Operating On A Herd Mentality
WMFE reports on Florida. “The rebound of Orlando’s housing market is expected to continue in 2014 but at a slower rate. Florida realtors say that’s a good thing. Florida Realtors Chief Economist John Tuccillo estimates nearly half of sales are cash sales, about the same as the rest of the state. He says that indicates strong investor presence but not another bubble. ‘I think we should purge the word bubble from our vocabulary at the moment. This is a very different world from what we had just before the crash. Just before the crash the market was operating on a herd mentality. People felt they had to get into the market or else they would really lose out on something,’ he said.”
The Orlando Sentinel. “Home prices edged up slightly in the core Orlando area from November to December, but the market showed other signs of softening, according to a report by the Orlando Regional Realtor Association. ‘We’re seeing fewer investor and institutional buyers in the Orlando market due to the dramatic gains in median prices we’ve experienced,’ said Steve Merchant, chairman of the association.”
“Starting next month, about 130,000 Orlando-area homeowners with ‘underwater’ mortgages are likely to face a new tax bill if they sell their house, modify their mortgage or lose their home in foreclosure. A 2007 federal law that waived income taxes on unpaid mortgage debt is almost certain to expire Dec. 31. In Metro Orlando, more than a third of the houses with mortgages — about 130,000 — were financially underwater in the third quarter, according to Zillow.”
“Orlando homeowner Julius Ludwin, 82, is a few months behind on mortgage payments and trying to work out a mortgage modification with Wells Fargo. Dependent mainly on Social Security for income, Ludwin said he would be unable to pay any taxes on unpaid debt if he gets the loan modification he’s seeking. ‘We can’t pay any taxes. We have no money,’ he said. ‘They’ll have to try to do something about that. I thought it was supposed to be easier now to get by.’”
From Bloomberg. “Isabel Santamaria thought she finally caught a break in her effort to save her Florida home from foreclosure after nine frustrating months: She reached Bank of America Corp.’s Office of the CEO and President. What the mother of two autistic children didn’t know is that her case would find its way to contractors, including Urban Lending Solutions in Broomfield, Colorado. Bank of America hired the firm to clear a backlog of complaints about a federal program designed to prevent foreclosures.”
“Santamaria and her husband bought their four-bedroom Palm Bay home in 2008 for $167,000 and spent $60,000 to renovate it, she said. They applied for HAMP in October 2009 after Echeverria’s hours as a driver fell. The bank rejected the application because their mortgage costs were too low in relation to their income to qualify for the program. The couple applied again in January 2010, sending their application to an Urban Lending office in Pittsburgh, after their children were diagnosed with autism, Santamaria said. Last month, Bank of America sent her a foreclosure warning, Santamaria said. ‘They tell the outsiders a completely different story from what’s really going on,’ said Santamaria.”
“To soothe homeowners frustrated by delays, employees had a monthly allotment of $25 and $50 gift cards they could give customers, said three of the former workers. The joke among staff: It was just enough money to buy moving boxes. ”
The Florida Times Union. “While Northeast Florida Association of Realtors’ monthly report shows some continued improvement in the housing market, there are mixed signals as well. The number of closed sales in November was lower than November 2012. That’s the first year-to-year drop in several years. And while prices have also dropped since summer, homes are selling faster and for more than they were a year ago.”
“‘Perhaps people are being more flexible in what they’re selling their property for,’ said Carol Zingone, president of NEFAR. ‘I’ve got people who are already in Seattle, so they had to make a concession on the selling price. They have to move on.’”
“Zingone said she was told by one lender that, starting Jan. 1, there will be a maximum borrower’s debt-to-income ratio of 43 percent. In other words, on an income of $50,000 a year, a borrower’s debt can’t exceed $21,500. ‘People used to slide through with 46, 47, 48 percent,’ she said. ‘That could really have an effect on some of the marginal buyers.’”
From WJHG. “For another month, Florida ranks number one for foreclosure rates. Eight of the top 10 cities with the highest foreclosure rates are in Florida, legislation that took effect in July has slowed the process. Upwards of 20,000 foreclosures a month but there are still around 275,000 that need to be processed. Anthony DiMarco with The Florida Bankers Association says the court process delays a foreclosure from beginning to end. ‘Here it’s taking 800, 900 days when you go through the court system,’ said DiMarco.”
“‘It doesn’t surprise me just because again the number of foreclosures that still need to get through the system, they’ve just been sitting there,’ said John Sebree with Florida Realtors Association.”
““Zingone said she was told by one lender that, starting Jan. 1, there will be a maximum borrower’s debt-to-income ratio of 43 percent. In other words, on an income of $50,000 a year, a borrower’s debt can’t exceed $21,500. ‘People used to slide through with 46, 47, 48 percent,’ she said. ‘That could really have an effect on some of the marginal buyers.’””
If your income is 2-300K+ maybe it could make sense to allow 40+% for DTI ratio. But at 50K a year? Are you nuts?? 21,500 a year in debt payments? At 50K a year, your take home, assuming you pay nothing for health insurance and save nothing in your 401K maxes out at about 3,200/mo. 21,500 in debt payments a year is almost 1800/mo. Leaving our mythical borrower with a whopping 1400/mo for things like, oh, I don’t know.. Electricity. Food. Clothing. Children/education. Home repairs/maintenance. You know, silly stuff like that! And, of course, if you ever plan to retire and want to fund your 401K, that 1400/mo is going to become more like 400/mo after you make your contributions. But hey, to have a house, food, healthcare, retirement.. All that stuff is secondary to owning a little piece of heaven.
If you’re making 50K/yr and spending more than 30% of your income on debt payments, you’re in bad shape. And yet, it sounds like this moron thinks that 21,500 isn’t enough? I’m sorry, but that’s just crazy talk.
What does it matter how much you earn?
You forgot car/fuel/insurance, which is a significant portion of people’s monthly.
“….bought their four-bedroom Palm Bay home in 2008″
I remember learning the word “sticky” on this blog in 2006: How any correction in housing prices will be “sticky”. People get emotionally invested in their homes and they “aren’t going to give them away”.
It will be 2014 soon and so many FBs are still unable to accept reality. It is a tragedy with no end 6 years later. The cost of this bubble is extraordinary in so many ways. The destruction of monetary value is just one.
“It’s a tragedy with no end 6 years later.”
It a tragedy for some but a good living for others.
The stupid decisions of one group results in lives of leisure for other groups. The larger the membership in the first group the greater the degree of leisure that gets to be enjoyed by the second group.
It really doesn’t have to be this way but I am glad that it is.
Life is good.
“It will be 2014 soon and so many FBs are still unable to accept reality.”
LOLZ….. you’re one of them.
Housing prices get “sticky” when all the king’s horses and all the king’s men try to prop them up on a permanently high plateau.
I’ve shopped for housing in Palm Bay. The whole place is barely above sea level. When the new FEMA surveys kick up the price of flood insurance there, expect great hilarity.
“Orlando homeowner Julius Ludlin, 82, is a few months behind on mortgage payments and is trying to work out a mortgage modification with Wells Fargo.”
He’s 82 and he has a mortgage. Astounding!
“Dependent mainly on Social Security for income, Ludwin said he would be unable to pay any taxes on unpaid debt if he gets the loan modification he is seeking.”
He’s 82 and he is mainly dependent on Social Security for income and he has a mortgage and he is trying to work out a mortgage modification with Wells Fargo but if makes little difference if he gets a modification or not because even if he does get a modification he will not be able to pay the taxes on the unpaid debt.
He is screwed. If he was able to make it all the way up to age 82 you would think he might have learned something on the way, but apparantly he didn’t.
Amazing!
Our species has suspended natural selection for far too long.
“Santamaria and her husband bought their four-bedroom Palm Bay home in 2008 for $167,000 and spent $60,000 to renovate it, she said. They applied for HAMP in October 2009 after Echeverria’s hours as a driver fell.
Now THAT is funny.
And here we are, 2006/7 all over again, in the midst of the ongoing dead cat bounce with gravity taking over, and the most recent round of entrants 2010-2013 headed for the financial doom room.
Yeeeeeeeeeeeeeeeehaw!
“And here we are, 2006/7 all over again …”
The golden years.
“… in the midst of the ongoing dead cat bounce with gravity taking over …”
Gravity, got to love that gravity.
“… and the most recent round of entrants 2010-2013 headed for the financial doom room.”
A thing of pure beauty.
So let me understand this….. You don’t have two dimes rub together because you couldn’t say no to debt…. and now you want to go deeper into debt for a rapidly depreciating house at a massively inflated price.
You’re a DebtDonkey.
You are my bread and butter.
The last time MSM-favored real estate “experts” dispensed that advice, a crash was right around the corner.
The MSM, my second most valuable assets.
The first most valuable are my politicians.
Why do you place such low value on your minions?
The value which you consider to be low is really the value of which they are actually worth, which isn’t all that much.
But on the other hand, the activities of these low-valued minions can produce very much value to me in the form of what money happens to land in my bank accounts.
They do what they do best, I get to collect some vey big bucks as a result. I then peel off a few of these bucks and scatter them among my minions and they then tend to get all fired up and work all that much harder on my behalf.
Precisely.
“Bubbles are for bathtubs!”
Interesting triva: The word ‘twerp’ originally referred to someone that bites their fart bubbles in the bathtub.
‘The couple applied again in January 2010, sending their application to an Urban Lending office in Pittsburgh, after their children were diagnosed with autism’
What a circus this has become. Do you suppose I can ask my landlord to excuse me from paying rent if I have some kids diagnosed with autism? Or better yet, can I just stop paying rent for a couple years, apply for some government “modification” so I don’t have to move?
Everything is a get-out-of-debt card. Lose a job? Just stop paying. Get a divorce? Live in a house for free a couple five years.
After all, none of those things ever happen to people who didn’t borrow more than they should have.
While the media has their tiny violins out, here’s something to think about:
‘Florida renters have the highest rental cost burden in the nation, according to a new report from the Joint Center for Housing Studies at Harvard University, which shows many Floridians pay more than 30 percent of their income on rent.’
‘According to the Havard University study, almost 60 percent of the state’s renters are cost burdened, which means they spend more than a third of their income on housing. That statistic hits home at the Heart of Florida United Way in Orlando.’
‘Larry Olness, vice president of Community Services at the Heart of Florida United Way, says that of the roughly 400 calls the center gets per day, about half of them involve housing help.’
“‘It comes down to, ‘Do I pay my utility bill or do I eat today? Do I feed my children and myself, or just my children?’” says Olness.’
So why do we tolerate hundreds of thousands of houses just “sitting there”? Because prices might fall? Heaven forbid.
Do you suppose I can ask my landlord to excuse me from paying rent if I have some kids diagnosed with autism?
Perhaps a few more years from now you’ll be able to bribe a poorly-paid doctor and he will diagnose YOU for some compensable condition.
I knew a couple of docs who had trained under the old communist regime in Hungary & they said in their time bribery of medical professionals was common.
“So why do we tolerate hundreds of thousands of houses just “sitting there”? Because prices might fall? Heaven forbid.”
The PTB are doing their best to make everything expensive, to keep everyone in debt up to their eyeballs. Best thing for people to start doing would be to buy a little piece of land, install well, septic, power, etc., and live in a cheap RV with no payment. Oops, can’t do that, it’s against the law! Yep, you got that right, you are not allowed to live in an RV on your own land. You are required to build something acceptable to them in order to exist on your own plot of land, and pay for expensive permits for everything along the way- building permits for wells, for septic, for structures which must adhere to certain standards, permits for driveway construction, permits for gates, permits for fencing, permits for bringing in gravel or any other material, permits for digging, permits for permits for permits. Has anyone had enough of this crap? I know I have.
Has anyone had enough of this crap? I know I have.
yep, it’s absolutely sickening that the know-it-all power elite won’t let people live their lives the way they choose.
i’m with you. words can’t describe the disgust i have for them. governed and lorded over by idiots and tyrants. i hate them with everything i’ve got.
‘The PTB are doing their best to make everything expensive, to keep everyone in debt up to their eyeballs…Has anyone had enough of this crap? I know I have.’
I’d vote for you for president.
+1. My sentiment exactly. And he’d get my vote too.
One caveat….. don’t overpay for the dirt.
So my participation will be minimal.
Can, for amusement, someone look up and post about who “bubble” was?
I know, many of you do, it wood be great if all of us did.
Also;
I am of the mind that the new reg z stuff might not be the great favor to borrowers rights it appears to be. I believe that the new regs aren’t to protectthe borrowers but to tighten loopholes they might slip out of as far as their respresponsibility goes.
The new regs protect the borrower up to the initial length of the loan…does it reciprocate to the lender?
Once all these protected class crap rules are in Mr. Banker will possibly be able to.actually jail defaulters.,
‘Can, for amusement, someone look up and post about who “bubble” was?
I know, many of you do, it wood be great if all of us did.’
I get some emails and texts from smart phones, and they resemble this comment.
Out of curiosity, can you read the post or comments on your phone? Do you have to zoom in or something?
I can Ben…Did it yesterday
How big is your screen? Do you use zoom? Does it all fit on the screen horizontally, or do you have to scroll left or right?
Zooms to maybe 30pt font, typing is painful.
Zooms to maybe 30pt font, typing is painful.
I just recently got an Android with a 7″ screen. Reading blogs is just fine, but typing is excruciating and tends to be full of errors no matter how precisely I attempt to enter keystrokes. UGH.
Sounds like Tuccillo thinks that ‘investors’, aka speculators, are immune to a ‘herd’ mentality. I seem to recall on this blog a number of years ago, that the really smart money exited the housing market when too many ‘amateurs’ started to make the real estate market a scary place. Wonder what the Blackstone Group is thinking right now that the ’spec’ herd has followed them into the rental market.
They’re thinking that the federal government will find some way to bail them out at our expense.
For the record, I was surprised at the taper yesterday. But the Fed clearly thought that promising ZIRP indefinitely, while also promising to resume “purchases” at the prior level in its discretion, would keep asset prices propped up.
But I do have a question. Where is Sean Snaith in these quotes? He used to be the go-to guy down here for newspaper stories. Remember this from 2006?
_____________________________/
“Bubbles burst, soufflés flatten. So says University of Central Florida economist Sean Snaith, who denies that the housing market is in a bubble.
He prefers a culinary analogy: Snaith sees the run-up in housing prices as a soufflé, which rises until it’s done, then loses some hot air. ”
http://tinyurl.com/ketr7a9
“It was the third consecutive month of falling sales, suggesting that higher mortgage rates are putting the brakes on the housing recovery.”
http://money.cnn.com/2013/12/19/news/economy/home-sales/index.html?iid=HP_LN
‘The National Association of Realtors said sales of previously owned homes fell 4.3 percent last month to an annual rate of 4.90 million units. That was the lowest since December last year and the third straight monthly drop.’
“We are starting to reach a point where we are seeing a shift from a speculative investor driven recovery to one that is going to be more represented by the traditional buyers and sellers that make housing decisions based on lifestyle,” said Budge Huskey, chief executive officer at Coldwell Banker Real Estate in Madison, New Jersey.’
Heck yeah Budge, (great name BTW) us little old renters are ready to jump in there and take up the slack for these speculative investors. We don’t mind that they drove prices way up in a little over a year. Come on everybody, buy one for the team!
Two headlines on Yahoo:
‘Bernanke’s new formula for pleasing investors’
‘The Fed still has Wall Street’s back: Rickards’
What a relief! I for one was sooo worried about Wall Street investors.
It’s interesting that while Congress is shedding responsibilities, the Fed is adding them.
‘China’s interbank 7-day repo rate spiked sharply today, reaching 9.8% intra-day and closed at 7.5% versus yesterday’s 4.85%. China’s central bank had to inject emergency cash into the banks in the afternoon to avoid another liquidity crunch we saw back in June.’
‘What happened? Nomura Securities believes four factors contributed to the spike:
“First, the financial system remains highly leveraged and fragile, hence vulnerable to liquidity shocks. Second, the US QE tapering decision may have made commercial banks in China nervous about a liquidity squeeze. Third, the PBoC intends to avoid loosening policy and has not conducted open market operations in the past two weeks, including today after the US tapering decision was announced. The continued suspension of repo operations today may have made commercial banks concerned about a potential liquidity squeeze. Lastly, the year-end effect pushes up liquidity demand.”