A Good Market Almost Always Benefits Sellers
A report from the Mail Tribune in Oregon. “In many respects, 2016 was just the kind of year Jackson County real estate agents like. During the fourth quarter of 2016, median prices jumped 9.7 percent to $247,375 from $225,440 for the corresponding period in 2015. During the past five years, northwest Medford ($197,500) and west Medford ($161,250) have seen more than 80 percent appreciation in their median prices. ‘Every market favors buyers or sellers,’ said Colin Mullane, spokesman for the Rogue Valley Association of Realtors. ‘What we call a good market almost always benefits sellers, and we fear the buyers’ market. I’m always happy when our median prices stay close to inflation. We’re really close to getting back to where we were, and I think we’ll get there in 2017 or 2018. I think inventory combined with interest rates will keep the median growth to 2 or 3 percent versus what we’ve seen over the past three or four years.’”
“‘Looking at the statistics, there’s a stark contrast to what people really think is happening,’ said Mullane. ‘We’re not seeing rapid and soaring prices, and the market won’t tolerate it if prices pushed beyond what we saw.’”
The White Mountain Independent in Arizona. “The White Mountains housing market is different from the Valley market, but it surely is showing signs of rebounding. Cliff Pettingill, Century 21 Sunshine Realty broker, said a majority of the homes in the White Mountains belong to second-home buyers. The main reason most are second homes, he said, is because young people do not tend stay in the area after high school. ‘The majority of our young people leave town,’ Pettingill said, ‘partly because there are few well-paying entry-level jobs. Because of that, there are few affordable first-time buyer homes for sale in the area.’”
“Pat Sarcoz, of White Mountain Realty in Show Low, added that there has been a slight increase in foreclosures the last couple of years and that more buyers are using USDA and veteran entitlement loans that require zero down payment. ‘But, opportunities for veterans and people who qualify for USDA loans to get a low mortgage payment and a low interest rate could be diminishing, depending on what the feds do with interest rates,’ she said.”
“Pettingill said people who purchased a site-built home in the White Mountains in 2006 for $300,000 found out the next year it was only worth a little more than half. Pettingill said a home purchased in 2006 for $300,000 is now worth about $240,000, meaning the local housing market has recovered about 80 percent since the 2006 collapse. He said the Phoenix market is booming again, adding that, ‘We can’t expect the same level of housing recovery until we get the same kind of economic recovery as the valley is enjoying due to a growing employment base.’”
“In other words, Pettingill said the White Mountains need more better-paying jobs before it can have the same kind of recovery.”
The Washington Post. “During his final news conference of 2016, in mid-December, President Obama criticized Democratic efforts during the election. ‘Where Democrats are characterized as coastal, liberal, latte-sipping, you know, politically correct, out-of-touch folks,’ Obama said, ‘we have to be in those communities.’ In fact, he went on, being in those communities — ‘going to fish-fries and sitting in VFW halls and talking to farmers’ — is how, by his account, he became president.”
“But Obama can’t place the blame for Clinton’s poor performance purely on her campaign. On the contrary, the past eight years of policymaking have damaged Democrats at all levels. Two key elements characterized the kind of domestic political economy the administration pursued: The first was the foreclosure crisis and the subsequent bank bailouts.”
“Obama didn’t cause the financial panic, and he is only partially responsible for the bailouts, as most of them were passed before he was elected. But financial collapses, while bad for the country, are opportunities for elected leaders to reorganize our culture. In January 2009, Obama had overwhelming Democratic majorities in Congress, $350 billion of no-strings-attached bailout money and enormous legal latitude. What did he do to reshape a country on its back?”
“In this case, big banks and homeowners both experienced losses, and it was up to the Obama administration to decide who should bear those burdens. Obama prioritized creditor rights, placing most of the burden on borrowers. This kept big banks functional and ensured that financiers would maintain their positions in the recovery. At a 2010 hearing, Damon Silvers, vice chairman of the independent Congressional Oversight Panel, which was created to monitor the bailouts, told Obama’s Treasury Department: ‘We can either have a rational resolution to the foreclosure crisis, or we can preserve the capital structure of the banks. We can’t do both.’”
“Second, Obama’s administration let big-bank executives off the hook for their roles in the crisis. Sen. Carl Levin referred criminal cases to the Justice Department and was ignored. Whistleblowers from the government and from large banks noted a lack of appetite among prosecutors. In 2012, then-Attorney General Eric Holder ordered prosecutors not to go after mega-bank HSBC for money laundering. Using prosecutorial discretion to not take bank executives to task, while legal, was neither moral nor politically wise; in a 2013 poll, more than half of Americans still said they wanted the bankers behind the crisis punished.”
“Third, Obama enabled and encouraged roughly 9 million foreclosures. This was Treasury Department Tim Geithner’s explicit policy at Treasury. The Obama administration put together a foreclosure program that it marketed as a way to help homeowners, but when Elizabeth Warren, then chairman of the Congressional Oversight Panel, grilled Geithner on why the program wasn’t stopping foreclosures, he said that really wasn’t the point.”
“The program, in his view, was working. ‘We estimate that they can handle 10 million foreclosures, over time,’ Geithner said — referring to the banks. ‘This program will help foam the runway for them.’ For Geithner, the most productive economic policy was to get banks back to business as usual.”
“Many Democrats ascribe problems with Obama’s policies to Republican opposition. The president himself does not. ‘Our policies are so awesome,’ he once told staffers. ‘Why can’t you guys do a better job selling them?’”
The discussion around house prices in the US is basically FUBAR.
‘During the fourth quarter of 2016, median prices jumped 9.7 percent…During the past five years, northwest Medford ($197,500) and west Medford ($161,250) have seen more than 80 percent appreciation in their median prices. ‘I’m always happy when our median prices stay close to inflation…We’re not seeing rapid and soaring prices, and the market won’t tolerate it if prices pushed beyond what we saw.’
80% is tracking inflation? Or 9.7%? We are and have been seeing rapid and soaring prices in every nook and cranny of the country. If you look at history, over 600 years of history, house prices never went up like this. If I’m the only one on the planet to point this out, so be it. The crisis didn’t start with the foreclosures. It was when house prices lurched out of historical price ranges, ensuring a collapse.
“If you look at history, over 600 years of history, house prices never went up like this.”
Coincidentally I’m sure, interest rates have never been this low for this long in the history of modern finance going back hundreds if not thousands of years.
http://ritholtz.com/2012/01/222-years-of-long-term-interest-rates/
This is a good place to re-post that interest rate chart going back to ancient Mesopotamia…
http://www.businessinsider.com/chart-5000-years-of-interest-rates-history-2016-6
The chart is somewhere misleading, as it is not visibly clear that Ben Bernanke successfully engineered a 5000 year low in long-term interest rates.
That is quite a feat, and helps explain why the Fed is now permanently stuck in low gear. Got long-term extraordinary accommodation?
80% is tracking inflation?
I think the sub-text is that he means rate of inflation AFTER returning to peak bubble prices…
Everyone with a vested interest in insanity-pricing seems to subscribe to the belief that the decline after the bubble popped was the problem, rather than the increases to insane bubble prices being the problem; so they want to see the decline erased, rather than the bubble erased.
Personally, I just hope I see sanity return within my lifetime, but I’m getting used to the idea of being a perma-renter; I’ll let landlords participate in a dutch-auction for my monthly housing budget.
it is because of the credit created out of thin air to buy these homes.
Thank you, Ben. I often feel like I live in an alternate reality when it comes to housing prices. There is NO way this is normal.
‘Pettingill said people who purchased a site-built home in the White Mountains in 2006 for $300,000 found out the next year it was only worth a little more than half. Pettingill said a home purchased in 2006 for $300,000 is now worth about $240,000, meaning the local housing market has recovered about 80 percent since the 2006 collapse. He said the Phoenix market is booming again, adding that, ‘We can’t expect the same level of housing recovery until we get the same kind of economic recovery as the valley is enjoying due to a growing employment base.’
I nearly fell out of my chair when I first read this article. I was probably the only property preservation guy in this area for a couple of years. I worked on hundreds of houses. There is no economic base. It’s just people driving up from Phoenix. There ain’t no way these unused shacks are “worth” 2 hundred grand. Most of them were built for $20,000, are 30 years old or they’re mobile homes. Oh, but the USDA loans! Zero down! I guess there will again be people like me driving for day after day to find these lonely little shacks and make sure the pipes don’t freeze.
leverage ! zero down and just start paying interest to mr banker.
‘it was up to the Obama administration to decide who should bear those burdens. Obama prioritized creditor rights, placing most of the burden on borrowers. This kept big banks functional and ensured that financiers would maintain their positions in the recovery.’
The sad pandas usually get it wrong. The HARP program was designed to prop up house prices. String out foreclosures while the FB’s defaulted twice or three times (yes, I know a guy who did three on the same house!)
And enter the courageous Bernanke. Is it just an accident QE was targeted at hammering interest rates low and keeping the MBS market alive? Oh and Fannie and Freddie! Now there’s a situation where evil market forces forced the market to find a floor - NOT! Mel Watt: pedal to the metal! It’s all such a convoluted cluster fark of propaganda anymore.
Who dont the Dems blame for Hillary and their party getting beat like a rented mule? So far the list has been:
The (((lamestream media))) (that they own)
White people
Black people
Podesta
Bill Clinton
Huma
Putin
(((Bernie)))
Comey and the FBI
Wikileaks
Alt-media
A cartoon frog
Whats next? Sunspots, fluoride in the water? I wonder if Ozero is going to make it onto that list soon.
I’m definitely more socialist than most commenters at this site, (Yes, go ahead and throw all the tomatoes you’d like. I still really like Ben and most of the commenting here.)
That said, I’ve been saying for 7 years that Obama is destroying the progressive brand worse than any Republican ever could. He’s enriching bankers, insurance companies, and other oligarchs to a ridiculous degree. He’s doing jack shit for the urbanites who love him for being black and educated.
The Washington Post article is a good one and articulates this very well. Clinton-bashing has reached a fever pitch over the last few months. It seems to be the favorite American past time right now, for both Republicans and Democrats.
I really don’t get it. If progressives want to do some finger pointing, they ought to aim for the guy who was president and had both houses of congress at his side. He did jack shit. You give that to the Republicans and they’ll pass through every law they feel like making without a care for opposition. Just watch what happens this year.
But Obama wanted to make buddies and meet halfway with Republicans who had no policies in mind other than destroying the guy. Everyone forgets that even Obamacare was originally a conservative, Heritage Foundation idea. The idea was to make all people chip into healthcare since most of us are paying for all the illegal-alien freebies at the hospitals (and the non-illegals sans insurance too). Find a way to make them pay.
The bank/insurance bailout, abetted by both parties, is the greatest financial crime in US history. Never has so much gone to so few so quickly. The housing fraud went unpunished and continues to live on and thrive in the present. Our new Secretary of Treasurer was basically a foreclosure king. Did the banks get punished for all the illegal liar’s loans? Nope. They conned a lot of “Libertarians” that everything was the fault of irresponsible borrowers. Some blame can be assigned to the naive, but most should go to the lenders who knew better. A stated income loan is a felony. You wouldn’t know it the last 8 years.
SYLF
Republicans who had no policies in mind other than destroying the guy ??
Yep….1 term President….Birther Illegitimate President etc…
Its payback time…Trump is so narcissistic and thin skinned its just a matter of time before he blows a gasket and compromises the security or economic health of the united states…At that time enough republicans will roll over with the threat of impeachment and the threat is all it will take…Trump will quit just like Nixon…
Democrats & the media…Just keep poking at the dude with real news or fake…It does not matter…Unlike Obama and even GWB, he can’t take the heat…
He is the heat.
Birther Illegitimate President
Keep in mind the fact that Trump was one of the most prominent birthers.
Sorry I’ve been away for so long but I’ve have been gorging myself on Marxist snowflake tears.
They are delicious!! (Zero calories too!)
Now, please resume talking about the boogieman and other assorted liberal BS.
Rent free
the most prominent of birthers
Clinton.
Why won’t Obama release his college transcripts? Isn’t there a foreign student ID in there somewhere?
Obama thought he could rule by fiat.
“We had an ekection. I won”
He refused to compromise. He expected Republicans to give him everything he wanted. When he didn’t get it he just whined and complained like a four year old.
Obamacare was passed by a democrat filibuster proof senate and a super majority in the house. Not one republican vote as Republicans were completely shut out of the process.
When democrats lost big in the midterms, obama continued in his fiat ways.
“I have a phone and a pen.”
Stomp those feet.
Stomp those feet ??
HA !! I am not crying, I am laughing 2-fruit…..
‘Some blame can be assigned to the naive, but most should go to the lenders who knew better’
As I type this there are thousands of ads playing with Quicken encouraging cash out refinancing. How could have imagined that these short years later, people would be implored to use their house as an ATM? These are largely government backed loans. Why should the government even be involved with cash out refinancing?
Why should the government even be involved with cash out refinancing ??
+1 Ben….I totally agree….
I still think the way to get rid of the government in the mortgage industry is a simple rule: Minimum down payment required to get any government backing to increase by 0.25% per calendar quarter.
Eventually, government backing will simply be irrelevant, and there will be no shock to the system.
There will be plenty of time for other mortgage companies to form/grow–just like the rest of the planet. Forget worrying about cash out financing, or other rules. Focus all the attention on making this one rule stick.
Why should the government even be involved with cash out refinancing?
+infinity, Ben. That is a simple, sane reform that SHOULD have come about after the last crash—but didn’t. Did any, really?
“Why should the government even be involved with cash out refinancing?”
This is exactly what Greenspan created to mitigate the dot.com crash.
Easiest way for progressives to regain the high ground: send Obama to The Hague for war crimes for not shutting down Guantanamo Bay.
Mike, the liberal ideas would get more traction if they were based on actual citizenship and meritocracy. Citizens before non-citizens, merit before race/culture.
Racis.
Your reputation is such that I can’t tell if you’re being facetious with this post.
‘it was up to the Obama administration to decide who should bear those burdens. Obama prioritized creditor rights, placing most of the burden on borrowers.’
The Band - The Weight
‘They conned a lot of “Libertarians” that everything was the fault of irresponsible borrowers. Some blame can be assigned to the naive, but most should go to the lenders who knew better’
How many loans would have been made if FHA/Fannie and Freddie weren’t there? How many would be made today? You could say 100%, but the terms would be different. Let’s go way back, to when Fannie first couldn’t produce financials. Prices hadn’t even started going down and they were broke. That’s how fraudulent this whole thing was. Now SEC rules say no financials, your stock is delisted. It just didn’t happen. How in the world does such an obvious rule get disregarded? The PTB wouldn’t allow it. Think of how many bad loans would never have happened if this simple legality was enforced? Then it happened with Freddie too!
All these years later, and these two entities are still backing most of the loans in the US.
A couple of weeks ago I posted a story on this lady in Michigan. In her 60’s, she had bought a house in 1998 for $60 something thousands. Now she’s walking away and lo and behold she owes $150,000! The reporter didn’t ask, but someone in the comments said, “how do you end up owing 150k for a 60k house?” I would add, why are you loaning a single woman in her 60’s that kind of money?
Was this person irresponsible? Was the lender? Does it matter? She can’t possibly pay that much money back. Now, should she get the house for free? Somewhere out there is a bond holder who needs to be considered. Maybe even another older woman who is counting on that money to retire or something.
I’m not buying this evil bankster theme because I watched it being crafted. It’s a cover for the house prices being central to the problem. It goes like this: there was nothing wrong with this house in Michigan going from 60 to 150k in 18 years. It was the loan, it was the evil bankster! (Even though in this case it was some government hardship/minority program).
If there is anything we should be able to agree on it’s the rule of law. If a GSE should be barred from selling bonds, do it. If you borrow money you have to pay it back. When you start separating parties from responsibility, problems are going to follow. So SEC, who got fired for not following the rules? Nobody. The press briefly mentioned it and all was forgotten. Culpability runs wide and deep, but until we agree on a framework of responsibility, a course of actions when certain things happen, blame won’t mean a thing and the moral hazards will continue to produce their bitter fruits.
Ben, at least one culpability identified in the mess was the selling of loans up the food chain with no skin in the game. The result was to establish a rule that if you lend to ANYone, you can only sell 95% of the loan and you have to retain 5%. The only exceptions were watered down “qualified mortgages” and pretty strict auto loans.
Of course, that responsible rule is part of Dodd-Frank, the “crushing regulations” that the GOP wants to repeal.
oxy, you haven’t been paying attention; the QM rules got watered down during the rule-making process such that they do not apply to any mortgages sold to and then backed by the GSEs. In other words, they don’t apply in virtually the entire market for mortgages, as the GSEs _are_ the market.
QM: meaningless, except to suppress the emergence of a private market.
I’m not buying the evil bankster theme either. There was/is nothing innocent about all these people borrowing money to buy houses they couldn’t afford. They were all in on the scheme, hoping some greater fool would come along and make them a whole lot of money in a couple of years.
I was naive enough to try talking some people out of buying in the early 2000s. These were all housekeeper/landscaper/low-level construction laborers. Mostly immigrants without enough English proficiency to read any of the docs they were signing. I wanted to save them from making a terrible financial mistake and boy was I surprised at their reactions.
They thought I was the stupid and unsophisticated one. Since I drove an old car and was a renter, I was obviously poorer than they were and there was no way they were going to listen to me. I was treated with disdain. Some people also became angry with me. It took going through this with several people for me to realize the nature of what was going on and give up*.
There was no way to save these people from themselves, and it was not the fault of evil bankers. I do realize there is a level of advertising/propaganda that entices people to believe they should buy a house, but being an adult means thinking for yourself and accepting responsibility for your decisions.
*Before you feel too sorry for any of these folks, many of the ones I knew that bought before the peak did cash-out refis and got tax-free income from this. How do I know? I was working at a local law firm that handled a lot of real estate transactions that came through. I wrote all the checks and saw where all the money went. Also, many of them lived in these houses rent and mortgage free for years after they stopped paying. Some of them even owned rental housing and were collecting rent from tenants on housing that they were no longer paying for.
‘owned rental housing and were collecting rent from tenants on housing that they were no longer paying for’
There were many thousands of these.
Of course, this is all libertarians being fooled by the banksters stuff. So where are all those crooked banksters? Sure aren’t locked up. I first started to see this was a rouse to obscure the role of house prices listening to the guy who wrote the big short on NPR. Man he tore those evil banksters a new one. Then at the end he was asked, shouldn’t they all go to jail? Oh no! he exclaimed, (his exact words) “that would stifle financial innovation!”
OK, who are you fooling. All this work up on the one group to blame and even you say the world will end if we put them in jail? One nice tidy package, morality and all, ready for a screen-play. I’m sure there is a term for set up like this: let the “progressive” NPR play this clown up as the big expert and his conclusion was to let the villain get off. Not only that, it’s for the children!
Now what was that about prices being too high? Never even came up.
Oh no! he exclaimed, (his exact words) “that would stifle financial innovation!”
If “financial innovation” is the sort of thing that causes the global economy to implode, perhaps, just maybe, “stifling” it a bit would be a GOOD THING??!?
“Culpability runs wide and deep, but until we agree on a framework of responsibility, a course of actions when certain things happen, blame won’t mean a thing and the moral hazards will continue to produce their bitter fruits.”
We don’t need to agree on a framework of responsibility because we have one already - we just need to allow the market to do its thing. I see market clearing mechanisms as wonderful, neutral arbiters in the blame-game.
Using the above example, it was the fault of EVERYONE involved, and in an honest market allowed to clear, everyone involved would be hurt, but the hurt will be distributed around. The problem comes when the hurt is artificially concentrated in one or two participants because the market is not allowed to clear. Then you have winners and losers, victims and perpetrators, no one learns their lesson and the whole thing starts up again.
The market distributes the blame much more fairly than we ever could. It doesn’t hate pensioners but love Wall Street; it doesn’t understand irresponsible buyers but loathe irresponsible lenders. The old lady loses her house, the bank takes a loss, the pension fund has to reduce its payouts, the retired teacher loses some income, the politicians that encouraged the whole thing get voted out of office. Everyone learns a lesson, and the people who refused to participate are rewarded with a return to rationality.
The only role of the law/people/gov’t is to prosecute people who actually broke the law. The market will take care of the rest.
It isn’t working. In late 2004 a criminal probe was opened up by the Justice Dept against Fannie Mae employees. It just went away. The SEC didn’t delist the GSE’s. Banks got a bailout, rules changed so they didn’t have to sell REO’s. FB’s got HARP or lived for free for years. The Federal Reserve got more power. At almost every level, the rules as they exist are changed or ignored.
Laws are only strictly enforced for the little people:
“A western Kansas family is outraged and heartbroken after game wardens killed their pet deer that lived in their home and took walks with the family.
Kim Mcgaughey, of rural Ulysses, said the mule deer was ‘very much a big pet’ and that there was ‘no reason for her to be killed’.
But it’s illegal to keep a wild animal as a pet in Kansas, and wildlife officials raised concerns that the animal could hurt people or spread disease, The Wichita Eagle reported.
The family filmed the moment law enforcers turned up at their home, stalked Faline and shot her dead.”
http://www.dailymail.co.uk/news/article-4092496/Kansas-familys-pet-deer-shot-game-warden.html
Wow, I just got a fancy circular in the mail for an “affordable luxury home” starting at $1,089/month. That’s 1,089*, yes, with a *. Principal and Interest only. Taxes and insurance is another matter.
An affordable luxury home. Affordable luxury. The whole point of luxury is that it’s not supposed to be affordable for the average person.
Yes, Palmy, but you (and everyone else this mass circular got mailed to) are not an “average person.” You are unique and special, like a snowflake. Thus you are ENTITLED to luxury at an “affordable” price point. And Auntie Yellen has made all that cheap credit available just for you.
I’d go ahead and take the plunge. You have the assurance of knowing that Suzanne researched this.
Did the “*” also subtract the MID tax refund amount (spread out over 12 months) to the monthly payment to make it even lower? I saw that a few times on condo advertisements.
During the previous bubble I saw that advertised in front of one of those in house banks at Walmart, on a whiteboard on display at the entrance.
Swindling is most effective where stupid people gather.
‘One of the unique aspects of the United States is that banks lend people great sums of money at fixed rates for 30 years in order to buy a house.’
‘Ben Carson, physician and politician, has been tapped by president-elect Donald Trump to manage the Department of Housing and Urban Development. HUD is responsible, at least in name, for this uniquely American bit of financial engineering, which relies on the government guaranteeing loans made by private institutions.’
‘At his confirmation hearing today, Carson was asked about this financial product by Senator Jon Tester of Montana. Did Carson think that a 30-year, fixed-rate mortgage loan would be widely available without government backing?
“Yes, I think it is possible,” Carson said. “How ya going to do it?” the senator replied. “The private sector,” Carson said. “But you can’t do it overnight.”
‘This belies the entire history of the 30-year, fixed-rate mortgage. Many experts say the private sector simply cannot deliver the same benefits without government backing. Here’s a refresher course: In the throes of the New Deal, the US government birthed a plan to promote home ownership by creating a mortgage market backed by the Federal Housing Administration, or FHA, which lives within HUD. The FHA would combine with banks to insure long-term, fixed-rate mortgage loans in an effort to replace the shorter-term, variable-rate loans available to home buyers at the time. This helped boost the US economy after the Great Depression and allowed many more people to buy homes.’
‘Over the decades ahead, the government expanded on this idea by creating Fannie Mae and Freddie Mac, two major financial institutions that back 30-year loans by purchasing them from banks and securitizing them into mortgage bonds. Laws allowing Americans to deduct mortgage interest from their taxes also boosted affordability.’
‘Such government support ensures wide availability of long term, fixed-rate home loans. They have become a political sacred cow in a society that sees homeownership as a key component in the American dream. And there are good arguments that the 30-year, fixed-rate mortgage creates financial stability more effectively than the short-term loans that blew up the economy in 2008.’
‘It would be one thing if Carson recognized that the 30-year mortgage wouldn’t be widely available without government backing and instead argued that a different model is needed. Developed countries like Germany, for example, get by happily with lower homeownership rates and no 30-year loans. Critics are quick to note that Fannie Mae and Freddie Mac had to be rescued by the government during the 2008 collapse of the housing market, though they eventually paid back that cost. Libertarian-leaning commentators argue that the housing market should be left to its own devices, with private lenders only making loans of at the rates and terms of their choosing.’
‘the short-term loans that blew up the economy in 2008′
Jeebus. Over 90% of foreclosures were 30 year, prime loans.
Let’s not deviate from The Narrative, Mr. Jones.
If it wasn’t the type of loan, statistically what did define the wave of foreclosures we saw? It was glaringly clear: the “footprint”, meaning when they were made. In other words, it wasn’t prime or subprime from 1999 or 1980. It was the loans made when prices were at their peak. That 3 or 4 year period accounted for over 90% of foreclosures.
Hi Ben,
Is it really true that 90% of the foreclosures were on 30 year primes? Are you saying that these weren’t ARM’s or just that they were prime?
I alluded to the liar’s loans (stated-income loans) above, but maybe they were far less consequential than I knew. Maybe it’s the ARM piece that got everyone in trouble, along with job losses of course? Or maybe even prime loans were made with faulty income numbers?
Also, is it true that Japan has 99 year mortgages or is that just urban legend?
It was the loans made when prices were at their peak. That 3 or 4 year period accounted for over 90% of foreclosures ??
Yep…I had completed a Townhouse development in 2004…I was receiving offers from Real Estate Brokers with 80% 1st loan and a 20% 2nd…In other words, zero down…Well, The first few I rejected even though the realtor pleaded with me that they could get it done…Finally, a friend of mine who was a broker brought me a offer with the same terms….Because I knew her so well, I accepted it and sat back and waited to see if she could get it done…It closed…I may have done one other like that but all of the others were 10% or 20% down….In my mind I new this would end badly and I shut down my development business…
“It was the loans made when prices were at their peak.”
Yep. Not subprime, according to Oxide’s definition, yet highly likely to fail…
These are the weeds the MSM doesn’t get into. When I first got into the foreclosure biz I had access to the Flagstaff MLS. I got in the habit of looking up the loan history of my assignments. In that first year, I’d say 80% plus of the foreclosures had refinanced multiple times. Huge amounts. When I went to the trustee sales it was almost a given there would be second and third loans. So you can say, “well the prime loan was foreclosed.” But that misses the fact there was a second, leaving the FB with no skin in the game. Go to a bank, any bank. Is there a flyer in the lobby advertising HELOC’s? I’d bet there are.
flyer in the lobby advertising HELOC’s? I’d bet there are ??
In every Bank….
It was the loans made when prices were at their peak.
Yes, but Option ARMs, liar loans, piggie back loans enabling 0% down purchases, etc. are what allowed prices to reach such high levels.
scdave,
My own personal “holy sh*t this is going to end badly” moment was when a local (mid-peninsula) mortgage broker noted to my partner that the “Option-ARM” was the most popular loan in the Bay Area. I believe that was 2005 or so.
The first thing that you should be doing as a lender when you make a loan is work to get paid back.
The first thing you should do as a borrower after you get a loan is work to pay it back.
The Option ARM flew in the face of these two conventions–among other things (high prices, excess housing development–as it related to population growth, etc.), this was a giant flashing red light.
My definition of “subprime” is based on FICO, which was the official definition until “subprime” was redefined for the lowest common denominator by some bleach-blonde thigh-gap in a bubble bath.
Anyway, Mike, I’m pretty sure many of those prime (high FCIO) loans were ARMs or even I/O ARMs, especially the refi’s. Even at low interest rates, you can’t afford a regular PITI mortgage more than 3x income. And there were simply not enough $170K combined incomes to fill all those $450K houses that were selling during the bubble.
‘work to pay it back’
The other day I was listening to this financial adviser on the radio. He had a guy call in asking if he should use his cash to pay off his mortgage. He was advised to borrow the maximum he could against the house and use the money to buy stocks. I know a person who has $250k in student loans. Was told by a financial adviser to pay the minimum and never make any extra effort to pay it off (is in the 50’s, will probably die owing the bulk of it). A conversation I overheard recently: “my bank asked me if I want to do a cash out refi.” Reply, “Take that money every time they offer it.”
It’s being bandied about as the opposite to Clarke Howard and some of those other guys. Also heard a guy on the radio who has 1,000 apartment units say he’s considering going to interest only because his goal is to never pay off the loan, and keep taking the equity by refinancing. There are a whole bunch of people out there who are thinking this way.
Even at low interest rates, you can’t afford a regular PITI mortgage more than 3x income.
Not true; the ratio changes with interest rate.
“He was advised to borrow the maximum he could against the house and use the money to buy stocks… There are a whole bunch of people out there who are thinking this way.”
Because we live in a risk-free fantasy land of “opportunity cost”, which is just a fancy phrase for blatant, soul-eating, society-corrupting GREED. The philosophy is summed up in one fact: Mark Zuckerburg, net worth $53 billion, has a mortgage on his $6 million house. And it’s a g*d*mned ARM.
If you want to be nauseated:
“Economists say that every investment or purchase you make comes with an opportunity cost.
Using your savings to buy a house — or making a large downpayment — means you can’t also use it to invest in stocks, buy boats or take trips. Wealthy people tend not to keep a lot of money in their checking accounts, earning virtually nothing.
They didn’t get rich by passing up opportunities to make their money work for them.
If long-term investing in the stock market nets an average of over 11 percent per year (and it does, according to MarketWatch) why would you take money out of it to buy a house.”
http://themortgagereports.com/21788/why-mark-zuckerberg-has-a-mortgage
Not to mention that other countries have survived without massive foreclosure crises for decades without the 30-year loan.
‘Ben Carson, physician and politician, has been tapped by president-elect Donald Trump to manage the Department of Housing and Urban Development. HUD is responsible, at least in name, for this uniquely American bit of financial engineering, which relies on the government guaranteeing loans made by private institutions.’
It’s a pretty good deal for the private institutions for taxpayers to subsidize the premiums AND pay the bailout costs whenever they arise.
Time to end the subsidies. No more mooching.
“In the throes of the New Deal, the US government birthed a plan…”
Birthed at the bottom of an 80 year credit cycle. A nice house was $10,000. Now at the top of the credit cycle, the government plan is exactly opposite what is helpful.
Hey oxide,
A couple of days ago, you went on about the first 7yrs of a mortgage; I’ve (and others) have tried to tell you multiple times that this isn’t true—interest is just based on the current balance and the rate, so yes, it declines over the period of the mortgage, but not in any special way between years 7 and 8 (or any other years).
Anyway, to try to convince you of this, I spent the 3minutes to put together a spreadsheet. If you tell me the interest rate on your mortgage, I’ll tell you exactly what percentage of the interest is in years 1-7 vs 8-30. Happy to share the spreadsheet with you as well, so you can double-check the work.
Maybe Points at 7 years?
She ran the NYT Rent/Own spreadsheet already. It’s a done deal.
Thank you for the effort, but there are quite a few amortization calculators out there which show how much of each payment goes to interest or principle, total interest paid, current balance etc. Yeah, you’re right. 7 years just happens to be an inflection point, regardless of when someone actually moves or trades up.
So the mortgages aren’t designed around 7 years. But mortgage companies know about the 7 years and will start to pester you even more after 7 years. Of course, they definitely want to reset the clock to the interest-heavy beginning.
I’ve been getting a lot of refi offers in the mail, and even got a phone call. My guess is that I’ve been putting so much more $$ onto principle over 5 years, that I’ve already burned through those 7 years of interest front-load. Pretty funny, a couple had interest rates which were *higher* than what i pay now. But I don’t think any have talked about cash-out yet.
7 years just happens to be an inflection point,
There is no inflection point—period.
Of course, they definitely want to reset the clock to the interest-heavy beginning.
Again with the “interest-heavy” falacy. It’s simply not true.
I’ve offered you the data, in a simple to digest form; I’ll even share the spreadsheet with you. But you didn’t provide the couple of specific data-points that I would need to make it reflect your actual mortgage.
At the moment, it have variables at the top for principal and rate; I picked 300K and 3.75% at random. With those assumptions, the total interest over 30yrs is 200164.84, and you would pay 36.66% of it in the first 7yrs, and the remaining 63.34% over the next 23yrs.
Again, there is no inflection point; the math for the next 7yrs, if run at the end of year 7, would make years 8-15 look very similar w.r.t. the remaining years.
I’ve said several times that my interest rate is 4%. I am not going to reveal my mortgage amount because of privacy issues, and because I get enough flack from HA already thanks. Plus, I add $$ to principle so that will mess up the amort charts anyway.
Ok, that’s sufficient; we can just do it on a “per $100K” basis. Sorry, I didn’t remember your rate—it’s been a long time since you bought your place.
Ok here goes:
At a 4% rate, you are paying 36.40% of the loan’s interest in the first 7yrs/84mo, and 63.60% of it in the remaining 23yrs.
Over the lifetime of the loan, the total interest paid is $71,869.51 per $100K of initial principal.
Your specifics will differ from that, of course, since you have been prepaying principal; good for you, I salute you for that, btw.
To clarify a post from yesterday:
Colorado property taxes to drop in 2017. This is on top of TABOR.
http://www.denverpost.com/2017/01/13/tax-soaring-home-values-colorado/
“Colorado homeowners will get a tax break, thanks to TABOR’s lesser-known cousin. But local governments will be squeezed.”
“Since 2003, the assessment rate for residential properties has been unchanged, at 7.96 percent of market value. Next year, according to a study released Friday by the Department of Local Affairs, that’s projected to drop to 6.56 percent. Local officials apply that rate to their tax levies to calculate how much property owners owe.”
The percent value above is not the tax, it is the assessment. The assessment will be 6.56% of market value.
I paid less than half a percent tax on market value last year, not 7.96%.
I thought I remembered you paying a low tax bill on a $300k home. Like $900 or something which is way below my part of SE Region IV.
Not quite that low. That example you gave would be 0.3%. In my case it’s about 0.44%, though it sounds like it might drop to just under 0.4% this year.
Bankster scams on taxpayers and FBs are unceasing, while their captured political adjuncts in the Establishment parties enable and abet such ripoffs.
http://wolfstreet.com/2017/01/14/from-one-scam-to-another-how-banks-in-spain-intend-to-compensate-1-4-million-fleeced-homeowners/
20/20 covered high housing prices last night…. end is near
Not sure what 20/20 covered, they said a 2 or 3 bedroom house,1700 sf in the 70’s, cost $191000.00.
Replayed it to make sure I was hearing and reading correctly.
My parent’s sold their Fountain Valley, Orange County, 4 bdrm, 2000 sq ft house for $30,000 in 1971. 191,000? Maybe in the mid to late 1980’s it would have fetched that much.
The current zestimate for the place is $750K. It now has a pool, so it must be worth every penny. /sarc
The house was close to the now defunct Fountain Valley elementary school (which was across the street from the high school). The elementary school is gone and the land it was one has been subdivided; though the high school is still there.
My folks also bought a place in one of LA burbs, 1/2 mile from the beach. Paid 28k back in ‘72, sold in late 70’s for about 80k. House they bought in the central coast CA was 22k in ‘77. I bought a condo in ‘82 for 72K That’s why I questioned the 20/20 show.
I like real estate crashes, it means the Realturds go back to their old jobs at Payless shoes.
new job site….by the same people as daily job cuts
http://www.dailyjobfix.com/
4:23 video that I tried to stop watching like 8 times but couldn’t.
https://www.youtube.com/watch?v=G3_RA6xWziM
heh, good one.
January 13, 2017, 4:53 AM
Paul Ryan: Trump mass deportations “not happening”
c’mon! this is why we voted for DT! Too much traffic out there in LA, cull the herd.
And that $25 billion wall does not look like it will happen. Bush tried.
wars, walls, deportations AND tax cuts.
got debts?
“Paul Ryan: Trump mass deportations “not happening”
He needs the kidz.
His oligarch patrons need the wage slaves, cheap landscapers, and maids.
Only if they don’t have the right blood type.
Speaking of which, they found some kidz from Central America working one of the dairy farms in his district. Will try to find the link for you.
‘Liberal snowflake’ Hollywood stars come under fire for ‘pathetic’ video which shows them singing ‘I Will Survive’ about Trump’s inauguration
Read more: http://www.dailymail.co.uk/news/article-4120208/Celebrities-come-fire-Trump-supporters-Survive.html#ixzz4VlgA5zZN
Follow us: @MailOnline on Twitter | DailyMail on Facebook
Thumbs down/up good indicator Trump 2020
https://www.youtube.com/watch?v=bTYidWBC8-4
Do “snowflakes” stand up and fight such a badarse as DT? This guy DT is crushing everyone in his site, if you talk to his followers. Snowflakes stay home and comment on blogs.
Thothialithm
https://www.yahoo.com/news/venezuelas-maduro-oversees-military-drill-guard-socialist-fatherland-193915514.html
Now, natty, you should be grateful to Trump. He has brought the rains to California, ended the drought and filled the reservoirs. Not to mention increasing the snowpack. And he isn’t even in office yet. This is part of making America great again and he is graciously including CA in his plans.
I told the SJWs to forget about Trump and go after Congress. Trump actually wants to HELP the middle class; Congress wants to dismantle the middle class even more. But they can’t let go of the perceived racism, and Trump is a bigger target, easier to hit.
Plus he committed the unforgivable sin: he defeated Screech.
Here’s another collectivist favorite the SJWs can use to rally the troops.
https://www.youtube.com/watch?v=Ko9wikf_RBc
Thumbs down/up good indicator Trump 2020
You probably found that on Drudge, so the thumbs indicate nothing.
“You probably found that on Drudge”
Your nose is out of joint, kindly move it back in place.
“You probably found that on Drudge”
Don’t you ever get tired of being wrong?
I said probably. I also just checked. It’s close to the top of Drudge at the moment.
“I said probably. I also just checked. It’s close to the top of Drudge at the moment.”
Thumbs down on that answer Mike, you must be exhausted drink some Gatorade.
“snowflakes” with weapons and bats - Inauguration Protesters Plan To Destroy Property And Disrupt Balls
know your ghetto enemy
When I want a pony, I get a f’ckn pony.
http://875357559f655c0fd9842374.eventingnation.netdna-cdn.com/wp-content/uploads/2013/10/D55A83844.jpg
“When I want a pony, I get a f’ckn pony.”
Oh God stop it hurts!
One good turn deserves another. That auto accident vid was priceless.
The bedwetters and nose-pickers are gathering their forces. Go ahead and pull that crap in the gun-free cities, Soros scum - just don’t try capering out in the heartland. Or else.
http://www.zerohedge.com/news/2017-01-14/anarchists-plan-stop-trump-pence-regime-grave-danger-it-starts
Girls With Balls Plan To Destroy Property With Their Purses At Inauguration
The typical snowflake has never swung a bat, much less owned one.