People Just Don’t Want To Hang Onto Those Loans
CBS Denver reports from Colorado. “Real estate brokers say year over year they’re seeing a lack of inventory in the Colorado housing market. Real estate agent Andrew Nagel says some of the brokers in his RE/MAX of Cherry Creek office are astonished by how many offers are going into some resale homes. Nagel says about 30 percent of his buyers are now choosing new construction, which also comes with some built-in perks. ‘In 6 or 9 months that pricing is going to go up and up and up, so by the time you close and move into your house you’ve built in some equity,’ he said.”
The Journal Sentinel in Wisconsin. “With home prices slowly increasing, consumer confidence rising and interest rates still low, home equity lines of credit are making a modest comeback in Wisconsin. In 2014, the amount of home equity lines of credit on the books of Wisconsin-based banks rose 1.9% to more than $3 billion — the first time since the recession and housing market crash that such loans increased from the previous year. ‘The biggest factor has been home prices going up rather than going down,’ Doug Gordon, chief executive of WaterStone Bank.”
“Landmark Credit Union has been offering a fixed 1.99% annual percentage rate for the first 18 months of a home equity line of credit. After that period, the rate goes to 3.99% or the prime rate, whichever is higher. ‘When (home) prices are going up, they’re are a little more confident in spending. And obviously, the home equity lines are a perfect way for people to do improvements or buy cars and such because of the deductibility of the interest,’ Gordon said.”
AZ Family in Arizona. “There are a lot of hard working Arizonans who can’t afford a new home. They’ve got jobs and good credit, but don’t have enough money for a down payment. For many of them, help may be on the way. The nonprofit housing assistance group Trellis, announced this week, that the FirstBank Holding Company, has invested $1 million to make housing more affordable for low and middle income families. The new program will provide qualified home buyers up to $25,000, to be used as a down payment towards the purchase of a new home.”
“To qualify - a family of four must make less than $51,000, and a single person make less than $35,850. However, the money is not a gift - its a loan. Home buyers must repay the loan to Trellis over a 15-year period. Peoria mom Jenelle Forrester said a program like this could make a big difference for her family. ‘Coming up with money, a lot of times is really hard,’ Forrester said. ‘You don’t want to spend all your savings, because you are buying a house. You want to have something to fall back on.’”
The Wall Street Journal. “Home prices in some U.S. markets are rising much faster than rental incomes or what it would cost to build new houses in those markets, according to a new study by a real estate valuation firm. The growing gap between sales prices, on one hand, and rents and so-called ‘replacement cost’ on the other is evidence of markets that are over-heating, said the report by Jacksonville, Fla.-based Smithfield & Wainwright. ‘The build-up of false equity is on the rise again,’ the report states.”
“During the last housing boom, inflated appraisals helped contribute to the run-up in home prices. In December, The Wall Street Journal reported that appraisers are increasingly being pressured to inflate home valuations. In the story, the Office of the Comptroller of the Currency expressed concern that some of the mortgages banks are giving out are based on inflated values. Freddie Mac said it had launched fraud investigations to determine whether lenders had approved mortgages backed by inflated home appraisals.”
“Using inflation-adjusted data, the firm concluded that recent sales prices of single-family homes in 13 states and the District of Columbia are 10% more on average than what the homes would have been appraised for using two other methods.”
The New York Post. “A new time bomb in the residential mortgage market is starting to go off — potentially pushing thousands of struggling New York families into foreclosure. This year marks the start of a 3-year period for thousands of home equity lines of credit, known as HELOCs, to reset from interest-only payments to interest-and-principal payments. New York state has the fourth-largest dollar volume of HELOCs set to reset between 2015 and 2018 — roughly $8.4 billion.”
“Nationwide, RealtyTrac estimates there are 1.8 million underwater homes with resetting HELOCs, to the tune of $88.7 billion. ‘The foreclosure crisis is not anywhere near done,’ said Tom Cox, a Maine-based attorney and foreclosure expert. ‘I can’t tell you we’ve had enough time with it yet to say the stats demonstrate an uptick in actual foreclosures through HELOC resets, but … we know it’s going to happen.’”
8 News Now in Nevada. “New numbers show Nevada’s housing market could be headed for trouble. Notice of default, which is the beginning stage of a foreclosure, saw a sharp rise in its numbers last month. According to RealtyTrac, more than 350 default notices were filed in February 2014 while 662 were filed in February 2015. That’s an 80 percent increase. The hardest hit zip code, 89108, is near Lake Mead and Jones boulevards. Currently, about three out of 10 homes in Clark County are underwater. ‘Even though the market has gradually climbed and increased in property value, it’s still going to be decades for many, many people,’ said attorney Tisha Black, who has helped many struggling homeowners through the foreclosure process.”
“Numbers from RealtyTrac show many zip codes spiked in default notices last month. The zip code 89108 led the valley with 32 notices and 89031 came in second place. The top zip codes all have at least 25 homes in danger of foreclosure. ‘I think it’s a combination of a number of factors as to why that number has increased,’ Black said. Some homeowners declared bankruptcy which halted the foreclosure process, until now. Also, homeowners tired of being underwater have chosen to walk away from their homes.”
“‘I think a lot of those people just don’t want to hang onto those loans, when you’re that far undervalue,’ Black said.”
‘Nagel says about 30 percent of his buyers are now choosing new construction, which also comes with some built-in perks. ‘In 6 or 9 months that pricing is going to go up and up and up, so by the time you close and move into your house you’ve built in some equity,’ he said.”’
Considering a new house can be had for less than the price of a resale, why wouldn’t this be? But this notion that somehow a depreciating asset will cost more after 9 months of depreciation is a strange one.
Denver, CO List Prices Plunge 9% YoY As Oil Craters
http://www.zillow.com/denver-co-80230/home-values/
‘In 6 or 9 months that pricing is going to go up and up and up, so by the time you close and move into your house you’ve built in some equity,’ he said.
There it is, “Real Estate always goes up!”
Yeah, and there was the “regulator” from New Zealand saying the other day, ‘I don’t know what a bubble looks like’ or something. Denver is in a classic mania. I’m sure lots of GSE backed loans are being set in motion on the hoods of SUV’s as I type.
Why Denver? Why not Kansas? Or Oklahoma?
“Why Denver? Why not Kansas? Or Oklahoma?”
Jobs (including energy), climate, and legal weed.
BTW, I’m not saying it’s not a mania. I’m just saying that Denver is preferable to Kansas and Oklahoma for a lot of people.
Kansas and Oklahoma is preferable for alot of others.
Back to the question;
Why Denver.
You’ll have to ask people who moved to Denver from Kansas and Oklahoma.
Some people might like to live in the mountains.
Some people might really like to smoke weed.
Some people might like the tech jobs available.
A part could be the growth in energy jobs (fracking is just getting ramped up in Weld County–Niobrara formation)–Denver grew energy jobs by 6% in 2014.
Some people might like the cultural scene.
There are lots of reasons why someone might prefer Denver.
Low summer humidity, lots of sunny days. Close to mountains. Hipsters love lofty old town and the singles scene.
There are lots of reasons why someone might prefer Oklahoma or Kansas.
Back to the question;
Why Denver
Because there are far MORE reasons why people prefer a place like Denver than Kansas or Oklahoma. If you did a survey of people under 50 and asked if they would rather live in Denver, Kansas City, or bumblef*ck Oklahoma, I guarantee 80%+ would pick Denver.
Having grown up around those states and know far more Okies than I care to, I can tell you Denver is the most fun by far.
My $.02
Smoking weed clouds judgment, leading to ever-loftier bubble valuations.
“Because there are far MORE reasons why people prefer a place like Denver than Kansas or Oklahoma.”
And what are they? Smog? Crime? Low wages?
‘“Numbers from RealtyTrac show many zip codes spiked in default notices last month.’
San Francisco And Los Angeles Foreclosures Skyrocket 35% YoY
http://www.realtytrac.com/images/reportimages/foreclosure_trends_20_largest_metros_jan_2015.png
“With home prices slowly increasing, consumer confidence rising and interest rates still low, home equity lines of credit are making a modest comeback in Wisconsin.”
Oh? And just why is that?
“‘The biggest factor has been home prices going up rather than going down,’ Doug Gordon, chief executive of WaterStone Bank.”
So if home prices are going up then one automatically and magically gains some equity, and in true David Lereah fashion this magically obtained equity should be immediately cashed out. Got it.
“Landmark Credit Union has been offering a fixed 1.99% annual percentage rate for the first 18 months of a home equity line of credit. After that period, the rate goes to 3.99% or the prime rate, whichever is higher.”
So not only should be the newly-acquired equity be cashed out but the terms of this cash out - the interest rate that will ultimately be charged for the cash out - shall inhabit the realm of The Great Unknown.
Once again, no dollar shall be allowed to escape.
“So not only should be the newly-acquired equity be cashed out but the terms of this cash out - the interest rate that will ultimately be charged for the cash out - shall inhabit the realm of The Great Unknown.”
Let’s just hope that Global Economic Cooling keeps those interest rates frozen near absolute zero forever!
Absolute zero for some, but not for all.
“It’s a private club and you’re not a member.” - George Carlin.
There are the guys who take payday loans, for example. Of course I’m not entirely sure making those illegal will improve matters; won’t this simply result in more kneecap collateral?
A realtor told me yesterday that interest rates are going up.
“… interest rates are going up.”
And this translates to: A sense of urgency.
As in “Buy now or rising interest rates will price you out forever”.
Inventory is on the rise here…Its off of a low base but rising nonetheless…
Brilliant. Put your house up as collateral to buy a car.
And obviously, the home equity lines are a perfect way for people to do improvements or buy cars and such because of the deductibility of the interest,’ Gordon said.”
Obviously.
Funny how the ‘new time bomb’ mentioned in the story has been repeatedly covered in MSM articles on the housing crisis for about a decade running already. It’s more of a ‘frozen-in-time bomb.’
Given the dimensions of the mania, it seems somewhat surprising that only 30% of homes in Clark County are underwater.
A bunch of people bailed, it’s a very transient city as you probably know. The 30% is made up of clingers and deniers.
#NoShameInFolding
“Clingers” That’s either alien beings from a foreclosed planet in Star Trek or multiple Jamie Farr’s.
Conversely, just out of town is a bunch more land that will not be underwater shortly.
A major factor in future housing values during this century, in the West, will be the availibility of water. We should discuss that further.
“There are a lot of hard working Arizonans who can’t afford a new home.”
Which means they should probably remain renters.
“They’ve got jobs and good credit, but don’t have enough money for a down payment.”
Sound like it’s time to start saving up some money. Oh, wait, maybe not!
“For many of them, help may be on the way.”
Why, it’s a miracle!
“The nonprofit housing assistance group Trellis, announced this week, that the FirstBank Holding Company, has invested $1 million to make housing more affordable for low and middle income families. The new program will provide qualified home buyers up to $25,000, to be used as a down payment towards the purchase of a new home.”
A true miracle!
“To qualify - a family of four must make less than $51,000, and a single person make less than $35,850.”
Yes, yes … go on …
“However, the money is not a gift - its a loan.”
Yes! A loan to a family that makes less than $51,000 is just what this family needs!
“Peoria mom Jenelle forrester said a program like this could make a big difference for her family.”
I’ll bet.
“‘Coming up with money, a lot of times is really hard,’ Forrester said. ‘You don’t want to spend all your savings, because you are buying a house. You want to have something to fall back on.’”
Hence it makes sense to take out a loan.
Can’t come up with the 3 percent down, which is pretty much everything these days?
Cmon.
Yeah, because paying back a loan with interest is SO much easier than socking money away for a larger down payment or just paying with all cash. House fever throws most logic out the window. I guess car fever can do the same.
“There are a lot of hard working Arizonans who can’t afford a new home.”
Which means they should probably remain renters.
———————-
Unless it costs more to remain a renter, which is the idea behind owning and renting it out. The difference being a down payment.
‘RealtyTrac today released an analysis of wage growth and home price appreciation during the U.S. housing recovery of the past two years that found home price appreciation has outpaced wage growth in 76 percent of U.S. housing markets during that time period. The report also found home price appreciation nationwide has outpaced wage growth by a 13:1 ratio.’
‘Home price appreciation outpaced wage growth in 140 of the 184 metro areas (76 percent) with a combined population of 176 million. Metropolitan statistical areas with the highest ratio of price appreciation to wage growth included Merced, California (141:1), Memphis, Tennessee (99:1), Santa Cruz, California (94:1), Augusta, Georgia (78:1), and Palm Bay-Melbourne-Titusville, Florida (62:1).’
‘Other metro areas where home price appreciation has outpaced wage growth by a wide margin during the housing recovery included Sacramento, California (17:1 ratio), Riverside-San Bernardino, California (15:1 ratio), Las Vegas, Nevada (14:1 ratio), and Detroit (12:1 ratio).’
‘45 metro areas (32 percent) with a combined population of 63 million had a median home price in December that required more than 28 percent of the median income for monthly mortgage payments — unaffordable by traditional standards.’
‘These 45 traditionally unaffordable markets with price appreciation outpacing wage growth included Los Angeles, San Francisco, San Jose and San Diego in California, Seattle, Portland, Boston and Denver.’
“Home prices in many housing markets across the country found a floor in 2012 and since then have rapidly appreciated, particularly in markets attracting institutional investors, international buyers or some other flavor of cash buyer not constrained by income as much as traditional buyers,” said Daren Blomquist, vice president at RealtyTrac. “Eventually, however, those traditional buyers will need to play a bigger role in the housing market for the recovery to maintain its momentum.”
http://www.realtytrac.com/news/home-prices-and-sales/home-price-growth-versus-wage-growth-during-housing-recovery/
‘How could this happen? Enter the investor.’
‘In many markets, the housing recovery has “largely been driven over the last two years by buyers who are not as constrained by incomes — namely the institutional investors coming in and buying up properties as rentals, and international buyers coming in and buying, often with cash,” Daren Blomquist, vice president at RealtyTrac and author of the report, said in an interview.’
‘For demand from traditional buyers to improve, “either wages are going to need to go up or prices are going to need to at least flatten out and wait for wages to catch up,” he said. “You might say the third alternative is interest rates go down so you give people more buying power with their wages, but interest rates are about as low as they can go.”
‘The trend illustrates the limited impact of the Federal Reserve’s decision to include mortgage-backed securities in its unprecedented asset-buying program. The Fed bought more than $1 trillion of those securities to prop up the housing market after it collapsed.’
‘With the economy improving and home prices climbing, central bankers seem to have achieved at least part of their goal. However, investors have reaped much of the benefits of rising prices, while meaningful wage growth — and with it the ability of many Americans to buy homes — has yet to materialize.’
http://finance.yahoo.com/news/u-home-prices-surging-13-040103236.html
“Enter the investor.”
Who is no doubt loaded with pile of cash that belongs to somebody else and when this investor “invests” this cash he gets to extract a hefty fee.
Or maybe extract lots of fees, lots and lots of fees as time rolls on.
This is the year we see how the Phoenix area (canary in the coal mine) does without the investor.
I’m seeing all sorts of contradictory craziness. Lots of price cuts. Some price increases too. Crazy listing prices. Houses sitting. Other houses selling that didn’t show up in the listings. Lots of shenanigans certainly.
In 2 months it’ll be too hot.
I read that story myself this morning, typical Yahoo fluff and no mention of another possibility that might get people back in the market…a substantial price DECREASE. I’m one of the many that was shut out by flippers and specuvestors and flat prices and/or interest rate changes will not get me back in the market but a 30% price drop might. Until that happens I’ll continue renting, no way I’ll buy a mediocre aging tract house house for $400K plus that was $250K in 2012.
Will it all crash in the next bear market ? Institutional investors and foreign investors sound like Hot Money to me.
Traditional buyers are hereby advised to stand clear until the mania ends. Let the investors rightfully eat the losses on their foolish speculation.
“‘RealtyTrac today released an analysis of wage growth and home price appreciation during the U.S. housing recovery of the past two years that found home price appreciation has outpaced wage growth in 76 percent of U.S. housing markets during that time period. The report also found home price appreciation nationwide has outpaced wage growth by a 13:1 ratio.’”
Low interest rates can account for a portion of disparity, but it is still a stunning statistic.
#GotWages?
Low interest + low IQ
‘The report also found home price appreciation nationwide has outpaced wage growth by a 13:1 ratio.’
Move along, folks. Nothing to see here…
‘When you ask 29-year-old Anthony Walker about the home he owns, his response is a chorus of resigned sighs. It’s not quite the reaction you’d expect from one of the few in his generation who has managed to achieve homeowner status. But the property Walker co-owns with a good friend and former roommate is deeply underwater. That means that since he purchased the property, the value has slipped so much that the house is worth less than total mortgage debt taken out to buy it. As time passes, he’s growing increasingly doubtful that he’ll ever see the property value back in the black.’
‘It’s a predicament that more and more owners of less expensive starter properties are facing. Homes that were bought for a “reasonable” price at the top of the market are now floundering in negative equity and according to Svenja Gudell, the director of economic research at the real-estate data firm Zillow.’
‘Walker, like most Americans in 2007, figured he was making a sound investment in real estate that would surely appreciate during his lifetime. Even if he chose to move, he thought, his condo might provide some financial benefit down the line.’
‘But then the housing bust hit. The neighborhood improvements stalled and Walker watched the value of his investment plummet. “That transition that we thought was going to happen didn’t. I think it’s partly because of the financial crisis. Some of the developments in the area got either put on hold or shelved,” he says. “I would say that our mortgage is somewhere around $210,000 today. And I would guess that the property is worth $125,000. So we’re still 40 percent underwater.”
http://finance.yahoo.com/news/stuck-house-cant-sold-115000767.html
If the value has not come back by now with all the financial engineering, its likely not going to..He is so far underwater I Can’t understand why he does not just walk away…
Even if “the value came back”, what does it matter considering nobody is willing to overpay 300% for a depreciating asset like a house?
Remember…. I can ask $50k for my 10 year old Chevy pickup but where is the buyer at that price?
shyster
Data Poet… Stick with the data.
Huntington Beach, CA List Prices Crater 15% YoY; Demand Plummets to 20 Year Lows Statewide
http://www.zillow.com/huntington-beach-ca-92646/home-values/
Wait, 2007? The peak here in the DC suburbs was the summer of 2007. He thought he was buying at the bottom before it all zoomed back up again… but he had to know that real estate doesn’t always go up.
Something smells fishy.
This guy is 29 in 2015, so that would make him at most 22 when he bought in 2007.
This house is less than 20 miles away from New York City (East Orange, NJ adjacent to Newark) and it’s worth less than 2007? $125,000 today?
‘Santa Maria - The president of Coastal Community Builders, Gary Grossman, says since the recession hit in late 2007, very little home building has taken place. He says even now, production of homes is less than half of what it was in the early 2000s.’
“I think it’s a very exciting time, and if I was thinking of getting into the home market, this is the time,” said Grossman. “There’s a general lack of supply of homes. And we have people now who are coming into the market that 8 years ago were in their early 20s and now they’re 30s and have a family and they’re looking for homes.”
‘Grossman says things have slowly started to change. He says at a time when interest rates are at all-time lows, there’s very steady demand up and down the Central Coast.’
“Pismo Beach is on fire. Pismo Beach has really high demand,” said Grossman. “Arroyo Grande has high demand. San Luis Obispo of course. Santa Maria’s doing really well. Santa Maria’s coming back both on entry level and on the high end.”
‘Those new homes are at lower prices for now, Grossman says, from $290,000 entry level housing, to ocean view homes that are half the price they were 10 to 15 years ago.’
Prime yer time machine for 2005….
‘In 6 or 9 months that pricing is going to go up and up and up, so by the time you close and move into your house you’ve built in some equity,’ he said.”
Another yahoo (the article, not the poor woman):
I Achieved the American Dream — and It Was Awful
Tale of “woah!” continues…