What Started It Was The Buzz
A weekend topic to connect some dots on the price surge in certain markets compared to the slowdown a few months ago. The first two from the Mercury News in California. January 2015: “San Jose and San Francisco lead the nation in house flipping, according to Trulia, but the best days for making a profit may be over as price gains slow. Glenn Polf of Diversified Ventures Group in San Ramon said his group bought a house in East Oakland at auction but only broke even on the resale. ‘We overpaid. That’s what happens when you don’t get deals for a while. You get a little bit more aggressive. We were more optimistic than we should have been,’ he said.”
“‘The buyers are paying such a premium for houses, it doesn’t make sense for flippers,’ said Alisha Karandikar of CSR Real Estate Services in San Jose. ‘The acquisition costs are so high, that one little tweak in the market and they are going to lose their shirts,’ she said.’”
Late May, 2015. “How high does this ladder stretch? With spring buyers vying for a limited number of properties, the median price for Santa Clara County homes reached yet another all-time high in April. Sticker shock spread throughout the region, with prices for single-family homes jumping from a year ago in all nine counties, according to CoreLogic. ‘Prices are jumping,’ said Kristine Kim-Suh, a Palo Alto-based agent. ‘Some properties are selling for $30,000, $40,000 or $50,000 beyond last month’s comparables, and it’s making buyers that much more aggressive. For example, they know that the comparable is $825,000 and they’re bidding $885,000, they’re so anxious. It’s even surprising the listing agents.’”
“On the Peninsula, ‘nothing has slowed down,’ said Alain Pinel agent Nick Granoski, who recently worked with first-time homebuyers Becky and Brandon Stroy, who had been outbid and worn out since their house-hunting began in December. But by throwing an extra $400,000 on top of the $1,350,000 list price on a Mountain View ranch-style home in the Varsity Park neighborhood, the Stroys were finally winners. ‘There were 17 other offers and ours was sort of just barely high enough to win,’ said Brandon, an attorney. He received news of the successful bid while on his way to work, taking it in with ‘a mixture of joy and relief and surprise — and then terror, I guess.’”
This past week, from the Sun Sentinel in Florida. “Buying a house these days can mean putting up a fight. A surprisingly strong housing market this spring has put more homebuyers in the middle of bidding wars in South Florida, buyers and agents say. Heavy demand helped give the once-reeling market a boost and led to double-digit price increases in Broward and Palm Beach counties. That pace, though, couldn’t continue, and the market cooled in 2014. Now buyer urgency is back, fueled by loosening restrictions on mortgages and young families eager to find something before the next school year starts, agents say.”
WPRI in Rhode Island. “A quick glance at any local real estate broker’s website shows what seems to be plenty of homes to choose from, but agents say there’s less than meets the eye. ‘The buzz is getting out that there’s a shortage of inventory, and that’s the biggest problem right now. There’s just not enough houses,’ said RE/MAX Realtor Tammy Deviley.”
“The low inventory of existing and new homes has Deviley surprised. Weeks ago, she said market conditions were so challenging that sellers had to do a little bit extra to generate interest. ‘I did a market analysis for a potential client two months ago,’ she recalled. ‘And that price of that home was $20,000 less because there were so many homes to compete with.’”
“First-time buyers and those looking to move into larger homes have fueled an uptick in demand. Demand is so strong, in fact, that single offers for one property are now the exception. ‘People talk, and they talk about how they put in an offer on one. Bidding wars are actually starting again, which is something I have not experienced,’ Deviley said. ‘I think what started it was the buzz of people talking about the shortage of inventory.’”
Something just happened that changed these markets. Was it the ‘loosening standards? MarketWatch, “Buying a home has gotten a little bit easier — at least in terms of getting a down payment together — and young people may finally be ready to make a move. The average down payment for single-family homes, condos and townhouses purchased in the first quarter of 2015 was 14.8% of the purchase price, down from 15.2% in the previous quarter and down from 15.5% a year ago, the lowest level since the first quarter of 2012, according to RealtyTrac.”
“The average down payment for loans issued by the Federal Housing Authority — a government agency — originated in the first quarter was 2.9% of the purchase price while the average down payment for conventional loans was 18.4% of the purchase price. ‘Down payment trends in the first quarter indicate that first-time homebuyers are finally starting to come out of the woodwork, albeit gradually,’ says Daren Blomquist, VP at RealtyTrac.”
“New low down payment loans recently introduced by Fannie Mae and Freddie Mac and lower insurance premiums for FHA loans are helping first-time homebuyers, who typically can’t afford large down payments. FHA loans usually have looser terms. The government has been promoting low down-payment loans to woo first-time buyers into the property market. The FHA has offered a 3.5% down-payment loan, and many can be below 3% due to down payment assistance programs.”
“The government-backed lending enterprises Fannie Mae and Freddie Mac recently introduced the 3% down payment loan program, and the U.S. Department of Housing and Urban Development lowered insurance premiums that low down-payment borrowers have to pay, which Blomquist says would save the average house buyer $917 a year.”
“The share of low down payments — with a loan-to-value ratio of 97% or higher, meaning a down payment of 3% or lower — was 27% of all purchase loans in the first quarter of 2015, up from 26% a year ago, and they reached a two-year high.”
Vegas Inc. in Nevada. “Las Vegas homebuyers are making smaller down payments for new purchases, says a new report, a possible sign of easier mortgage lending in what had been ground zero for America’s real estate bust. Southern Nevadans made an average down payment of 13.3 percent of the home’s purchase price in the first quarter this year. That’s down from 14.9 percent a year earlier, according to RealtyTrac. In dollars, the average down payment last quarter was $36,326, down from $43,712.”
“In theory, stronger credit scores could also result in smaller down payments. But that seems unlikely in Southern Nevada, as the state’s residents have some of the worst personal finances in the country. Nevada, with the bulk of its population in Clark County, is racked by some of the highest rates of lousy consumer credit, bankruptcies, foreclosures, underemployment, mortgage delinquencies and uninsured residents, according to the nonprofit Corporation for Enterprise Development.”
From Banking Exchange. “The employment picture is brightening, real estate is on solid footing, and business activity is humming along in San Diego, providing bankers in the market abundant drivers of loan growth and myriad reasons for optimism. Competition is intense, bankers and observers note, resulting in pricing pressure. But they add that, with loan demand mounting, growth opportunities remain ample when looking out to the remainder of 2015.”
“An SNL analysis found that Silvergate Bank increased its first-quarter loans by nearly 40% from a year earlier. Several other San Diego-area banks generated robust double-digit growth in the same period, including San Diego Private Bank, Bank of Southern California NA, and Seacoast Commerce Bank. Among eight San Diego-area-based commercial banks, median first-quarter loan growth from a year earlier topped 27%, according to the analysis of regulatory filings.”
“Low long-term interest rates helped create a ‘mini boom’ in residential mortgage refinancing early this year, he said. Now, with the summer home-shopping season on deck, Silvergate CEO Alan Lane is looking for a rise in home purchases. The bank also is buying nonqualified mortgage loans from correspondents, adding to its loan totals. ‘That’s been a nice little niche for us,’ Lane said.”
“The strength of the market has proven a lure for more lenders, Lane said, fueling competition. That, in combination with already low short-term interest rates, is putting downward pressure on prices, affecting loan profitability. That helps explain why loan yields are declining in San Diego despite the healthy loan demand. ‘It is intense,’ Lane said of competition in both the commercial and residential lending spaces. ‘It’s about as intense as I’ve ever seen it.’”
“Lane said that while competition is clearly affecting yields in Southern California, he said he has not witnessed irrational moves on credit standards or on the structure of loans. He has not seen any competitor introduce no-documentation loans or products of that nature that helped deepen the last credit crisis. Lenders, he said, are instead competing primarily on pricing. ‘We’re not losing a lot of loans because people are starting to do stupid things,’ Lane said. ‘And that’s good, because that would be the sign of the next downturn.’”
‘The need to expand access to credit is a point of broad consensus among regulators, policymakers, President Obama’s administration, academics, consumers and lenders.’
‘As we work to get housing back on track, a number of reliable data sources, including the Mortgage Bankers Association and the Urban Institute, confirm that credit is too tight. This has sparked a debate as to how best to increase access to credit for qualified borrowers.’
‘While current regulations may still be in need of some tweaks, the next opportunity is not to loosen underwriting guidelines or reintroduce risky products. It is to begin serving more qualified borrowers who are slipping through the cracks of the current credit-scoring models.’
‘Today, lenders use credit-scoring models sanctioned by the Federal Housing Administration, Fannie Mae and Freddie Mac. But in the past ten years, technology has matured, increasingly granular data has become available, and consumer behaviors have changed. Using updated and more sophisticated models would help lenders reach significantly more consumers, many of whom would qualify for mortgages even in today’s environment of tight credit standards.’
‘Using newer, more accurate credit models would help to increase the number of eligible borrowers within the U.S. without weakening today’s underwriting parameters by changing debt-to-income, loan-to-value, or minimum score cut-offs.’
‘It is encouraging to see that this issue has been gaining traction in Washington. The Federal Housing Finance Agency has asked the GSEs to consider modernizing their credit scoring requirements and has included this initiative in its 2015 scorecard. In addition, Secretary of Housing and Urban Development Julián Castro has called for expanding mortgage credit to borrowers with non-traditional credit files and promised to review ways to incorporate alternative credit-scoring models into FHA’s automated underwriting system.’
‘Any change will come with implementation and technology costs, but it will also bring opportunity. Recent research from VantageScore shows that the GSEs stand to earn up to $500 million more each year by serving a larger pool of creditworthy borrowers. Lenders and others in the housing industry also stand to make additional revenue. Serving more creditworthy consumers is a true win-win for the entire market.’
‘Updating credit-scoring models is a viable way to responsibly broaden access to credit. It is yet another actionable step towards sustaining progress in the ongoing housing recovery.’
‘Debra W. Still is president and chief executive of Pulte Financial Services.’
With the REIC propaganda apparatus having successfully erased from collective memory how subprime lending planted the seeds for the last collapse, a headlong rush is on to a repeat of the same outcome.
‘Lenders and others in the housing industry also stand to make additional revenue. Serving more creditworthy consumers is a true win-win for the entire market.’
‘Serving more creditworthy consumers is a true win-win for the entire market.’
Just as it was back in the Countrywide era!
Recent research from VantageScore shows that the GSEs stand to earn up to $500 million more each year by serving a larger pool of creditworthy borrowers. Lenders
If the intent is to serve a larger pool of borrowers, isn’t that just a fancy way of saying that they intend to lower credit standards?
It is a very surreptitious (at best) or downright sneaky (at worst) way of lowering credit standards, too, since they are proposing doing so by hiding it in the incomprehensible “black box” of a modern credit scoring algorithm.
“If the intent is to serve a larger pool of borrowers, isn’t that just a fancy way of saying that they intend to lower credit standards?”
No more than Affirmative Action is a fancy way of lowering college admission standards for minority applicants. In either case, these programs are simply a way to help more people get what they deserve.
‘Today, lenders use credit-scoring models sanctioned by the Federal Housing Administration, Fannie Mae and Freddie Mac.’
A skulk of foxes is guarding the chicken coop.
They could save a lot of computing power simply basing their decision primarily on income and and discounting FICO altogether.
Or just base the decision on race…
Cra
Cra
ter
ter
Many high-earners walked away from expensive houses during the last downturn.
Plenty of “wealthy” people declare bankruptcy as well.
Plenty of “wealthy” people declare bankruptcy as well.
Those who discharge debts via bankruptcy by definition, are not wealthy; they are living a life of _appearing_ wealthy, but they have a negative net-worth.
Those who are actually wealthy (rather than merely appearing it) may need BK protection due to lack of liquidity, rather than negative net-worth, but those would be restructurings, not liquidations.
My point remains.
You can earn a lot of money, but spend more than you make and gamble your way into risky situations.
I don’t know what you think you are refuting or clarifying.
I loved this quote before I started reading the book. Now that I am reading the book, and understand the considerable irony that the character who dispenses this wisdom, a Mr. Micawber, is a chronic deadbeat who borrows money wherever he can then spends it like there is no tomorrow, I love it all the more.
A $1M earner walking away from a $10M house is fundamentally the same as a $15/hr lucky duck walking from a $300K house.
It’s a ratio, not an absolute. It’s not difficult.
The thing I was trying to highlight was the misuse of the term “wealthy”. Or maybe it was intended to be an ironic statement, since you put it in quotation marks.
The statement would be more true if you said “people with high income”, instead of “wealthy people”. The two are not the same. The truly wealthy are very unlikely to need the protection of the bankruptcy code.
They are trying to repeat all of the same mistakes. Unbelievable.
“Recent research from VantageScore shows that the GSEs stand to earn up to $500 million more each year by serving a larger pool of creditworthy borrowers.”
Lost in all of this talk are THE LOSSES!
Not here on the HBB. And we’re gonna keep talking about massive housing losses.
“They are going to lose their shirts,’”
If you bought a house in the last 15 years, you already lost your ass.
Mountain View, CA Housing Prices Fall 6%
http://www.zillow.com/mountain-view-ca/home-values/
What are you smoking?? The market in Mountain View is hot-hot-hot.
According to the link that you sent, List Prices in Mountain View have gone from 799K (Feb 2014) to $968K (Feb 2015) in the past year!
….and sale prices falling.
*Study* the data my friend.
….and sale prices falling.
Studying the Sales Price curve, it looks noisy, but up-and-to-the-right for the last year+ period that you have been saying things were cratering. Nice cherry-pick!
Falling prices. Get over it and get on with your life.
I’ve been living my life, while watching to see whether sanity returns. This is a multi-decade economic event (a train wreck occurring at molasses speed)—you better not put your life on hold to wait for it!
Fixt for you.
you better not
put your life on hold to wait for it!risk your entire life on a depreciating asset at a grossly inflated price.Prices are not falling in Mountain View. HA just likes to think they are. That is one of the strongest markets in the U.S. today.
Refute the data Jingle_Fraud.
And a “strong” market is one of frequent sales. Housing demand in CA is at 30 year lows.
Lots for you to learn Jingle_Fraud.
“The share of low down payments — with a loan-to-value ratio of 97% or higher, meaning a down payment of 3% or lower — was 27% of all purchase loans in the first quarter of 2015, up from 26% a year ago, and they reached a two-year high.”
It amazes me how quickly subprime lending came back as a driver of home price appreciation.
‘Recently, the Federal Housing Finance Agency announced an extension for HARP (Home Affordable Refinance Program) and HAMP (Home Affordable Modification Program).’
‘That means that these programs, intended for homeowners affected by the housing crisis, will still be available all the way through 2016. And plenty of people still stand to benefit—experts estimate that at least 600,000 eligible homeowners still haven’t taken advantage of these programs.’
‘What does this extension mean for you?’
‘Basically, it means more time. If you bought your home on or before May 31st, 2009 and your home has lost value or you’ve experienced significant financial hardship, then there’s a decent chance you can still qualify for one of these programs. Depending on your exact situation, you may stand to save thousands a year on your mortgage payments.’
‘Think this could be you? Give us a call or fill out our form to learn more.’
http://www.totalmortgage.com/blog/general/harp-and-hamp-now-extended-through-2016/27814
‘Federal Housing Finance Agency Director Mel Watt said over 600,000 people could still benefit. To put these numbers in some context, there are over 81,000 people in Florida and 31,000 Californians alone eligible for a HARP refinance.’
‘That could also be a really low estimate. The 600,000 figure only accounts for those who could benefit from the program who have loan-to-value (LTV) ratios greater than 80%. Although not technically a HARP refinance based on the LTV ratio, clients that meet all the other requirements can do a streamline refinance through Fannie or Freddie. According to the Urban Institute, when you account for lower LTVs, that number is actually just shy of six million. A lot of people could be saving money.’
‘If you lost value on your home, you can refinance even if your home is worth half of what you paid for it. For example, if your home is worth $50,000, but you owe $100,000, you qualify. This is true even if the property is your second residence or vacation home.’
http://www.quickenloans.com/blog/fhfa-extends-harp-hamp-programs-through-2016#GBkq1ej49LLD53kT.99
‘if your home is worth $50,000, but you owe $100,000, you qualify. This is true even if the property is your second residence or vacation home’
But there’s no subprime lending going on.
And rife with fraud.
You can paint all the lipstick you want on a pig, but if it has a curly tail, squeals, and rolls around in the mud, it’s still a pig.
But there’s no subprime lending going on.
Clearly subprime, but I have to point out that this doesn’t represent net _new_ subprime lending. These programs are just swapping out old-subprime for replacement-subprime. The amount of subprime in the system remains the same. The affordability for the FBs improves, so these loan likely have a slightly lower risk of going bad than the ones that they are replacing.
Oh, and I forgot to mention one element: also clearly a hand-out to the big banks. Some of the old-subprime that gets replaced is private-issue stuff (e.g. banks likely still hold the equity tranche) that hasn’t gone bad yet, and it is being replaced with GSE-backed stuff. This does represent a transfer of risk: net risk to the taxpayer has gone up; net risk to the banksters has gone down.
“The affordability for the FBs improves, so these loan likely have a slightly lower risk of going bad than the ones that they are replacing.”
I’m pretty skeptical on this point. Couldn’t the FBs have ‘afforded’ the same monthly payment with or without the subprime loan? What these programs do is to qualify a select class of buyers to take out larger loans and purchase more expensive homes on the same size downpayment and monthly payment.
For an example I recently posted, the same $9,000 that could provide a 3% downpayment on a $300,000 home could just as well provide a 20% downpayment on a $45,000 home. Which will work out well for the subprime buyer of the $300,000 home, so long as double-digit home price appreciation results in $30,000+ in new home equity every year after purchase.
This “high rate of home equity wealth gains” scenario, in turn, depends on Grandma and Grandpa having to continuously eat up their savings to make ends meet, thanks to the near-zero returns on their CDs and money market accounts. It’s all part of the plan.
“This does represent a transfer of risk: net risk to the taxpayer has gone up; net risk to the banksters has gone down.”
The Housing Bubble is moving backwards in time!
‘ Barofsky shows how HAMP’s faulty design led to all sorts of problems like this, with trapped borrowers, extended trial payments, no-doc modifications, and eventually unnecessary foreclosures. Barofsky mused that Treasury didn’t care about the suffering of borrowers under HAMP, and the issue came up in a meeting with the Treasury Secretary, which was also attended by Elizabeth Warren, then the head of the Congressional Oversight Panel, another TARP watchdog.’
‘Warren asked Geithner repeatedly about HAMP. After several evasions, Geithner said about the banks, “We estimate that they can handle ten million foreclosures, over time… this program will help foam the runway for them.”
http://firedoglake.com/2012/07/20/barofsky-book-geithner-confirmed-in-2009-that-hamp-was-designed-for-banks-to-spread-out-foreclosures/
I’m pretty skeptical on this point. Couldn’t the FBs have ‘afforded’ the same monthly payment with or without the subprime loan?
Based on the snippet that Ben quoted, I thought we were talking about HARP refi’s with ridiculous LTVs. In that case, the affordability for the FB does improve, as the only reason for them to go through the refi is for the now-lower rates. Lower rates implies lower payments; lower payments implies improvement in their discretionary budget post-mortgage payments.
My bad — thought we were talking about the pernicious effects of subprime lending.
California Housing Demand Falls 9% YoY
http://files.zillowstatic.com/research/public/State/State_Turnover_AllHomes.csv
‘Five years ago when the market was in the tank, the national media carried stories that the Millennial Generation (now aged 18-34) wasn’t buying into the American dream of homeownership as much as older generations had. Now numerous studies show that to be nonsense: Millennials haven’t bought because they haven’t had the income and down payments to do so. Here in Denver, with rents rising at the second-fastest rate in the U.S., a bright job picture is allowing young buyers to get on the homeownership track; maybe with a little help, something that CHFA has provided 84,000 Colorado buyers since 1974.’
‘CHFA knows the housing market is daunting now, with Denver’s low inventory of homes. “What we hear is buyers are having to put seven or eight bids on properties to get a contract, almost like an auction,” McMahon says. But for those willing to swim in those faster waters, CHFA is making it happen for millennials like Zayac and Zio.’
‘The couple toured 30 houses and made six offers before landing a keeper. “We’re really glad we did that,” says Veronica Zio, 25, who with her fiancé John Zayac closed on a house in Southeast last month, after being pre-qualified by American Financing, using some CHFA backed programs. Could they have made it without that, using money they had saved? “It would have been really, really hard,” Zio says.’
‘Now Zayac and Zio are painting and fixing up their place, using some of their savings they didn’t put into the purchase, thanks to CHFA. Would they have been better off to wait a year, when they’d saved more? Absolutely not, says a study by Realtor.com – citing the costs of postponing in 101 national housing markets. Here in Denver-Aurora-Lakewood, the study says, the net from purchasing now, projected over 30 years, is estimated at $696,131 – while the cost of waiting even a single year is pegged over $26,000; $88,000 to wait three years.’
‘Meanwhile, all of the reasons not to buy a home are evaporating as Colorado moves into faster growth. Even many buyers who were upside-down on mortgages a few years back are seeing fast appreciation that erases the red ink and puts them into the black. “It was a myth that Millennials don’t want to own stuff,” says Gene Myers, CEO of New Town Builders, with millennial kids of his own. “These are buyers that have had to postpone their lives because they got out of school at a difficult time. Now they’re hopping around West Highlands and other neighborhoods, trying to find what they can afford.”
‘CHFA can get the ball rolling: “It’s important and to get educated and preapproved,” says CHFA’s McMahon. And you don’t need to be a Millennial to qualify (McMahon recalls a recent loan to a couple in their eighties). CHFA is on the web at CHFAinfo.com, where you’ll find a Facebook contest for a $500 gift card, launching next week, celebrating Down Payment Assistance Grants: ‘What freedom would you grant yourself with homeownership?’
“‘What freedom would you grant yourself with homeownership?’”
Have you seen the advertisements from Quicken and Realtor? Their lies are at desperation level.
Who pays for downpayment assistance under CHFA?
A quick google search shows that HUD is behind it. I’m guessing that every state has a similar agency, federally funded.
HUD = our federal tax dollars at work?
‘ ‘Meanwhile, all of the reasons not to buy a home are evaporating as Colorado moves into faster growth. Even many buyers who were upside-down on mortgages a few years back are seeing fast appreciation that erases the red ink and puts them into the black. ‘
I read stuff like this and think that it has a bit of the buy high and sell higher though-train that pervaded the late 1990’s stock market. Ultimately, all we will get from the REIC-released media statements via print and internet and radio and TV is that buying a house is always a great thing to do, etc. No surprise that Denver is popular because it is popular. It is going California. However, it suffers booms and busts. Not so sure it being isolated in the west, away from another major urban hub by many hundreds of miles and people sparsity between is a great thing when the economic cycles wane again.
Are Coloradans high on drugs or something?
She put the photo with the keys on this page:
https://www.facebook.com/veronica.killjoy
Vet Tech at MaxFund No-Kill Animal Shelter and Adoption CenterStudied Veterinary Assistant at Pickens Technical College
And here:
https://www.facebook.com/john.k.zayac
GM Assistant Head Clerk at King soopers
Studied Electrician Occupations at Pickens Tech
The sale of a depreciating asset at a grossly inflated price today results in tomorrows foreclosure….. and two newly minted DebtDonkeys.
Hee Haw~!
I saw an article the other day that credited legalization with attracting well heeled out of staters who are driving house prices up.
Color me a skeptic, but that sounds like a lot of bull.
And if you look at the details on her FB page Ben linked to, they’re not even married, but they’re buying a house together.
They’ve been “engaged” since…2007.
Hope their union doesn’t end in bankruptcy and a shooting like my neighbors a couple of blocks over.
– while the cost of waiting even a single year is pegged over $26,000;
Can the median homebuyer save $26K in a year?
Incidentally, this was the first indicator that clued me in to the fact that there was a bubble in Seattle; this was back around 2002, IIRC. I realized that if I didn’t already own a house, I wouldn’t be able to save enough to keep up with the increasing down-payment that I would need in order to buy—and I considered myself relatively well employed.
“– while the cost of waiting even a single year is pegged over $26,000;…”
I interpreted that as the estimated opportunity cost of missing out on $26K in home equity wealth gains by renting another year rather than buying currently; is this the point?
Yep, that’s how I took it as well. My point is that unless their ability to borrow increased by $26K during that year of renting (unlikely, unless their income increased significantly as well), they would have to have saved the difference in order to be capable of buying one year later.
And the follow-on point: if the above is not true (no large increase in income, no larger increase in borrowing capacity), then the pool of able buyers should be dwindling rapidly YoY.
“…the pool of able buyers should be dwindling rapidly YoY.”
Agreed. It seems wildly optimistic to think that loosening of lending standards will somehow bring demand back to pre-2008 levels.
Downpayment assistance and loans to people in ther 80’s. What could go wrong?
Ben -
This…..
http://www.denverpost.com/business/ci_28262201/denver-developers-cant-get-lots-market-fast-enough
Remember my post a while back oh a couple of weeks ago when I think it was Rental Watch was talking about land and the opportunity costs for developable land i.e. govt. mandated crap driving the cost of land up? This when I had returned from Denver with my little missive about what I had experienced with a company that literally that week had sold the land they owned in Castle Rock to another outfit with the justification they wanted to get back to their core concept for house construction?
Well…..
This is the guy (company) that sold some 50+ lots in Castle Rock - they were build ready in a medium dense area of CR and look at what this guy is saying now. I had been waiting on this development from Boulder Creek to seriously consider buying into and lo and behold it just didn’t happen and now I understand a bit more as to why.
My question beyond the obvious which was to sell the land at a high margin - why would anyone in that environment sell raw dirt with a market that is like it is there? What does this portend?
‘The fourth and final weight is the skepticism among many builders about how long the market will hold up, especially if interest rates increase as the Federal Reserve has repeatedly warned will happen.’
‘A jump in 30-year mortgage rates to 5 percent from 4 percent would reduce demand enough to put a deep chill on the housing market, said Mike Rinner, a senior vice president overseeing Colorado operations of Meyers Research. “We have to provide housing for more people than we are, but everybody is treating everything with a jaundiced eye,” he said.’
‘Builders today didn’t survive the industry’s worst downturn by being overly aggressive, and those survival instincts remain keen. Faced with limited workers and land, area builders are targeting their resources on homes in the $400,000-$500,000 range, Whiton said.’
‘In that regard, builders are being measured and logical in their approach, Perlman said. But the long-term problem is that median incomes aren’t keeping pace with rising housing costs, and that gap will only grow over time and need to be reconciled.’
The gap will only grow but needs to be reconciled? It’ll be reconciled alright. But we see here a glimpse of what’s going on. Many builders are looking at these land prices and saying, I’m not putting my head in that noose.
‘The fourth and final weight is the skepticism among many builders about how long the market will hold up, especially if interest rates increase as the Federal Reserve has repeatedly warned will happen.’
In a nut shell, isn’t this the reason everyone should take the Fed’s rate hike announcements with a ginormous grain of salt? If everyone knows that higher rates might precipitate a crash, including FOMC members, then why would they ever want to raise rates?
Wouldn’t it be far more pleasant to (once again) pretend they are going to raise rates, only to later reveal yet another head fake, thereby stimulating a massive stock market rally?
‘Faced with limited workers and land, area builders are targeting their resources on homes in the $400,000-$500,000 range, Whiton said.’
“From the $1 millions” in our nabe.
“What does this portend?”
Falling prices and collapsing housing demand.
“‘Prices are jumping,’ said Kristine Kim-Suh, a Palo Alto-based agent. ‘Some properties are selling for $30,000, $40,000 or $50,000 beyond last month’s comparables, and it’s making buyers that much more aggressive. For example, they know that the comparable is $825,000 and they’re bidding $885,000, they’re so anxious. It’s even surprising the listing agents.’”
The comparables, the comparables are moving up in price! Which means …
Equity! Equity is magically springing into being and is ready to be
… ready to be CASHED OUT!
(I got so excited I had to use up two posts to get it all out.)
Bay area BMW, Audi, Mercedes, Lexus and Tesla dealers are probably high fiving each other.
‘Some properties are selling for $30,000, $40,000 or $50,000 beyond last month’s comparables, and it’s making buyers that much more aggressive. For example, they know that the comparable is $825,000 and they’re bidding $885,000, they’re so anxious. It’s even surprising the listing agents.’
It almost seems like the next crash is imminent, especially against the recent price collapses of other major asset classes (e.g. commodities soon followed by soverign bonds).
Can home prices stay forever inflated when other entire asset classes are experiencing bubbles bursting?
Gilroy, CA Housing Prices Fall 5%
http://www.movoto.com/gilroy-ca/market-trends/
Park Slope Brooklyn Housing Prices Fall 14%
http://www.zillow.com/new-york-ny-11215/home-values/
Massachusetts Housing Prices Fall 16% Statewide
http://www.zillow.com/ma/home-values/
Fort Lee, NJ(NYC metro) Housing Prices Fall 10%
http://www.zillow.com/fort-lee-nj/home-values/
‘Banks reported an increase in demand for a number of home lending products over the past three months. At the same time, several financial institutions have relaxed standards.’
‘On mortgages eligible for purchase by Fannie Mae or Freddie Mac, more than a quarter of large banks indicated that credit standards had eased.’
‘Demand for government-sponsored enterprise loans was up at half of the respondents, with smaller banks experiencing a slightly larger bump.’
http://www.mortgagedaily.com/stories/LoanOfficerSurvey050515LP.asp?spcode=rss
February 21, 2015
‘A closely watched index that tracks mortgage credit availability — lender requirements on credit scores, down payments and other key loan terms — has some good news for potential homebuyers: Things are finally loosening up.’
‘After years of progressively tighter rules on borrower eligibility in the wake of the housing bust, banks and mortgage companies have begun modestly easing their requirements and even expanding the types of mortgages they offer.’
‘The Mortgage Bankers Association’s latest credit availability index reported improvements in all four of its loan categories during January.’
‘The improvements mainly reflect positive lender responses to government efforts to ease regulations and improve affordability in the housing market — all of which means an improved environment for mortgage shoppers.’
‘Among the initiatives: giant investor Fannie Mae’s resumption of purchases of conventional mortgages with as little as 3 percent down. Freddie Mac, another major investor, is planning to begin similar 3 percent down loan purchases for mortgages closed on or after March 23.’
‘According to Mike Fratantoni, chief economist for the mortgage banker’s group, “roughly 40 percent of investors” already have begun offering the Fannie 3-percent-down program. The guidelines for the Freddie Mac program are in lenders’ hands and there’s likely to be a strong rollout for it as well.’
‘Also contributing to better affordability: the Federal Housing Administration’s reduction late last month of its costly upfront mortgage insurance premiums, a move that could expand eligibility for home purchases to thousands of buyers, according to industry estimates.’
‘Virtually all lenders who work with the FHA program began offering the lower mortgage insurance premiums when the reduction took effect in late January. FHA insures loans with down payments as low as 3.5 percent.’
‘Brad Blackwell, executive vice president of Wells Fargo Home Mortgage, the country’s largest-volume mortgage originator, is certain about what’s under way in the market: “Things are looking better for homebuyers and refinancers” — not only in terms of underwriting requirements but in the cost of credit as well.’
http://www.seattletimes.com/business/requirements-for-mortgages-are-easing/
‘A closely watched index that tracks mortgage credit availability — lender requirements on credit scores, down payments and other key loan terms — has some good news for potential homebuyers: Things are finally loosening up.’
Didn’t a loosening of lending standards lead to the last housing collapse?
“Didn’t a loosening of lending standards lead to the last housing collapse?”
Maybe so, but before the collapse a lot of equity was generated due to rising house prices and a lot of this generated equity was cashed out and spent and this cashing-out-and-spending of equity sent a lot of money flowing throughout the economy and got the economy really, really humming along.
Pirate stores and candle making stores and other such necessities of life were generated and prosperity was at hand.
So the hope is for a re-run.
Pirate stores and candle making stores and other such necessities of life were generated and prosperity was at hand.
Beamers and Audis for everyone!
And instead of “Pirate stores” they will now be “Zombie stores”. Pirates of the Caribbean is so last decade.
Inglewood, CA Housing Prices Fall 8%
http://www.zillow.com/inglewood-ca/home-values/
Explain what you are constantly spamming please.
“The median home value in Inglewood is $382,800. Inglewood home values have gone up 4.9% over the past year and Zillow predicts they will rise 2.3% within the next year. The median list price per square foot in Inglewood is None. The median rent price in Inglewood is $1,300, which is lower than the Los Angeles Metro median of $2,250.”
Your beef is with the data my friend.
Inglewood, CA Sale Price
Apr 2015: $357k
Apr 2014: $390k
‘You may have heard that it is extremely difficult to get approved for a mortgage to buy or refinance a condominium. That was the case for several years after the housing market crashed, but lenders finally have loosened the rules on condo financing.’
‘Borrowers seeking to get a condo loan these days will find more lenders to choose from and more condominiums that are eligible for financing, said Norman Koenigsberg, president and CEO of First Choice Loan Services. “The market is definitely much more liquid,” Koenigsberg said.’
‘Mortgage giants Fannie Mae and Freddie Mac have eased some of the requirements on loans for condos, and a growing number of lenders offer loans that go outside the box of the condo rules in conventional financing, he said.’
‘Companies that buy mortgages from lenders, package hundreds or thousands of loans together, and then sell the resulting mortgage-backed securities to investors.’
‘”Condominiums today are eligible for 95 percent financing with mortgage insurance,” Koenigsberg said. That means that people can buy condos with down payments of 5 percent. For a few years after the housing bust, some lenders required down payments of 30 to 45 percent.’
‘Lenders are more flexible when analyzing condominiums’ financial stability. Late in 2014, Fannie issued new guidelines to lenders allowing them to issue loans in developments where up to 15 percent of the owners were 60 days past due on monthly payments. The threshold had been 30 days. Another change made it easier to finance condos in new developments. The new Fannie guideline reduces the presale requirement from 70 percent of the project to 50 percent.’
‘For mortgage eligibility, the minimum percentage of units in a condominium or co-op that must have been sold to owner-occupants (and not to investors). “These changes seem to have helped some people,” said Michael Becker, branch manager for Sierra Pacific Mortgage in White Marsh, Maryland. “I have done a few condos recently, and I haven’t had any issues in getting them approved.”
‘When a condominium doesn’t meet the requirements of Fannie or Freddie, the gap is filled by lenders who keep the loans instead of selling them. Such mortgages are called portfolio loans. “There are several options that have now become available for portfolio lending,” said Orest Tomaselli, CEO of National Condo Advisors in White Plains, New York’
‘These lenders are willing to lend outside Fannie and Freddie’s box of requirements, and the loan terms are comparable to conventional loans. “It used to be that interest rates on programs like that were extremely high. Now they are close to market,” Tomaselli said.’
http://www.chron.com/news/article/Mortgage-Want-a-mortgage-to-buy-a-condo-It-s-6307725.php
“I have done a few condos recently, and I haven’t had any issues in getting them approved.”
Robo-signing is back.
‘The federal overseer of Fannie Mae and Freddie Mac offered an update on an initiative that could transform a bond market powering U.S. housing. The Federal Housing Finance Agency released information Friday on how it’s viewing feedback on its push to facilitate interchangeable trading of mortgage securities guaranteed by each of the taxpayer-backed companies.’
‘Decisions so far “generally confirm” the so-called single-security plan that the FHFA set forth last year in a request for comments, the agency said in a paper that largely responded to suggestions with explanations on the perceived benefits of its approach.’
‘The effort “remains a multi-year initiative,” FHFA Director Mel Watt said in a statement, that is meant to improve liquidity in the market for the two companies’ mortgage bonds, which now exceeds $4 trillion. It’s also intended to address the discount at which Freddie Mac’s securities trade because of their lesser volumes, which in turn requires the firm to offer compensation to lenders that lowers its profits.’
http://www.bloomberg.com/news/articles/2015-05-15/fannie-freddie-overseer-offers-update-on-single-security-plan
How does 3% down on 27% of buys compare to 05/06?
Sounds very bubbly
It’s a long way down Flat…… a long way down.
It’s not even close to 05/06. You probably had 27% with no money down at all, and an ARM I/O to boot.
And WHY is HBB so fixated on % down? Income checks and fully amortized PITI will pop a bubble MUCH more quickly than 3% down.
you’re right donk. Current conditions are far far worse today.
I don’t know how it can get “far far worse” than no-doc, fog-a-mirror standards. Maybe if they start lending to folks who have passed away? If they did that, Chicago would be a BOOM-town!!
3% down or lower is what inflates bubbles, not what pops them. Does this really seem confusing to you?
Donk’s increasingly frequent hoof-in-mouth statements speak volumes.
No, what I’m saying is that income checks and fully amortized PITI will deflate a bubble quicker than 3% down will inflate it.
Or is the concept of two things acting simultaneously too confusing for you?
It hasn’t worked that way now has it Donk…
If folks have even 15% they don’t walk away
Who would that be with everyone underwater?
No, but they do get foreclosed when they lose their job in a recession, at which point the 15% goes down the toilet.
If you expect to eventually lose your home, anyway, it makes perfectly good sense to put as little down as possible.
Many decisions to make. We have three weeks left till our lease runs out and the LL wants to start showing the house. I’ve checked out lots of rentals, all more $$$ and less suitable than where we are now.
My LL has named his price, and wants a counteroffer (?). I don’t want to be forced to buy at the (latest) worst possible time. If I can’t bring myself to do it, I will ask the LL to let us stay through the showings to give me extra time get a place.
What a revolting development this is. (For the kids - early classic tv catchphrase.)
Like I said, offer $20/sq ft and stop at 35.
Meant to include that one of those decisions is whether I should put the minimum down, as everyone else in Las Vegas seems to do, if I find no better rental and have to buy.
Listened to the local RE show this AM. People are apparently unfazed by their losses; they want to do it again. So I shouldn’t worry - everyone says things are great here and only getting better and will continue to be that way forever. Ecch.
Like I said, offer $20/sq ft and stop at 35.
Oh, I remember and that would be nice if they accepted, but we need a place to live.
If it were just me, it wouldn’t be a problem. I’d just go.
Negotiate while looking for a rental in parallel.
You can carry out multiple tasks simultaneously right?
Negotiate while looking for a rental in parallel.
You can carry out multiple tasks simultaneously right?
Isn’t that what I wrote? (I could have asked you if you can read.)
Your repetitive, nasty comment added nothing. But what else is new?
No it isn’t what you wrote. You’re directing your frustration at me.
He’s not the only one . . .
Data my friend.
Redmond, WA Housing Prices Fall 9%
http://www.movoto.com/redmond-wa/market-trends/
You could always “buy at the (latest) worst possible time”, with a plan to walk away if/when it becomes clear that it was the worst possible time…
Nevada is no-recourse, right?
If you truly believe there is a bubble and your inside voice is telling you it is a bad time to buy, can you live in another rental for a year or two until you find something you would want to buy? It is not ideal, but not taking action is taking inaction, and can leave you feeling frantic. Your landlord just wants to cash out, maybe he is sensing that things could end badly if he doesn’t sell now.
I’d rather own my own home, but the inventory felt tight, the rates were low but the houses felt overpriced, and the Realtors were acting pushy (as per usual) and adding fuel to the fire.
We got sucked into the panic for about two weeks, almost willing to buy anything. My husband put an offer on a house without me seeing it since we haven’t joined him in our soon to be new home state. When I drove up to see it, I had us back out of the buy.
He was willing to pull the trigger on ANY thing to make everyone happy. I had to be the bad guy and say no and that it felt overpriced and needed a ton of work. My kids were bothered, but after the dust settled, we are both feeling better and can see that we were getting sucked into the mania. Now we can sleep easy.
I read an article the other day, an interview w/ Shiller, the Pulitzer prize winner for his housing index.
He said everything is overvalued (stocks, housing, etc).
and the last bubble was from exuberance (everyone thought things would keep getting better) and this one is from FEAR.
I’m not sure if it matters what drives it, but I would think it will matter how people will behave when this pops.
The strangest part of this bubble is the low inventory. I know any number of you can throw stats at me, but everyone is acting like we are running out of homes. It seems silly. I think banks are holding on to them, people aren’t moving, but there are enough homes. Just not enough money to buy them.
Either way, I’m not house poor and my bank account is pretty happy right now since I didn’t plunk away the 20% on a home I didn’t want.
My point Tralala, is that it might not be perfect but you have to to live somewhere, and the sooner you decide, the better off you will be, even if it wasn’t your first choice.
“When I drove up to see it, I had us back out of the buy.”
I hope your husband appreciates that he has a gem of a wife!
“I think banks are holding on to them”
Why do you think this? The FDIC shows aggregate financials of all insured US financial institutions. As of 3/31/15, the FDIC shows the total OREO in the 1-4 unit residential as an aggregate of $5.7 Billion.
Which seems like a lot, until you divide by $100k…then you get a paltry 57,000 homes…spread across the US. If, of course, the average value is $100k. If existing home sales are approximately 5MM homes, this number of homes represents less than a week of sales.
Do you think this because you can’t imagine how there is a shortage of homes? A few years ago, economists wrote articles about the coming housing shortage if we didn’t start to build more homes (citing historical rates of construction and population growth, teardowns, etc.). The describe exactly why they thought there would be a shortage.
http://money.cnn.com/2010/06/15/real_estate/new_housing_bubble/
http://www.forbes.com/2010/02/13/wesbury-housing-starts-intelligent-investing-real-estate.html
http://www.huffingtonpost.com/alex-charfen/the-coming-housing-crisis_b_1807746.html
Rental Watch
I understand that there are dynamics that I don’t understand. And even know more about this than I do…
But.
When people quit looking for jobs, and the government quits counting them as unemployed because they have simply quit looking, and this makes the jobless number go down, it is artificial.
That is one example of the artificial numbers we read about daily. I believe that yes, populations are growing, and there is always a need for more housing near large urban centers. But there are oodles of towns all over the US that can’t relate to these news reports of a hot housing market or lack of housing.
Housing is no longer affordable for many. If it were, builders would build more. The fact that they aren’t is because it is not profitable except in the luxury market. Bad credit, no credit equals less demand for housing for the middle American. People are moving back home w/ parents, getting roomates, but not buying they way they were during the last bubble.
Do we have a bubble everywhere? No. Absolutely not.
We have bubbles and craters.
Huge massive craters, areas where there is little demand and deflating markets, and hot Bubble spots where people are overbidding.
The supply or lack therof, is a factor I don’t have a grip on. I know banks are holding on to some homes. Maybe the shadow banks are holding on to them as colattoral. Clearly, there are foreclosed homes not on the market.
Did Blackrock have some inside access enabling them to buy all of those homes a few years ago? If they hadn’t, it would have flooded the market in some places. Clearly they were given the inside track.
Why weren’t people like us allowed to buy distressed properties, why weren’t they brought to market so that we could have access? Because things like this happen all of the time.
I can buy a home today. I’m choosing not to buy into the hype the realtors are selling. You can always buy a house. The question is, can you afford one? I’m not saying I won’t buy, but I am going to tread carefully.
Thank you for the stats, I know there are plenty, but it doesn’t always tell the real story. That’s my point, really. There are factors we aren’t privy to and it’s why things don’t feel quite right. It is why I’m on this board. I am trying to make sense out of a million little pieces that don’t make sense.
collateral.
Sorry, didn’t spellcheck
Have you noticed how many luxury senior retirement places have been built, but hardly and that address the needs of a senior on a budget?
I live in a burb of NYC that is considered upscale. The seniors aren’t leaving. They aren’t putting their homes on the market and the ones I’ve talked to have said their homes are paid off and it costs less to stay than to buy in “one of those luxury developments”
If a builder built more moderate senior housing, they would sell out pretty quickly in my opinion. But it is not affordable to build inexpensive housing. That is adding to this shortage we feel.
With 25 million excess, empty and defaulted houses and falling population growth, there is no “shortage of housing”.
Sara,
I tend to agree with most of what you have said, including this following point:
“Housing is no longer affordable for many. If it were, builders would build more. The fact that they aren’t is because it is not profitable except in the luxury market.”
Builders are not building affordable homes because it is too costly to do so.
I have some peripheral insight into the distressed sales. As I understand it, there were some block trades of homes–direct portfolio sales from lenders to the Blackstones of the world. And I think you’re right–the public had no chance to buy these homes. The company I work for acquired a small portfolio of homes for rent with a partner. Despite looking into the acquisition of some homes in smaller chunks directly from lenders (5 or 10 at a time), that process was cumbersome and pricing not that great. Instead, we purchased homes one at a time through public auctions and some short sales.
At some point in time (starting in 2012), our partner started to see more and more whales showing up at auction. By “whale” I mean groups like Blackstone/Colony, etc. They showed up with huge amounts of capital, and bought a lot of homes through public auctions.
Did the big guys get a chance to buy homes in bulk outside of a public process? Absolutely.
Did they buy ALL their homes in bulk, where the public couldn’t compete to purchase the property? No. They purchased plenty of homes in the light of day for all to see.
Rental_Fraud,
We construct for a living. We and our competitors aren’t building houses because there is no demand at any price point.
‘Have home prices in your town risen so quickly that you can’t afford to buy a home anymore? Email for the chance to be included in an upcoming article on CNNMoney.’
CNNMoney (New York) March 21, 2014
‘Borrowers with bad credit were shut out of the mortgage market after the housing bubble burst, but now a handful of small lenders are starting to offer subprime loans again.’
‘The premium price is worth it for some borrowers who are trying to build or repair their credit, according to Bill Dallas from Skyline Financial, of Calabasas, Calif. Skyline started offering subprime loans a few months ago under its NewLeaf Lending division. Among his firm’s subprime mortgage customers: young, first-time homebuyers and former homeowners whose credit was ruined in the housing bust.’
“They’re just Americans who want to buy homes but can’t,” said Dallas, who used to run First Franklin, a subprime lender that went bust in the mortgage meltdown.’
http://money.cnn.com/2014/03/21/real_estate/subprime-mortgages/
Updated: 05/04/2014
‘As an example of those industry professionals that are bucking the trend, take Bill Dallas, whose previous two sub-prime mortgage companies went bankrupt during the most recent real estate meltdown. Before the crash, Mr. Dallas sold First Franklin Financial Corp to Merrill Lynch in 2006 for $1.3 billion. The new company from Mr. Dallas, NewLeaf Lending in Calabasas, California, is offering sub-prime loans under the banner of non-prime. “You’re going to have to make all types of loans, ones that conform to all the new standards and ones that don’t, to keep powering the housing recovery,” said Mr. Dallas, “There needs to be a solution for people who don’t fit in the box, and rebuilding non-prime lending is it.”
‘Non-prime is a sort of “new and improved” sub-prime loan, without the bitter aftertaste. In fairness to Mr. Dallas and other mortgage executives like him, this newly re-formatted loan product is a sincere and much needed noble effort to resuscitate the unconventional loan market, which in this case is a re-vamped sub-prime product. If you were to graph the mortgage product market that non-prime loans fall under, this product type would tumble somewhere between prime loans — which average about a 4.5 percent interest rate today, and hard money loans — which average about 13 to 18 percent in today’s market. The interest rate range for non-prime loans — which are sometimes called Alt-A, where the ‘Alt’ stands for alternative, is anywhere between 6 to 13 percent, on a 30-year fixed rate.’
‘The real good news for those wanting to buy a rental, is that non-prime loans require only 20 percent down with a FICO score in the 680 range. The real kicker however, is that income documentation requirements are substantially more lenient. In addition to being more forgiving for past transgressions (think foreclosure, bankruptcy and mortgage lates), non-prime will yield to higher debt ratios for an individual. Players in this market include Citadel Loans, Athas Capital Group and IMPAC.’
‘On the opposite spectrum, prime loans usually require 30 percent down with about a 740+ FICO score for an investment property.’
‘Smart money incidentally goes to HomePath.com and HomeSteps.com. These government websites are fully functional (take note Affordable Care Act website). Administered by Fannie Mae and Freddie Mac, respectively, these websites/government REO sites only require borrowers to provide 10 percent down on investment property for single family homes and condos. Minimum FICO requirements are in the 650 range.’
http://www.huffingtonpost.com/d-sidney-potter/is-nonprime-the-new-subpr_b_4893129.html
“Non-prime is a sort of “new and improved” sub-prime loan, without the bitter aftertaste.”
New and improved. The scope and depth of this collapse now exceeds my forecast.
Is there really an aftertaste when you’re starving because you can’t afford to eat?
“…Skyline Financial, of Calabasas, Calif. Skyline started offering subprime loans a few months ago under its NewLeaf Lending division.”
Calabasas…subprime lending…why are alarm bells ringing inside my head?
Company Overview of Countrywide Financial Corp.
As of July 1, 2008, Countrywide Financial Corp. was acquired by Bank of America Corporation. Countrywide Financial Corp. provides home loans. The company offers refinance mortgage solutions; home equity loans and home equity line of credits; home loans for new home purchases, as well as second, vacation, and investment homes; reverse mortgage products; and multi-family and commercial loans. The company was formerly known as Countrywide Credit Industries, Inc. and changed its name to Countrywide Financial Corp. in November, 2002. The company was founded in 1969 and is based in Calabasas, California.
4500 Park Granada
Calabasas, CA 91302
United States
Founded in 1969
50,386 Employees
Gilbert, AZ Housing Prices Fall 14%
http://www.zillow.com/gilbert-az-85298/home-values/
‘Leonel Lemus and his wife Adriana became homeowners in March, before then the couple, along with their three children, lived in a cramped two-bedroom apartment in Indio. Lemus’s dream of owning his home came true through the self-help housing program offered through a partnership between the Coachella Valley Housing Coalition and U.S. Department of Agriculture.’
‘Lidio Bello and his wife Guadalupe, along with their two children, moved in to their home in December. He heard about the program through family and friends. “So I went in and got my application and I also got help with establishing my credit,” Bello said.’
‘The family used to pay $900 a month to rent a house in Coachella. The mortgage on their new four-bedroom house is $745 a month. Between Bello’s job working in landscaping and his wife’s working in the fields, owning a house seemed like a far -etched idea. “My wife and I have always wanted to own a home, but the prices were always so expensive and we couldn’t afford it,” he said.’
http://www.desertsun.com/story/news/local/coachella/2015/06/05/self-help-low-income-homes/28520987/
‘Renting can be frustrating, something Brooke Trevino and her husband were fed up with after recently having their first child. But buying your first home can be stressful, especially when you’re trying to come up with that down payment. Like many others, Trevino and her husband turned to their parents to write that check when they recently bought a home in Pasco. ‘
“The down payment is definitely a little bit of the scarier piece but thankfully we have really great family and they were willing to come through and help where we needed it,” said Trevino.’
‘LoanDepot, a national mortgage company, found that 17% of parents with millennial children ages 18 to 35 expect to help their children buy a home within the next five years. That is an increase of over 30% from the last five years.’
‘Vicki Monteagudo, Owner and Designated Broker of Century 21 Tri-Cities, said she’s seen a 20% increase of the clients that need assistance from parents since last year and she can see it increasing even more in coming years. Century 21 also tells us that zero-down payment loans are becoming more difficult to get.’
http://www.kvewtv.com/article/2015/jun/04/more-parents-helping-their-children-purchase-first/
I posted this the other day:
‘A growing number of U.S. households will be headed by Hispanics in the coming years, but a new report finds that many of them will struggle to achieve home ownership because they lack the down payment, income or credit to follow through on their plans.’
‘The Demand Institute’s report, “Hispanics & Home Ownership: Closing the Gap,” notes that between now and 2020 roughly four out of every 10 new households that form in the U.S. will be headed by someone of Hispanic descent — more than any other single racial or ethnic group.’
‘Nearly 4 million Hispanics would like to purchase a home when they move, the report said, but only 1.5 million are financially prepared to do so. That’s a gap of 2.5 million households.’
‘Marty Rodriguez, owner of Century 21 Marty Rodriguez in Glendora, agreed that many potential buyers are struggling to achieve home ownership. But resources are available to help them secure homes. “There are lots of programs out there for them,” she said. “And these are not just for Hispanics in general. There are ways to subsidize the down payment and help with closing costs.”
‘The California Homebuyer’s Downpayment Assistance Program (CHDAP) is a prime example. It provides a deferred-payment junior loan for up to 3 percent of the purchase price or appraised value — whichever is less — to be used for the down payment and/or closing costs. CHDAP can also be combined with a CalHFA (California Housing Finance Agency) or non-CalHFA, first mortgage loan.’
‘Rodriguez said the programs make a difference. “We just sold a house to a client that came in with less than $1,000 down,” Rodriguez said.’
http://www.sgvtribune.com/business/20150601/report-finds-low-home-ownership-rate-among-hispanics
It’s like the cold middle gap
Hilary will offer to have taxpayers fund hispoloans
Housing is a right
Fdr said so
Calling Mel Watt, come in please!!
Why do Fannie Mae and Freddie Mac always go to such great lengths to suck in low-income household buyers just before prices collapse? Is there some kind of diabolical plot to financially ruin people who are barely getting by to begin with?
I think the GSE’s have no interest in their charter no different than Social Security, Medicare, Obamacare, etc. These are big, legalized skim operations the citizenry are funneled or forced into by law and basically take their money.
Of course half the citizens willingly accept it and think they’re getting something.
‘Governor Larry Hogan and Secretary Kenneth Holt have announced a $20 million initiative that will give a boost to veterans and military families who are looking to buy a home in one of Maryland’s 86 Sustainable Communities. The “You’ve Earned It!” initiative for veterans and military families offers low mortgage rates and significant down-payment assistance for active military and those honorably discharged veterans and veterans with a disability. The first phase of “You’ve Earned It!” aimed at qualified homebuyers with more than $25,000 in student loan debt was announced May 4.’
“The program is not only good for our economy, but good for our communities.” Department of Housing and Community Development Secretary Kenneth Holt added, “Owning a home helps families create a financial legacy for their children; it stabilizes and brings economic investment into the state’s communities, and it puts the power of the housing market to work to revitalize Maryland’s economy. We are pleased to offer this program to members of our military and recognize all they do to keep our communities safe and stable in these times.”
http://www.eyeonannapolis.net/2015/05/31/hogan-announces-homebuying-initiatives-for-veterans-and-military-families/
Hogan became a dem/enabler overnight,usually takes months
B@@wambaugh free stuff
‘With the high price of housing these days, more buyers are turning to the Bank of Mom and Dad for help in acquiring a new home. Often, this takes the form of the parent advancing funds for a down payment. Typically, banks will require confirmation that the parental assistance is a gift and not a loan. But when the family agrees otherwise, problems can arise. In at least one case it led to litigation.’
‘In 2008, Nickolas Crepeau wanted to buy a house on Trailside Dr. in Sudbury, Ont., and asked his mother, Kathleen Crepeau, if she would provide the down payment the bank required in order to arrange mortgage financing on the property. Kathleen agreed and in October 2008, she gave Nickolas a cheque for $30,000 for the down payment and some planned renovations. It was deposited into the joint account of Nickolas and his wife, Sarah-Jane.’
‘After Kathleen’s cheque was cashed, Scotiabank issued a commitment letter for a mortgage loan of $368,910. Among other things, the commitment was conditional on the borrowers providing a gift letter from an immediate family member verifying the down payment.’
‘Shortly afterward, all three parties signed a gift letter which provided: “This is to confirm that a financial gift in the amount of $30,000 has been made to Nickolas Crepeau to assist in the purchase of a home. These funds are being provided as a gift and will not ever have to be repaid.”
‘Without this gift letter, Scotiabank would not have given the couple a mortgage so they could buy the property on Trailside Dr. The transaction closed on November 17, 2008. Six months later, Kathleen wrote a demand letter to Nickolas requesting repayment of the $30,000.’
‘The situation escalated, with Kathleen’s common-law spouse, Andy Racine, being drawn in to the claim, and the police were called in to mediate several times. In the fall of 2009, Nick left messages on Kathleen’s answering machine. In part, he said: “Mom, it’s Nick, I got your letter in the mail and ah, your (sic) gonna get your money whenever I feel like giving it to you, so just ah leave us alone OK like I don’t know what the f— you, you don’t understand so I don’t know what to tell you OK. Love you, bye, bye.”
‘And later, in a message for Andy, he said: “I’m just calling to say that ah . . . whatever you want to do, do what you got to do, Andy, cause you know what, your threats don’t f—– scare me one bit and ah, and ah I’m not dropping f— all off, my mother already knows when I have to pay her back so it’s as simple as that.”
http://www.thestar.com/life/homes/2015/05/29/mom-helping-son-with-down-payment-ends-miserably.html
Seems like if Mom signed off on the gift letter, the $30K was a gift. Is there some legal issue here that doesn’t meet the eye?
PS You really have to wonder about a guy who laces a voice message to his mom with F-bombs.
+1, PB. That is one messed up family!
Regarding the opinion: I could see how a judge might conclude that the “gift letter” was a representation to the bank to induce them to issue a loan; it does not necessarily represent an agreement between the two parties.
Further, as the letter to the bank occurred after the fact (the money had already been deposited), it may well not be part of the same transaction. Of the four required elements of a contract, only one seems present (consideration), unless there was some additional verbal offer to do something (likely, based on the son’s wording regarding “when it needed to be repaid:).
So while all three parties may have made a gift representation to the bank, that representation might well have been fraudulent, and there are multiple reasons that it might have no bearing on whether the payment was legally a gift or a loan.
Thanks for the fascinating insights. I had a flash back to when my wife and I bought our first home, and the down payment loan my parents made to help bring our total down payment up to the 20% level needed to avoid PMI. We managed to repay them on a timely basis without stooping to intrafamily conflict or profanity.
‘Buying your first house can be a frightening experience, especially for young adults. However real estate experts say in the current market, buying is a great option, especially compared to renting. Over the past year, rent rates have gone up 4%. Kelley & Katzer Real Estate in West Springfield said there’s actually a good chance you’d save money every month paying a mortgage instead of rent.’
“There’s a lot of down payment assistance programs out there that are a lot lower than people expect. People think you’ve got to put 20% down on a house,” said Joe Kelley, the real estate agency’s co-owner. “The interest rates are so low you’d almost be paying as much as you’re paying in rent if not less.”
‘Kelley said in many cases, down payments can be as low as 3%.’
http://wwlp.com/2015/05/27/renting-vs-buying-in-the-current-market/
3% downpayment requirement + downpayment assistance = instantly underwater on purchase — just like in 2006.
‘In March 2005, Rubio and a fellow state lawmaker, David Rivera, went in together on a house in Tallahassee to live in while in the state capital, making no down payment and taking out a $135,000 mortgage that initially only required interest payments. Meanwhile, the Rubios upgraded to a newly built four-bedroom 2,600-square-foot home with a pool in West Miami.’
‘Real estate records show the Rubios made a 10 percent down payment to buy that $550,000 house. He says he paid cash for upgrades to the home before construction finished.’
‘A little more than a month after the Rubios closed on the house in December 2005, a bank owned by one of his political supporters appraised the house at $735,000 and gave Rubio a $135,000 home equity loan. Rubio has said the add-ons to the house, plus Florida’s heated real estate market, justified the appraisal.
‘It was around this time that other issues in Rubio’s finances started to surface.’
‘Once in Washington and making a $174,000 salary as a senator, Rubio still felt the bite of his old real estate transactions. The bank moved in 2010 to foreclose the house in Tallahassee after Rubio and Rivera fell behind on the payments. Rivera paid $9,200 to bring the house out of foreclosure, and the pair sold the house for $117,000 last week — $18,000 less than the original purchase price.’
‘The collapse of the housing market in Florida haunts Rubio, too. The home next to his in West Miami was foreclosed, which he says is part of the reason why the county has assessed the value of his current house at $400,000 — well below the price Rubio sought when he put it on the market in 2013. The asking price was $675,000, but it didn’t sell.’
“We wanted to see if we could get the right price,” Rubio said. “We had offers, but I’m not going to give it away.”
http://news.yahoo.com/rubios-real-estate-dealings-often-drag-finances-135730257–election.html
Every housing transaction reeks of fraud.
Watch your azz.
“We had offers, but I’m not going to give it away.”
He seems to have the kind of financial savvy one would want in a U.S. president.
FreeShitters…. That’d be u Dan/Lola/rental fraud/donk and others. Educate yourself.
“The Public’s Illusions Are About To Be Crushed As The Biggest Ponzi Scheme In World History Implodes”
http://kingworldnews.com/the-publics-illusions-are-about-to-be-crushed/
Buy and hide The Precious™, and you need never worry about seeing your wealth crushed by 50%+ losses!
When the housing bubble burst, and it will, you will know it. It won’t be convoluted statistics, it will be panic. I don’t care how much you make in SillyCon Valley, you’re going to have a hard time selling your million dollar garage.
I left the Bay Area for Georgia 3 months ago, the craziness in San Franfreakco became unbearable. It’s NOT different this time!
I’m calling the top, just like I did on this board back in 2008! If you a fool who wants to overpay for a sh*thole in a crime ridden suburb of SF….Go for it!! Just remember to feed the squirrels.
“I don’t care how much you make in SillyCon Valley, you’re going to have a hard time selling your million dollar garage.”
It was like this in the wake of the tech stock crash, and we lived in the Bay Area at the time, providing a front-row seat. SillyValley home sales were frozen, while East Bay homes were getting snapped up like hot cakes as an ‘affordable alternative’ to SillyValley homes that wouldn’t sell at pre-2000 prices.
You were 2 years late in 08.
+1…
IIRC, San Diego peaked first, in late 2005 (Dec?); most of the rest of the country followed at various points throughout 2006. CS can help pinpoint who peaked when.
other than that, CS is useless.
I remember meeting up with Rich Toscano at a local Starbucks in 2005. At the time he was working a couple of miles from where we live. It was fun to be among the enlightened few who noticed a crash was coming!
Rich also joined us at at least one of the San Diego HBB Chapter Meet-and-greet events with Ben.
He called the housing crash. What’s next?
By Jonathan Horn
6 a.m. May 30, 2014
Rich Toscano, a partner at Pacific Capital Associates, who runs the blog Piggington’s Econo-Almanac. — Sean M. Haffey
In November 2005, when San Diego County home prices were riding a record high, Rich Toscano penned two ominous blog posts.
The first was called “Risks of a Serious Home Price Decline.” A few hours later, he posted “Evidence of a Southern California Housing Bubble” on his site, Piggington.com.
At the time, real-estate tracker DataQuick reported that the median price for a home in the county was $517,500. It was a price only 9 percent of income earners could afford using a 20 percent down payment, according to the California Association of Realtors. But that didn’t stop almost anyone from buying a home, hence the risk, Toscano noted online.
“People are getting around the low affordability by making very small down payments and getting ‘creative’ loans whose monthly payments start quite low but increase over time,” said Toscano in his first ominous post that November day. “While this ‘buy now, pay later’ strategy has worked well thus far, it has rendered the Southern California market unusually vulnerable to rising interest rates or tighter lending standards.”
Toscano, who began warning of a bubble in 2004, was met with skepticism. After all, he was a computer scientist by trade who simply found the numbers fascinating. By January 2009, the median price was down to $280,000, completing the collapse of the housing market in the Great Recession. That also happens to be the time Toscano bought his house in Bay Park, timing he attributes simply to luck.
The U-T caught up with Toscano, who now works as a financial adviser, to talk about the real estate market, past and present. His answers have been edited for length.
…
first-time homebuyers Becky and Brandon Stroy, who had been outbid and worn out since their house-hunting began in December. But by throwing an extra $400,000 on top of the $1,350,000 list price on a Mountain View ranch-style home in the Varsity Park neighborhood, the Stroys were finally winners. ‘There were 17 other offers and ours was sort of just barely high enough to win,’ said Brandon, an attorney. He received news of the successful bid while on his way to work, taking it in with ‘a mixture of joy and relief and surprise — and then terror, I guess.’”
If these 2 dodo brains saved up the $400,000 to get conventional financing on the $1.35 million, I’ll tip my hat and congratulate them on being able to save up that much money…but I got a feeling most of the $1,750,000 is dumb Yellen money chasing return ON capital foolishly pretending they’ve eliminated risk of return OF capital.
“…terror, I guess.” Becky and Brandon Stroy, you have no idea of the TERROR that is waiting for you down the road. You are about to EXPERIENCE true terror, mortgage debt collar for the rest of your lives in servitude to your debt master.
^ Donk…. are you listening?
Triple Witching, Three Bubbles: Housing, Stocks, and the Dollar. Watch out below!
What makes this so much more interesting is the Fed’s great reluctance to drain the punch bowl. The longer they hesitate, the more violent an eventual end will come to the drunken debauchery pervading asset markets when they initiate liftoff.
Don’t forget to add tech companies to your list!
It’s going to happen the same way it did last time: Right now people think housing can only go up, in a short time people will realize housing can only go down. And then NOBODY wants to catch that falling knife! Take out the investors and flippers and you’re left with first time buyers who are broke.
“Take out the investors and flippers and you’re left with first time buyers who are broke.”
What all these subprime programs springing back to life do is to enable wealthy investors to cash in off gargantuan federally-guaranteed loans currently being made to a new wave of subprime buyers.
Once the next recession rolls in, and the current wave of subprime buyers find themselves unemployed, hopelessly underwater, and unable to repay their home loans, Democratic politicians can come up with a bevy of programs to help these innocent victims. And lenders will get made whole on defaulted federally-guaranteed loans that were made while good times rolled.
And so it goes…
Pretty damn sickening, the ignorant just keeping getting fleeced. I just can’t believe it’s only been 7 years since the last crash and these morons think ‘it’s different this time’. It befuddles me.
The taxpayers are getting fleeced
How did we miss this one?
“Bucks County Realtor Charged With $643K Fraud”
http://www.phillymag.com/news/2015/04/02/bucks-county-realtor-charged-with-643k-fraud/
‘Housing inventory declined from last year, and supply in many markets is very tight, which in turn is leading to bidding wars, faster price growth and properties selling at a quicker pace,’ says Lawrence Yun, chief economist for NAR. ‘To put it in perspective, roughly 40% of properties sold [in April] went at or above asking price, the highest since NAR began tracking this monthly data in December 2012.’
‘April’s setback is the result of lagging supply relative to demand and the upward pressure it’s putting on prices,’ NAR’s Yun says. ‘However, the overall data and feedback we’re hearing from Realtors continues to point to elevated levels of buying interest compared to a year ago. With low interest rates and job growth, more buyers will be encouraged to enter the market unless prices accelerate even higher in relation to incomes.’
Will Yun manage to again keep his job after the NEXT crash?! I can’t believe he’s still the NAR’s chief economist.
The most sagacious Jonathan Smoke, chief economist of realtor.com will probably replace him
http://www.realtor.com/news/home-prices-climbing-faster-but-this-is-no-bubble/
http://www.realtor.com/author/jonathansmoke/
Which maximum security prison was he recruited from?
‘The price of farmland is starting to fall – after doubling since 2007 – and the number of non-performing farm loans is increasing, according to a Kansas State University survey of farm bankers across the country.’
‘In the Agricultural Lender Survey, conducted in March and just released, lenders cited lower crop prices and rising operating costs as cutting into farmers’ profits. Farmland values rise and fall with farm profitability, and for the last eight years, crop farming generally has been profitable.’
‘In a dynamic reminiscent of last decade’s housing bubble, farmers were able to borrow large amounts of money based on their land’s inflated value to buy more land at inflated prices. However, the loan payments on that borrowed money, might be unsustainable if their incomes fell.’
‘It’s too early to tell what will happen, said Allen Featherstone, professor and head of Kansas State University’s Department of Agricultural Economics, which conducts the survey every six months. “A lot of it will depend on how quickly it happens,” he said. “If it gradually declines, the sector will be able to adjust fairly well. If it falls rapidly as it did in the 1980s, they won’t be able to keep up.”
‘So far, he said, farm ground prices appear to have dropped less than 10 percent from their peak last year. How much further do they have? He said that if crop prices remain at about 2006-07 levels that implies land prices could fall another 25 to 30 percent.’
‘In Kansas, Featherstone said, that would mean unirrigrated crop land might fall from a peak of about $2,000 per acre to $1,200 or $1,300 per acre.’
‘It’s too early to tell what will happen,[...] “A lot of it will depend on how quickly it happens,” he said. “If it gradually declines, the sector will be able to adjust fairly well. If it falls rapidly as it did in the 1980s, they won’t be able to keep up.”
What a bunch of baloney! How quickly farmland prices fall has nothing to do with whether a given farmer can make the payments on their various mortgages. The only thing that bears on ability to make payment is their income. And their income depends on the prices of agricultural commodities.
Now how quickly farmland prices drop may well correlate with whether they walk away or not…
How do agricultural commodities prices correlate with all those industrial commodities prices which are off by 50% or so since this time last year?
‘The price of farmland is starting to fall – after doubling since 2007 – and the number of non-performing farm loans is increasing, according to a Kansas State University survey of farm bankers across the country.’
Where are we in this episode — around 1933 or so?
P.S. Homeowners need not worry. Commodities, farmland and bond prices are all dropping steeply, but it is unpossible for anything similar to ever happen to the value of the most important investment in your highly-leveraged household portfolio.
Las Vegas, NV Housing Prices Fall 22%
http://www.zillow.com/las-vegas-nv-89138/home-values/
Please tell me where on that page I can see the 22% decline you are proclaiming.
I’m not proclaiming it. I’m merely posting their own data. Click the dropdown box and select median sale price and you’ll find the answer.
From Dec 2014 to April 2015 the line goes up from $306k to $340k. Or were we not supposed to look at numbers or charts?
If you look as far back as May 2008, you get to $321k with lots of ups and downs in between. What’s your point to posting random Zillow pages with random percentages?
Allow me to help you…
Las Vegas Median Sale Price
April 2015: $340k
April 2014: $434k
HA likes to cherry-pick an itty-bitty zip-code, so that the data is as noisy as possible due to a tiny number of sales.
For a better data-set, broaden to the entire city of Las Vegas, not one small corner of the city:
http://www.zillow.com/las-vegas-nv/home-values/
There, you will see:
April 2015: $189K
April 2014: $187K
That’s quite a CRATER!!
You can’t accept the fact that;
-Housing prices are falling locally
-Housing prices are falling regionally
-Housing prices are falling statewide
Housing prices are falling my friend. Get over it and get on with your life.
Massachussetts Housing Prices Fall 16% Statewide
http://www.zillow.com/ma/home-values/
Ok, wow—that MA graph is impressive! It certainly appears to detach from normal seasonal pattern in Jan 2015 and head straight down, down down…
You’re backpedalling.
No—I am looking at a different data-set, and drawing a different conclusion. Are you one of those people who ignore the data unless it supports your foregone conclusions?
Falling prices YOY statewide.
Backpedal some more.
I saw some cops hanging out in a neighbor’s garage today, with the door open. There was also a Fox news camera van lurking around the corner.
My wife thinks there is a drug bust underway. Seems totally plausible, as drug dealing is one of the few occupations which can generate enough income to afford to buy a home in our neighborhood.
I guess it is worse than I thought earlier, at least if my wife’s information is correct (which it usually is). She thinks the home is that of a murder suspect at large.
She is usually right on such matters.
Update: Suspect Identified in Scripps Ranch Shooting
Posted by Aleksandra Konstantinovic on June 6, 2015 in Crime
The San Diego Police Department mounted a search for the suspect of a shooting located just off the 15 Freeway in Scripps Ranch Saturday.
Officials said the suspect, 30-year-old Jeremy Green, shot and killed his wife about 2 p.m. in the San Diego suburb. He fled the scene in his silver Corvette convertible with California license plate 5YGE642, homicide investigators said.
Police said the suspect has several weapons registered to him.
…
You can’t control who your neighbors are. Guy gunned down his wife in cold blood at 2 o’clock in the afternoon. He’s headed to prison when and if the cops find him, and their three kids are effectively orphans. Very sad.
Perpetrator could be a drug dealer, judging from his taste in automobiles and weapons…
This was the top story on tonight’s San Diego Fox News.
Seems totally plausible, as drug dealing is one of the few occupations which can generate enough income to afford to buy a home in our neighborhood.
An unintended side effect of prices soaring into the stratosphere.
And the number one consequence is demand collapsing to 20-year lows.
Taraboomdea
Las Vegas is called up 8% by zillow
They could be half wrong
They used to have real tough tenant laws
My hood 22151 is called flat,but turnover is swift.
Good luck
Flat,
Youre in Springfield VA in DC?
Springfield, VA Housing Prices Fall 5%
http://www.movoto.com/springfield-va/market-trends/
Thanks, taxpers.
Here’s another article to go along with the Vegas, Inc. article Ben posted above about Las Vegas - same subject:
Las Vegas seeing growth in low down-payment mortgages
Good comments.