers–but at the cost of further downward pressure on prices.

Given the drop in prices already seen over the past five years along with dirt-cheap mortgage rates, affordability is much less of a problem than it was just a few years ago. Real estate website Trulia calculates that buying a home is cheaper than renting in 98 of 100 U.S. metro areas even when expenses like insurance and taxes are included.

Yet even as owning wins out financially, home demand still remains far below what history suggests given the recent formation of new households.

“Many people cannot afford a down payment or qualify for a mortgage,” says Trulia’s chief economist Jed Kolko. “High unemployment and credit tightening during the recession have sidelined many people from considering home ownership.”

Comment by Arizona Slim
2012-03-22 14:41:31

But that doesn’t mean housing has overcome its oversupply problem. The market still faces a shadow inventory of millions of homes whose owners will put them on the market once conditions look more stable.

Sounds like a couple of friends. They’re leaving AZ and it looks like they’re going to retire in CO. Asked the wife if they were going to sell the AZ house. Nope, they’re going to rent it.

I suspect that the reasons for renting it have to do with the price that it will sell for vs. the one they wish it would sell for. And, of course, the former price is less than the latter price.

 
 
Comment by Muggy
2012-03-22 17:45:45

Thanks, Ben. Thanks for your choice of words for title of this thread. This song has been running in my head all day.

http://www.youtube.com/watch?v=A_Zi-YSW3aQ

WOOT WOOT!

 
Comment by Lisa
2012-03-22 18:51:22

I think the HAMP re-fi’s are all full recourse loans (even if the mortgage were originally non-recourse), so the FB becomes a permanent debt slave.

The government’s determination to keep those payments coming in to the banks is just beyond beyond. And why folks would sign up to re-fi a house they still can’t afford, well, oh well.

 
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