July 24, 2013

It’s Nearly Too Late For The Theoretical Wealth Creation

The Kitsap Sun reports from Washington. “Some 40,000 property owners got change-of-value notices in the mail Saturday, compliments of the Kitsap County assessor who says plummeting home values finally appear to be leveling off. The 40,000 notices that went out are fewer than half the amount sent out in recent distressed years. The slow market didn’t stop local real estate agent Penny McLaughlin of Penny’s Team of Poulsbo from sounding the alarm on the buyer’s market. ‘Lack of inventory of homes for sale, plus interest rates on the rise means it is nearly too late,’ she warned.”

The Columbian in Washington. “Clark County’s housing rebound continued in the second quarter, with all indicators showing improvement over the same period last year, Portland-based RMLS reported. The number of homes sold as foreclosures also increased dramatically in the second quarter. Mike Lamb, a Vancouver broker with Windermere Real Estate/Stellar Group, attributed the surge to more foreclosures being sold off by banks that were stalled by a multistate, $25 billion settlement negotiated in 2012 with the nation’s top mortgage companies. Lamb said banks likely will recover more losses by having waited to sell off the foreclosure assets, also called real-estate-owned.”

“‘This is an opportune time for the banks to unload some of that inventory because the values have come up and the demand is strong,’ he said.”

From KPLU in Washington. “The number of foreclosures in Washington state has jumped so far this year compared with last year. Bank repossessions climbed 78 percent in the first half of this year, according to RealtyTrac. New foreclosure filings have risen as well. Real estate economist Matthew Gardner says it’s not because all of a sudden a lot more people can’t pay their mortgages. He says lawsuits in Washington state artificially suppressed the number of foreclosures in 2011 and part of last year. ‘It’s not going to be the cure-all to the housing shortage, but flushing these homes through the system is amazingly important,’ Gardner said.”

“Gardner says the reason why it’s not a cure-all is that there are still a lot of people underwater on their mortgages, meaning they owe more than their houses are worth. He says they’re waiting for home prices to keep rising before they list their homes.”

CNBC on Oregon. “David and Heather Littlejohn are one of about 10 million underwater borrowers in the U.S. Millions more don’t have enough equity to afford a move up. The Littlejohns would love to sell the Oregon home they built as newlyweds in 2005 and move to a larger one, but that would mean paying into their mortgage. ‘Everybody else seems to be getting out OK on this one, and here we are just the perfect timing and circumstance to be on the outside looking in,’ said David. ‘There’s this theoretical wealth creation all around us, and yet we’re not participating in it.’”

The Oregonian. “A Washington County jury rebuked JPMorgan Chase’s handling of a foreclosure case, ruling the nation’s second largest bank likely had broken promises it made to borrowers Bela and Eva Lengyel, resulting in the seizure of their home. The jury awarded $10,850 in damages, and presiding Judge Don Letourneau will rule later on whether the Lengyels may remain in the home.”

“The Lengyels had refinanced their Bethany home in 2007, borrowing against it to build a $1 million house in Happy Valley. They planned to sell that home, but that dream collapsed with the housing market. ‘He took a gamble, and he lost big, and he went underwater,’ said Chase’s attorney, Philip Rush. Rush had on Wednesday presented evidence that Lengyel had reported income and losses from gambling at casinos during years he was fighting the foreclosure.”

The Missoulian in Montana. “Building permits across Missoula continue to increase, and new housing starts are on the rise, but those in the business aren’t calling it a boom, as the market remains well below its pre-recession level. Alrick Hale, VP of Knife River’s mountain states division, said building activity across western Montana remains painfully slow. ‘Our general feel for the market is that it’s as bad as we’ve ever seen it,’ Hale said. ‘Our industry is as bad right now as it was when the recession hit in 2008. It’s slow in the housing market, and it’s slow in new subdivisions.’”

“Hale’s employees continue to struggle for work, and the company has consolidated its Missoula and Kalispell offices in an effort to reduce costs. ‘The other thing we’re not seeing – there are very few commercial projects,’ Hale said. ‘The commercial projects are most of what keeps our people employed. The economy in western Montana is the worst we’ve seen it yet.’”

The Daily Inter Lake on Montana. “Mark Campbell, developer of The Landing at Somers Bay, said he would love to have year-round residents of the Flathead Valley living in his new subdivision. However, he said with southern exposure lake access on around 400 feet of sandy Flathead Lake beach, chances are good the houses will be snapped up for seasonal vacation homes. Campbell, who lives in Santa Barbara, Calif., found the site on which his new 12-home subdivision will sit a few years ago. The previous developer and the bank financing the project had both gone out of business long before building could begin, so the assets had been transferred out of state.”

“The cottage-style homes will vary from 1,500 to 2,500 square feet, with separate garages that will have a usable room over the garage space. Though only four homes will be directly on the lake, all 12 will have lake access plus their own boat slips. The eight homes in the four lots to the back will be the smaller units, with two on each lot connected by adjoining roof lines and covered walkways.”

“He said the smaller houses also allow him to deliver new construction with unique architecture to the marketplace at competitive price points. Campbell estimates that the eight homes off the water will sell from $699,000 to $999,000, with those on the shore going from $1.2 million to $1.4 million. ‘It’s probably half of what the original developer was thinking in terms of price points,’ he said.’

“Most of his real estate investments have been in waterfront. ‘Waterfront property has always done well for me,’ he said. ‘I’ve been scared to invest in property off the lake. There are so many failed subdivisions.’”




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71 Comments »

Comment by Combotechie
2013-07-24 05:40:24

“Gardner says the reason why it’s not a cure-all is that there are still a lot of people underwater on their mortgages, meaning they owe more than their houses are worth. He says they are waiting for home prices to keep rising before they list their homes.”

And while they are waiting for home prices to keep rising they are keeping up with the payments on their underwater mortgages.

They would probably not do this if their perception was that RE prices would not come back.

Comment by Blue Skye
2013-07-24 08:41:49

“flushing these homes through the system is amazingly important,’ Gardner said.”

That “flushing” is not likely to make those waiting for higher prices realize their wish. Everyone is waiting for the promised recovery (of the bubble). I don’t think anyone expects a return to normal, which is not going to look like a so-called “recovery”.

 
 
Comment by Beer and Cigar Guy
2013-07-24 05:42:11

“The slow market didn’t stop local real estate agent Penny McLaughlin of Penny’s Team of Poulsbo from sounding the alarm on the buyer’s market. ‘Lack of inventory of homes for sale, plus interest rates on the rise means it is nearly too late,’ she warned.”

No, Penny. Actually, lack of inventory of homes for sale, plus interest rates on the rise means that you would have to be a blithering idiot to buy in that kind of market.

Comment by 2banana
2013-07-24 05:47:12

No, no, no.

She means it is nearly too late to make her Lexus lease payment unless she sells a few more house right now…

 
Comment by perkonkrusts
2013-07-24 06:31:46

“you would have to be a blithering idiot to buy in that kind of market”

Do you think it would have been a wise decision to buy in that market two years ago, when there was a lot more inventory and rates were lower? I’m trying to determine under what scenario you would say it was a good time to buy a house.

Comment by Blue Skye
2013-07-24 08:46:00

That’s easy; after rates have normalized AND prices have normalized AND when the 20 million or so surplus houses are in plain sight. Keep reading here, you’ll get it eventually.

 
Comment by Beer and Cigar Guy
2013-07-24 08:55:02

Lots of room for differing definitions and variables, but here is my take on it- and I speak for no one else. Just as background, wife and I are both working professionals. In 2006 we sold a house (coincidentally) near the top of Bubble 1.0 and moved to Central Florida to help care for a terminally ill family member. My undergrad degree is in the Dismal Science and when we moved down here and looked at a few houses/did some research, it became obvious that there was an epic bubble that would eventually collapse. We have been renting a 2100 sq/ft 3/2 across the street from a lake in a nice part of town. Our rent is $1200/month with lawn care thrown in. The landlord paid $283k for it in 2007 and the county currently appraises it at $134k. My commute to work is 20 minutes each way (6.25 miles).

Would buying 2 years ago be better than buying now? Depending upon your location, almost certainly, but it was not good enough to get me to jump in. For normal people- real ‘homeowners’- you only get one bite at the apple and it is apparent that real price equilibrium has not been reached. We will continue to enjoyably rent for significantly less than the cost of ownership in this current market and invest/bank the rest. Was the market more favorable 2 years ago- yes. Will the housing market be even MORE favorable 1 or 2 years from now- I am absolutely convinced of it.

Would I like to own another house someday? Absolutely. The right property at a fair OR even more advantageous price which is in line with historical and regional norms. Do I think that true price discovery and a ‘bottom’ are coming? Without a doubt. Do I know when the bottom will be? Of course not, nobody does. But all any rational buyer really NEEDS to see is that the bottom certainly isn’t now, in a worsening economy, under artificial conditions of scarcity and grossly inflated or escalating prices.

In many respects, I feel that the NAR through its frantic hype of housing as an ‘investment’, propaganda and outright misrepresentation of facts has destroyed the sense of trust and crippled the RE market for decades to come. They have shat within their own lunchbox, as it were.

Comment by perkonkrusts
2013-07-24 10:58:23

Beer and Cigar Guy, well thought-out answer, thanks for posting it. By the way, if my math is correct, that’s $64 sq ft based on current appraisal, that seems like a great price if you could buy a house for something in that range.

Blue, what is normal price to you, in regards to $/sq ft on a regular 1/4 acre subdivision lot? Is $90 reasonable? $80? Between $80 and $90 is what I’m seeing around here, a 2,800 sq ft home for $238,000 doesn’t seem that bad to me, and neither does BCG’s 2,100 sq ft home for $134,000, 6 miles from work. Sounds like a great deal to me.

I wouldn’t buy in SF, NY, LA either, but there’s just so many other places to go that are reasonably priced.

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Comment by Housing Analyst
2013-07-24 11:12:18

KrustyTheRealtard….

Are you in the construction business?

 
Comment by perkonkrusts
2013-07-24 11:57:19

“Are you in the construction business?”

No, I’m a psychic, and I’m predicting your future, sometime very, very, soon you’re going to say something about $50/sq ft, anywhere in the country, on a $5,000 acre of land.

 
Comment by Blue Skye
2013-07-24 12:03:00

My answer to what “anyhouse” should cost per ft2 wouldn’t matter to you I am sure. I looked at properties in my local market for several years and started with valuing the land first, then the improvements (as they fit my needs or not) and then the cost of converting the building (or lack thereof) for my unusual intended use. I had a budget for cash purchase + improvements. I bought when I found a suitable place that intersected with my budget. In that case, no analysis of profit/loss trajectory was done.

I bought out of season. I bought out of the way. I avoided competing with Debt Donkey Bubbleheads by buying an impaired property that no lender would consider. I put 16 months of weekends into the improvements and am about 2 months from completion (on hold while I am cruising). It is energy efficient, well built, overwired and meets my needs completely at total cost under $30/ft2 (including the lot and utilities and a big garage not in the ft2). My time couldn’t be worth more than another $5/ft2.

Timing wise, I consider this an unrecoverable investment. I believe a massive reality check is rolling in. It is however chump change, probably less than most spend on interest over a few years, or their closing costs.

 
Comment by Housing Analyst
2013-07-24 12:12:08

Krusty says “No” when asked to substantiate his understanding of the input cost for a single family residence.

Krusty,

Just where are you picking these numbers from?

 
Comment by "Uncle Fed, why won't you love ME?"
2013-07-24 14:06:18

krusty:

The reasonability of the price is calculated in comparison to rents and incomes. It is not calculated in comparison to prices in other places.

 
 
Comment by Mr. Smithers
2013-07-24 11:29:27

Beer,

You say the house you’re renting now is worth $134K. And you’re paying $1200 rent. And you think you’re better off renting?

That makes no sense. Why not buy the same house (or an equivalent) for $134K instead? Even with $0 down your payment would be around $700 a month. With tax/insurance it would be well under $1200 that you now pay in rent.

Or better yet get a 15 year mortgage, your payment would be around $1000 and in 15 years the house is yours.

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Comment by Housing Analyst
2013-07-24 11:34:54

Because the underwater owner isn’t selling it at $134k. He’s deluded like most of you.

Pay attention Slithers.

 
Comment by Mr. Smithers
2013-07-24 14:58:30

If a comparable house is worth $134K it will sell for $134K. You know this. Stop being obtuse.

 
Comment by Beer and Cigar Guy
2013-07-24 15:12:14

“Because the underwater owner isn’t selling it at $134k. He’s deluded like most of you.”

^^ This^^

They are trapped, like most owners around here who bought during the bubble. They haven’t raised the rent in years because they don’t want us to leave (you should have seen their previous tenants). But more than that, I do not want this house or to be this close to my neighbors. When this shit-storm does hit, densely populated areas will change rapidly and I won’t be locked into that.

 
Comment by Beer and Cigar Guy
2013-07-24 15:50:05

“That makes no sense. Why not buy the same house (or an equivalent) for $134K instead? Even with $0 down your payment would be around $700 a month. With tax/insurance it would be well under $1200 that you now pay in rent.”

It makes absolute sense, for us and in our situation. It isn’t just about howmuchamonth right now for us, as we have a long view and a more strategic goal. The Great Housing Dementia 2.0 is simply accommodating us by encouraging us to remain renters while this idiocy shakes out.

Why not buy something similar now? As I said before, I would not want to own this particular house or be in this ‘close’ of a neighborhood. But for now, it is extremely convenient and very affordable. We pay no maintenance or taxes and we will not absorb the continued expenses as taxes increase and prices continue to normalize and decrease. Houses in this area that we have looked at on an acceptable amount of acreage frequently fluctuate ~8-10% at a shot. That 1-time price decrease pays for over 2 years worth of rent at this location. And we are now into the 2nd (and most important) half of the housing-bust game. Just think what price reductions will be like when people get serious- much less desperate.

 
 
 
Comment by Neuromance
2013-07-24 09:00:12

Bidding wars on typical residential houses is not a normal market.

Comment by bluto
2013-07-24 09:51:15

True…nor is having to compete with 100% cash flippers and speculators on anything that is priced right…a year of that in 2011 and 2012 was enough for me. A $250K 3/2 house two years ago would have required a $1000/mo payment (with 20% down) vs. the $1450 I pay in rent for half of a duplex (and I do realize property tax and insurance would be additional, have owned before and the tax deductions covered that)…so buying made sense for me then.

NOW?? no way with prices up 30%+ , am waiting for Bubble 2.0 to pop and may reenter the market then

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Comment by Rental Watch
2013-07-24 16:50:39

Question #1:
What caused the first bubble to form and pop?

Answer:
Mortgages going to anyone with a pulse, with riskier and riskier terms, lower and lower credit scores (option ARMs–negative amortization, zero down with 2nd DOTs, etc.), and toward the end as we ran out of risky borrowers, the riskiest borrowers started to default, beginning a cascade failure that was made worse by the fact that we were ahead of ourselves building too many homes.

Question #2:
What will cause bubble 2.0 to get fully formed and to pop?

I guess I’m seeing bubble 2.0 forming right in front of our eyes like everyone else (I see it as a second bubble, not an extension of the first). So far however, I haven’t seen the same crazy low credit score, adjustable-rate, negative-amortization, liar-loan finance creating the bubble, just Fed-induced low rates that most are taking advantage of by taking out 30-year fixed rates.

This bubble could be created by a buying frenzy riding the low rates and too little being built (or too little being available). Will more being put on the market by people waiting for prices to rise or more being built cause prices to crash? Rising rates will reduce buyers at the margin, but not cause people with fixed rate finance to default.

I guess I’m not yet ready to call the next crash…I still think we are a bit early for that. If the current trajectory continues, we are bound to re-crash. If the current trajectory is altered due to higher interest rates and more construction, this cycle might become more elongated (and be more like prior cycles than the most recent bubble/crash).

 
Comment by Housing Analyst
2013-07-24 17:08:09

RW aka Rental Watch….

What other media outlets are you pimping NAR lies?

 
Comment by Blue Skye
2013-07-24 17:35:03

Rental,

I suspect you do not grasp the mania.

You don’t get an entirely different bubble when the big one never corrected. You don’t get a housing mania twice in a decade, it is a multi generational thing.

 
Comment by Beer and Cigar Guy
2013-07-24 17:55:44

“Question #1:
What caused the first bubble to form and pop?

Answer:
Mortgages going to anyone with a pulse, with riskier and riskier terms, lower and lower credit scores (option ARMs–negative amortization, zero down with 2nd DOTs, etc.), and toward the end as we ran out of risky borrowers, the riskiest borrowers started to default, beginning a cascade failure that was made worse by the fact that we were ahead of ourselves building too many homes.

Question #2:
What will cause bubble 2.0 to get fully formed and to pop?

Yadda, yadda, yadda…..”

In both of these you either omitted or missed the most important point: Prices escalating without justification far beyond the point of realistic affordability.
Credit could be as tight as a drum and people would still value and purchase houses- as long as the purchase prices reflected that reality.
Interest rates could be 15% and people would still purchase housing- as long as the purchase prices reflected that reality.
But you cannot have cheap, stupid-easy credit and completely unrealistic prices at the same time. The equation will always balance itself. One cannot, ‘Have their cake and eat it too’. The government can attempt to cheat or subordinate this effect in any way they choose, but they will only succeed in postponing it and thereby amplifying its results. They have already tried and will probably try even more, because they are not really very intelligent. Watch how it turns out.

 
Comment by Beer and Cigar Guy
2013-07-24 18:06:15

” Comment by Blue Skye
2013-07-24 17:35:03

Rental,

I suspect you do not grasp the mania…”

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

Upton Sinclair

 
Comment by Rental Watch
2013-07-24 18:38:53

“You don’t get an entirely different bubble when the big one never corrected.”

I guess you and I are looking at different data.

Case Shiller’s inflation adjusted data going back to 1890 shows that the last three troughs in prices were within approximately 10% of each other. This is data that has nothing to do with affordability (ie. the numbers are not affected by interest rates).

This data is publicly available on Prof. Shiller’s Yale website.

Additionally, at that trough, cash buyers were coming out of the woodwork…why? Because on a rental basis, buying made sense.

Remember during the bubble, how people were equating a “reasonable price” to houses being 100s-120x the monthly rent? Prices hit that level in many markets (including So Cal).

Clearly this is NOT the story in SF, and other coastal communities, but unlike 2006-2007, these places are the exceptions, NOT the rule.

Also clearly, prices have bounced back off the bottom as shown in the Case Shiller data MUCH faster than prior housing cycles, and we are at risk of another bubble being created if the increases do not slow down.

But to state that prices didn’t fall enough is ignoring the very same data that identified the bubble in the first place.

 
Comment by Housing Analyst
2013-07-24 18:44:25

RW aka Rental Watch The Liar,

Let me help you out seeing as you want to invoke CS.

http://img802.imageshack.us/img802/7812/caseshiller.jpg

 
Comment by Rental Watch
2013-07-24 19:59:02

The graph is not inflation adjusted.

As I’ve said over and over again, go to the source. Try the Excel spreadsheet on Professor Shiller’s Yale website:

http://www.econ.yale.edu/~shiller/data.htm

 
Comment by Rental Watch
2013-07-24 20:13:09

Go to the source (Shiller’s Yale Website), not “imageshack”.

My link has yet to arrive, but the inflation-adjusted data is there for all to see going back over 100 years, not NOMINAL data, going back 25 years.

 
Comment by Housing Analyst
2013-07-24 20:21:57

Your “inflation adjusted data” is right there in my link. Your links are a fraud. Just like you… RW.

 
Comment by Rental Watch
2013-07-24 20:49:04

Why don’t you e-mail professor Shiller himself then, and ask him for the data? He’s been pretty responsive when I’ve e-mailed back and forth with him:

robert.shiller@yale.edu

 
Comment by Housing Analyst
2013-07-25 04:28:50

Who gives a crap what you say??? It was established a long time ago that you have a stake in the direction of housing prices……

You’re an established liar here. And your reputation for being loose with the truth will always follow you here. We’ll make sure of that.

 
 
 
 
Comment by Housing Analyst
2013-07-24 07:08:37

“Too late”

It depends on who she’s talking about. Good luck getting her to be truthful about it. Afterall….. she’s a real-tard.

Comment by Housing Analyst
2013-07-24 07:12:20

Do you think it would have been a wise decision to buy in that market two years ago, when there was a lot more inventory and rates were lower? I’m trying to determine under what scenario you would say it was a good time to buy a house.

Realtor…..

Let me help you out. What was the price per square foot “two years ago”?

Comment by kamon
2013-07-24 15:57:31

and this is EXACTLY why our family is sitting this round out. Houses that sold 2 years ago are now slowly hitting the market in my area for $75k-100k higher! LOL, no, just no, we will keep renting for $1200 a month saving our money and wait for the chaos to start. I just hope there are no more bank bail outs this time, but we all know there will be…

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Comment by Whac-A-Bubble™
2013-07-24 19:18:20

“…it is nearly too late…”

Oldest Realtor™ scam in the book: Convince prospective buyers that if they don’t buy now, they will be priced out forever.

Comment by United States of Moral Hazard
2013-07-24 21:08:09

They even have a commercial out now where a couple are looking at a house online, and the wife says they should go see it, but a SOLD sign goes up right at that moment. Sickening.

 
 
 
Comment by 2banana
2013-07-24 05:45:07

So we stopped paying our mortgage.

Lived rent/mortgage free for 6 years.

Lived large at the casinos.

And now we get $10K from the bank in “damages.”

And be able to stay in our home for free.

The free sh*t army marches…

—————

The jury awarded $10,850 in damages, and presiding Judge Don Letourneau will rule later on whether the Lengyels may remain in the home.”

“The Lengyels had refinanced their Bethany home in 2007, borrowing against it to build a $1 million house in Happy Valley. They planned to sell that home, but that dream collapsed with the housing market. ‘He took a gamble, and he lost big, and he went underwater,’ said Chase’s attorney, Philip Rush. Rush had on Wednesday presented evidence that Lengyel had reported income and losses from gambling at casinos during years he was fighting the foreclosure.”

 
Comment by Beer and Cigar Guy
2013-07-24 05:45:54

“‘This is an opportune time for the banks to unload some of that inventory because the values have come up and the demand is strong,’ he said.”

Mike Lamb, local real estate genius and professional knife catcher offering his sage advice on how to skate to where the puck has already been…

 
Comment by Beer and Cigar Guy
2013-07-24 05:57:05

“‘Everybody else seems to be getting out OK on this one, and here we are just the perfect timing and circumstance to be on the outside looking in,’ said David. ‘There’s this theoretical wealth creation all around us, and yet we’re not participating in it.’”

Yesssss, theoretical wealth creation… Like Pets.com, Enron, Housing Bubble 1.0 and Bernard L. Madoff Investment Securities LLC… The current housing market is in very good company. I’m certain that “it is different this time” and people won’t lose their @sses… All the other times it was too good to be true, but not this time… THIS time it is really going to happen… Because I NEED it to happen…

 
Comment by Beer and Cigar Guy
2013-07-24 06:01:04

“The Lengyels had refinanced their Bethany home in 2007, borrowing against it to build a $1 million house in Happy Valley. They planned to sell that home, but that dream collapsed with the housing market.”

They lost their ass on a 1 million dollar house in Happy Valley. I’m telling you folks, you just couldn’t make this stuff up.

Comment by Ben Jones
2013-07-24 06:30:05

‘Lengyel acknowledged making a mistake borrowing money to build a $1 million home in Happy Valley. The couple refinanced the mortgage on their adult foster home in 2007 in part to pay for the Happy Valley home construction. “Everybody was doing just wonderful in real estate,” Lengyel said. When his attorney asked who was responsible, Lengyel replied, “The truth of the matter is me, because I could’ve gone fishing.”

‘The Lengyels left Romania during its 1989 revolution, arriving in the United States in 1992. They bought the home in question in unincorporated Washington County in 1996. A few years later, Bela Lengyel started Bella Plumbing, laying pipe mostly in new homes. Their businesses did well. They started construction on a large home in Happy Valley. Chase contends the Lengyels refinanced their adult foster home in 2007 with a $405,000 mortgage to help pay for the Happy Valley home’s construction.’

‘When the crisis hit, Bela Lengyel’s plumbing business “had all but stopped,” Scannell said. Lengyel eventually closed it in 2011, bankruptcy records show. He also let the Happy Valley home go into foreclosure after trying to sell it, Scannell said.’

‘The Lengyels sued Chase Home Finance in 2010 around the time they lost their home in foreclosure to the loan’s investor, Fannie Mae. Their wrongful foreclosure claims against Fannie Mae and Northwest Trustee Services were later dismissed. They’re asking the jury to award them about $10,000 in payments made to Chase as part of their trial modification, their attorney Terry Scannell said.’

“We’re not looking for a free house,” Scannell told the 12-person jury Tuesday afternoon. “All they’re looking for is the payments they made to Chase.”

‘Separately, though, they’ll ask presiding Judge Don Letourneau for their home back.’

Comment by Blue Skye
2013-07-24 09:08:29

It is a very strange game; the bank telling people to fall behind in payments to qualify for a loan modification, then telling them to make three months of payments to qualify for a loan modification, then taking six months of payments while shuffling paperwork, then saying get lost.

 
 
 
Comment by Bubbabear
2013-07-24 06:26:57

Kondratieff Waves – 2nd Phase Of Winter From 2013 Onwards

Based on Professor Thompson’s analysis long K cycles have nearly a thousand years of supporting evidence. If we accept the fact that most winters in K cycles last 20 years (as outlined in the chart above) this would indicate that we are about halfway through the Kondratieff winter that commenced in the year 2000. Thus in all probability we will be moving from a “recession” to a “depression” phase in the cycle about the year 2013 and it should last until approximately 2017-2020.

http://alternativeeconomics.wordpress.com/2013/04/07/kondratieff-waves-2nd-phase-of-winter-from-2013-onwards/

Comment by Blue Skye
2013-07-24 09:04:37

I’ve been hearing this since 1970.

It would seem that the greatest global expansion of credit in history has thrown a curve in the natural rhythm of things.

I suspect we’ve just had the first frost of fall and are in Indian Summer, not the second half of winter.

Comment by Bubbabear
2013-07-24 15:16:24

…the greatest global expansion of credit in history
hasonly postponed the inevitable

According to the Global Leading Indicator Swirlogram by Goldman Sachs the global economy is in a slowdown and about to enter a CONTRACTIONARY phase. Nothing new here for most folks tracking global economic statistics but interesting nonetheless.

http://ltinvesting.com/investing-blog/global-leading-indicator-swirlogram-by-goldman-sachs/

 
 
 
Comment by Bubbabear
2013-07-24 06:30:16

Kondratieff Waves – 2nd Phase Of Winter From 2013 Onwards

Based on Professor Thompson’s analysis long K cycles have nearly a thousand years of supporting evidence. If we accept the fact that most winters in K cycles last 20 years (as outlined in the chart above) this would indicate that we are about halfway through the Kondratieff winter that commenced in the year 2000.

Thus in all probability we will be moving from a “recession” to a “depression” phase in the cycle about the year 2013 and it should last until approximately 2017-2020.

http://alternativeeconomics.wordpress.com/2013/04/07/kondratieff-waves-2nd-phase-of-winter-from-2013-onwards/

 
Comment by Ben Jones
2013-07-24 06:45:44

‘People looking to buy a luxury home at the annual NW Natural Street of Dreams showcase have few options this year, as most of the featured houses have already sold. The monthlong event kicks off Saturday in the Stonehenge neighborhood off Rosemont Road just outside West Linn, overlooking Lake Oswego. Seven of the neighborhood’s nine million-dollar-plus homes — each built on a 1-acre lot — are spoken for.’

‘Each house in this year’s show has a floor plan larger than 4,000 square feet, and the two largest are more than 6,000 square feet. The two unsold houses — “Beauvoir” and “The Two Thousand Thirteen” — are priced at about $1.89 million and $2 million respectively, and each has a living space of more than 5,200 square feet.’

‘Each year the Thurston County Assessor is required by law to inspect one-sixth of all properties county-wide. This year, properties throughout Yelm and the surrounding areas will be physically inspected. Drew said the public forum is necessary in the Yelm area due to the large amount of underground structures and bunkers that are going to be assessed.’

“We are required to assess the whole of the community, which includes many of JZ Knight’s students who have underground bunkers,” he said. “They’re a structure. They are required to be assessed for property tax.”

‘Drew said to value and assess the underground structures is inherently more intrusive than inspecting a home as the assessor will have to physically enter the bunker to measure and appraise the value. In recent years, Drew has noticed a large influx of detailed no trespassing signs speaking directly to government employees.’

Comment by Bluestar
2013-07-24 08:16:12

Where I live I have never seen our tax assessor conducted physical inspections on existing housing unless you sue them over the appraised value. They use a combination of computer models with sales data being the main variable. For some reason houses around here never deteriorate or depreciate despite the average age of the housing stock is over 30 years old.

 
 
Comment by Taxpayers
2013-07-24 08:08:39

new home prices soar !” MSM headline

sell before ben bernacke does

Comment by Whac-A-Bubble™
2013-07-24 13:17:27

New home sales hit five-year high, prices soar
By Lucia Mutikani
WASHINGTON | Wed Jul 24, 2013 12:49pm EDT

(Reuters) - New U.S. home sales vaulted to a five-year high in June, while other data on Wednesday showed an acceleration in factory activity in July, boosting hopes of a third-quarter pick-up in economic growth.

Showing no signs yet of slowing in the face of higher mortgage rates, single-family home sales increased 8.3 percent to a seasonally adjusted annual rate of 497,000 units, the highest level since May 2008, the Commerce Department said.

Economists, who had expected sales to advance only to a 482,000-unit rate, said buyers sitting on the fence had probably rushed into the market to lock in lower rates in anticipation of mortgage rates moving even higher.

“The recent increase in mortgage rates hasn’t slowed demand as long as home affordability remains high,” said Bob Walters, chief economist at Quicken Loans in Detroit. “We are, however, seeing an increased urgency from potential new home buyers as they move to secure today’s historically low rates.”

 
 
Comment by Housing Analyst
2013-07-24 08:54:43

Mortgage Apps Sink at Peak of “Selling Season”

http://online.wsj.com/article/BT-CO-20130724-704569.html

Comment by Whac-A-Bubble™
2013-07-24 17:01:33

It’s a crisis! Quick, do something to drive mortgage rates back down to ‘affordable’ levels!!!

Comment by Whac-A-Bubble™
2013-07-24 22:41:40

Oh bugger. Gold and Treasury yields are both up, suggesting the Fed’s efforts to pump up future inflation expectations are succeeding.

July 24, 2013, 4:25 p.m. EDT
Treasurys battered; 10-year yield near 2-week high
By Ben Eisen, MarketWatch

NEW YORK (MarketWatch) — Treasury prices continued to slide on Wednesday after a mixed auction of 2-year notes, extending losses that began with concerns over the Federal Reserve’s policies.

The 10-year Treasury note yield, which moves inversely to price, closed 8 basis points higher at 2.585%, its second day of gains and the highest level in almost two weeks. The 30-year bond yield jumped 7 basis points to 3.646%.

The 5-year Treasury note yield was up 6 basis points at 1.372% after an auction of $35 billion of the debt.

 
Comment by Whac-A-Bubble™
2013-07-24 22:54:32

“..sending the 30-year yield to 6.5% … Return on 30-year: -8.3%.”

Funny…I came up with a 37.5% loss on a 30-year T-bond if yields increased from their current 3.646% level to 6.5%. I must be making a calculation error.

Short Treasurys and ditch duration, says Pioneer Investments

July 24, 2013, 4:29 PM

The rising yields that have characterized the bond markets over the past few months are only the start of a “potentially difficult transition” to a rising rate environment, says Michael Temple, director of U.S. credit research at asset-manager Pioneer Investments.

So, looking in the rearview mirror at the “Great Bond Bear Market of 1994” — where investors were caught flatfooted as rates rose — Pioneer is shorting 5-year and 10-year Treasurys and reducing exposure to duration.

“You need to actively go short the part of the market that is encountering negative returns,” Temple said in an interview. “We’re shorting Treasurys, not owning much in the way of agency mortgages, and reducing exposure to investment grade corporates.”

Treasury yields rose sharply in May and June, dragging yields higher across the bond market as investors fled fixed income on suggestions that the Federal Reserve could begin scaling back its bond-purchase programs later this year, which have helped push down yields. Bond yields settled for much of July as the Fed clarified its intentions of keeping short-term interest rates low even after it concludes its purchase program, but are rising again this week as concerns continue to mount.

Temple sees a couple of different potential scenarios for the next climb higher. In a July report, he assigns each a probability, a corresponding Treasury yield, and an investment return by the end of 2014:

Bear Case: Employment and inflation rise rapidly, and GDP growth hits above 3%, sending the 30-year yield to 6.5% and the 10-year yield to 5%. Probability: 25%. Return on 10-year: -3.2%. Return on 30-year: -8.3%.

Base Case: The economy moves moderately higher, with GDP growth at 2% to 3% over the next two years. That sends the 30-year yield to 5% and the 10-year yield to 4%. Probability 50%. Return on 10-year: -3.1%. Return on 30-year: -8.2%.

Stagnant Case: The economy grows at 1% to 2% over the next two years, putting the 30-year yield at 4% and the 10-year yield at 3%. Probability: 20%. Return on 10-year: 0.2%. Return on 30-year: -0.3%.

Bull Case: The U.S. stumbles into another recession, pushing the 30-year yield to 2% and the 10-year yield to 1.25% by year-end. Probability: 5%. Return on 10-year: 0.8%. Return on 30-year: 2.1%.

 
 
 
Comment by Mr. Smithers
2013-07-24 09:12:47

“Campbell estimates that the eight homes off the water will sell from $699,000 to $999,000, with those on the shore going from $1.2 million to $1.4 million. ‘It’s probably half of what the original developer was thinking in terms of price points,’ he said.’”

Whaaaa? But it’s Montana. The median income there is $12 a year. This is crazy!!!

Well yeah, except not in this part of Montana. The Whitefish and northern Flathead Lake area has become crazy expensive thanks to Californians. House on the lake out there goes for $3K a week to rent.

You can get something cheaper further south around Polson. But do you really want to spend your week in Polson?

Comment by Ben Jones
2013-07-24 12:12:47

‘House on the lake out there goes for $3K a week to rent’

A million bucks would buy a lot of weeks, then right? And how many months of the year can you use it? And why is this mentioned?

‘There are so many failed subdivisions’

Comment by Mr. Smithers
2013-07-24 15:08:16

1. Subdivisions aren’t on the lake.

2. Summer Season is May to Sept so about 20 weeks a year. That’s $60K a year in rental revenue which will pay the mortgage on a $1M house. Just renting out in the summer.

And Whitefish ski resort is close by which means it’s rent-able in winter as well as a ski cabin as well.

And $3K is for a so-so house. A $1M brand new house is more like $4K a week if not more

Some examples:

$1000 a night:
http://www.homeaway.com/vacation-rental/p964777

$4500 a week:
http://www.homeaway.com/vacation-rental/p252835

$7000 a week
http://www.homeaway.com/vacation-rental/p152295

Look at the availability calendars….booked solid year round.

Comment by Ben Jones
2013-07-24 16:26:58

‘Look at the availability calendars….booked solid year round’

So you’re saying it’s a money maker? Why then would this guy from Santa Barbara let anyone in on this gold mine? Why wouldn’t he build them and rent them out instead of selling them? Why wouldn’t Warren Buffet buy all the Montana lake cabins and rake it in? Maybe because they lose money. And so why do people pay so much when they can rent a week when they feel like it? Possibly, they think the price can only go up.

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Comment by Rental Watch
2013-07-24 17:04:35

Not everyone likes to rent their second home. If each of those second homes were put on the market to be rented, supply would swamp demand, and rental rates would fall. I’m willing to bet that THAT is why the developer isn’t building them and renting them all.

I personally think that people buy second homes rather than rent them because they see it as a long-term store of wealth, or pre-planning for retirement. A friend bought a second home in Nevada that he is currently only using about a month each year, and not renting the rest of the time. He figures when he retires, he can move there full time and enjoy NV’s lack of income tax.

His impetus for buying? He had cash that was burning a hole in his pocket and thought prices weren’t likely to go much lower…he bought a couple of years ago.

Another friend owns a second home that he rented to a billionaire who is frequently interviewed on CNBC. He wrote a nice handwritten note to the owner of the second home (my friend) commenting on how much his family enjoyed the stay (for which I give him a great deal of credit/respect–not everyone does such things anymore). My friend offered to sell the second home to the renter.

The response…second homes are terrible investments.

I agree with the renters…second homes ARE terrible investments, and lock you into one location to visit. You are much better off renting as you go, and don’t have the headache of second home management, even if you pay more per week than what a week’s costs if you owned the place outright.

 
Comment by Blue Skye
2013-07-24 17:39:47

“I personally think that people buy second homes rather than rent them because they see it as a long-term store of wealth…”

Have you ever owned a vacation cottage? It is a constant drain on your time and money. Store of wealth, my ass. Only if you believe real estate can only go up, and up and up.

 
Comment by Whac-A-Bubble™
2013-07-24 19:22:03

“I personally think that people buy second homes rather than rent them because they see it as a long-term store of wealth…”

Those who recently bought at interest-rate-suppressed bubble price levels are going to learn the flip side of the old adage, ‘buy low, sell high.’

 
Comment by Rental Watch
2013-07-24 20:03:13

Blue, did you note my language: “they see it as a long-term store of wealth”? Emphasis on the word “THEY”.

And my other comment down below?

“I agree with the renters…second homes ARE terrible investments, and lock you into one location to visit. You are much better off renting as you go, and don’t have the headache of second home management, even if you pay more per week than what a week’s costs if you owned the place outright.”

And yes, my grandfather built a small home in the late 60’s that is still in our family. We have built great memories there, but those memories cost a lot of money and time in management. It has been drilled in my head from birth by my father and grandfather that second homes are expenses, not investments.

 
Comment by Housing Analyst
2013-07-24 20:30:23

Who gives a crap what you say??? It was established a long time ago that you have a stake in the direction of housing prices.

You’re an established liar here. And your reputation for being loose with the truth will always follow you here. We’ll make sure of that.

 
 
 
 
 
Comment by Housing Analyst
2013-07-24 15:27:45

And many more at $150-200/nite…

So for the million dollar price of one of those rapidly depreciating shacks, you can rent a week every summer for 714 years.

Slithers Slithers Slithers…….

Comment by Mr. Smithers
2013-07-24 15:38:20

Yeah and the $150-200 a night don’t cost $1M. You really are not very bright at all.

Comment by Housing Analyst
2013-07-24 17:05:45

714 years Slithers.

You’re really not very honest at all.

Comment by Blue Skye
2013-07-24 17:41:49

….and not pay any interest.

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Comment by Housing Analyst
2013-07-24 18:22:01

…… or depreciation.

 
Comment by Whac-A-Bubble™
2013-07-24 19:26:48

All-cash Chinese and Canadian investors pay no interest…unless they borrowed the money, that is.

 
 
 
 
 
Comment by Housing Analyst
2013-07-25 04:25:56

Of course Liar of course….

 
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