The Housing Market Looms Large For Voters
Readers suggested a topic on market manipulation. “Here’s something that pisses me off: I think banks think the area I live in is more valuable, way more valuable, than it actually is. The wishing prices on REOs, in many cases, are astronomical. Bubble pricing got so high here because everyone was in on it. Den of thieves. It’s amazing what prices are in other parts of the country that don’t have all of the FL problems, and yet, most of the jobs here pay crap and we still have massive price points.”
“And seriously, I check homepath.com every now and then. Really? Only 4 Fannie Mae homes in Seminole? Really? REALLY?”
I replied, “I’ll give you my theory on this; the Republicans have been saying they want to get rid of the GSE’s. The Democrats say they want to save them. It’s possible that the GSE’s and HUD are holding back on inventory to make the housing market look better so Obama has a better chance at being re-elected, and they keep their jobs.”
One said, “A step further…… could it be proven that inventory is artificially lowered by the GSE’s in swing districts and states?”
One had this, “I was under the impression that the current goal was to move (transfer) the investment bank’s former illiquid assets to the taxpayers through the FHA backed lending. The investment banks preyed on the low-class poor folks using no-doc, high-fee mortgages toward the end of the bubble when everyone else knew the gig was over. This is why many of the modest properties appearing on the market are ‘as-is’ fixers in chit neighborhoods.”
“The better ‘here’s the keys’ homes in nice neighborhoods are still over-priced, and the GSEs have raised the qualifications threshold on potential borrowers.”
And another, “I suspect it has more to do with banks being able to unload inventory at a higher price. Seriously money controls everything in our gov. You really think some Gov worker would be able to stand in the way of what the banking sector wants. Fat chance.”
Finally, “That would certainly make sense based on the data I posted the other day. Fannie was reducing inventory in all bubble states…except FL. There, the REO inventory of Fannie was growing fast. You would think that with reports of rising prices in FL, Fannie would have an easier time selling homes…”
“They give data on how long from first missed payment to foreclosure (over 1,000 days), but they don’t give information on how long on average it takes from foreclosure to sale date… Foreclosure Radar has this for CA (264 days–and rising gradually), AZ (232 days–and rising FAST), and NV (216 days–and rising gradually). No data for FL.”
From Reuters. “The November 6 U.S. presidential election between President Barack Obama and presumptive Republican challenger Mitt Romney may be decided by a small number of “swing” states - those that could go to either man - where the health of the housing market looms large for voters as they weigh their choice. A Reuters examination of the latest housing data in 10 states that may determine the election’s outcome shows signs of hope in even the most battered real estate markets, notably Florida, with some other key battlegrounds doing much better.”
“In addition to Florida, the other states were: Arizona, Colorado, Iowa, Nevada, New Hampshire, North Carolina, Ohio, Pennsylvania and Virginia. The recovery in home prices in battleground states is good news for the Democratic president as he stays barely ahead of Romney in national opinion polls.”
“In the northern Virginia suburbs of Washington, home prices in the first quarter of this year rose 5.9 percent compared to the same period a year earlier, and were up 2.4 percent for the state as a whole. The uptick already may be helping Obama. A survey released this month by the firm Public Policy Polling put Obama 8 percentage points ahead of Romney in Virginia, which backed a Democratic president for the first time in a generation when Obama won there in 2008.”
“Realtors in Denver, which dominates the Colorado real estate market, are reporting a shortage of housing and a 10.5 percent price rise in April versus a year ago. Obama has conceded that his administration could have done more to improve housing market conditions across the country. An overhang of foreclosed properties worth less than the price for which they were purchased has been a particularly difficult issue to resolve, in part because of questions around loan forgiveness. Romney has attacked Obama for failing to fix the problem.”
“But Romney provided ammunition to the Obama camp when he said the foreclosure process should be allowed to run its course and hit bottom. That may be a very unwelcome message in a state like Florida that is still saddled with hundreds of thousands of foreclosed properties.”
“Florida is considered a crucial battleground state in the election as Obama and Romney plot a path to winning the 270 electoral college votes needed to secure the presidency. Florida, which Obama won in the 2008 election, accounts for 29 electoral college votes - more than 10 percent of the total needed to win. ‘There is no path to victory for Romney without Florida and Virginia. Those are going to be tough states for Republicans to get this time around, particularly Virginia,’ said Jim Kessler, at Third Way, a Washington think tank.”
“Thomas Schoenrock and his wife Jessica recently bought a house in Las Vegas after moving to the city to take advantage of prices that are roughly half compared with the cost of homes in their native Washington state. ‘For us to get a house in the market we came from would have cost $250,000. In the market here, they are practically giving them away,’ Thomas Schoenrock said.”
From Tallahasee.com. “I am hearing reports of low inventory. At face value, this is not just good news, it is the very news that we have been waiting to hear. Falling inventory is a major ‘next step’ in the return of the housing market. But sadly, thus far it is just unsubstantiated positive sentiment from real estate agents who have a vested interest (as do I) in seeing a housing market recovery.”
“My reports show falling inventory, but they also show that home sellers who have failed to sell their homes in recent years (as a statistical group) are growing far larger than our existing inventory. My reports also show a rise in foreclosure activity, so I know that the next few years will see an increase in the number of distressed homes for sale in Tallahassee. This shadow inventory of homes is also larger than our current inventory.’
“Thus I believe it would be nothing more than false prophecy for me to just report falling inventory, because the bigger picture shows something different entirely. In Tallahassee, our units sales are down to 50% of the historical norm. Think about it, if we’re not selling them, where are they going? This ‘forgotten inventory’ of homes is the future supply, and had our market retained values, these would be current supply.”
“The forgotten inventory of homes in Tallahassee is more than double what our current active inventory shows in the Tallahassee MLS, and for this reason, and do not think the falling inventory numbers are going to have the impact that we all are hoping for. So, real estate agents everywhere, step up to the challenge and show us where your market really is. I bet there are some markets out there with true recoveries underway, I just want to see some real evidence, not just the normal chirping real estate agents who have never changed their tunes.”
How much of the nation’s shadow inventory is essentially unsaleable due to economic changes since 2008? During the bubble it made sense to some people to live near Sacramento and commute to high-paying jobs in the Bay Area. Now, the price of gas makes such a commute very expensive, even if you are in the ever-shrinking demographic pool who would consider or would be considered for both a high-paying job in the Bay Area and a home loan.
Your point shows that the pool of buyers at a grossly inflated price is small and narrowing.
Caesar’s Empire wants to enslave us by tempting us. It’s our job to be truthful.
“How much of the nation’s shadow inventory is essentially unsaleable due to economic changes since 2008?”
It’s all salable at the right price. And an easy way to sell it is to auction it off to the highest bidder.
There is no need for Uncle Sam to give away homes for free, in the manner which the Homestead Act gave away America’s government-owned land. But why the inventory is best held by Uncle Sam instead of put to private use by whichever American citizens can best use it is a great mystery to me. I wish our presidential candidates would address a few economic issues of fundamental national importance, like this one. That would go a long way to helping this independent voter decide how to vote in November.
Why not trumpet the move to get GSE-owned homes back into private hands as a new-age Homestead Act? Again, there is no need to give the homes away for free; an auction would serve well to protect taxpayer’s interest in the homes which are currently held off the market, either maintained at taxpayers’ expense or crumbling into desuetude.
This is a fantastic opportunity for America to move forward from the post-housing bubble muddle in which it currently wallows. I would love to hear a difference of opinion, so long as you refrain from personal attacks.
(I really don’t care as much about personal attacks as some posters here apparently do, either. I simply find calling others st00pid to be counterproductive.
)
OPINION
May 18, 2012, 6:54 p.m. ET
Fergus Bordewich: How the West Was Really Won
The Homestead Act, which celebrates its 150th anniversary this weekend, offered free land to men and women willing to farm it. The law helped America become an economic superpower.
By FERGUS M. BORDEWICH
One hundred and fifty years ago, on May 20, 1862, Abraham Lincoln signed a bill that transformed the country. The Homestead Act offered 160 acres of free public land to settlers who would build a home on it and farm it for at least five years. Anyone 21 years old who was either a citizen or declared the intention to become one could stake a claim.
The law, declared Horace Greeley, the editor of the New York Tribune, was “one of the most beneficent and vital reforms ever attempted in any age or clime—a reform calculated to diminish sensibly the number of paupers and idlers and increase the proportion of working, self-subsisting farmers in the land evermore.” Bombast aside, his words were not far from the truth.
In all, four million settlers would file homestead claims to 270 million acres in 30 states, 10% of the land mass of the United States. (The size permitted for homesteads was eventually increased to 640 acres as settlers moved into drier regions.) Although the number of claims dropped off during the Great Depression, hundreds continued to be filed annually through the 1960s. Homesteading ended in the lower 48 states in 1976 but continued in Alaska, where the last homesteader filed his claim in 1979.
The movement to offer free public land to the landless was not universally popular. When homestead legislation was proposed in the 1850s, Southern congressmen repeatedly blocked it, fearing it would lead to the creation of more free states hostile to the expansion of slavery.
The political landscape shifted with the election of Abraham Lincoln in 1860 and the secession of the 11 states of the Confederacy the following year. House Speaker Galusha Grow (R., Pa.) reintroduced the Homestead Act in early 1862 as a war measure, a reward to “the soldier now in the field fighting the battles of constitutional free government,” as well as to the “soldiers of peace—that grand army of the sons of toil, whose battlefields are the prairies and the wilderness.” With Southern opposition gone, the bill sailed through Congress.
…
It’s all salable at the right price.
Someone should tell Detroit the good news.
My guess is that contrary to many other places, Detroit has already bottomed out and their homes would auction for above the price at which they were selling a couple of years ago.
At any rate, it is not the government’s business to manipulate market prices. The good thing about “overcorrections” is that if the market adjustment process is allowed to play out, they eventually correct themselves.
Million-Dollar Mansion Has A Bargain Basement Price
Meg Cramer and Sonari Glinton
Weekend Edition Saturday
[4 min 28 sec]
Stone Hedge, a 10,000-square-foot Detroit mansion built in 1915 is listed at less than $450,000.
Enlarge Jessica J. Trevino/Detroit Free Press
April 21, 2012
Even before the financial crisis, Detroit was known for its undervalued real estate. Now, a bad situation is even worse.
Michael Bradley and his sister Annette Foreman have spent the last several months cleaning their mother’s home. She died on Christmas Eve last year, and they’re putting her house up for sale.
The four-story house, known as Stone Hedge, was originally built for Walter O. Briggs in 1915. Briggs was in the car business. His company built auto bodies, and he owned the Detroit Tigers.
Stone Hedge is large, about 10,000 square feet. There’s a room just for linens and a two-part kitchen. There’s an elevator, a solarium and a cold closet for fur coats.
Stone Hedge: $445,000
Beds: 11
Baths: 7
House Size: 9,638 Sq. Ft.
Lot Size: 1.44 Acres
Year Built: 1915
Bradley and Foreman’s parents were active antique collectors, too. They filled their home with collectibles and they enjoyed entertaining in their ballroom.
The late Joseph and Gloria Bradley bought the house 1976 for about $65,000. It sits in Boston Edison, a neighborhood that attracts Detroit’s richest and most important people. Motown mogul Berry Gordy and automaker Henry Ford both called the neighborhood home. With its tree-lined streets and its Tudor Revival mansions, it looks like it could be any wealthy neighborhood — another Greenwich, Conn., or Beverly Hills.
A comparable house in Silicon Valley is selling for $15 million. Yet the Bradley’s home, with its stained-glass windows, servants’ quarters, coach house — all on one of Detroit’s most historic streets, runs for less than $450,000.
Sometimes in Detroit, housing prices don’t seem to make much sense at all. The median Detroit home price in 2011 was about $54,000 — more than $100,000 less than the rest of the country.
Walter Maloney, with National Association of Realtors, says the Bradley family is facing the same problems that millions of Americans are.
“This is perhaps an extreme example of a home being worth really a mere fraction of what it would cost you to build that property,” he says. “In fact, in most of the country today, we are seeing homes selling for less than replacement construction costs. This is really an over-correction of the housing boom and bust cycle.”
…
“In fact, in most of the country today, we are seeing homes selling for less than replacement construction costs.”
Hey Realtor A$$hole….. How would you know? Will you lying bastards ever backup anything you say? Ever?
“Thomas Schoenrock and his wife Jessica recently bought a house in Las Vegas after moving to the city to take advantage of prices that are roughly half compared with the cost of homes in their native Washington state. ‘For us to get a house in the market we came from would have cost $250,000. In the market here, they are practically giving them away,’ Thomas Schoenrock said.”
So much for the failed Realtwhore theory that ‘they’re not gonna just give it away.’
They are practically giving them away because it’s hot in the summer and air conditioning is expensive,water will be expensive and there is no industry to speak of. What about we bought there because we love the desert and it’s close to CA without the taxes?
Your thoughts ran the same as mine. High a/c costs and high water bills. You can live without the a/c in the evening, though, so if you spend all day “winning” at the casinos, you can use the downtown a/c and go home when the cool night air sets in.
You could probably skim off a bath at one of the many outdoor fountains that Vegas has in an effort to waste a very limited resource that they take from the Colorado reservoir…..
So, if you do it right, you could probably work out a suitable life-style arrangement that makes for relatively cheap living.
If you bought a big enough place, you could take in vagrants for room/board, too.
From the article, this couple aren’t retirees. One of them is a medical technician — presumably you can be a medtech anywhere in the country. I’m interested in what they paid and what their finances look like. Parts of Vegas may be Oil-Cityish. But why a place with four inches of rain?
“because we love the desert”
Really? People Love desolation? Isolation perhaps, which they won’t get buying a crap shack in a development.
“because we love the desert”
The Columbia Basin, which is roughly three hours east of Seattle, WA, has all the desert a Bedouin could desire with high temperatures over 100-degrees and below zero cold every winter. And wouldn’t ‘ya know…housing is affordable, and low-cost, contractible hydro-power has attracted a variety of sophisticated employers.
There are a lot of neighborhoods in Henderson that seem devoid of people.
They could be the only people on the block.
“they are practically giving them away”
God help us…seven years later and these dolts have no clue.
Some people buy houses in unfamiliar places just because the houses are dirt cheap. Then when they complain about the culture or lack of income opportunities after they buy, whose fault is it?
That’s a great point. In some ways you can’t blame people for wanting affordable housing, but unfortunately most fail to sit down and really think about the pros and cons of the decision. It’s that whole bogus fear of being priced out forever combined with the desire for a stable house to put down roots.
“Florida is considered a crucial battleground state in the election as Obama and Romney plot a path to winning the 270 electoral college votes needed to secure the presidency. Florida, which Obama won in the 2008 election, accounts for 29 electoral college votes - more than 10 percent of the total needed to win. ‘There is no path to victory for Romney without Florida and Virginia. Those are going to be tough states for Republicans to get this time around, particularly Virginia,’ said Jim Kessler, at Third Way, a Washington think tank.”
So is the election going to come down to the question of which candidate promises to do more to keep housing prices propped up?
If so, I have a simple suggestion for prospective buyers: Don’t even think about buying before the election, after which housing market fundamentals are likely to overwhelm campaign promises.
Just today the guy on Fox News was talking about… Great news! Gas prices are down!
Why are we so hung up on high house prices?
Because all that equity is free money just waiting to be liberated!
I’m still confused as to why, before the bubble, when oil prices rose stocks declined. Now, when stocks decline, oil prices decline.
You are only confused because you expect both those markets to follow some kind of fundamental logic.
Just because you cannot decipher the equations behind the market does not mean it is not acting logically.
Current electoral map for 2012:
http://www.realclearpolitics.com/epolls/2012/president/2012_elections_electoral_college_map.html
Looks like Romney has a solid swath of the heartland, and Obama has several large coastal states (CA, NY for two).
Any idea who would win the election based on the map as it reads today?
Obama.
I agree. And I predict that his second term will not be an easy one.
For one thing, his 2008 supporters, especially the progressive ones, haven’t forgotten all the promises he distanced himself from after he got elected.
Expect them to go into high gear and really start agitating for things like a public option in health insurance. Or even single payer.
All of this agitation will have a most surprising ally: The oh-so-conservative business community, which will view the ever-rising cost of health care/health insurance as an profitability issue. And an international competitiveness issue.
Romney is going to have a hard time here in Florida with all of the stories of Bain gutting successful FL companies.
Who knows though, maybe he’ll pin us all down and cut our hair. That’ll fix Florida.
“…the business ventures of Bain Capital while Romney was in charge: Dade Behring, which, saddled with debt, wound up shuttering two medical technologies facilities in Miami. Some 850 jobs were lost, while Bain walked away with $242-million - an 800 percent return on its investment
The Dade Behring case has been well-documented, but here’s a new wrinkle: The company under Bain’s leadership sought and received millions of dollars in tax breaks for creating jobs in Puerto Rico - shortly before closing it’s facilities, costing nearly 300 jobs.
The company in 1997 received a $3-million federal tax break aimed to promoting job creation in Puerto Rico. It also received a $4.1-million tax exemption from Puerto Rick in 1997 in the name of job creation. Dade ceased its operations in Puerto Rico in the first quarter of 1998.
As a presidential candidate years later, Romney has voiced skepticism about tax breaks to promote job creation.”
http://www.tampabay.com/blogs/the-buzz-florida-politics/content/under-romney-bain-received-millions-job-creation-tax-breaks-dade-behring-it-laid-hundreds
“The recovery in home prices in battleground states is good news for the Democratic president as he stays barely ahead of Romney in national opinion polls.”
“But Romney provided ammunition to the Obama camp when he said the foreclosure process should be allowed to run its course and hit bottom.”
Pandering. It’s What’s For Dinner.
I wonder if the anti-REIC social justice believers will still go pull the lever for Obama knowing he will stop at nothing to reflate the bubble including having our great great grandchildren pay for it and lining the pockets of the one percent.
I’m not saying that the Republicans wouldn’t do the same thing if the shoe was on the other foot. But a lot of things don’t add up:
The robo-signing thing was wrapped up months ago. That was supposedly holding up REO supply. But now we see articles from all over the country, in the space of a few months, that there is no supply. Lack of inventory. Then ta-da, bidding wars, multiple offers over asking. UHS camping out for lots.
If I’m right about this squeeze by the GSEs and HUD, it’s an important issue. I wish someone in the media (they have the resources after all) would look into it. Because one thing’s for sure; there is no shortage of houses or land. It’s the opposite, there’s a glut.
Maybe someone on high will somehow connect the dots and recognize that if a glut is enabled, or even encouraged, to be put on the market for sale, perpetually elusive affordable housing goals can finally be achieved.
“… perpetually elusive affordable housing goals…”
AKA cheap houses. A worthy goal if you are a potential homebuyer but a disaster if you are a mortgage holder.
IMHO the Big Game is to save the banks, and the various little games that are being played - such as the robo-signing thing - are numerous little games that are played to support the goal of the Big Game.
Why can’t America learn from Iceland’s experience that saving banks isn’t necessarily the best way forward after a financial collapse? Why not just focus on saving the American economy, and let the smartest bankers in the room figure out how to save themselves?
I suspect the key difference is related to education; on average, Icelanders are better educated than Americans. But that is just a hunch.
MARKETS
Updated May 20, 2012, 3:18 a.m. ET
In European Crisis, Iceland Emerges as an Island of Recovery
By CHARLES FORELLE
VESTMANNAEYJAR, Iceland—Three and a half years after Iceland collapsed in a heap, Dadi Palsson’s fish-processing plant has the air of a surprising economic recovery.
Mr. Palsson arrived at 4 a.m. on a recent workday. Twelve tons of cod were coming in. Soon, his workers would bone, slice and pack the fish for loading onto towering container ships headed abroad.
Three years after a spectacular financial collapse, Iceland is coming back, largely on the strength of its strong exports.
In 2008, Iceland was the first casualty of the financial crisis that has since primed the euro zone for another economic disaster: Greece is edging toward a cataclysmic exit from the euro, Spain is racked by a teetering banking system, and German politicians are squabbling over how to hold it all together.
But Iceland is growing. Unemployment has eased. Emigration has slowed.
Iceland has a significant advantage over stressed euro-zone countries—a currency that could be devalued. That has turned its trade deficit into a surplus and smoothed its recovery.
…
from the Iceland article:
Iceland has a significant advantage over stressed euro-zone countries—a currency that could be devalued. That has turned its trade deficit into a surplus and smoothed its recovery.
Iceland—with its own currency, its own central bank, its own monetary policy, its own decision-making and its own rules—had policy options that euro-zone nations can only fantasize about. Its successes provide a vivid lesson in what euro countries gave up when they joined the monetary union.
Everything that Iceland did would be impossible under the gold standard, and is the exact opposite of what the ‘hard money’ moralists call for. They would prefer the Greek method- Austerity, cuts, deflation, rinse and repeat.
Greece is living the hard money nightmare. They might as well be on the gold standard- it would be equally disastrous.
+1 Alpha Sloth
However, it’s worse than that in reality. It’s like Greece is on the gold standard, but that at any moment it will become a fiat currency, which may or may not change multiple other currencies which are on the gold standard and may change. The uncertainty is causing more problems that it would if Greece was simply on the gold standard with no change in sight.
Greece could go back on its own currency. But like the article on Iceland points out, unlike Iceland, which produces lots of geothermal energy, Greece imports most of theirs. So opting to get out of the Euro and go back to the drachma might create some major energy price inflation issues for the Greeks.
Excellent point CIBT. Energy inflation would make leaving the Euro extremely painful.
Iceland, which produces lots of geothermal energy,
Then Iceland is a unique example whose economic policies don’t teach us anything, since few if any other countries have such a built-in geothermal system (and everyone else’s energy is fungible).
We should quit mentioning them when discussing the credit bubble and economic policies. There is nothing us ‘normal’ countries can learn from them.
I suspect the key difference is related to education;
But then you say the key difference is geothermal energy. Make up your mind.
Possibility, though I have no evidence at all - the GSEs are holding back on foreclosures to see if they are going to get permission to do principle reductions. FHA has said no, but there is still a lot of “studying” going on. When people don’t know what the final verdict will be, putting stuff off is often the best you can do.
Or it just could be that the state courts are all backed up. Or that the small details of how the banks are going to implement the robo-signing agreement (guessing they have to get some approval of their procedures) are still in flux. The fact that something happened a few months ago is almost meaningless in anything this big and with this many different moving parts.
“…the GSEs are holding back on foreclosures to see if they are going to get permission to do principle reductions.
…
When people don’t know what the final verdict will be, putting stuff off is often the best you can do.”
That’s a drawback of encouraging so much cargo cult thinking, as cargo cultists put rational decisions on hold while they wait for cargo drops of manna to fall out of the helicopters above.
“…all backed up.”
I also like your alternative hypothesis, as I suspect the truth contains elements of both factors.
‘the GSEs are holding back on foreclosures to see if they are going to get permission to do principle reductions’
The majority of GSE houses go through foreclosure by banks first. When the GSEs get them the FBs are usually long gone.
In my nabe, the GSE houses I’m seeing were in-VEST-ment properties that failed to appreciate to the sky. There’s one just up the street that sold for almost $200k not once, but twice, during the bubble years.
The second owner must have soured on the absentee landlording thing pretty fast, because the house has been empty for at least a year. And he/she bought the place back in ‘08.
It’s now a Phoney Mae special, priced at $121k, and I don’t think that it’s worth even that. It’s a small house on a small lot, and the house needs a *ton* of work.
I’m not sure I understand what you mean? Aren’t the banks acting as servicers for the GSE?
The difference between GSE owned and regular bond holder owned is that there is someone to actually tell the servicer what to do with GSE owned as there aren’t thousands of bond holders of 5 to [who knows how many] tranches who have a basically insurmountable collective action problem to deal with.
Ben,
Is it the bank’s responsibility to go through the eviction process (if necessary)? Or does that fall to FNM?
Just curious, because most of what we see is that the FB is still in the house at the time of foreclosure. The question of whether GSE REO would be sold in bulk or not could be holding things up at various stages. My understanding is that if you are to bid on these REO pools controlled in some way or another by the GSEs, you need to pledge to give the current occupant the first opportunity to rent back.
If the foreclosure has happened, and the tenant has been booted, this kind of position being taken by the GSE’s makes no sense. If on the other hand, the foreclosure has not yet been finalized, this could be the reason many foreclosures continue to be postponed.
Or that the small details of how the banks are going to implement the robo-signing agreement (guessing they have to get some approval of their procedures) are still in flux.
Like the detail that they can’t just make stuff up anymore. It could be my old theory still holds: they cannot legally prove title ownership.
“they cannot legally prove title ownership”
So how will that play out?
So how will that play out?
I have no idea.
“I have no idea.”
Beer me.
There are procedures in place in every state in the union for how to prove ownership of a mortgage when the original paperwork is lost. There always has been. In the old days banks kept those papers in warehouses and occasionally there was a fire. But the procedures are probably very burdensome. Like proving actually having to search all the old paperwork they have everywhere they have it and swear that it really was lost. It will happen eventually. The banks are almost certainly waiting to get started to see if they can get the states to pass rules that proof that the person paid them at least a few payments on the loan are sufficient to prove that the loan existed. They would help with a lot of them.
I wonder if all the papers have been shipped to India to be re-indexed?
I wonder if all the papers have been shipped to India to be re-indexed?
Frighteningly enough, that’s exactly the sort of vague guesswork that veteran RE lawyers I know have used.
It doesn’t exactly inspire confidence, does it? Good thing MERS is shrouded in secrecy- a great ‘free-market’ replacement to obtrusive big government.
“The robo-signing thing was wrapped up months ago. That was supposedly holding up REO supply. But now we see articles from all over the country, in the space of a few months, that there is no supply.”
To be candid, I didn’t think that robosigning was holding up REO supply, but the foreclosure process. A wave of foreclosure starts actually hit California prior to the signing of the settlement, as banks like BofA were conducting internal process reviews, which were completed prior to the settlement being signed–once their internal process reviews were complete, they restarted foreclosures, with a little burst in January.
Once the robo-signing settlement was signed, banks all of a sudden had an obligation to conduct principal reduction modifications, new short sale process requirements, single point of contact for modifications, etc., which then reduced somewhat the number of foreclosures to hit the market. The real question is what happens once banks like WFC and BAC complete the modifications as required under the settlement…will there then be an increase again in the number of foreclosures?
I think what is actually happening on a granular level (lender by lender) is very difficult to know. Some lenders I’m sure are slow playing the process as to not take too many hits to balance sheets too soon, and others are blowing through their inventory because they want to be done with this and appear strong again. The best I can do when tracking any particular state is reviewing the data that I can glean from the REO on the books of financial institutions and the current number of delinquencies in that particular market.
As long as the number of delinquencies and REO are high and not falling very fast in a particular market, I see an unhealthy market (risky for buyers) for some time to come. Once REO and non-current loans have fallen to low levels (or are falling fast), IMHO, the days of the market being dominated by distressed sellers are numbered.
“there is no shortage of houses or land. It’s the opposite, there’s a glut.”
I truly think this depends on where you are and what type of quality you are seeking.
This is different state-by-state and municipality-by-municipality and product-type by product type.
California has very low vacancy rates (5% for rental, 2% for owner-occupied) relative to the rest of the country, places like Florida, very high (13.6% and 2.7%).
In Stockton for instance, while the foreclosure numbers are diminishing, there is plenty of supply of foreclosures. But from what I understand (from people trying to buy nicer homes in Stockton), the supply of nicer foreclosures in less crime-ridden neighborhoods is more limited (not what it used to be a couple of years ago)–they keep getting outbid on homes in which they would want to live.
To build more, in Texas, you can build with little restriction, with plenty of land. In places like Tracy, California, there are strict growth control ordinances…where despite lots of land, they will only permit a certain number of housing units per year (600 units per year)–a City of 80,000 people today.
The result is not enough houses in some markets, and less potential to build more, and too many houses in other markets, where additional supply can be added with ease.
You’ve got to watch your market and understand what is going on…you need to look beyond the national and regional headlines, or you’ll miss the local dynamic.
For my $0.02, people need to look beyond the headlines of recovery in Florida (and other judicial foreclosure states) and Nevada (which became judicial in a sense through recent legislation), the backup of foreclosures combined with higher vacancies may cause problems in the near/medium term.
Likewise, people who are looking to live long-term in the Central Valley, CA should be looking today…once the game of foreclosure musical chairs ends, I think people will find there is a lot less supply than the presumed land availability would indicate. The state of CA has cracked down on urban sprawl in places like Stockton, which will restrict development, and today, the glut is less than perception. (The Stockton/Tracy rental vacancy rate is 3.3%…the rental vacancy rate in Bakersfield is <5%…statewide, rental vacancy rate is 5%)
In Arizona, the noncurrent loan rates indicate the recovery could be for real. However, once prices justify new development, additional supply can be added with ease…be careful about buying with the belief that whatever price appreciation has been happening, or will happen over the next 12 months will continue. I think prices could bounce in AZ, but then have appreciation flatten quickly as more supply is added (with the wildcard being the Fed keeping rates too low for too long again…).
“…California has very low vacancy rates (5% for rental, 2% for owner-occupied)….”
Where are you getting these figures, Rental? They certainly don’t jibe with what I’m seeing in Kern Kounty– or El Dorado, either.
http://www.census.gov/hhes/www/housing/hvs/rates/index.html
Census quarterly estimates.
I also saw REIS had an estimate for Stockton fairly recently of 3.0% (you can click around on their Metropolitan list to get to other cities from the link below).
https://www.reisreports.com/Markets/California/Stockton/Apartment/
“I wonder if the anti-REIC social justice believers will still go pull the lever for Obama knowing he will stop at nothing to reflate the bubble including having our great great grandchildren pay for it and lining the pockets of the one percent.”
A provoking question Nick. And a difficult one to answer but you’re speaking directly to me so I figured I’d respond.
What is the alternative? Will not each of these bought and paid for whores continue the madness in the name of the Empire? Isn’t it fair to say that after the last 3 years, the office is subservient to the power structures that call the shots? It seems that way to me so I can’t give an answer that I believe you’ll accept given your positions.
I appreciate your posts (your serious ones).
“Will not each of these bought and paid for whores continue the madness in the name of the Empire?”
Yes they will. Nobody has the guts to tell the American people that it’s time to take the hard medicine.
“I appreciate your posts (your serious ones).”
Ditto.
“In addition to Florida, the other states were: Arizona, Colorado, Iowa, Nevada, New Hampshire, North Carolina, Ohio, Pennsylvania and Virginia.”
Non-current loan rates per LPS at last check:
FL: 21.5% (recovery is likely illusion)
AZ: 9.1% (recovery may be real)
CO: 6.2% (recovery may be real)
IA: 7.7% (recovery may be real)
NV: 15.5% (recovery is likely illusion)
NH: 8.1% (recovery may be real)
NC: 10.9% (?? Borderline…non-current is not falling very fast, roughly flat year on year)
OH: 13.2% (recovery is likely illusion)
PA: 10.9% (?? Borderline…non-current still rising in judicial state, my guess is illusion)
VA: 7.5% (recovery may be real)
“FL: 21.5% (recovery is likely illusion)”
No Hay Banda!!
http://www.youtube.com/watch?v=6DZ7DfrTDds
“recovery may be real”
Recovery to what? Unrealistic 2005 peak bubble prices? In some of those locations prices have recovered down to pre-bubble levels, in other words the prices are about where they should be given median incomes. The prices in 2005 were mania driven, so to have houses “recover” to those levels this year would just be another mania driven government primed bubble.
I’m not talking about price recovery.
In my world, the definition of recovery is getting back to supply/demand/price levels where new development/construction is justified as the solution to vacancy levels falling/prices rising in response to population and job growth. In this ideal recovery, prices are held down by the addition of supply, and prices don’t grow excessively from poor underwriting/overlending to people who can’t afford the homes.
Along with that definition of recovery comes construction jobs that have been thusfar missing in this economic “recovery”, but should exist with a US population currently growing at ~1% per year. We should ultimately see housing unit growth of ~1.2MM homes per year, up from ~700k homes per year today.
Remember, at it’s core, housing=shelter, which is a basic need, and at a reasonable cost is a good thing to have. Growing population, no construction and 0% Fed rates are ideal conditions for the creation of the next bubble. As vacancies fall, distress is reduced and prices start to go up in particular markets, we should all be rooting for more construction and/or increases in interest rates, or else be doomed to housing bubble part 2.
My fear is that in early recovery markets, we will not get enough new construction (lots of private homebuilders are totally out of business, and they were 75% of the market), and rates will be too low (the Fed is talking about QE3). This could cause prices to rise too much in these markets if lenders get too loose with the lending.
I’m not talking about price recovery to 2005/2006. I truly hope we don’t get there anytime soon. However, I do except that we will eventually get there as the result of 2-3% inflation over a period of 20-30 years (35% fall from the peak needs a 50% increase from the trough). At the end of the day, I am a realist–I expect the Fed will be successful in creating inflation of at least 2% annually over long periods of time.
Growing population? New construction? Have you gone daft?
Who do you think will be buying these “recovering” houses? Certainly not the college-educated twenty and thirty-something couples working McJobs (if that) and who stand to inherit two or three houses from their Boomer parents (to maintain or try to sell into a diminishing market.)
Certainly not the Lucky Ducky lowering-middle-class or the taxpayers who subsidize them.
And most certainly not the assimilating immigrants who are working five jobs per family just to afford to rent.
Seriously. Where is the market? Chinese landlords? Wealthy Canadian retirees who can’t wait to live in Sacramento? Really?
The population IS growing. There WILL be new construction.
Those in their 20s were never big buyers of homes…the last several years were anomolies (1/3 and less homeownership rates is more typical). It takes getting into your 30s before homeownership rates go up to 50% and above.
Those buying will come from where they always have, people with jobs, who save their money, are starting to grow a family, and want to set down roots. Ivy Zelman (who was an early bear), estimates that there are about 3 million renters who have saved the down payment and would like to buy.
It’s easy to get hung up on averages and assume that no one is getting a job that pays well. The reality is that there are fewer getting good paying jobs, but there are still a large number that are doing OK. If there weren’t, the median income would not simply be stagnant, but falling.
How are there any homes being built and sold if there are no buyers?
How are there multiple bids on existing homes if no one wants to buy a house?
How are there any loans being written if no one has a job to support a loan now that banks are actually underwriting?
Will the mix of renter/for-sale housing be more geared to renters than before? Yes. Does that mean that there will be no new homes sold? No.
I am one of six people that I know who were renting all throughout the bubble, thinking it was madness. Now, 4 of us have purchased. One more is in contract, and the other is looking earnestly. There are more of us…Ivy Zelman thinks 3 million more.
http://www.floridamoves.com/Property/PropertyResults.aspx?SearchID=9744816
only 5 bank owned listed in Cape Coral, FL, as a resident I can tell you, there are that many vacant houses in the three block neighborhood from my residence and have been that way for two years and to add insult to injury housing prices housing prices in my area have increased 30 percent in two years.
looked at homes in Sarasota, FL this weekend several fannie mae, out of the 5 listed at about 100k, I would consider only one didn’t need a bulldozer, all houses needed total gut including roofs/doors/windows/electrical/plumbing/mechanics and houses were in neighborhoods I would not consider driving through at night
Thanks Walt. I see this stuff all the time and it’s good to hear other reports across the country.
Bizarre stuff. Those empty homes must be part of the 21.5% non-current that are simply clogging the system.
Taking the “21.5% non-current” figure at face value, and estimating the number of mortgages at 44M, brings us a total non-current figure of 21.5%*44,000,000 = 9,460,000.
Is that figure in the right ballpark?
That 21.5% is only for Florida.
US Average is 11.2%. Call it 50 million mortgages for round numbers, that’s 5.5 million loans that are either delinquent or in default. Of those, about 2.5 million is in the ordinary course of a market (from 1995-2005, the average was around 5%). The excess therefore is about 3 million loans.
Out of the 5.5 million, about 7.5% are in the seriously delinquent (90+ or in foreclosure category), or about 3.25 million). This is the category that needs to be worked through–traditionally is 0.5% to 1% of all loans (250k to 500k would be “normal”. These are disproportionately stuck in the judicial states.
<90 days are pretty close to “normal” in terms of overall numbers today (perhaps high by a half a percent or so). Usually there are a few percent of loans where people have missed a payment or two.
What appears to be happening is that the 90+ day inventory is shrinking, foreclosure is about static (as many entering foreclosure as exiting through various means). Eventually, the 90+ will be whittled down to normal, and then the foreclosure inventory can shrink.
Based on the year-on-year shrinkage of the 90+ day inventories, we have a few years yet to go before this is “normal”, although I expect the robo-signing settlement will change the pace somewhat…if you just look on the month-to-month data, it would point to 1.5 years as about the magic number.
Needless to say though, these excesses are being worked off at different speeds. AZ and CA both worked off 3-3.5 points of their excess in the past 12 months (from low-mid 12% range to low 9% range). At that pace, they hit “normal” in 18 months, perhaps faster for Arizona. Florida worked off 1.5 points…another 10 years at that pace.
As of today, I generally think of the 90+ days/foreclosure categories PLUS REO as the shadow inventory…homes that are going to be marketed by sellers that are differently motivated than traditional sellers.
I’ve had a hard time pinpointing national REO numbers from freely available information, although Foreclosure Radar has it for the Western US. For perspective, CA REO is at about 85k, so if you believe the press, that CA is still in rotten shape, I would have a hard time extrapolating nationwide REO to a number higher than 1 million. Haven’t found that data for Florida, other than what Fannie publishes…they show REO still growing in Florida.
And I know, my estimate based on non-current+REO of ~4 million homes is less than some of the articles. I take some comfort in knowing that some of those articles were written by many of the same folks who didn’t see the bubble coming.
What’s with the atrium covering the swimming pools, mosquitoes?
And here’s the report that shows the state-by-state data:
http://www.lpsvcs.com/LPSCorporateInformation/CommunicationCenter/DataReports/MortgageMonitor/201203MortgageMonitor/Mortgage_Monitor_March_2012.pdf
The new one will likely be out in a few weeks, with a preview due to be published (their “first look”) likely next week.