A Repeat Crisis
Readers suggested a topic on the housing bubble. “How many of us are feeling like we time travelled back to 2006? I live in Long Beach, CA — lots of friends in their 30’s and 40’s talking about flipping homes, condo’s, and buying rental properties with low single digit cap rates because they are certain the prices will increase. Bonus flashback: AM radio news stations have been running ads for Rich Dad, Poor Dad seminars which will unveil the ‘new rules of money.’ Ohhh, boy, here we go again . . . .”
A reply, “I think its already run out of gas - since the true buyers (owner occupants or self-funded mom and pop investors) are gone, the PTB are trying to create new, marginal buyers to pick up the slack. It’s 2006 again pass the Coors.”
One asked, “What happened to the fraud? In all the debate over whether prices are actually rising or not in some places, everyone seems to be forgetting that much of the prior run up occurred because of fraud. Fraud on the applications, fraud in the comps, fraud by the banks lying to the eventual bag-holders. Now prices can rise back up to those bubble peak levels but there’s no fraud? Gimme a break.”
A reply, “Everyone in the RE business is in cahoots. When we bought our house last September, there was some worry that it would not appraise high enough. RE agent puts together a fancy shcmancy excel doc with comps that he gives to the appraiser. Voila! The house appraises for EXACTLY our offer price.”
And finally, “An entire generation of Americans have come to view <8% interest rates and 3% down on a mortgage as normal. When the economy inevitably readjusts and those 600K mortgage loans service at $6,000 a month (excluding taxes, maintenance, insurance et al), bubble-era prices will fall back into line with the historical norm."
The LA Times. “In the High Desert, separated from downtown Los Angeles by 65 miles and a mountain range, the housing market is finally gaining steam after the latest debacle. The reason is simple: Big new houses are selling in the $200,000 range, a mere fraction of home prices across much of the region. Cliff Neves is among the newest arrivals. The 36-year-old said he moved from the San Fernando Valley with his wife and children. He bought a new four-bedroom home in Palmdale last summer for about $190,000. ‘I am not paying $250,000 for a bucket,’ he said.”
“Behind Neves’ Palmdale home, rows of graded dirt lots flanked completed streets. The smell of wood filled the air one recent morning as a construction worker swung his hammer again and again on a wood-framed house, part of a new development by Harris Homes. The developer is being cautious, putting up about 10 to 15 homes at a time — and raising prices with each phase, said Andrew Fisher, the exclusive broker for Harris Homes.”
“Lancaster Mayor R. Rex Parris said residents’ long commutes concern him, adding that he knows hundreds of families who endure debilitating treks to the office. ‘The mother and father spend most of their productive hours on the freeway,’ Parris said. ‘You used to be able to afford to commute. Now you can’t. What good is it to have a cheaper house if you can’t afford to get there?’”
The State Journal Register. “Attorney General Lisa Madigan and Gov. Pat Quinn graced the same stage at different times Monday and talked about housing, not politics. Each addressed about 225 people attending the Illinois Housing Leaders Conference hosted by the Illinois Association of Realtors. ‘I will continue to fight for relief on behalf of Illinois homeowners to restore our housing market and ultimately to restore and revitalize our economy,’ Madigan said. ‘I look very much forward to continue to work with the Realtors to get this work done.’”
“‘We all know the key to economic recovery is making sure our housing market is operating at full speed, and I look forward to working with you on that this coming year,’ Quinn told the group. ‘…Realtors find creative ways to help everyday, hardworking people and families get that opportunity at the American dream. I really feel that your association is one of the most creative groups I’ve ever encountered. … You know how to make things happen.’”
“Phil Chiles of Springfield, president-elect of the Illinois Association of Realtors, said the appearance by the two statewide officeholders helps show the importance of housing and the group. ‘I don’t think there’s any doubt that housing is a crucial area in Illinois, and their coming shows that they feel like it’s important,’ Chiles said. ‘And I think that they understand that we’re a major player in the industry.’”
From CNBC. “The U.S. Treasury’s mortgage bailout is failing at an ‘alarming rate,’ according to a government watchdog, but architects of the four-year-old plan say that it is no worse than they expected. A new report from Special Inspector General for the Troubled Asset Relief Program points to disturbing numbers, but offers no reason for the high rates.”
“Treasury’s data shows that the longer a homeowner remains in HAMP, the more likely he or she is to redefault out of the program. As of March 31, 2013, the oldest HAMP permanent modifications, from the third and fourth quarter of 2009, are redefaulting at a rate of 46.1 percent and 39.1 percent. HAMP permanent modifications from 2010 also had high redefault rates, ranging from 28.9 percent to 37.6 percent.”
“Back in May of 2012, bank representatives complained that the back end debt-to-income ratios (DTI), (which include all debts upon which a borrower pays) for HAMP modifications were far too high. That is, borrowers were paying far too much of their incomes on debt, and the numbers were only rising. At the time, mortgage analyst Mark Hanson said, ‘A 64.3 percent DTI is so far out of scope with the pre-bubble years safe-and-sound 36 percent total DTI — and even typical bubble-years full-doc DTI’s of 50 percent — it is absolutely irresponsible. Servicers are pushing the envelope with respect to getting people to qualify.’”
“Today Hanson is the least surprised of anyone at the failure of HAMP modifications. ‘Because if you look at them structurally — sky-high DTI, LTV [loan to value] and low credit score — they make legacy Subprime loans look sane.’”
“‘People read headlines that ‘foreclosures are at 2005 levels’ and cheer. I say the high-risk distressed loans and foreclosures are still out there. They have just been called something different by banks and the government and kicked down the road a few years,’ says Hanson.”
The Desert Sun. “Some arguments are never over, even after the evidence is in. That’s the way it has been with the 2007-08 mortgage meltdown, and it could mean a repeat crisis. One side has persisted in blaming unscrupulous mortgage brokers and greedy investment bankers. The other side has struggled to point out that ‘affordable housing’ goals played a crucial role in the housing bubble that burst.”
“At a Sept. 25, 2003, committee hearing, Rep. Maxine Waters said: ‘Everything in the 1992 (Community Reinvestment) Act has worked just fine. In fact, the GSEs have exceeded their housing goals.’”
“Later testimony was reinforcing. In a Dec. 9, 2008, hearing of the House Oversight and Government Reform Committee, former Freddie CEO Richard Syron said, ‘As the goals went up, and the goals were specified by HUD, you had to take more risk.’ Former Fannie CEO Franklin Raines testified that those goals compelled the companies ‘to entertain loans they would not have otherwise entertained.’”
“Fast forward to 2013. In January, the Consumer Financial Protection Bureau finalized a new Qualified Mortgage rule. It is heavy on monitoring the technicalities of loan origination, but permissive about small down payments, low credit scores and high debt-to-income ratios. This has been followed by an April 2 Washington Post report that ‘housing officials are urging the Justice Department to provide assurances to banks … that they will not face … recriminations if they make loans to riskier borrowers who meet government standards but later default.’”
“After the crisis we have sustained, it would seem that regulators would retreat to the traditional requirements for borrowing that make default unlikely. Instead, the old affordable housing goals seem to be the priority.”
‘the longer a homeowner remains in HAMP, the more likely he or she is to redefault…’A 64.3 percent DTI is so far out of scope with the pre-bubble years safe-and-sound 36 percent total DTI — and even typical bubble-years full-doc DTI’s of 50 percent’
I know a guy in this “program”. A family man, bought in 2006 for about $330k. He does flooring, so his income is not what it used to be. He has defaulted twice. Got a small modification, but is still struggling and I don’t think he’ll ever pay of this house that is now said to be worth $180k. He probably can’t pay back $180k, as he’s about 50 years old. He confided once that the stress is ruining his marriage. But he’s “hanging in there” sending most of his money to the lender, which is probably Fannie or Freddie.
Think about this; in this part of his life, he has nothing to show for it. What will he retire on? And let’s play along with the cheerleaders; assume prices go back to $330k and he sells and gets out from under the loan. That just means some other sucker now has a loan they can’t afford. And where will my friend go to live?
IMO, the best solution would have been to walk away years ago. Start over and rebuild what he could.
IMO, the best solution would have been to walk away years ago. Start over and rebuild what he could ??
I agree Ben…
And for all you SS haters, that may be the only thing this guy will have to rely on in old age…So, in this mans case the “insurance” policy of SS is likely going to allow him some dignity when he gets old…
If he is self employed.
That means he is paying 15% for his SS.
Assuming he reported his income.
We all pay 15% for SS, whether or not self employed. Think about it: If your employer didn’t have to pay half of 15% to SS on your behalf, that money would be available to pay you more, right?
“Think about it: If your employer didn’t have to pay half of 15% to SS on your behalf, that money would be available to pay you more, right?”
Or it would be available to plow back into the company or pay dividends to stockholders. I would not expect wages to increase by 7.5% if SS went away. And if they did increase uniformly, would I be any better off?
“I would not expect wages to increase by 7.5% if SS went away.”
You are right.
I didn’t want to get into nuances of elasticities of labor supply and labor demand which determine how much of that 7.5% (actually 7.65%) employer share of the entitlements tax burden could come back to employees as wages, were it not required.
The true number most likely lies strictly on the range from 0% to 7.65% (i.e., not 0%).
The insanity of government “helping” the housing market.
Instead of affordable housing based on market principles we get endless bubbles.
And people enslaved to the banks (really the government) to pay off their debts. Forever.
A 64.3 percent DTI???
Serfs in medieval Europe only had to pay a third of their harvest to the Lord…
But then on the other hand, nobody put a gun to anybody’s head and forced them to buy a home at 64.3 percent DTI, DID THEY?
“But then on the other hand, nobody put a gun to anybody’s head and forced them to buy a home at 64.3 percent DTI, DID THEY?”
Betcha his mortgage was heavily back-end loaded with professional fiduciary service fees, and knowing that the odds were heavily stacked against him they phucked him good anyway.
“Think about this; in this part of his life, he has nothing to show for it.”
Is somebody putting a gun to his head and forcing him to keep making those monthlies? Or is he expecting the promise of ever-rising home prices from now on to make him whole again?
No, but he did stop paying twice, probably because he didn’t have the money. First on the original loan, then he got some govt program loan, and defaulted on that. I think he’s current now but I don’t ask him about it. He did say once he feels like he should pay back what he promised, etc. He’s just a simple working guy.
I’m pretty sure that if this program he got involved in hadn’t existed, he would have been out of there years ago. Foaming the runway for the banks, as the treasury secretary said.
Yup…
Barofsky: ‘Geithner Admitted To Us Privately That Obama’s Housing Policy Was DESIGNED To Sacrifice Homeowners In Order To “FOAM THE RUNWAY” For The Banks’
This is funny, funny, funny…WAY TOO FUNNY! And it stinks to high Heaven. LMFAO!!!
While Wronged Homeowners Got $300 Apiece in Foreclosure Settlement, Consultants Who Helped Protect Banks Got $2 Billion
POSTED: April 26, 3:53 PM ET
Senator Elizabeth Warren
Andrew Harrer/Bloomberg via Getty Images
The obscene greed-and-arrogance stories emanating from Wall Street are piling up so fast, it’s getting hard to keep up. This one is from last week, but I missed it – it’s about the foreclosure/robo-signing settlement that was concluded earlier this year.
The upshot of this story is that in advance of that notorious settlement, the government ordered banks to hire “independent” consultants to examine their loan files to see just exactly how corrupt they were.
Now it comes out that not only were these consultants not so independent, not only did they very likely skew the numbers seriously in favor of the banks, and not only were these few consultants paid over $2 billion (over 20 percent of the entire settlement amount) while the average homeowner only received $300 in the deal – in addition to all of that, it appears that federal regulators will not turn over the evidence of impropriety they discovered during these reviews to homeowners who may want to sue the banks.
In other words, the government not only ordered the banks to hire consultants who may have gamed the foreclosure settlement in favor of the banks, but the regulators themselves are hiding the information from the public in order to shield the banks from further lawsuits.
Secrets and Lies of the Bailout
To recap: in the foreclosure deal, 13 banks agreed to pay a total of $9.3 billion to settle their liability in a number of areas, including robo-signing, which is just a euphemism for mass-perjury – robo-signing is the practice of having low-level bank employees sign documents attesting to full knowledge of case files in court foreclosure actions, when in fact they were signing hundreds of files per day, often having no idea whether the paperwork was correct or not.
It was done across the industry and turned housing cases across America into nightmares of jumbled and/or forged paperwork, in which even people who did not deserve to be thrown out of their homes were uprooted thanks to systematic errors by faceless bureaucrats who cut legal corners purely to save money.
All the major banks were guilty on a mass scale, but they worked with federal regulators like the Fed and the Office of the Comptroller of the Currency to secure this wide-ranging, industry-saving settlement, which not only covered the robosigning epidemic but a host of other bad or illegal practices, like the wrongful denial of modifications and the improper levying of (often hidden) fees.
Minus this crucial settlement, banks would have faced enormous uncertainty about their legal liability going forward, and getting a deal that not only gave these companies some legal closure but allowed them to pay pennies on the dollar for their illegal activity was a massive coup for the whole finance sector.
Only $3.6 billion was earmarked for cash payments to the nearly 4 million homeowners covered in the settlement. Most of the remainder of the deal was in other forms of non-cash relief, i.e. modifications or principal reductions.
Now, at the time of the deal, press releases by the Fed and the OCC stated that part of the reason they’d fixed on that particular settlement amount was that regulators had uncovered that banks had made errors or committed illegal acts in about 6.5 percent of the mortgage files reviewed. In other words, the error rate was an important component of this calculation.
But it turned out that this error rate had been calculated with the help of several consultant firms regulators had ordered the banks to hire. Regulators had mandated the hiring of these “independent” consultants back in 2011, and the list of companies included Promontory Financial Group, PricewaterhouseCoopers, Ernst & Young, and Deloitte & Touche. These private firms were hired to review the banks’ loan files in search of errors, and collectively were paid by the banks over $2 billion, a staggering sum which ultimately worked out to over $20,000 per file.
With such highly-paid help, it would seem impossible that these consultants could screw up so simple a task as figuring out how many of these mortgage files were corrupt. Regulators came up with the 6.5 percent number this past January, then shortly afterward revised the number downward, saying that only 4.2 percent of some 100,000 mortgage files reviewed were compromised.
But that low number stank so badly that even the Wall Street Journal was moved to check it out, and in late February, in a story called “Foreclosure Files Detail Error Gap,” the paper discovered that the error numbers were almost certainly very much higher. From that piece:
So you have numbers from all of these other banks coming in at 9 percent, 11 percent, even 21 percent, and yet somehow J.P. Morgan Chase came in at 0.6 percent. The OCC just took the Chase numbers and averaged them together with the rest and ultimately came up with the 4.2 percent number.
So how did Chase come out so squeaky clean? Well, it seems they developed quite a rapport with the government-mandated consultants who were hired to review their loan files.
…
What did people who didn’t even lose their homes have to do in order to qualify for a $300 foreclosure settlement payment?
Payments coming for borrowers in $3.6B foreclosure settlement
By Les Christie @CNNMoney April 10, 2013: 9:29 AM ET
NEW YORK (CNNMoney)
Were you going through the foreclosure process in 2009 or 2010? Well, even if you didn’t end up losing your home, you might have some money coming to you.
Starting Friday, cash payments ranging from $300 to $125,000 will be sent to 4.2 million borrowers as part of a $3.6 billion settlement over foreclosure abuses reached between the government and 13 mortgage servicers, according to the Office of the Comptroller of the Currency and the Federal Reserve.
Borrowers will receive payments based on the level of damage caused. The largest checks, for $125,000, will go to 1,082 military service members whose homes were repossessed while they were on active duty, a violation of the Servicemembers Civil Relief Act, and to 53 borrowers who were current on their payments but were foreclosed on anyway.
Most borrowers, however, suffered other types of financial damage. In some cases, servicers charged them unfair fees or failed to modify their mortgage to more affordable terms.
The servicers participating in the agreement include Aurora, Bank of America, Chase, Citibank, Goldman Sachs, HSBC, MetLife Bank, Morgan Stanley, PNC Mortgage, Sovereign Bank, SunTrust, U.S. Bank and Wells Fargo. Payments from all of the servicers except Goldman Sachs and Morgan Stanley will go out starting this week and be completed by July. Details on when Goldman and Morgan Stanley will start issuing checks will be announced later.
…
The banks and the government are ripping the country off blind.
LOL ‘Everything in the 1992 (Community Reinvestment) Act has worked just fine. In fact, the GSEs have exceeded their housing goals.’
- related to some degree to “socialism works” (until it runs out of other people’s money.”
CRA certainly did work “just fine.” Destroyed stable neighborhoods. Worked as fine as section 8.
Housing has become a depreciating asset, masked by the seemingly slam dunk deal of MID and zero capital gains tax on principle resident. The reality is the CRA and section 8 destroys the values of any remaining affordable middle class neighborhoods. Only rich limousine socialists can afford stable neighborhoods with no “affordable housing” (I.e. section 8).
I doubt if housing will become an appreciating asset for most people in my remaining life. May as well enjoy freedom of renting.
Socialism worked great in the Union of Soviet Socialist Republics — right up until the day the Soviet empire utterly collapsed.
P.S. If you live near or ever get up to Simi Valley, there are some great exhibits on this theme at the Ronald Reagan Presidential Library.
“An entire generation of Americans have come to view <8% interest rates and 3% down on a mortgage as normal. When the economy inevitably readjusts and those 600K mortgage loans service at $6,000 a month (excluding taxes, maintenance, insurance et al), bubble-era prices will fall back into line with the historical norm.”
I thought for sure we’d be back to bigger down payment requirements by now (10% - 20%). 3% down = instantly underwater given it costs about 6% to sell.
And those HAMP programs have turned FB’s into debt zombies, absolutely. I also think they convert non-recourse loans to full recourse, so folks are really stuck.
Just wait until mortgage rates come off their once-in-a-century 3.5% lows on the 30-year. An unbelievable number of greater fools are about to get the schooling of a lifetime in experience’s dear school, since they don’t have the brains to understand the inverse relationship between mortgage rates and home prices. (Of course the Fed’s economists understand this, but tend to avoid talking about it publicly.)
I thought low rates were here forever?
Because so many American pension funds are invested in real estate-backed securities, it’s imperative the government keep the game going — if only to prevent 20 million impecunious Boomers from taking their walkers and voting block to the streets in the coming decades. The whole system has become a Gordian Knot, too massively intertwined to unravel without bringing the whole infrastructure down, so the best we can hope for is a gradual deflation of the bubble and the promise of the inevitable mass die-off.
With the income disparities we’re seeing now, it’s not possible for a sufficient number of “average” Americans to save up the necessary $40-200K downpayment today’s typical house prices would historically suggest, let alone pay the interest rates that would shift the burden from the taxpayers to the individual buyer, so the subsidies will continue in one form or another for the foreseeable future and the tax system will be incrementally rejiggered toward the median.
My best guess is that the policy legislations enacted to address this issue will lag efficient timeliness by about 12 years, ensuring that by the time the last Boomer has been placed in an urn, a massive government surplus will be ripe for the next Reaganite generation to come along and pluck. Have patience, my babies….
“Have patience, my babies….”
‘My babies’ is the right thought. I may be priced out forever, but I can certainly start saving now to provide downpayment assistance to help my kids out in another 15 or so years, after the hair-of-the-dog cure has clearly given way to capitulation, downward-spiraling U.S. home prices, and a severe drought of qualified and interested buyers.
the homes around here in Citrus Heights, CA (suburb of Sacramento) are selling briskly if priced around $200k.
I’ve noticed the determined owner/occupied buyers new strategy to beat the corporate buyers;
find the highest purchase point the corps will pay, then bid just a bit beyond.
(this happened to a neighbor of mine last week, when he was selling his deceased mother-in-laws house, remarking how his relatives handling the estate “blew it” by countering a corporate offer of “only” $5000 more.)
the corp buyer declined, but the back up-offer from a retiree was happily accepted.
the back-up offer difference was $2000.
Yes is does appear that some parts of Sacramento have improved…Other parts seem to be still distressed…
“…have improved…”
Meaning that prices have become more affordable?
more affordable ??
Housing in some parts have come off their lows is what I ment to say…
“Housing in some parts have come off their lows is what I ment to say…”
Same here in Woodland, 15 miles west of Sac. Just in the last two months, sellers have started to highball. Too soon to tell the results. In our corner of town, most homes were built in 1995. All the one-story homes are identical, all the two-story homes the same. In 2011, the one-story homes were going from 120K to 150K (the 120K ones “needed some TLC”. They all sold within a couple of months in ‘11. The same types to come on the market now are listed between 180K and 215K. The 215K house just had new stucco put on it, while every other house is that crappy masonite stuff, so I won’t curse the stucco in this case. I don’t think the 215K house will go for asking, but who knows in this environment? Here’s the house: http://www.movoto.com/real-estate/homes-for-sale/CA/Woodland/1979-Huston-Cir-102_13015270.htm
Here’s the house ??
Roughly $200. per foot…Thats well above a lot of stuff I saw even just 6 months ago…
“Roughly $200. per foot…Thats well above a lot of…”
They actually have the square footage wrong on the site I linked to. The home is 1322 sf. Still $162/sf though.
Agree 100% with the strategy to cut out the PE funds who are buying. In today’s world, most of them simply do the math with respect to what they are willing to pay, and make an aggressive all-cash/quick close offer at that number. They make A LOT of these offers (hundreds if they are in many markets). If it’s accepted, they close and move on…if not, they’ve already thrown out their best pitch and move on.
They have the manpower to make hundreds of offers…they don’t have the manpower to negotiate hundreds of offers.
“AM radio news stations have been running ads for Rich Dad, Poor Dad seminars which will unveil the ‘new rules of money.’”
Hopefully they won’t put him back on public television during pledge drive again.
He did say something is only an asset if it puts money in your pocket every month; otherwise its a liability.
But what people mostly heard was “get rich without working hard!” And ran out and bought negative carry property.
The Kiyosaki/Trump team misled many into thinking that becoming a landlord is the only way to gain financial independence. Kiyosaki hates stock investing, especially tax deferred investing. Joe Smith is a subscriber of Kiyosaki’s philosophy. I cannot possibly have over $1.5 million in net worth because I did not follow Kiyosaki’s rules of building wealth.
The reality is that rents come down as everyone becomes a landlord. This makes it a renter’s market, which allows a renter to save leftover money in stock index funds. VTCLX is a tax advantaged fund that, over the long term, will beat real estate investing. I can rent a SFH in North Scottsdale with mountain views, endless pool, barbecue, and in a gated community for $2,000. To own it would easily cost $4,000 per month. Plus I get freedom in case AZ turns into another Taxifornia nanny state.
“Everyone in the RE business is in cahoots. When we bought our house last September, there was some worry that it would not appraise high enough. RE agent puts together a fancy shcmancy excel doc with comps that he gives to the appraiser. Voila! The house appraises for EXACTLY our offer price.”
I’ve seen a version of this on Zillow™. A home seller lists at several hundred thousand dollars above asking, and the Zestimate™ increases in lockstep.
Many, many months later, the home sells for way south of the Zestimate™.
I’m really curious about this although I doubt the Stealtor ™ types shilling on this blog will reveal the Zillow scamming secrets here. I see all sorts of oddities: houses with two listings, houses that you can’t find unless you search for the exact address, houses showing up on the maps two blocks away from their actual address coinciding with going on the market.
Anybody know the inside tricks and willing to share?
The Zillow™ scam system is heavily stacked in favor of owners and prospective sellers. Not only do they misrepresent values based on list prices (which really should have no effect on appraisals), but they also have been known to hide historical data that might give prospective buyers any kind of advantage.
“An entire generation of Americans have come to view <8% interest rates and 3% down on a mortgage as normal.”
Hay man — straw man!
<8% my arse. Try 3.5% on the 30-year mortgage — the lowest rate you will ever see in your entire lifetimes.
Mortgage rates fall, home sales rise
By Polyana da Costa • Bankrate.com
Mortgage rates inched closer to historic lows this week as more homebuyers jumped into an increasingly competitive housing market.
The benchmark 30-year fixed-rate mortgage fell to 3.57 percent compared to 3.61 percent the week before, according to the Bankrate.com national survey of large lenders. The mortgages in this week’s survey had an average total of 0.31 discount and origination points. One year ago, that rate stood at 4.09 percent. Four weeks ago, it was 3.75 percent.
The benchmark 15-year fixed-rate mortgage fell to 2.8 percent compared with 2.85 percent the previous week, and the benchmark 5/1 adjustable-rate mortgage fell to 2.65 percent from 2.66 percent.
The 30-year fixed has dropped for six weeks in a row. If it continues to fall at this pace, the 30-year rate soon will reach a record low again, which was 3.5 percent in early December, according to Bankrate’s weekly survey.
…
I bought my first property in 1969, rejoicing that I’d found such a steal with an interest rate of only 7%. That remains the lowest I’ve ever paid in the four decades since.
My parents used to brag about the 5% interest, 10% down terms they scored on their first house with the GI Bill after WW2.
My grandmother’s rental properties, financed before, during and just after the Great Depression through her private credit union were at a flat 10% interest with the downpayment taken from her tenured salary.
I don’t know what my great grandmother paid for her San Marino property at the turn of the 20th century, but I know she didn’t get it on a 3.75% mortgage, and had to sell her ranch to come up with enough collateral to swing the loan.
Rates were at comparable levels to the current ones in the early 1960s (though higher, as we are currently at record lows). Clearly, many who read here will never, ever see rates this low again in their entire future lifetimes.
Buy now, or get priced out forever!!!!
“The developer is being cautious, putting up about 10 to 15 homes at a time — and raising prices with each phase, said Andrew Fisher, the exclusive broker for Harris Homes.”
The MSM is bubbling over these days with the craziest Realtor™ propaganda bullsh!t I have ever read!. I can’t wait until the day the Fed takes away the QE3 MBS purchase punch bowl over concerns that the housing market might be getting a bit frothy, when we can all enjoy a good laugh and a toast to another popped bubble.
This is also BS about the controlled build. That may be one guy or one builder, the problem is they all have the same plan and where I’m at that means 20 other builders ramping up also.
Why didn’t these guys go bankrupt? All the biggies seem to still be here, Shea, KB, whoever.
“This is also BS about the controlled build.”
It’s more of a controlled burn. And twenty controlled burns at the same time and place add up to a conflagration.
Then again, 20 doesn’t sound bad compared to the 2006 situation in San Diego, when there were “131 new home communities” offering spec homes for sale “from the $800s”!
I mean only 20 in about a 5 mile radius. For the PHX metro area there must be way ,ore than 131
“Why didn’t these guys go bankrupt?”
They sold a bunch of land at a huge loss, and then went to Uncle Sam for a tax refund on taxes paid in prior years.
I know of one builder who literally needed to sell land at any price in 2008 in order to raise money to pay basic operating expenses (utility bills, etc.). Within a year or two, he was flush with cash (several tens of millions of dollars), and he was back in the market buying land.
He’s now building homes again.
Look up “Tax Loss Carryforward”.
Good grief! Do today’s journalism programs offer coursework in strawman caricature artistry? Because there sure is a great abundance of it in today’s MSM articles on housing.
“Attorney General Lisa Madigan and Gov. Pat Quinn graced the same stage at different times Monday and talked about housing, not politics. Each addressed about 225 people attending the Illinois Housing Leaders Conference hosted by the Illinois Association of Realtors. ‘I will continue to fight for relief on behalf of Illinois homeowners to restore our housing market and ultimately to restore and revitalize our economy,’ Madigan said. ‘I look very much forward to continue to work with the Realtors to get this work done.’”
Propaganda technique numero uno: Start off by disclaiming the political bullsh!t you are about to propagate:
Disclaimer:
“…talked about housing, not politics…”
Political bullsh!t:
“I will continue to fight for relief on behalf of Illinois homeowners to restore our housing market and ultimately to restore and revitalize our economy…”
Speaking of propaganda bullsh!t, where are all the trolls today who recently took up rent-free residence here?
Out at open houses spreading the manure?
I just got back from driving around RB. There are very few For Sale signs in yards around our area. I saw several Open House signs in a 10-mile drive (total for today) but more Estate Sale signs than Open House signs.
This is a harbinger of what’s to come. People who die or move away to Golf Green Estates in Arizona leave behind vacant homes which add to shadow inventory. Eventually the pig-in-the-python will make its way out the rectum, at which point the SWHTF.
Phil Chiles of Springfield, president-elect of the Illinois Association of Realtors, said the appearance by the two statewide officeholders helps show the importance of
housing and the group.bribery to getting reelected.“A new report from Special Inspector General for the Troubled Asset Relief Program points to disturbing numbers, but offers no reason for the high rates.”
Could it be terrible underwriting subsidized by losses that are summarily handed over to the taxpayers, which completely crowd out private sources of loanable funds to the mortgage market?
Nah…couldn’t be.
‘A 64.3 percent DTI is so far out of scope with the pre-bubble years safe-and-sound 36 percent total DTI — and even typical bubble-years full-doc DTI’s of 50 percent — it is absolutely irresponsible. Servicers are pushing the envelope with respect to getting people to qualify.’
As long as taxpayers are happy to pay for the losses on this latest wave of subprime lending, where is the problem?
“Today Hanson is the least surprised of anyone at the failure of HAMP modifications. ‘Because if you look at them structurally — sky-high DTI, LTV [loan to value] and low credit score — they make legacy Subprime loans look sane.’”
Soon enough the borrowers who took these loans will morph into the next group of victims for Democratic politicians to fawn over and bail out. And the debt is federally guaranteed, so the lenders are covered.
It looks like only taxpayers get screwed, so it’s all good!
“‘People read headlines that ‘foreclosures are at 2005 levels’ and cheer. I say the high-risk distressed loans and foreclosures are still out there. They have just been called something different by banks and the government and kicked down the road a few years,’ says Hanson.”
What have they been called?
REO assets on the Fed’s balance sheet, perhaps?
“At a Sept. 25, 2003, committee hearing, Rep. Maxine Waters said: ‘Everything in the 1992 (Community Reinvestment) Act has worked just fine. In fact, the GSEs have exceeded their housing goals.’”
What on God’s earth is she talking about Was their goal to completely collapse? Because that was exactly what happened in Fall 2008.
“Fast forward to 2013. In January, the Consumer Financial Protection Bureau finalized a new Qualified Mortgage rule. It is heavy on monitoring the technicalities of loan origination, but permissive about small down payments, low credit scores and high debt-to-income ratios. This has been followed by an April 2 Washington Post report that ‘housing officials are urging the Justice Department to provide assurances to banks … that they will not face … recriminations if they make loans to riskier borrowers who meet government standards but later default.’”
The Consumer Financial Protection Bureau has turned out to be another fox in the henhouse federal housing agency.
Have you all noticed any “accidental” Dutch Auction sales in your area?
Here is one I noticed last year…started off at $1.8 m, ended up at $1.3 m. How would you like to discover you are $500,000 poorer than you thought you were when you started to sell, over a year after you started marketing your home?
Price History
Date Description Price Change $/sqft Source
09/28/2012 Sold $1,320,000 -5.6% $385 Public Record
09/23/2012 Pending sale $1,399,000 – $408 –
07/04/2012 Price change $1,399,000 -3.5% $408 –
06/05/2012 Listed for sale $1,449,000 -3.1% $423 Agent
01/19/2012 Listing removed $1,495,000 – $436 Pacific Sotheby’s Int’l Realty
11/26/2011 Listed for sale $1,495,000 – $436 Pacific Sotheby’s Int’l Realty
11/24/2011 Listing removed $1,495,000 – $436 Coldwell Banker Residential Brokerage - Point Loma
10/30/2011 Price change $1,495,000 -5.7% $436 Coldwell Banker Residential Brokerage - Point Loma
09/10/2011 Price change $1,585,000 -11.9% $463 Coldwell Banker Residential Brokerage - Point Loma
06/24/2011 Listed for sale $1,799,000 309% $525 Coldwell Banker Residential Brokerage - Point Loma
Here is a hint for folks who put their homes on the market only to receive no buyer interest or offers for weeks, months or even years on end:
REDUCE THE PRICE!!!!!!!!!!!!!!!!!!!
If you regularly reduce the price in, say, five percent increments on a weekly basis, you will have no trouble soon attracting a willing buyer.
But what if you overpaid and have no cash?
EVEN IN HOT MARKET, NOT ALL HOMES SELL QUICKLY
By U-T San Diego 12:01 a.m.April 28, 2013
With full-fledged sellers’ markets underway in dozens of metropolitan areas around the country, new research has found curious statistical patterns emerging: Even in cities where listings get multiple offers within days or hours, significant numbers of homes are sitting on the market for six months, 12 months or more with no takers.
Call them turnoff listings. Despite roaring sales paces all around them, for one reason or another these houses send shoppers scurrying away, often because of mispricing, excessive restrictions on access to buyers and agents, failure to clean or make repairs, and a variety of other marketing bungles.
…
Why the glacial pace for certain homes in even the fastest-moving sellers’ markets? Realty agents who visit houses with potential buyers in tow aren’t shy about sharing the major reasons. One agent, Jeff Dowler of Solutions Real Estate in Carlsbad, says more often than not, the root problem is the owners of the property. As he guides shoppers from one listing to another, “I see homes being sabotaged by owners all the time.”
Sabotaged? Not intentionally, says Dowler, but by “doing things or not doing things that would make the house easier to sell.” Demanding an unrealistically high asking price — and refusing to negotiate on lower but qualified offers — is the top turnoff for Dowler and many other agents showing homes.
Imposing severe restrictions on when and by whom the house can be shown is another. For example, sellers who will only allow showings between 10 a.m. and noon on Saturdays, or who require a 24-hour advance notice before appointments to show during the week, or who won’t let anyone in unless they or the listing agent are present, inevitably delay offers and sales.
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Bottom line: Just because houses are selling fast in your area doesn’t mean yours will. You’ve got to think of it as a product you’re marketing, not just as your home. Get it in shape to sell. Price it realistically. Be flexible and cooperative on showings and negotiations. Unless it has grossly off-putting features — costly physical defects, ugly design, bad location, bad schools — your property should sell.
Kenneth Harney is a columnist for The Washington Post Writers Group. Send email to kenharney@earthlink.net
Good work today Wac A Bubble.
There is so much housing bubble stupidity out there in the world today, it is quite impossible to keep up!
For instance:
Help to Buy risks helping to create another housing bubble
In his ‘emergency’ budget in 2010, George Osborne pledged to create a less debt-fuelled economy. Where is that promise now?
Heather Stewart
The Observer, Saturday 27 April 2013
George Osborne in a hard hat
George Osborne: helping to buy, not helping to build. Photograph: Reuters
The late Eddie George, in 2002, brought the phrase “two-speed economy” into common parlance, telling an audience in Scotland: “We have taken the view that unbalanced growth in our present situation is better than no growth – or, as some commentators have put it, a two-speed economy is better than a no-speed economy.”
But his words could just as well have been applied to last week’s GDP figures. While it was undoubtedly great news that the UK has skirted around a “triple dip”, the breakdown of the numbers suggested that, far from achieving the rebalancing George Osborne hoped for, away from consumers and towards industry, the mix of growth looks much as it did a decade ago. Manufacturing output declined; services expanded; government spending made a positive contribution. Industrial output is still 10% below its pre-crisis peak.
Yet far from acting to redress the balance, the coalition’s latest policies read like a desperate attempt to return to the unstable, unsustainable norms of the early noughties.
Help to Buy, announced in the budget, will offer taxpayer backing for up to £130bn worth of mortgage lending, while last week’s extension of the Funding for Lending scheme will allow banks to receive £10 of cheap funding for every pound they lend to small businesses in 2013 – and lend it back out again in any way they like, including to buy-to-let investors.
Back in 2002, George wanted to reassure consumers they would not face a runup in interest rates – because with other sources of growth, such as industry and exports, struggling, the Bank was willing to allow Britain’s shoppers to continue propping up demand with their buy now, pay later spending habits rather than risk economic stagnation.
When he spoke, the cost of the average home was less than £96,000, though prices were already rising at double-digit rates; by the peak of the boom, little more than five years later, it had all but doubled, to £183,959.
Alongside that extraordinary growth in house prices came an unprecedented explosion in household debt. But constantly rising prices bred a warm feeling of confidence among homeowners and fuelled a sense of entitlement to the unearned benefits of rampant housing-market inflation, creating a ready-made lobby group opposing changes to inheritance tax, council tax or any other method of sharing the windfall more widely.
In Osborne’s first, “emergency”, budget in 2010, he carefully laid out his intention of building a safer, more stable economy, less reliant on debt-fuelled spending. Yet three years on, scarred by the failure of the pound’s 20% depreciation to spark an industrial renaissance, he appears to be banking on the two-speed doctrine to lift him clear of trouble.
Osborne has insisted that Help to Buy is not aimed at pushing up prices. But encouraging first-time buyers to take out mortgages with high loan-to-value ratios – on properties whose value may be unsustainable even at current levels, let alone after another market bounce – is hardly a recipe for a fairer or more stable economy.
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This time is different…supposedly. Don’t forget, all real estate is local — even if interest rates are at rock-bottom levels everywhere houses are built, bought and sold across the U.S.A.
Signs of a new housing bubble
April 25, 2013|Mary Umberger | On Real Estate
Los Angeles is one of four housing markets that are in mini-bubble territory, at risk of price correction.
Los Angeles is one of four housing markets that are in mini-bubble territory, at risk of price correction. (Allen J. Schaben, Los Angeles Times)
Um, don’t look now, but out there in the real estate trenches, they’re whispering the B word again. That’s B as in “bubble.”
That’s because agents in various parts of the country are using such terms as “overheated” and “buying craze” and “skyrocketing prices” to describe what they’re seeing in their markets, according to a recent trade journal report.
It isn’t an isolated discussion: Redfin, a real estate brokerage that does business in 20 markets around the country, recently ranked 15 major metros it perceived as most vulnerable, and least vulnerable, to experiencing another housing bubble.
Redfin Chief Executive Glenn Kelman said he doesn’t see housing, as a whole, headed for another fall. But in an edited interview, he explained that although he’s advising clients in some places that now might be the perfect time to dive into buying, in others, he’s suggesting that renting might be a safer move.
Q: Your company’s analysis of potential bubble areas came with a caveat that, even with the relative frenzy in some places, this time is different. I wish I had a dollar for every broker, agent and housing economist who uttered that same phrase to me during the couple of years before the bubble burst. How is it different this time?
A: Though I think there are places that are really vulnerable to some kind of setback, in general, talk of a bubble is just that.
In Chicago or Atlanta or Dallas, any bubble talk is just talk. But in Washington, D.C., it isn’t just talk. And it isn’t just talk in Los Angeles or San Diego. Those areas are vulnerable because prices are rising (at a rate that’s getting) ahead of incomes. And mortgage interest rates are going to rise, which will chill the market — the Mortgage Bankers Association is predicting average 30-year rates will rise to 4.5 percent by this time next year.
The No. 1 question Redfin’s real estate agents are being asked these days is, is this another bubble? It would be wrong to say we’re in for a big (price) correction across the overall U.S. market. It’s more nuanced than that.
But, yes, there are different conditions this time around.
…
April 25, 2013, 8:18 AM
Irish House Prices Fall for Fourth Consecutive Month
The Euro Crisis HOME PAGE
By Eamon Quinn
Irish home prices fell for the fourth consecutive month in March, suggesting the country’s housing slump is far from over after more than five years.
The government and its international bailout creditors continue to watch home prices for signs that Ireland is recovering from its banking and fiscal crisis.
The country came close to bankruptcy when its over-heated property market crashed in 2007. The Central Statistics Office said house prices are now 51% lower than at their 2007 peak, marking one of the largest declines recorded worldwide.
Prices nationwide dropped 0.5% on average last month from February and were down 3% from March 2012, the CSO said. In Dublin, residential prices fell 0.8% from February, but were 1.4% higher than in March 2012.
Home prices have now fallen in five of the last six months, including 1.5% in February, 0.6% in January and 0.5% in December.
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Housing in Spain
Mortgaged to the hilt
After the house-price crash come the repossessions—and the angry response
Apr 27th 2013 | MADRID |From the print edition
SPANIARDS used to complain that housing cost too much. Now they fret that, with unemployment at 26% and incomes tumbling, they can no longer afford it at any price. The Spanish are among Europe’s keenest owner-occupiers, with 83% living in their own homes. A culture of immobility means that, once a home is bought, it is expected to be for life. For Mariano Rajoy’s government, the problem of repossessions is thus a big headache.
The pre-crash bubble saw Spaniards borrow merrily, owing almost twice as much in mortgages as Italians by 2010. The total debt is falling gradually, but is still around €600 billion ($780 billion). Some 8% of mortgage-holders are now jobless. Last year 80 families a day had mortgages foreclosed, with their properties usually valued far below the purchase price. Many owe money on homes they no longer own or live in. Passions are running high. A vociferous protest movement blocks the doorways of houses due to be repossessed. It obtained 1.4m signatures on a petition demanding a retroactive law to allow American-style mortgages, where the keys (and ownership) can be dumped on the banks.
This spooked banks already struggling with toxic assets from bust developers. With half a million mortgaged properties in negative equity, many mortgage-holders would be better-off handing their homes over. “If half of the potential beneficiaries took advantage of the measure, the non-performing loan rate could triple,” says María Romero of Analistas Financieras Internacionales in a paper.
The government has now passed a watered-down law to stop banks foreclosing until mortgagees are three months in arrears. Poorer families have two years. It also capped interest rates, which can reach 25%, and includes only a very modest version of the key-return idea. Banks breathed a sigh of relief, however. Spain’s finance sector is undergoing a huge restructuring with €41 billion of European bail-out money. Nobody wants a return to last year, when Bankia alone declared losses of over €19 billion. With more than 600,000 new homes still unsold, a flood of new properties onto the market would hurt both banks and house prices. Ripples would extend, as Spain has Europe’s second-largest mortgage-securitisation market.
…
It also capped interest rates, which can reach 25%,
Say what? I wonder if that’s common or an extreme case. 25% a year mortgage on an underwater home in a recourse country. Ay de mi.
Does Spain’s housing crisis offer us a glimpse of the future?
Though Spanish law is more sympathetic to tenants than the UK judiciary, it offers creative ideas for coping with housing pressures
Ben Reeve-Lewis
Guardian Professional, Friday 26 April 2013 03.45 EDT
Apartments in Barcelona
Barcelona, Spain: Unemployed Spaniards are struggling to meet their housing needs, with many resorting to occupying empty properties. Photograph: Martin Godwin
A recent trip to Spain and a perusal of a selection of English ex-pat newspapers offered some interesting insights into the nature of the country’s housing crisis, and the way the Spanish people and their government are responding to it.
Admittedly the Spanish situation is heavily underpinned by critical levels of unemployment, with some areas seeing 40% of the workforce out of work. Yet the toxic combination of an economy based on cuts, rising rent, mortgage repossessions and direct action by squatters provide parallels that may provide a glimpse into Britain’s near future.
Spain responded to recession by implementing cuts in welfare benefits, leading to an exponential rise in the number of tenant evictions and mortgage repossessions.
The Spanish mortgage system is different from the UK in several respects: a home owner can find their property reposessed easily, if they fall into just one month’s arrears, and a bank is entitled to be repaid the full loan amount at that point – even if the borrower has already paid back 50% of the original loan. If a bank repossesses and sells a property on, it is allowed to keep the entire sum raised at sale even if the loan is cleared and there is an excess.
…
if they fall into just one month’s arrears, and a bank is entitled to be repaid the full loan amount at that point – even if the borrower has already paid back 50% of the original loan. If a bank repossesses and sells a property on, it is allowed to keep the entire sum raised at sale even if the loan is cleared and there is an excess.
Wow. Banksters’ paradise. How insanely unfair are those rules? Sounds like a contract written by Ebenezer Scrooge.
Property prices still falling in Portugal but confidence is improving, says RICS
Thursday, 04 April 2013
Residential property prices in Portugal continue to fall due to weak demand and rents are also down but confidence in the country’s hard hit real estate sector has risen to its highest level for over two years.
The latest housing market survey from the Royal Institution of Chartered Surveyors (RICS) and Confidencial Imobiliario highlights the broad based weakness of the sales market in contrast to the partial strength of the lettings sector.
It points out that this has been an ongoing theme since at least the third quarter of 2011 when the lettings data was introduced.
In the sales market, transactions and prices continued to decline, with the national price net balance broadly stable at -61 which means that 61% more respondents experienced price falls rather than rises.
The good news is that new buyer enquiries are showing signs of stabilising. Not only did the national enquiries balance improve from -11 to -1, the highest reading since the survey began in September 2010, but this improvement was quite broad based across the surveys three regional groups of Lisbon, Porto and the Algarve.
Moreover, the national confidence index, which is a composite measure based on price and sales expectations, improved 13 points from -44 to -31, which is the highest in over two years.
The report says that it is also noteworthy that residential developers, on the whole, are reporting less severe price declines than sales agents. This suggests the market for new build, whilst still under pressure, is holding up slightly better than for existing stock.
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Europe
Cohousing Tempts Italians During Real Estate Crisis
By Marco Tistarelli, Epoch Times | April 26, 2013
Last Updated: April 26, 2013 1:07 am
Number Zero facade in Turin, Italy. The doors opened on the March 4, 2013, after over five years of work. (Matteo Nobili / cohousingnumerozero.org)
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With the Italian real estate market in free fall, increasing numbers of people are tumbling through the gaps. Too rich to claim social housing and too poor to afford a traditional house, some are turning to a new approach—cohousing.
“The concept of cohousing originated in northern Europe in the ’60s,” says Nadia Simionato, spokeswoman for the Italian network Cohousing.it “Then it spread to other countries and reached Italy in 2006.”
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2 Officers Are Shot as Italy’s Government Is Sworn In
Simona Granati/Agence France-Presse — Getty Images
Police officers rushed to aid a fellow officer who was shot in the neck during an attack outside the Italian prime minister’s office on Sunday.
By ELISABETTA POVOLEDO
Published: April 28, 2013
ROME — Two military police officers were shot and wounded on Sunday in a crowded square outside the office of Prime Minister Enrico Letta and near the presidential palace, where his new government was being sworn in.
The shooting was shown live by the state broadcaster RAI, which had a television crew in the square in front of Mr. Letta’s office, Palazzo Chigi, where the new ministers were to go after the swearing-in ceremony.
What was supposed to be a day of celebration, marking a government that took nine weeks after the elections to assemble, quickly turned into a national drama. The square in front of Palazzo Chigi was cordoned off, and ambulances and police cars blocked traffic in one of Rome’s busiest downtown areas. Inside the palace, the ceremony continued undisturbed, and most of the ministers were not told of the shooting, which occurred about half a mile away, until after the ceremony.
A man, identified as Luigi Preiti, who is unemployed and is from the Piedmont region, was detained and accused of the shooting, the authorities said.
“I heard seven or eight shots,” said Enrica Agostini, an RAI reporter. “I was pushed back into Palazzo Chigi. The police was screaming, ‘It’s an attack, it’s an attack.’ ”
…
Roll up, get your piece of Greece
8:28 AM Saturday Apr 27, 2013
From pristine beaches to palaces, entire islands and its London embassy, a nation in crisis is selling its assets. Harriet Alexander reports from Rhodes.
Huge chunks of prime real estate on the island of Rhodes are on the auction block. Photo / Supplied
As George Georgas drives his golf buggy along the seafront, the sprightly 80-year-old muses on why this is the best stretch of coast in the world.
The beach is the longest on the Greek island of Rhodes - more than 6km of crystal waters and a gently sloping pebble shore. The 18-hole golf course that flanks it is lined with olive trees and wild flowers, and there is scarcely a hotel or high-rise in sight.
Georgas has played here for more than 30 years. And now he thinks the Government should sell it.
“We are like a bankrupt housewife forced to sell the silver, to save the family,” he said. “Greece has no choice.”
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“We are like a bankrupt housewife forced to sell the silver, to save the family,” he said. “Greece has no choice.”
Will Greece still have the power to tax these items after they are sold? If so, they are not actually for sale, only for rent. The ‘rent’ is the tax that will be assessed.
ECB study shows German households poorer than Cyprus’
Published time: April 10, 2013 13:25
The poorest households in Eurozone are in Germany, whereas households in Luxembourg and debt burdened Cyprus top the list as the wealthiest, according to the ECB study. The data gathered in 2008-2010 may not however reflect the current situation.
The European Central Bank’s survey sparked debate on how much EU taxpayers’ money should be directed to help troubled economies in the Eurozone.
The study released on Tuesday spans 15 member states and looked at the median net wealth of 62,000 households. Most of the data was gathered in 2009-2010, while some data refers to 2008, right after the global credit crunch, thus the figures may not be currently accurate.
“It should be kept in mind that the survey focuses on one particular type of wealth, i.e. wealth of private households,” says the report.
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Cyprus news magazine for overseas property buyers & real estate investors
EU set to finalise rules on mortgage lending
The European Union is seeking to avoid housing bubbles with a set of common rules for mortgage lending in efforts to avoid property bubbles that have resulted from reckless lending.
By: Nigel Howarth Published: Monday 22nd April 2013 •
EUROPEAN Union negotiators are expected to finalize the bloc’s first common rules on mortgage lending on Monday, in an attempt to avoid a repeat of property bubbles that helped fuel the euro zone’s debt crisis. The legislation will force lenders in Europe’s 6.5 trillion euro mortgage market to check the creditworthiness of potential customers and their ability to repay, effectively banning self-certified or “liar” loans. The rules would also make it illegal for those carrying out credit checks within banks and other lenders to have their pay linked to the number of mortgages they approve – a practice blamed for encouraging irresponsible lending in the past.
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Beans and rice aren’t that bad of a combination. In fact, our dinner tonight comes pretty close to that description (black bean lasagna = beans + pasta)…
Here’s What A Chinese Real Estate Expert Says About Whether There’s A Bubble Forming Or Not
By Angelo Young | April 23 2013 9:01 AM
Here’s the worst-case scenario: China’s housing market tanks, which sends the country’s financial system into free-fall, taking the global economy down with it. The result? You lose your job and end up eating only beans and rice as you slog through the next global economic recession.
This isn’t hyperbole. As outlined last month on “60 Minutes,” a collapse of China’s real estate market could have formidable global repercussions. If China falls, so could the U.S., in part because the Chinese would have to curb their purchasing of U.S. Treasury bonds, which fund U.S. deficit spending. China is also becoming an important market for goods, and Chinese consumers are particularly finicky about taking on consumer debt, unlike Americans.
This is why all eyes are on Chinese real estate, which makes up about a fourth of the world’s fastest-growing economy. There’s alarming growth in home prices in the country’s urban centers, while at the same time there’s a housing surplus in many less-populated parts of the country, where many structures sit empty as investments waiting to mature.
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SA housing bleak until next year: report
Posted Tue Apr 23, 2013 5:58am AEST
building site Photo: Housing outlook for SA might improve by 2014 (Gary Rivett: ABC News)
A quarterly business report says 2013 will mark the low point of South Australia’s housing construction cycle and growth will pick up next year.
The Access Economics business outlook said a lift in housing construction would have a flow-on effect for local retail spending, which had been no higher than four years ago despite population and wages growth.
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Something about this story smells wrong. I’d be curious to hear from someone in Oz about whether it is accurate.
Australia Turns to Auctions as Housing Revives: Mortgages
By Nichola Saminather - Apr 24, 2013 12:50 AM PT
Australians selling properties are increasingly turning to auctions as interest rates matching the lowest in 50 years fuel demand for homes in the country’s largest cities.
In Sydney, the most-populous city, almost two-thirds of homes offered at a public sale found buyers in February and March, the highest level since April 2010, according to data from researcher Australian Property Monitors. In Melbourne, the second-biggest city and largest market for auctions, the proportion rose to 68 percent in February, the highest since May 2010, the figures show.
Unlike in the U.S., where auctions are frequently used to dispose of distressed properties, home sellers in Australia are more likely to try them when the market is strengthening and there’s the prospect of higher prices, a probability that’s growing after the Reserve Bank of Australia cut rates to a half- century low. A private index of housing market sentiment surged in the first quarter to the highest level since 2010.
“There’s now an emerging sense of urgency, that the market is on the rise,” Angus Raine, chief executive officer of Raine & Horne, a Sydney-based residential, commercial and rural property broker founded in 1883, said in a telephone interview.
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Funny how rock bottom low interest rates contributed to bubblicious housing prices in Norway, but not in the U.S.
Bloomberg News
Norway’s FSA Warns on Substantial Risks for Household Debt
By Josiane Kremer and Stephen Treloar
April 23, 2013
Norway’s financial regulator said that the optimism gripping Norway can easily evaporate and trigger a retrenchment for debt-burdened Norwegian households.
“Weakened confidence in the Norwegian economy could lead to a fall in house prices or intensify an incipient decline, triggering substantial financial consolidation in the household sector,” the Oslo-based regulator said in a 2013 outlook report. “Knock-on effects to the wider economy may be substantial, and banks’ loan losses will rise.”
The financial watchdog in March threw its weight behind a government proposal to force banks to assign higher risk weights on mortgage loans as the nation looks for ways to cool its overheated property market. The nation has also proposed curbs on covered bond issuance and higher capital requirement to prevent a repeat of the 1990s crisis that sent Norway’s real estate prices plunging 40 percent.
The Finance Ministry in December proposed tripling risk weights to 35 percent, more than double the recommendation in neighboring Sweden, after house prices and private debt burdens soared to records. Lawmakers have also proposed higher capital requirements for its banks, including DNB ASA (DNB), and to implement them earlier than international regulators.
House prices in Western Europe’s biggest oil exporter have doubled since 2002, and rose an annual 7 percent last month, according to the Norwegian Association of Real Estate Agents. At the same time, household debt will swell to about 200 percent of disposable incomes this year, the central bank estimates.
Low interest rates have contributed to imbalances in the housing market. Norway’s central bank has held its benchmark interest rate at 1.5 percent for more than a year. Policy makers last month signalled a possible cut to match a 2009 record as they try to fight krone gains that are weighing on inflation.
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Canada’s luxury housing market is heating up, because everyone wants to live there!
Canada’s housing market drawing the big-money crowd
Sotheby’s finds more foreign buyers looking to Canada as a safe and stable place to live
According to Sotheby’s, foreign interest in high-dollar homes like this one is increasing. / The Toronto Star
According to Sotheby’s, foreign interest in high-dollar homes like this one is increasing.
Susan Pigg Business Reporter, Published on Wed Apr 17 2013
Sotheby’s International Realty is seeing a surge in demand from wealthy Syrians, Egyptians and Europeans looking for a safe and relatively stable place to park their millions — Canada’s softening real estate market.
There has been an uptick in “very significant transactions” in tony areas like Oakville and North Toronto by Europeans, many with young families who originally had planned to settle in the U.S. but fell in love with Canada instead, says Sotheby’s Canada CEO Ross McCredie.
At the same time, Montreal’s exclusive Westmount area has become top of the real estate wish list for high-net worth Syrians and Egyptians looking for a safe haven for their money and families, he added.
Increasingly, many of these deals — especially those over $10 million — aren’t even showing up in MLS sales tallies because of buyers seeking the privacy afforded by private or exclusive deals, or finalized under the cloak of a corporate purchase, McCredie noted.
“The lack of inventory is a big problem in the high-end market,” so agents are having to find their own properties rather than look to the MLS system, said Andy Taylor of Sotheby’s Toronto office, which has done more international business in the last 18 months than in the last six years.
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Yes.
The economics of housing
How do Canadian and U.S. house price fundamentals stack up?
Ben Rabidoux
Special to The Globe and Mail
Published Wednesday, Apr. 24 2013, 5:00 AM EDT
Last updated Wednesday, Apr. 24 2013, 9:52 AM EDT
Canadians are obsessed with whether or not our housing market is going to suffer a “U.S.-style” correction. It’s by now widely accepted that corrections are happening in key Canadian cities. Sure, there are still pockets of strength – Calgary and the detached market in Toronto, for example – but most markets are seeing rising inventory and falling sales, which typically foretell price weakness.
I don’t believe that what happened in the U.S. is going to happen in Canada. The U.S. housing crash was the greatest destruction of wealth in human history. House prices dropped 35 per cent nationally from peak to trough, inflicting a crippling and long-lasting blow on their economy and labour market.
But that doesn’t mean we have nothing to worry about. As I’ve argued before, there are a lot of very negative outcomes between “painless soft landing” and “U.S.-style collapse.” And given that the Canadian economy and labour market are significantly more reliant on housing-related industries than the U.S. ever was, even at market peak, I am extremely skeptical that policy makers can easily orchestrate a soft landing without significant collateral damage.
Here are three ways Canada compares to the U.S. in terms of some important house price fundamentals, and why there may be cause for concern:
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The U.S. housing crash was the greatest destruction of wealth in human history.
Worse than WW2? Or the last Great Depression? Or WW1?
Greatest nominal wealth destruction: Plausible
Greatest real wealth destruction: Doubtful
Vancouver’s housing market suddenly faces a buyers’ strike:
Vancouver-area home sales down 18 per cent
BRENT JANG
VANCOUVER — The Globe and Mail
Published Wednesday, Apr. 03 2013, 2:34 PM EDT
Last updated Wednesday, Apr. 03 2013, 2:41 PM EDT
The number of homes sold in Greater Vancouver fell 18 per cent last month as buyers played a waiting game while sellers held out for improved bids.
There were 2,347 resale properties that sold in March, down from 2,874 sales a year earlier on the multiple listing service.
The benchmark index price for single-family detached homes, townhouses and condos slipped 3.9 per cent year-over-year to $593,100, according to the Real Estate Board of Greater Vancouver. Sales volume in March hit the second-lowest point for that month since 2001.
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EMERGING MARKETS-Latam (SIC) currencies slip on poor US housing data
Mon Apr 22, 2013 2:54pm EDT
* U.S. existing home sales unexpectedly fall in March
* Chile peso hits year low as top export copper slides
* Mexico peso falls 0.1 pct, Brazil real down 0.4 pct
RIO DE JANEIRO, April 22 (Reuters) - Latin American
currencies edged lower on Monday after an unexpected drop in
U.S. existing-home sales added to global economic concerns,
driving investors to the perceived safety of the dollar.
The Mexican peso, whose performance is closely tied
to the outlook for the U.S. economy, dropped 0.1 percent to
12.2629 per dollar - a decline of nearly 2 percent from a
20-month high it hit only 11 days ago.
Most currencies in the region had opened higher but erased
gains after a report showed U.S. home resales slipped 0.6
percent last month, yet another sign that U.S. economic activity
may be cooling.
Also weighing on the peso was a report showing Mexican
retail sales slipped in February from the previous month, having
their biggest year-on-year drop in 3-1/2 years.
In Brazil, the real weakened 0.4 percent to
2.0195 per dollar. While investors were on alert for a possible
central bank intervention to stem further currency losses,
analysts believed that would not happen at current levels.
“The exchange rate would have to be near 2.04 per dollar for
it to trigger an intervention,” said Jose Carlos Amado, a
currency trader with Renascenca brokerage in Sao Paulo.
Chile’s peso closed at its weakest level so far
this year as prices of copper, the country’s main export
product, fell almost 1 percent and neared a 1-1/2-year low.
The Chilean currency ended 0.15 percent lower, at 477.50 per
dollar.
“The copper slide continued to weigh on the peso,” said a
trader in Santiago. “There is, however, a strong resistance
around 478 pesos per dollar. Every time the peso hovers around
those levels, there’s an increased dollar offer.”
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April 28, 2013, 12:32 pm
Top Lieutenant of Dimon Is Departing JPMorgan
By JESSICA SILVER-GREENBERG
A senior executive in the inner circle of Jamie Dimon, JPMorgan Chase’s chief executive, is leaving, the latest departure after the bank reported a multibillion-dollar trading loss last year.
Frank J. Bisignano, co-chief operating officer, will become chief executive of First Data Corporation, a payment processing firm, Mr. Dimon said in a statement on Sunday. The trading losses at the bank, the nation’s largest, have swelled to more than $6.2 billion since they were first disclosed almost a year ago.
Mr. Dimon said Matthew E. Zames, who shared the role of chief operating officer with Mr. Bisignano, would take over all aspects of the job, effective immediately.
“He is a proven business executive, who has performed exceptionally well since coming into his corporate role in May of last year,” Mr. Dimon said.
With Mr. Bisignano’s departure, executives who once surrounded Mr. Dimon as he helped steer the bank through the 2008 financial crisis will be even thinner. Several other executives have already left, including Heidi Miller, James E. Staley, Bill Winters and Steve Black.
Mr. Bisignano was promoted to co-chief operating officer last July as part of a broad management reshuffling. During his time at JPMorgan, Mr. Bisignano gained a reputation as a kind of Mr. Fix-It. His reputation had not been tarnished by the outsize bets made by traders in JPMorgan’s chief investment office.
He took the reins of JPMorgan’s floundering mortgage unit in 2011 just as the bank was grappling with thorny legal issues, including investors who accused the bank of selling shaky mortgage-backed securities that later imploded.
To root out the problems, Mr. Bisignano revamped the mortgage unit and unveiled a policy to address cases in which JPMorgan had wrongfully foreclosed on active-duty military members, a violation of federal law. He was a skilled manager at the bank and he kept a tight watch over the mortgage operations.
Mr. Bisignano will leave at a challenging time for JPMorgan, which once held special sway with federal regulators, in part because the bank largely sidestepped the financial crisis.
Now, JPMorgan is facing a criminal inquiry about whether it misled investors and regulators about the botched trades. Besides that inquiry, JPMorgan is dealing with investigations by at least eight federal agencies, including the Federal Deposit Insurance Corporation, the Commodity Futures Trading Commission and the Securities and Exchange Commission, according to the people with direct knowledge of the matter. Prosecutors are examining a variety of issues, including possible breakdowns in the bank’s controls of money-laundering activities.
The bank is also working to bolster its risk and compliance controls while repairing frayed relationships with regulators in Washington. The breakdown between JPMorgan and its primary regulator was illuminated during a Senate hearing and a report by the Senate’s Subcommittee on Investigations that painted a picture of a bank that sometimes took a defiant position with regulators.
To account for the trading losses, Mr. Dimon has testified before Congress and repeatedly apologized for the mistakes.
In his annual letter to shareholders this month, Mr. Dimon continued to be contrite. He vowed to continue improving risk controls, again expressing that the bank “let our regulators down.”
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America, behold thy future.
Mexico Follows U.S. in Foreclosures Crushing Builders
By Jonathan Levin - Apr 2, 2013 1:43 PM PT
Foreclosed Homes Flood Mexico Market as Builders Sink
For sale signs are displayed at an Urbi Desarrollos Urbanos SAB housing development on the outskirts of Mexico City on Feb. 25, 2013. Photographer: Susana Gonzalez/Bloomberg
Just as the U.S. emerges from the worst of its foreclosure crisis, Mexico’s is getting worse.
Home repossessions more than doubled last year to a record 43,853 from 2011, according to Infonavit, the state-backed lender responsible for about 70 percent of home loans in Mexico, as the past decade’s expansion in government-subsidized housing backfires and adds to a glut of empty homes weighing on the nation’s beleaguered builders.
Efforts to build thousands of properties on low-cost land beyond city limits has led to unpaid mortgages as workers shun commuting costs and return to urban living, according to the government. With abandoned homes mounting, Infonavit has ramped up home seizures by acting on unpaid taxes instead of delinquent loans, reducing its transaction time to about four months from more than two years, the lender said.
“We have a serious problem with unoccupied homes,” Eduardo Torres, an economist with the local unit of Banco Bilbao Vizcaya Argentaria SA (BBVA), said in a telephone interview from Mexico City. “They were built under the false premise that the housing deficit was so great that everything they built would be bought regardless of conditions. So people got their homes, but that didn’t resolve their needs when the homes were three hours from their jobs.”
Infonavit has been financing home purchases since the 1970s in part to help curb a housing deficit caused by population growth and properties in disrepair. The policy created windfalls for homebuilders, sparking a wave of initial public offerings and foreign bond sales over the past 10 years, with investors rushing to finance a government-backed industry that seemed shielded from economic swings.
Housing Downturn
Now the policy is fueling a housing downturn even as Latin America’s second-biggest economy enters its fourth straight year of expansion. Mexico probably will grow 3.5 percent this year, compared with a 3.1 percent rate in Brazil, the region’s biggest economy, according to Bloomberg surveys of economists.
The U.S. economy is forecast to grow by 1.9 percent as its housing market rebounds from a six-year slump and the pace of foreclosure filings slows to the lowest level since 2007. Shares of U.S. homebuilders have risen more than 10 percent this year and more than doubled since the end of 2011.
In contrast, Mexico’s builders are getting squeezed by the added supply from foreclosed homes, with the Mexico Habita Index (HABITA) of six builders plunging 36 percent this year. The measure fell 0.2 percent today. Urbi Desarrollos Urbanos SAB (URBI*), the country’s third-largest builder, has dropped 60 percent in 2013 and yields on its bonds due in 2022 reached a record 20.89 percent on March 25 from 10.61 percent at the end of last year. The benchmark IPC index of 35 Mexican stocks has climbed 0.9 percent this year.
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Expert: Fed Creating New Housing Bubble
Wednesday, 10 Apr 2013 06:20 PM
By Doug Hulette
The rebound in the housing market is “eerily familiar to the previous government policy-induced boom that went bust in 2006, and from which the country is still struggling to recover,” says Edward Pinto, who was the chief credit officer at Fannie Mae from 1987 to 1989.
In an opinion article in The Wall Street Journal, Pinto notes that the Federal Reserve’s aggressive policy of quantitative easing has lifted the stock market to record highs and supported strong bond prices. Moreover, he says, housing prices have jumped 8%, the biggest annual gain since 2006.
Pinto, now a resident fellow at the American Enterprise Institute, says that the market value of single-family homes has risen by more than $1 trillion. That “wealth effect” should empower homeowners to spend more, thus boosting the economy.
But data from the Federal Housing Finance Agency suggest that the increase in house prices reflects that the Fed’s lower rates are simply being capitalized into higher home prices, he says.
“While a housing recovery of sorts has developed, it is by no means a normal one,” Pinto says. “The government continues to go to extraordinary lengths to prop up sales by guaranteeing nearly 90% of new mortgage debt, financing half of all home purchase mortgages to buyers with zero equity at closing, driving mortgage interest rates to the lowest level in 100 years, and turning the Fed into the world’s largest buyer of new mortgage debt.”
“Will history repeat? When it comes to interest rates, whatever goes down must go up,” he says.
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Is the Fed Blowing a New Housing Bubble?
Stagnant real incomes suggest that rising home prices reflect artificially low interest rates.
By EDWARD PINTO
Over the past year, the Federal Reserve has ramped up its policy of quantitative easing, with the result being new stock market highs and surging bond prices. Moreover, housing prices jumped 8%, the biggest annual gain since 2006.
The result is that more than a trillion dollars have been added to the market value of single-family homes. Homeowners are now wealthier and according to what economists call the “wealth effect,” they should be willing to spend more, helping the economy.
But there is another, less sanguine view of the housing recovery. Recent data released by the Federal Housing Finance Agency (FHFA) suggest that the increase in house prices is not being driven by a broad-based improvement in the economy’s fundamentals. Instead, the Fed’s lower rates are simply being capitalized into higher home prices. This does not bode well for the future.
A comparison of FHFA’s conventional home-financing data for February 2012 and February 2013 shows that borrowers bought newly built and existing homes in 2013 for 9% and 15% more respectively than in the previous year. Increases of this magnitude cannot be attributed to higher incomes, as these rose a mere 2% over the last year, just keeping up with inflation. It appears that home prices are being levitated by quantitative easing. Because interest rates were .625% and .90% lower on new and existing homes respectively this year compared with last year, the monthly finance cost to purchase a new home remained the same and went up only 3% for an existing home.
While a housing recovery of sorts has developed, it is by no means a normal one. The government continues to go to extraordinary lengths to prop up sales by guaranteeing nearly 90% of new mortgage debt, financing half of all home purchase mortgages to buyers with zero equity at closing, driving mortgage interest rates to the lowest level in 100 years, and turning the Fed into the world’s largest buyer of new mortgage debt.
Thus, with real incomes essentially stagnant, this is a market recovery largely driven by low interest rates and plentiful government financing. This is eerily familiar to the previous government policy-induced boom that went bust in 2006, and from which the country is still struggling to recover. Creating over a trillion dollars in additional home value out of thin air does sound like a variant of dropping money out of helicopters.
Will history repeat? When it comes to interest rates, whatever goes down must go up.
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[VIDEO LINK IN SIDEBAR]
Assistant editorial page editor James Freeman on how Fed and White House policies may create another housing crisis. Photos: Getty Images
Op-Ed Columnist
The Story of Our Time
By PAUL KRUGMAN
Published: April 28, 2013
Those of us who have spent years arguing against premature fiscal austerity have just had a good two weeks. Academic studies that supposedly justified austerity have lost credibility; hard-liners in the European Commission and elsewhere have softened their rhetoric. The tone of the conversation has definitely changed.
My sense, however, is that many people still don’t understand what this is all about. So this seems like a good time to offer a sort of refresher on the nature of our economic woes, and why this remains a very bad time for spending cuts.
Let’s start with what may be the most crucial thing to understand: the economy is not like an individual family.
Families earn what they can, and spend as much as they think prudent; spending and earning opportunities are two different things. In the economy as a whole, however, income and spending are interdependent: my spending is your income, and your spending is my income. If both of us slash spending at the same time, both of our incomes will fall too.
And that’s what happened after the financial crisis of 2008. Many people suddenly cut spending, either because they chose to or because their creditors forced them to; meanwhile, not many people were able or willing to spend more. The result was a plunge in incomes that also caused a plunge in employment, creating the depression that persists to this day.
Why did spending plunge? Mainly because of a burst housing bubble and an overhang of private-sector debt — but if you ask me, people talk too much about what went wrong during the boom years and not enough about what we should be doing now. For no matter how lurid the excesses of the past, there’s no good reason that we should pay for them with year after year of mass unemployment.
So what could we do to reduce unemployment? The answer is, this is a time for above-normal government spending, to sustain the economy until the private sector is willing to spend again. The crucial point is that under current conditions, the government is not, repeat not, in competition with the private sector. Government spending doesn’t divert resources away from private uses; it puts unemployed resources to work. Government borrowing doesn’t crowd out private investment; it mobilizes funds that would otherwise go unused.
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There is absolutely no doubt that the top-down command-and-control hair-of-the-dog Fed-funded housing recovery is “in the bag”…
IS THERE?!
April 18, 2013, 3:22 PM
Raskin: Housing Recovery to Make Fed Policy More Potent
By Michael S. Derby
Federal Reserve stimulus aimed at spurring growth will likely grow more powerful as the housing market recovers further, but the trends that have fueled income inequality aren’t likely to change much, a U.S. central bank official said Thursday.
“The accommodative policies of the [Federal Open Market Committee] and the concerted effort we have made to ease conditions in the mortgage markets will help the economy continue to gain traction,” Fed governor Sarah Bloom Raskin said.
“As house prices rise, more and more households have enough home equity to gain renewed access to mortgage credit and the ability to refinance their homes at lower rates,” she said.
“I think it is possible that accommodative monetary policy could be increasingly potent” as the housing market picks up, Ms. Raskin said.
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The confidence among some experts that the Fed’s hair-of-the-dog housing stimulus will ‘work’ as planned borders on overwhelming.
And none of these MSM-cited ‘experts’ seem to find anything wrong with a housing market where Fed-encouraged gambling activities drive prices to levels where ordinary families cannot afford to purchase homes without high-risk federally-guaranteed subprime loans.
Federal Reserve Has Fueled Housing Rebound, Pimco’s Cudzil Says
By Jody Shenn & Tom Keene - Apr 24, 2013 7:54 AM PT
The Federal Reserve’s debt buying has helped housing both by holding down borrowing costs for home buyers and pushing investors to purchase properties instead of bonds, Pacific Investment Management Co.’s Michael Cudzil said.
“It’s definitely had a positive impact on the housing market,” Cudzil, an executive vice president who specializes in mortgages at Newport Beach, California-based Pimco, said in an interview on Bloomberg Radio with Tom Keene and Michael McKee. Along with helping traditional borrowers, the lower bond yields created by the central bank have “forced money away from center. You’re actually starting to see money moving out of the capital markets and into real estate.”
Blackstone Group LP (BX), the world’s largest private-equity firm, is among institutional investors rushing to buy up homes to rent out, helping prices in 20 large metropolitan areas rise 9 percent through January from March 2012, after falling 35 percent from a 2006 peak, according to an S&P/Case-Shiller index.
Values will rise 8 percent to 12 percent over the next two years, boosted in part by the near-record affordability created by the low mortgage rates the Fed has engineered, Cudzil said.
The central bank started its third round of asset purchases known as quantitative easing in September with $40 billion in monthly buying of mortgage bonds, before also adding $45 billion of Treasuries to the program. Rates on 30-year mortgages averaged 3.41 percent last week, after reaching an all-time low of 3.31 percent in November, according to Freddie Mac surveys.
Pimco, manager of the world’s largest bond fund, expects the Fed to start slowing its debt buying by September, before ending the expansion of its balance sheet early next year, Cudzil said.
Mortgage rates probably won’t experience a sharp jump when the Fed stops buying, increasing only 0.15 percentage point to 0.2 percentage point, he said. Ideally, the private sector will be strong enough to pick up the slack at the time the Fed begins tightening, he said.
“Whether or not that transition can happen remains to be seen,” he said. “The answer is still up in the air.”
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From Subprime Crisis to QE3 the Federal Reserve has Failed America
Politics / Central Banks Apr 26, 2013 - 10:37 PM GMT
By: Richard Mills
Politics
Alan Greenspan was chairman of the Federal Reserve from 1987 to early 2006. Greenspan used monetary policy to ignite one of the longest economic booms in history. Of course booms can soon turn to bust and nowhere was the boom more evident than in the housing industry - the sub-prime crisis collapsed the housing boom just after Greenspan left the Fed.
Sub-Prime Crisis
“The banking problems of the ’80s and ’90s came primarily, but not exclusively, from unsound real estate lending.” L. William Seidman, former chairman of both the Federal Deposit Insurance Corporation (FDIC) and the Resolution Trust Corporation
Between 1997 and 2005 mortgage fraud increased by 1,411 percent. In 2001 the US Federal Reserve lowered the Federal funds rate eleven times, from 6.5 percent to 1.75 percent. Mortgage denial rates were 28 percent in 1997, in 2002 – 2003 they were 14 percent for conventional home purchase loans. “Fog the mirror loans” were common, if you breathed you got a loan.
In June 2002 President George W. Bush set out to increase minority home ownership by 5.5 million. Bush’s lofty goals would be accomplished by tax credits, subsidies and Fannie Mae committing $440 billion to establish Neighbor Works America.
In June 2003 Federal Reserve Chair Alan Greenspan lowered the federal reserve’s key interest rate to one percent - the lowest rate in 45 years.
Throughout 2003 Fannie Mae and Freddie Mac bought $81 billion in subprime securities. President Bush signed the American Dream Down payment Act – the Act provided a maximum down payment assistance grant of either $10,000 or six percent of the purchase price of the home, whichever was greater.
U.S. homeownership rate peaked to an all time high of 69.2 percent in 2004.
From 2004 to 2006 Fannie Mae and Freddie Mac purchased $434 billion in securities backed by subprime loans.
In late 2004 the Securities Exchange Commission (SEC) suspended net capital rule for five firms - Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Stearns and Morgan Stanley. Free from government imposed limits on the amount of debt they could assume, they all levered up, as much as 40 to 1.
The United States housing market bubble burst in the fall of 2005. By year-end a total of 846,982 properties were in some stage of foreclosure. From the fourth quarter of 2005 to the first quarter of 2006, median prices nationwide dropped off 3.3 percent.
The U.S. Home Construction Index was down over 40 percent as of August 2006. A total of 1,259,118 foreclosures were filed in 2006, up 42 percent from 2005. Homeowners were going underwater (they owed more than the house was worth) and many had had questionable credit to start with.
In 2007, lenders started foreclosure proceedings on nearly 1.3 million properties, a 79 percent increase over 2006.
Foreclosure proceedings increased to 2.3 million in 2008, an 81 percent increase over 2007 and increased by another half million in 2009 to 2.8 million. By January 2008, the mortgage delinquency rate had risen to 21 percent and by May 2008 it was 25 percent.
By August 2008, 9.2 percent of all U.S. mortgages outstanding were either delinquent or in foreclosure. By September 2009, this had risen to 14.4 percent.
From September 2008 to September 2012, there were approximately 3.9 million completed foreclosures in the U.S. As of September 2012, approximately 1.4 million homes, or 3.3 Percent of all homes with a mortgage were in some stage of foreclosure compared to 1.5 million, or 3.5 percent, in September 2011.
Causes
The Great Recession started in December of 2007 and took a sharp downward turn in September 2008. It was started by the U.S. sub-prime crisis which burst the housing bubble. Businesses failed, consumers lost wealth estimated in the trillions of dollars and economic activity and international trade slowed.
So what caused the real estate crisis? Three things stand out:
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“Markets that saw a decrease in appreciation include New York (down 0.3 percent) and Chicago (down 1.4 percent, the biggest drop of any in the study). St. Louis and Charlotte also saw modest drops.”
What on Gawd’s earth does ‘decrease in appreciation’ mean? Instead of using these weasel words, why not call it what it is: TUMBLING PRICES.
Home Price Appreciation Boom Slows
By Alan Farnham
Apr 25, 2013 10:11am
Justin Sullivan/Getty Images
U.S. home values continue to appreciate, according to a new study released today, but the rate of appreciation is slowing.
The Zillow Home Value Index rose to $157,600 as of the end of the first quarter, up 5.1 percent from a year ago and up 0.5 percent from the fourth quarter of 2012.
The index is the median value for a given geographic area, on a given day, and includes the value of all single family residences, condos and coops, whether or not they sold within the period. It is seasonally adjusted.
U.S. home values in March rose for the 16th consecutive month–although the rate of appreciation slowed for the second consecutive month. Home value appreciation in the first quarter was 0.5 percent, versus 2.1 percent for the quarter before.
Historically, housing markets enjoy value appreciation of about 3 percent a year, according to Zillow’s chief economist, Dr. Stan Humphries. Zillow compiles and analyses real estate data from some 350 U.S. markets.
Markets that have seen the greatest appreciation in home values include five metros that showed year-to-year appreciation of more than 20 percent: Phoenix (up 24 percent), Las Vegas (up 23.3), San Jose (up 22.1), San Francisco (21.4) and Sacramento (20.1).
Markets that saw a decrease in appreciation include New York (down 0.3 percent) and Chicago (down 1.4 percent, the biggest drop of any in the study). St. Louis and Charlotte also saw modest drops.
Those drops, Humpries tells ABC News, can be attributed in part to the fact that Chicago and New York are in states where foreclosures require judicial review–a time-consuming process that, he says, ”impairs recovery.”
Over the past year, says Humphries, the national housing market has rebounded strongly, even though “the sometimes dramatic run-ups during these months were never expected to be sustainable. Recent slowdowns are indicative of a market that is slowly finding its natural level.”
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“Those drops, Humpries tells ABC News, can be attributed in part to the fact that Chicago and New York are in states where foreclosures require judicial review–a time-consuming process that, he says, ”impairs recovery.””
IL and NY are still among the worst in the US in terms of non-current loan rates (NY 5th worst, IL 11th worst).
NV is the anomaly at 4th worst and with rising prices…if they ever figure out their foreclosure process, we could see prices re-crash there.
Conversely, AZ and CA are now 10th and 12th best in terms of non-current loan rates.