Bailing out bad loans

From the Wall Street Journal:

Banks Move Earlier To Curb Foreclosures

As the number of borrowers falling behind on their mortgage payments climbs to the highest level in five years, the mortgage industry is trying new strategies to help bail them out.

Much of the attention is on homeowners who in recent years took out adjustable-rate mortgages, a popular way to finance a home when interest rates were low. Now, with rates having moved up, many of these borrowers have recently seen, or soon will see, their mortgage rates adjust higher for the first time.

To head off problems, mortgage companies are reaching out to borrowers earlier. Bank of America Corp. is allowing some borrowers with ARMs to refinance into a different loan at no cost. Citigroup Inc.’s CitiMortgage unit is focusing extra attention on parts of California, Florida and New York where home prices have moved up sharply. It is also contacting delinquent borrowers within days after a missed payment, if it doesn’t fit their normal bill-paying habits.

The rise in bad loans also is leading to a pick up in so-called short sales, in which a lender allows the property to be sold for less than the total amount due and often forgives the remaining debt. For the lender, the process can be shorter and less costly than foreclosing, especially in a declining market. For borrowers, it is a way to avoid having a foreclosure on their credit report.

Sheldon Klain, a manager in Dallas, wound up saddled with loans on two homes last year and now is trying to arrange a short sale of one of them. Mr. Klain got into trouble after he moved to Dallas from Las Vegas to take a new job. He bought a home in Dallas, thinking he had found a buyer willing to pay $475,000 for his Las Vegas home. The sale fell through at the last minute and Mr. Klain found himself stuck with two homes and behind on payments on the Las Vegas house.

Mr. Klain says his Las Vegas house, which is in a gated community and has a swimming pool, is valued at $419,000, according to a recent bank appraisal, well below the $440,000 he owes on the property. “The dump in the market put us behind the eight ball,” he says.

For some borrowers, efforts to work out bad loans can be complicated by the fact that many mortgages no longer are held by the banks that made the loans. Instead, roughly two-thirds of mortgages are packaged into mortgage-backed securities and sold to investors. How much leeway a borrower is given can vary, depending in part on the rules spelled out at the time the securities are created. Some agreements, for instance, don’t permit loan modifications or limit the circumstances under which a loan can be modified. Others put a cap on how many loans can be restructured.

Some 2.51% of mortgages were delinquent in the fourth quarter, according to new data from Equifax Inc. and Moody’s Economy.com Inc. That is up from 2.33% in the third quarter and the highest level since a recent peak of 2.53% in the first quarter of 2002.

The increase in bad loans is broad based, with delinquencies rising in the past year in roughly 80% of the 250 local areas analyzed by Moody’s Economy.com. Some of the biggest increases have come in California, where high prices have made it hard to afford a home, and in other once-hot markets such as Las Vegas and Port St. Lucie, Fla. Among the handful of major metropolitan areas where delinquencies have fallen: Salt Lake City, San Antonio and Albuquerque, N.M.

The rise in delinquencies is unusual because it comes at a time when the economy is relatively strong. Even though job growth remains healthy, “the total mortgage delinquency rate is the highest that it’s been since the depths of the [2001] recession,” says Mark Zandi, chief economist at Moody’s Economy.com. He attributes the increase in part to the weaker housing market and the widespread use of adjustable-rate mortgages, many of which now are resetting at higher rates.

What is more, as demand for loans softened, mortgage lenders loosened their standards and made riskier loans, Mr. Zandi says. He expects that nationwide delinquency rates could rise by as much as a full percentage point from current levels in the next year, but he doesn’t expect the trend will have a significant impact on the overall economy.

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177 Responses to Bailing out bad loans

  1. thatbigwindow says:

    It still won’t help the many who couldn’t afford it anyway.

  2. James Bednar says:

    From MarketWatch:

    Weekly mortgage applications off 8.4%

    The number of applications for mortgages filed with major U.S. banks fell by a seasonally adjusted 8.4% last week compared to a week earlier, with purchase and refinancing loans both lower, the Mortgage Bankers Association reported Wednesday.
    The overall volume of applications, encompassing both refinancings and purchase loans, was up 3.8% compared with the same week a year ago.

    Applications for mortgages to buy a home fell 8.4% on a week-to-week basis and were down about 15% compared with the same week a year ago.

    Sales of homes through November were down about 11%, year on year. December’s U.S. sales figures will be released later this week.

    Applications to refinance existing loans declined 9.6% last week but were up about 4% compared with the same week a year earlier.

    Refinancings accounted for 47.8% of total loan applications, down from 49.9% the previous week, the MBA’s data showed.
    The average interest rate for a 30-year fixed-rate loan rose to 6.22% up from 6.19% the previous week, matching an 11-week high.

    The average rate for a 15-year fixed-rate loan nosed higher to 5.93% from 5.92%, matching a 12-week high.

    The rate for a one-year adjustable-rate mortgage averaged 5.91%, up from 5.85%. It’s also the highest rate in 12 weeks.
    ARMs accounted for 20.3% of loan applications, down from 21.2% a week earlier.

  3. njrebear says:

    “Applications for mortgages to buy a home fell 8.4% on a week-to-week basis and were down about 15% compared with the same week a year ago. ”

    So much for the spring ‘uptick’. Last week the purchase index fell 7%. It looks like early January was a false bottom.

  4. BC Bob says:

    “The rise in delinquencies is unusual because it comes at a time when the economy is relatively strong. Even though job growth remains healthy, “the total mortgage delinquency rate is the highest that it’s been since the depths of the [2001] recession,” says Mark Zandi, chief economist at Moody’s Economy.com.”

    This is the key point. Yes, it is imploding on its own. What the hell happens if we are staring at a recession in 2008-2009???

    njrebear,

    There will be a multitude of false bottoms along the trendline down. This market is not even close to establishing a floor.

  5. SS says:

    A co-worker of mine said this housing prices. “You know prices are not coming down, instead they will remain high while salaries catch up” lol

  6. thatbigwindow says:

    With that logic, people currently making 40k a year will have to have their salary increased to 140k a year.

  7. lisoosh says:

    It just goes to show how bad the easy money spigots are for some people. Better to have never been encouraged to look into home “ownership” than to have to go through losing a home.

  8. BC Bob says:

    From the Daily Reckoning. Sorry no link;

    Since 2001 the dollar has been devalued by 60%.

    In 1934 FDR devalued the dollar by 41%.

    In 1971 Nixon devalued the dollar by 7.9%.

    In 1973 Nixon devalued the dollar by 10%.

    These were momentous monetary events, and every knowledgeable person
    worldwide paid close attention. Major changes were endured in 1979 and
    1980 to save the dollar from disintegration. This involved a severe
    recession, interest rates over 21%, and general price inflation of 15%.

    Today we face a 60% devaluation and counting, yet no one seems to care.
    It’s of greater significance than the three events mentioned above. And
    yet the one measurement that best reflects the degree of inflation, the
    Fed and our government deny us. Since March, M3 reporting has been
    discontinued. For starters, I’d like to see Congress demand that this
    report be resumed. I fully believe the American people and Congress are
    entitled to this information. Will we one day complain about false
    intelligence, as we have with the Iraq war? Will we complain about not
    having enough information to address monetary policy after it’s too late?

    If ever there was a time to get a handle on what sound money is and what
    it means, that time is today.

    Inflation, as exposed by high gold prices, transfers wealth from the
    middle class to the rich, as real wages decline while the salaries of
    CEOs, movie stars, and athletes skyrocket– along with the profits of the
    military industrial complex, the oil industry, and other special
    interests.

  9. AntiTrump says:

    There are Greedy sellers and then there are sellers who are mentally unstable (scary)

    Asking $929K.

    MLS: 2346956
    Addr: xx Greenfield Ave., Summit, NJ

    Of the many things $1 Mil can get me, why would I want this pos??

    This guy needs to find the biggest sucker fish out there !!
    http://tinyurl.com/2kcp7e
    http://tinyurl.com/2kfggb
    _______________________________________
    And the crack pipe was passed to:

    http://tinyurl.com/2kqezw

  10. NJSUX says:

    OT but worth looking at for a good laugh. I thought I had it bad in Madison but this takes the cake.

    Tiny London apartment on sale for $335K

    http://news.yahoo.com/s/ap/20070122/ap_on_fe_st/tiny_apartment

    LONDON – Location, location, location. Almost anywhere else, the tiny dilapidated studio wouldn’t attract much more than mice. But this is London and the 77-square-foot former storage room — slightly bigger than a prison cell and without electricity — is going for $335,000………………..

  11. RentinginNJ says:

    What else can you possible do to get more creative? It doesn’t seem there is much wiggle room to helped distressed homeowners these days. After all, many of these mortgages were written when real interest rates were negative. Even then, many included interest only or negative amortization provisions to further stretch affordability, since ultra low interest rates weren’t enough. And to top it all off, many borrows are stretched to the breaking point in the best of times, with a good economy with continued employment.

  12. RentinginNJ says:

    If you were seriously upside-down on a mortgage due to a foolish decision to buy a home you couldn’t afford and were now faced with higher payments, what would you choose? Cut and run? Take 7 years of bad credit and chalk it up to a lesson learned? Or, would you continue to play the refinancing game as fees piled up, the loan balance grew (or at least didn’t shrink) and you struggled to make the monthly payment, hoping that you wouldn’t get sick or lose your job and maybe one day appreciation would bail you out?

  13. rhymingrealtor says:

    Cut and Run, hope they don’t take as long as I did.

    KL
    http://njrereport.com/index.php/2007/01/24/bailing-out-bad-loans/#comment-73720

  14. syncmaster says:

    With that logic, people currently making 40k a year will have to have their salary increased to 140k a year.

    They will. At a rate of 3%, in about 40-45 years, lol.

  15. SG says:

    Below are sale transactions for townhouses on the same street with same configuration in Bridgewater.

    Sep 06 $320,000
    Jun 06 $330,000
    Jul 05 $375,000
    Nov 04 $305,000
    Oct 04 $299,000
    Aug 04 $316,000
    Jul 04 $300,900
    May 04 $285,000
    Sep 03 $272,000
    Jul 03 $239,000
    Feb 03 $230,000

    According to this we are back in August 2004 territory. Buying anything at prices higher then August 2004, shows uninformed buyer.

  16. syncmaster says:

    Below are sale transactions for townhouses on the same street with same configuration in Bridgewater.

    Do you have a feeling for how SFH values are holding up in Bridgewater?

  17. SG says:

    SFH prices are down significantly as well. Unfortunately they are not easy to compare.

    Anecdotally, in one SFH development, at end of 2005, I had seen transactions for 600K+, today similar house is asking 520K. I would say 15% to 20% decline at the least.

    But in SFH market you have more stubborn sellers. Many still refuse to price the house according to comp. I have an example where one SFH was recently sold for 525K, but for similar houses people are still asking 600K+.

    Here are some transactions from 2 adjacent street in one SFH development. The houses are very very similar, hence I think they are comparable.

    Jan 06 $525,000
    Oct 05 $579,900
    Jun 04 $570,000
    Apr 04 $525,000
    Aug 03 $440,000
    Jul 03 $474,500
    Feb 03 $407,000
    Apr 02 $395,100

    So we are back in Apr 2004 at present. You will have to find buyer who is either moved out or is motivated to sell.

  18. njrebear says:

    “Tiny London apartment on sale for $335K ”

    This sounds like pet.com aiming for $100 :)

  19. Richard says:

    wake up folks. as long as credit is cheap and plentiful the party will go on. sure you’ll have hiccups here and there, but the house (no pun intended) isn’t going to come crashing down. it’s my belief that if things do get ugly from a macro perspective it’ll come from a place that no one even thought of. that’s usually how it goes down.

  20. lowball says:

    No wonder the ‘compassionate’ bankers try to bail them out:
    “In the Myrtle Beach area, Tidelands Bank now has 90 percent of its total portfolio in residential and commercial real estate”
    also
    “In Myrtle Beach, new and existing condo sales dropped 37 percent in the third quarter from a year earlier”
    This thing is gonna be ugly….

  21. RentLord says:

    Another greedy seller:

    http://www.forsalebyowner.com/listing/BF3A5

    bought in ’96 for $269K, asking $680K

  22. BC Bob says:

    “wake up folks. as long as credit is cheap and plentiful the party will go on.”

    Richard,

    Sound like the roaring 20’s to me.

    In conjunction with this, what are the future implications for inflation/dollar if we continue on this reckless path of cheap credit??? Oh wait, we already know. The sophisticated investors of the world telling us. They are selling dollars and buying gold. What do you know that they are missing???

  23. James Bednar says:

    From the NY Times:

    Blogging for Property Sales

    Just as Web listings transformed international real estate a decade ago, new Internet tools are making even more information available — and not just from real estate agents.

    Increasing numbers of potential buyers and investors are exchanging information in online forums, downloading video and audio reports and reading blogs for property news and opinion.

    Web activity by international real estate professionals and laymen started picking up only last year. Sam Taliaferro, an American developer in Panama, now spends three hours a day on a half-dozen blogs that range from events in his development to general investment trends and life in the country.

  24. 2008 Buyer says:

    The mortgage companies (really servicers) are trying to do what ever it takes to keep some sort of cash flows going from these borrowers. It may be easier (good servicers have analytics to help in determining) to accept $1800 payments on a $2200 note than trying to legally (take like 2 to 6 mts) get the house and put it on the market which isn’t an easy task in this environment. We all know these people for what ever reason (purchased recently, used an IO, etc) are in bad financial shape right now. I think this is only the beginning we are seeing.

    Related….in California…if a borrower gets behind on payments…they have the option of moving out and sending the mortgage company the keys. Imagine what circumstances you must be in in order to get to the point where this is an option you are considering.

  25. RentLord says:

    Reechard – wake up! you are in denial; well, can’t blame you it’s just a phase. When it hits you it hits you hard.

    For your own sake, I hope you are looking for another job outside of RE

  26. CrazyCrazyRenter says:

    Grim – A while back you posted about condo prices for identical units in the same building(s) between 1988 and 1994 and I’m having trouble searching for it. Could you post a link please?

  27. James Bednar says:

    From MarketWatch:

    Centex sees more layoffs to get to ‘fighting weight’

    Centex Corp. Chief Executive Tim Eller during the company’s quarterly earnings call Wednesday said the home builder’s headcount is down 17% since the beginning of its fiscal year. “There will be more reductions in the [fiscal] fourth quarter,” the CEO said. “We’re taking the necessary steps to get our balance sheet and our organization to their fighting weight,” he added.

  28. CrazyCrazyRenter says:

    Thanks. Love your blog and appreciate all the hard work you’ve done.

  29. Clotpoll says:

    BC Bob-

    Covered my gold short on Monday. Ships sailing to Persian Gulf, Hugo Chavez’ sabre-rattling, Chinese asset “reallocation” and other assorted real and imaginary threats are just too overwhelming. Just one thing goes wrong, and it’s off to the moon for gold.

    I’m also coming around to the Cramer idea that we’re gonna get at least one Fed cut in the first half of ’07…even if they hold off until May/June. Not that I’m advocating a cut, but if some real pain begins to occur, it’d be an action that would engender some short-term relief.

    If one believes that the May ’06 25bp bump was one too many, the May/June ’07 could be explained as a “fine-tuning” counterbalance.

    Do you see this scenario as plausible?

  30. Willow says:

    I just realized that the above house was probably razed and then this house built.

  31. Kim says:

    Hi Grim – if you get a chance, is there any way you can pull up sales info for Eden Lane and Oak Ridge townhouses in Whippany (Hanover Township). These were going for the high $400s a year ago now many of them are sitting for under $400K. Thanks!

  32. James Bednar says:

    Kim,

    If you could list the streets in those developments, it would save me some time.

    jb

  33. SG says:


    Richard Says:
    January 24th, 2007 at 9:46 am

    wake up folks. as long as credit is cheap and plentiful the party will go on.

    I just posted Sales Transactions for both SFH & TH’s for last 5 years. You can clearly see that prices are down at least 20% or so from high in 2005. No body is going to give higher then comp rates in 2007.

    I have seen it all Richard. The boom and bust is normal in RE. The word bubble may be contested as it has implication of popping, but Boom & Bust has never been denied.

  34. UnRealtor says:

    Inventory is starting to swell. I’m seeing listings that were withdrawn in November now coming back on the market (under new MLS numbers, of course).

  35. James Bednar says:

    From the WSJ:

    Why You Should Think Twice About Investing in Real Estate

    Real estate may be getting cheaper. But homes are always expensive.

    Like any good knee-jerk contrarian, my enthusiasm for the property market grows as the bad news piles up. Only last week, the Federal Reserve’s “beige book” report on regional economic conditions noted that housing markets continue to soften, with sluggish home sales and falling prices in some areas.

    So is it time to buy the vacation home you’ve always wanted? Should you trade up to a larger place? It is tempting. But if your sole goal is making money, it’s mighty hard to justify.

    First, home-price appreciation has historically been modest and certainly nothing like the heady gains enjoyed earlier this decade.

    According to home-finance corporation Freddie Mac, U.S. house prices climbed 6.2% a year over the past 30 years, versus 4.3% for inflation. Beating inflation by 1.9 percentage points a year is (pun intended) nothing to write home about. To make matters worse, after the current decade’s blistering performance, even slimmer returns may lie ahead.

    Instead, as you toy with whether to trade up to a larger place or purchase a second home, your real focus should be the dividend. This dividend is the rent you receive or, if you live in the house yourself, the “imputed rent” — the rent you would have paid if you didn’t own the place. This rent might be worth 7% or 8% of a home’s value each year, though the figure will vary depending on the location.

    That brings us to the second key point. Homeownership is horribly expensive. In fact, it’s comparable to owning a mutual fund that not only charges 3% or so in annual expenses but also levies a 5% or 6% back-end sales charge.

    The back-end sales charge is the commission you will likely pay to sell your home, while the 3% annual expenses reflect the triple hit from property taxes, homeowner’s insurance and maintenance costs.

    In that case, all bets are off. You won’t collect any rental income and, after all costs, you probably won’t make much on the price appreciation.

    That doesn’t mean you shouldn’t buy that charming country cottage, assuming you have the financial wherewithal and you will get a lot of pleasure from the place. And clearly, it’s better to pay 2007’s prices than 2005’s. But don’t kid yourself: You aren’t investing in real estate — you’re consuming it.

  36. rhymingrealtor says:

    If anybody clicks on the link to the old posting regarding condo sales,and then reads the comments again… you’ll find Richard has changed his posistion as often as booyaaa bob has changed his name. Were’nt they both anonymous once?? The good ole days.

    No offense BOB…

    KL

  37. 1987 Buyer says:

    Jim,

    I lived throught the 1980-1990’s RiverMill West debacle in Belleville. Pull those sales from 1985 on, quite a lesson learned. these are the units on Mill Street in Belleville, 600-700 and a few on Montgomery Street.
    Bought in 87 at $132k, sold in 97 at $92k (should have waited 5 more years!)

  38. Better lower your prices fast THE RACE TO THE BOTTOM IS ON says:

    SG Says:
    January 24th, 2007 at 9:11 am
    Below are sale transactions for townhouses on the same street with same configuration in Bridgewater.

    Sep 06 $320,000
    Jun 06 $330,000
    Jul 05 $375,000
    Nov 04 $305,000
    Oct 04 $299,000
    Aug 04 $316,000
    Jul 04 $300,900
    May 04 $285,000
    Sep 03 $272,000
    Jul 03 $239,000
    Feb 03 $230,000

    According to this we are back in August 2004 territory. Buying anything at prices higher then August 2004, shows uninformed buyer.

    =================

    Like to see the next sale.

    Can you say 2003? Yeah.

    Spring 2008 Housing misery. Do NOT wait sell fast. It is a race to the bottom. There will be NO rebound off of 2008 misery prices.

    Better get realistic and fast. once you realize it or accept reeality it will be to late.
    Keep holding and dreaming it’s a race to the bottom.

    BOOOOOOOOOOOYAAAAAAAAAAA

    Bob

  39. chicagofinance says:

    Clotpoll Says:
    January 24th, 2007 at 10:33 am
    BC Bob-
    I’m also coming around to the Cramer idea that we’re gonna get at least one Fed cut in the first half of ‘07…even if they hold off until May/June. If one believes that the May ‘06 25bp bump was one too many, the May/June ‘07 could be explained as a “fine-tuning” counterbalance.

    Dude: People are starting to wonder about the first tightening, and whether it will happen in the 1H2007!

  40. James Bednar says:

    Speaking of inventory, here is the weekly inventory update. Inventory in Northern NJ is up approximately 5-6% since the beginning of the month.

    GSMLS Inventory
    Ber,Ess,Hud,Mor,Pas,Som,Sus,Uni,War Counties
    1/17 – 15,635
    1/24 – 15,860 (1.4% Increase)

    NJMLS Inventory
    Ber,Ess,Hud,Pas Counties
    1/17 – 7,368
    1/24 – 7,498 (1.8% Increase)

    MLSGuide Inventory
    Hud County
    1/17 – 2,310
    1/24 – 2,361 (2% Increase)

    jb

  41. Better lower your prices fast THE RACE TO THE BOTTOM IS ON says:

    rhymingrealtor Says:
    January 24th, 2007 at 10:57 am
    If anybody clicks on the link to the old posting regarding condo sales,and then reads the comments again… you’ll find Richard has changed his posistion as often as booyaaa bob has changed his name. Were’nt they both anonymous once?? The good ole days.

    No offense BOB…

    KL
    =============

    No offense. Keep up the good posts.

    BOOOOOOOOOYAAAAAA

    Bob – and very happy in house(s). will not sell whether price goes up or down. Who cares!

    The race to the bottom is on! Bring it on!

  42. Better lower your prices fast THE RACE TO THE BOTTOM IS ON says:

    2002 Housing prices here we come…..hehehehehe

    No Spring rebound. Depths of housing misery 2008. NO quick rebound off bottom! Do NOT count on it. Will take several years of bottom grinding. Your stuck if you want that dream price. Better lower price fast ahead of competition. You are not entitlement to your drem price. Smart young buyers demand better value. Gotta work for a living now. Housing ATM CLOSED!

    hehehehehhe

  43. 2008 Buyer says:

    Grim, thanks for bringing up that old article on condos.

    Felt like sharing today… I presently own a condo (bought in 04′) in South Orange, really didn’t appreciate that much since then but has enough equity in it to either break even or make a little bit of money (after paying realtor fees) if I sell. I’m actually getting tired of the place and want to upgrade. My dilemma…I’m getting the condo ready to either rent out (hopefully will break even after paying mort, condo fees with a worst case negative $150 rent flow) or sell in this market. I want to be in a position to buy (but not necessarily have to buy if the market hasn’t changed) in 2008. Its better to already have a tenant in my old place while I rent and carefully choice the next place.

    PS…LOL…I think that was Barbara Weismann’s (rebuttal of your data) first and last post on the blog

  44. bergenbubbleburst says:

    2008 Buyer: The way the market is going, you could very well be a 2007 buyer. Inventory is exploding in my “premier” Bergen County town,a nd it is only the end of January.

  45. bergenbubbleburst says:

    No rate cuts this year,a d very real possiblility of at least one hike. The big drop in oil prices is like an interest rate cut.

    The market is slowly adjusting to that reality now.

  46. Lindsey says:

    re posts 4, 28 and 40

    BC Bob, I don’t think we’re going to have to wait until 2008/09 for a recession (Check the predictions for my call. I would love to be wrong.)

    Clot, While housing might love a rate cut, the effect on the dollar in international trade would be hideous. People are already leaving, I think a cut could cause a stampede.

    Chifi,

    People are wondering, what do you think?

    If the Eurozone goes up, I’m not sure we have a whole lot of choice in the matter. The pound is certainly kicking our butts down the street.

    I don’t think Bernanke et. al. will do the right thing because it’s the right thing, but the rest of the world can force the fed’s hand.

    Sadly, there are still a lot of people with lampshades on their heads, but no one’s laughing anymore. Refilling the punch bowl now won’t revive the party, it will just make people sick.

  47. Al says:

    BC Bob Says:
    January 24th, 2007 at 8:36 am
    From the Daily Reckoning. Sorry no link;

    Since 2001 the dollar has been devalued by 60%.

    In 1934 FDR devalued the dollar by 41%.

    In 1971 Nixon devalued the dollar by 7.9%.

    In 1973 Nixon devalued the dollar by 10%.

    These were momentous monetary events, and every knowledgeable person
    worldwide paid close attention. Major changes were endured in 1979 and
    1980 to save the dollar from disintegration. This involved a severe
    recession, interest rates over 21%, and general price inflation of 15%.

    that is from post#8

    My Opinion – inflation is a great reason to buy a house right now. I wonder why we do not hear this one more ofter – yo me it is inevitable that US dollar will devalue at least 50% in the next 10 years…….

    Look at budget deficit and balooning stock market – it is already here, it’s just hasn’t been passed on comsumer yet – because chineese goverment is still agreeing to subsidize US spending. Once they will stop (actually China is already diversifying their reserves)dollar will crash??

    Whats wrong with this forecast??

    Granted I do not get my salary rised due to the fact that I am not at the top of the money chain. Look at finance people/very rich people/athletes/CEO – their salaris and bonuses skyrocketed. So do we expect a huge inflation 5-6 years down the road – I just do not see another way out of financial hole US put itself into?? DO you??

  48. Al says:

    Inflation of 15% for only 5 years will lower real US foreigh debt by half!!!

    After that no foreghn goverment will lend us money, but so what??
    We can still go and bomb the living sh$t in Iraq if they refuse selling us oil right?

  49. Kim says:

    Thanks Grim! Wippanong Way, Appleton Way, Cortland Lane, zip 07981. Thanks!

  50. AntiTrump says:

    #41 chicagofinance:

    I am in the .25 percentage tightening camp. I don’t see a cut coming at all.

  51. listentothecrybabywannabehomeowners says:

    Here’s an article from the WSJ.

    WAAAAAAAAAAAAAAAH!!!

    Why You Should Think Twice
    About Investing in Real Estate
    January 24, 2007; Page D1
    Real estate may be getting cheaper. But homes are always expensive.

    Like any good knee-jerk contrarian, my enthusiasm for the property market grows as the bad news piles up. Only last week, the Federal Reserve’s “beige book” report on regional economic conditions noted that housing markets continue to soften, with sluggish home sales and falling prices in some areas.

    So is it time to buy the vacation home you’ve always wanted? Should you trade up to a larger place? It is tempting. But if your sole goal is making money, it’s mighty hard to justify.

    • Counting costs. When analyzing the payoff from homeownership, it is critical to remember two key points.

    First, home-price appreciation has historically been modest and certainly nothing like the heady gains enjoyed earlier this decade.

    According to home-finance corporation Freddie Mac, U.S. house prices climbed 6.2% a year over the past 30 years, versus 4.3% for inflation. Beating inflation by 1.9 percentage points a year is (pun intended) nothing to write home about. To make matters worse, after the current decade’s blistering performance, even slimmer returns may lie ahead.

    Instead, as you toy with whether to trade up to a larger place or purchase a second home, your real focus should be the dividend. This dividend is the rent you receive or, if you live in the house yourself, the “imputed rent” — the rent you would have paid if you didn’t own the place. This rent might be worth 7% or 8% of a home’s value each year, though the figure will vary depending on the location.

    That brings us to the second key point. Homeownership is horribly expensive. In fact, it’s comparable to owning a mutual fund that not only charges 3% or so in annual expenses but also levies a 5% or 6% back-end sales charge.

    The back-end sales charge is the commission you will likely pay to sell your home, while the 3% annual expenses reflect the triple hit from property taxes, homeowner’s insurance and maintenance costs.

    Your annual expenses would be even higher if you add in home improvements and monthly mortgage costs. But arguably, neither should be included: Home improvements are optional expenditures, while a mortgage is a borrowing cost, not a cost inherent in homeownership.

    • Collecting rent. What’s the implication of all this? If you subtract the costs of homeownership from your price appreciation, you are unlikely to keep pace with inflation — and you might end up under water.

    True, if you have a mortgage, you could enjoy leveraged gains. But leverage can also bite. Indeed, from current levels, price gains may fall short of the 6.4% interest rate now charged by a 30-year fixed-rate mortgage. What about the mortgage-tax deduction? Even if you figure in the tax savings, the leverage may still not work in your favor.

    All that said, this could be a wonderful time to invest in real estate — and, no, I am not making a market prediction. Frankly, it isn’t that important whether property prices climb at 4% or 6% a year.

    Rather, what really matters is the long-run dividend. As savvy landlords will tell you, the key to a successful investment property is finding a place that will attract good tenants who deliver a steady stream of rental income.

    But what if you have no desire to be a landlord? What if, instead, you’re thinking of trading up to a larger house or buying a vacation home for your own use?

    In that case, all bets are off. You won’t collect any rental income and, after all costs, you probably won’t make much on the price appreciation.

    That doesn’t mean you shouldn’t buy that charming country cottage, assuming you have the financial wherewithal and you will get a lot of pleasure from the place. And clearly, it’s better to pay 2007’s prices than 2005’s. But don’t kid yourself: You aren’t investing in real estate — you’re consuming it.

  52. njrebear says:

    #48 Al,
    Housing could be a good bet against inflation if price appreciation can keep up with inflation. With all the baby boomers trying to cash out, I don’t think price appreciation will match inflation.

  53. James Bednar says:

    listen,

    I already posted the text and link.

    jb

  54. Al says:

    Housing scosts wil not follow inflation closelly for a while because: we had 100% housing inflation in 5 years and only about 15% wages inflation – housing is well ahead in this department.

    HOwever if High inflation is the path we are going to follow, than time to will be soon.

    In NJ it might be worth to wait for a year or two. In california it might be worth to wait for 2-3years.

    however if you are in Texas or Arizona it might be worth to buy now??

  55. syncmaster says:

    Poll: Corzine blamed for no tax reform

    A Qunnipiac Poll released this morning showed two out of three voters surveyed said they thought it was unlikely lawmakers would cut property tax bills.

    And more than half of the voters polled disapproved of how Corzine has handled the tax reform effort. That apparently has affected his overall approval rating, too. It fell to 42 percent…

    […]

    The state Legislature got even lower approval ratings. Overall, voters disapproved of the job lawmakers are doing by an upside-down, 27-to-54 percent margin. On property taxes, the disapproval is even greater, 16 to 62 percent, the poll showed.

    […]

    The poll showed that a majority (54 percent) supports a plan to limit property tax increases to 4 percent a year, although that support falls to 41 percent if those tax caps lead to layoffs of teachers, police or firefighters, the poll showed.

    […]

    Voters were evenly split, 46 to 46 percent, on whether public workers should pay more for their health benefits and accept a reduction in retirement benefits.

    The poll also found a majority of voters:

    * Oppose a proposal to sell or least the New Jersey Turnpike or the Garden State Parkway as a way to reduce the state’s debt, 53 to 34 percent.
    […]

    The poll of 1,310 registered voters was conducted by phone Jan. 16-22. It has a margin of error of 2.7 percentage points.

    Contributed by Deborah Howlett

  56. AntiTrump says:

    listen:

    Are you stupid and blind? I thought it was just stupid

  57. syncmaster says:

    … support falls to 41 percent if those tax caps lead to layoffs of teachers, police or firefighters, the poll showed.

    […]

    Voters were evenly split, 46 to 46 percent, on whether public workers should pay more for their health benefits and accept a reduction in retirement benefits.

    So 59% of the people in this state would actually oppose a cap on property tax increases if it meant layoffs?

    And 46% actually don’t believe public workers should have to contribute to their own benefits like everyone else?

    These are the people I share a state with? I feel disgusted. This state deserves what’s coming.

  58. syncmaster says:

    Dunellen’s “redevelopment” plan has changed due to the softening of the RE market. Instead of 400 townhomes built around the train station, they’re now talking about less than 300.

    http://www.nj.com/news/ledger/middlesex/index.ssf?/base/news-2/1169617771276370.xml&coll=1

  59. Lindsey says:

    Here’s a market snapshot for Monmouth County
    (Since I have the data)
    I’m jumping the gun by a day, but that’s life.

    As luck would have it the low inventory point at the beginning of 2006 and 2007 was Jan. 4 in both years.

    listings on the MLS
    1/4/06:5015
    1/4/07:6459, a YOY rise of 1444 or 28.8%

    1/25/06: 5326, a rise of 6.2% (311 listings) in 3 weeks
    1/24/07: 7064, a rise of 9.37% (605 listings) in 3 weeks. YOY 1738 or a rise of 32.6%

    So to be clear, we have more inventory, and it is rising more rapidly (better than 50% faster), and the call is for less buying.

    What direction do you think prices are going?

  60. BC Bob says:

    Clot,

    At this point, I feel that there is a beter chance of a rate hike. The fed knows that inflation is the # 1 threat. Right now, we are outside of their target range for core cpi and wages are accelerating. Barring any jolt, I feel that things would really have to unravel quick for a spring rate cut. Again, barring some unforeseen event, if they cut in the near future,IMO, the dollar will be crushed and gold will take off. However, your synopsis is certainly plausible, there is a wide range of varying opinions/forecasts on the street.

    Regarding your short. When copper and crude were getting crushed while the dollar was limping upward, gold held the $600 level like a rock and rallied when it could have certainly sold off another $30. The physical buying in the world markets is incredible. At this point, every 20-40 decline results in huge buying. If it gets thru the 650-660 level, it can certainly move upward fast. You are right, carriers to the gulf, the terminally ill dollar,Iraq, Iran, Chavez, etc….. Kind of like the perfect storm.

    Again, just an observation, certainly not a recommendation. This is just a forum for ideas.

  61. BC Bob says:

    Listen,

    #52

    I believe I read this, on this site. No link??

    “Rather, what really matters is the long-run dividend.”

    Could not agree more.
    Can you please explain to me how the dividend works in this scenario. Purchase price $590k, taxes $10,500 or rent for $2,500 mo?? Real life situation, saw it on Saturday. If you had a choice would you buy or rent this property??

  62. BC Bob says:

    Lindsey,#60

    Those #’s are incredible. It will be very interesting to see the flood hit after the Super Bowl.

  63. James Bednar says:

    If anyone else has any 80’s bubble stories they would like to share, drop me an email at jamesbednar@gmail.com

    I’d like to put some kind of compendium of stories together.

    jb

  64. Clotpoll says:

    ChiFi (40)-

    Common sense and a careful reading of Fed governors’ comments would indicate rate hike. However, some not-so-dumb people out there make a plausible case (thanks, BC Bob, for your response in #61) for a very unexpected cut.

    If it was one voice in the wilderness, I’d ignore it. But it’s not. And, I still can’t help thinking that Messrs. Paulson & Bernanke have a silent mandate to export as much of our pain as possible thru turning the USD into Monopoly money.

    As BC Bob has already pointed out, we’ve pretty much beat the USD to sh*t. What does it really matter that they now turn to flogging it some more to achieve whatever short-term fix-du-jour seems necessary?

    As the old quote goes: we’ve now determined that we’re whor*s…all that’s left to haggle over is the price.

  65. chicagofinance says:

    “Feel good” legislation wrecking markets. U.S. government BEWARE! Corzine as well. Did Corzine even crack a book in Chicago?

  66. chicagofinance says:

    Clotpoll Says:
    January 24th, 2007 at 1:03 pm
    I still can’t help thinking that Messrs. Paulson & Bernanke have a silent mandate to export as much of our pain as possible thru turning the USD into Monopoly money.

    Clot: those who hope to keep the RE market intact should hope we receive a market based set of brakes in the form of oil bouncing back to $60 and staying put.

    If all falls below $50 and stays there for any length of time beyond a couple of weeks, the resulting firestorm of economic activity is sure to singe the f— out of us.

    No matter what, China is going to but us off by 2010. Enjoy some more run-up in the markets, I think 2008 is going to be tough sledding as it looks now. Caveat – I’m in a bad mood.

  67. chicagofinance says:

    I have no idea how “oil” came out as “all” from my fingers. Must have be thinking with a Texas accent.

  68. Clotpoll says:

    Biggest “feel good” boondoggle: ethanol. Costs more to synthesize and distribute than refining gasoline (ethanol cannot be transported via pipeline…can only be trucked or delivered by rail). Will completely destroy soft commodity markets, as the race for corn acreage will decrease plantings of wheat, soybeans.

    Add to this the fact that the entire US ethanol industry is completely protected vs ANY foreign competition or importation…even though Brazil overproduces enough ultra-cheap sugarcane ethanol to be able to sell us massive amounts at well-below-market prices AND still power their entire vehicular-based economy! We won’t let one drop across the border.

    Of course, where is the US center of the ethanol business? Iowa.

    And where does the presidential primary cycle begin? Iowa.

    Some coincidence, huh?

  69. James Bednar says:

    From NJ.com:

    School Construction Corp. needs cash infusion

    Without authorization for new funding on top of the $8.6 billion it was initially allocated six years ago, New Jersey will have to start closing down its ambitious school construction program in May or June, officials of the state agency in charge of the program said today.

    “The time has come for us to start considering curtailment options,” Scott Weiner, chief executive officer of the state Schools Construction Corp., told the agency’s trustees at their regular board meeting in Trenton today. “We would be stopping projects from going into construction in the May-June timeframe.”

    Officials are seeking authorization from the Legislature to borrow another $3.25 billion for the program, including $2.25 billion for construction in Newark, Camden and 29 more of the state’s neediest communities.

    Without the additional funding, Weiner said, the program will continue work on 34 construction projects already underway, but will stop designing and doing other preliminary work on any new projects, Weiner said.

  70. James Bednar says:

    Clot,

    I believe Calderón has put price controls in place on corn tortillas due to rapid increase in price seen over the past few months.

    jb

  71. lowball says:

    #73 ChiFi:
    I have no idea how “oil” came out as “all” from my fingers. Must have be thinking with a Texas accent.
    —————————————-
    What Makes you Thank Teksuns Tawk Funny? (tobacco spit…)

  72. bergenbubbleburst says:

    #61 Sync: I wonder how many of these people polled are employed in the public sector, becasue other wise the % number is shocking, and residents of this state, and I am sorry to use the word are even stupider then I thought.

    The only thing I can think of, is that people may have a problem with laying teachers off, as that will be perceived to impact the quality of their local schools, which will in their opinion lower their property values.

    Otherwise, to use the word again, people are just plain stupid, so much for our exalted public schools, 4th best in the nation etc., etc.

  73. Clotpoll says:

    Grim (76)-

    What a fastball down the pipe that one is! There is nothing I can say in response that could make it past moderation.

    Suffice it to say that soft commodity markets are never going to be the same again.

  74. Clotpoll says:

    That is, unless Mexico can be converted to whole wheat and soybean tortillas.

    Yuck.

  75. AntiTrump says:

    Another crack smoking seller:
    http://tinyurl.com/35pnqu
    xx Mountain Ave, Summit, NJ
    OLP: $919,000
    LP: $769,900
    DOM: 317

    This game is called “Find me a sucker !”

  76. James Bednar says:

    From the Baltimore Sun:

    City apartments boom in a volatile market

    Ryan Conlon had a condo picked out. Nothing showy, but nice. Two bedrooms and a porch. No roommates, no landlords.

    The 29-year-old supervisor at Geico in Bowie was almost locked into the deal when he suddenly backed out.

    “The condo market is no good right now,” he decided.

    Instead, he and a friend took sanctuary at 1901 West, Annapolis’ newest luxury apartment complex, signing a one-year lease in December for a two-bedroom, two-bathroom unit with granite countertops, maple cabinets and stainless-steel appliances – for $1,900 a month.

    “For someone like me who makes decent money, I could afford a condo right now, but then I’d be house-poor,” he said. “I plan on buying as soon as prices go down.”

    “For some people, it’s a good idea to buy right now. For others, it’s not,” Hyland said. “Many of the listing prices were overextended to begin with, and most have dropped 20 percent in the past year. There are some pretty good opportunities out there.”

    He and his wife are renting an Eastport condo that “we could nowhere near afford to buy.” They intend to buy again once the market settles.

  77. AFE says:

    speaking of the baltimore area….

    I have a question re: real estate assessments. A townhouse I was looking at in howard county was recently bought at 440k. It had been on the market for ~470k for about 6 months. Now the 2007 assessment says it is worth 450k, vs. 275k assessment in 2004. Also, another tidbit of info is that it was bought for 375k in 2004. Question 1: how much profit did the seller make? Question 2: What does buying a property at cost below assessment value say about the property’s “true value”? Os it the cost paid or is the assessed value?

    Thanks for the input.

    AFE

  78. AFE says:

    clarification of question 2 (post #83 above)Is true “market value” the cost paid (440) or is it the assessed value (450).

    thanks
    AFE

  79. AntiTrump says:

    #83 & 84

    Historically the sale prices is almost always higher than the assessed values. Recently I have seen some towns were homes are selling below the assessed value.

    For the most part they are disconnected and you should only look at the actual sale price when considering how much to pay. The assessed values’s are for tax purposes are mostly not relevant to the transaction. Hope this makes sense.

  80. Willow says:

    #85
    FYI

    If you buy at least 15% below tax assessed value, you can appeal your assessment and get it reduced to the purchase price.

    Someone I know who bought in the early 1990s bought for below tax assessment (this town had a reval in the late 1980s when values were high) and successfully had it reduced to purchase price.

  81. BC Bob says:

    “as the race for corn acreage will decrease plantings of wheat, soybeans.”

    Clot,

    From your mouth to the fields of the Plains. Beans in the teens????

  82. James Bednar says:

    Interesting piece at Minyanville:

    A Dose of Reality on the Housing Market

  83. chicagofinance says:

    lowball Says:
    January 24th, 2007 at 1:37 pm
    #73 ChiFi:
    I have no idea how “oil” came out as “all” from my fingers. Must have be thinking with a Texas accent.
    —————————————-
    What Makes you Thank Teksuns Tawk Funny? (tobacco spit…)

    Low: I was talking to this guy from Lubbock, and he referred to answering a particularly easy question as a “lay down”. I was thinking WTF is a lay down. So he described…..a “layup”.

  84. Richard says:

    >>The sophisticated investors of the world telling us. They are selling dollars and buying gold

    That’s a generalized uncorroborated and subjective statement.

  85. Richard says:

    >>Inventory is starting to swell

    if inventory eclipses 35k at any point in 2007 i’d start to worry about pricing weakness based upon what we saw last year. that’s just my feeling.

  86. AFE says:

    thanks antitrump & willow. That info helps.

    Willow, is that 15% rule true throughtout the US or in NJ only?

    afe

  87. lowball says:

    Follow up to #82 James Bednar:

    “About 66 percent of Annapolis’ condos stood empty at the year’s end, according to Delta.”

    (NAR Troll to Joe6Pack: “Now is a good time to buy”)

  88. Richard says:

    and the beat goes on, and the world continues to turn, and people continue to get married, have kids, go to their jobs and live life….and the RE bears continue to rage against the machine, dumbfounded that the world isn’t adjusting to their forecasts, banding together in koresh-style fashion to reinforce their beliefs, grabbing and pulling out of context any information that supports their view of the world.

    that’s basically what someone told me the other day about RE bears. he bought 2 properties last year in NJ and is up 15% on each. not everyone who bought last year is a bagholding peak buyer.

  89. BC Bob says:

    “That’s a generalized uncorroborated and subjective statement”

    Richard,

    Quite the contrary. Go look at/read the charts. China has been telling us this over the last 6 months. Opec is making noise regarding pricing crude in Euro’s. It’s quite specific and concrete. Kind of like the RE data.

  90. James Bednar says:

    Richard,

    I applaud your creative use of both straw-man and ad hominem.

    jb

  91. still_looking says:

    ….in case it got missed….

    for those with mls access–
    any help with info on mls #s

    2364894
    2366512
    2365201

    would be appreciated
    as always, thanks in advance…

    sl

  92. Rich In NNJ says:

    >>if inventory eclipses 35k at any point in 2007 i’d start to worry about pricing weakness based upon what we saw last year. that’s just my feeling.

    That’s a generalized uncorroborated and subjective statement.

  93. Pat says:

    Is Richard two different people?

  94. Rich In NNJ says:

    >>that’s basically what someone told me the other day about RE bears. he bought 2 properties last year in NJ and is up 15% on each. not everyone who bought last year is a bagholding peak buyer.

    That’s a generalized uncorroborated and subjective statement.

  95. BC Bob says:

    “That’s a generalized uncorroborated and subjective statement”

    Richard,

    You can take your foot out of your mouth now.

    http://charts3.barchart.com/chart.asp?jav=adv&vol=Y&grid=Y&org=stk&sym=GCG7&data=H&code=BSTK&evnt=adv

  96. Willow says:

    “Willow, is that 15% rule true throughtout the US or in NJ only?”

    New Jersey is the only one I know about. You would have to check with the county or state gov’t in whatever state you’re in.

  97. James Bednar says:

    still_looking,

    Are those NJMLS or GSMLS?

    MLS# 2364894
    25# Oak Grove, Franklin NJ
    OLP: $749,000
    LP: $749,000
    DOM: 9

    MLS# 2365201
    # Sydney School, Franklin NJ
    OLP: $981,000
    LP: $981,000
    DOM: 8

  98. still_looking says:

    gsmls…and THANK YOU!!!!

    sl

  99. James Bednar says:

    That second one is coming back as Paterson, is that correct?

    jb

  100. bergenbubbleburst says:

    Richard: now I know your blowing smoke, there is no way your so called friend bough last year and is up 15%.

    Nobody is raging against the machine as you claim/ people on this site are going tot ake their time, be prudent and not over pay, it is a simple as that.

    You are more than welocme, to com on this site and hype all you want, but the fact remains that the bubble is bursting or deflating,and prices are coming down.

    At the end of the day there was no rational fundamental underlying economic reasons for house prices to double in less than 5 years. None.

    If you are happy with your recent purchase, than good for you, and I mean that sincerely, but why come to this site, should you not have moved on, you purchased, you ar allegedly happy with your decesion, you claim you are in it for the long term, yet for some inexplicable reason you are drawn to this site.

    Are you fervent in your beliefs, and you feel a need to convert us, or are you perhaps doubting the decesion you made, and the real reason you come to this site is to try and get a better understanding as to how bad this real estate decline will get.

    Then when you see something posted that antagonizes you, or shakes your beliefs you lash out at those of us who have not yet drunk the kool-aid, because if we all did, then there would be no need for this site, and you could feel confident in your decesion.

    Prices went up to high too fast, prices are and will continue to come down, and in many cases just as fast.

    Simple and simplistic, yes it is, and at the end of the day these things are.

    I will be buying sometime this year, 20% off the list price, it maky take a year to accomplish it, bu that is fine, as I have found over the years that patience is rewarded.

    After I havepurchased, I am fully prepared for prices to drop another 10% or more, and then flat line for a few years.

    I am financially prepared for that, andi will not be out screaming and yelling at people that they should be buying, andr eal estate always goes up, and we are close to NYC, and do not be a crybabywannabehomeowner/renter loser and all the other nonsense. I have heard.

  101. FirstTimeBuyer says:

    OT: I have a question about West Orange. I thought I knew the area, but I’d like any input from folks who live/work/have looked in the area.

    We have a lead on a house that’s $375k on a big lot on the Livingston border. The house needs cosmetic work only (paint, new kitchen, new bath). Taxes are pricey these days in WO, but would it be worth it. Anything to share?

    Thanks!

  102. Iselin007 says:

    Lets get to the meat of the problem. Selling homes to or giving loans to undocumented aliens who make low wages will usually end in disaster.

    How did they qualify for a loan? Forging documents in order to make a sale was and is still a federal offense the last time I checked!

    Knowing who bought into the housing boom in my area explains the clothes hanging on the line to dry and the many mattresses tossed around the properties outside! These properties are just places to warehouse illegal immigrants many of which have expired visas.

    Seems funny a person would pay $400,000 plus for a home then use a clothes line or dump mattresses in their backyard! I expect many loan officers and realstate professionals will be visiting the US Prison System by the time this bubble ends.

    ALready several towns are finding these homes bought furing the boom are in violation of occupancy laws or that they have been converted illegally. The purchsing of single family homes to house illegal immigramt workers for businesses is one of the most common scams going. Just because an undocumented alien bought a home does not give them a right to stay in the US an so they will be deported!

  103. Willow says:

    Re: West Orange

    If you have no children and won’t have children I guess it’s okay except for the taxes. Too many people I know who live in West Orange either send their children to private/parochial schools or home school because they feel they can not send their children to the public schools. Also, I know people who have moved into my school district from West Orange right before their oldest was to enter middle school.

  104. BC Bob says:

    “I have found over the years that patience is rewarded.”

    bergenbubble,

    Two of the most powerful attributes to success are patience and time.

  105. Richard says:

    sure bob, try again. you’ve proved nothing.

  106. Richard says:

    this blog is better than a 3 ring circus. the groupthink is borg-like.

  107. Rich In NNJ says:

    >>this blog is better than a 3 ring circus. the groupthink is borg-like.

    That’s a generalized uncorroborated and subjective statement.

  108. AntiTrump says:

    #94 Richard Says:
    “that’s basically what someone told me the other day about RE bears. he bought 2 properties last year in NJ and is up 15% on each. not everyone who bought last year is a bagholding peak buyer.”

    I say “That’s a generalized uncorroborated and subjective statement”

  109. BC Bob says:

    Richard,

    Glad to see you have your foot out of your mouth. Any comments regarding that “subjective” chart?? By the way, not trying to prove anything. Just listening to the markets.

  110. AntiTrump says:

    According to Richard everything people say here is “That’s a generalized uncorroborated and subjective statement”

    exccept when he gives *facts* like “five of my wall street buddies just bought in westfield”

    “I know two people who bought last year and they doubled their money”
    etc, etc

    It’d be nice, if you could add some mls numbers, etc.

  111. AntiTrump says:

    #106 bergenbubble Says:
    “After I havepurchased, I am fully prepared for prices to drop another 10% or more, and then flat line for a few years.

    I am financially prepared for that, andi will not be out screaming and yelling at people that they should be buying, andr eal estate always goes up, and we are close to NYC, and do not be a crybabywannabehomeowner/renter loser and all the other nonsense. I have heard. ”
    ______________________
    I completely agree. Even if I buy next year, I am prepared for a 10% decline or a flat market. I would be buying soley to enjoy the house house and not to make a killing on it. The same way I buy a car knowing that it is a depreciating asset. But the growl of a 400 bhp V8 warms my loins and I like it and am willing to pay the price for it.

  112. James Bednar says:

    this blog is better than a 3 ring circus. the groupthink is borg-like.

    Richard,

    Again with the logical fallacies,

    I don’t know why you seem to think that you aren’t a member of the blog. The fact is, you are a regular reader and contributor. You, yourself, prove your statement to be false.

    jb

  113. AntiTrump says:

    #107 FirstTimeBuyer Says:

    The schools in West Orange aren’t that great and if you work in the city, there is no train so you have to take the bus and live with the traffic on 280. I have a friend who lives there and works in midtown. Bus takes about an hour and fifteen to get to PA bus terminus. Other than that it is a decent town and you get a better price that livingston or the other premium towns nearby.

  114. Pat says:

    I just added this page to my favorites.

    Wanna be able to cut and paste from this page over the next few months, and there are a couple of nice phrases for some e-mails I need to write.

    Thanks….esp. to Richard for:

    TAG-U-ASS:
    That’s a generalized uncorroborated and subjective statement.

  115. syncmaster says:

    This conversation got me wondering:

    How much effort would be involved in using MLS and/or tax records to generate a list of RE purchases in 2006 in a specific town or county where the purchase price was below the purchase price of subsequent sales of similar properties?

    I have no idea how MLS is structured… is it a database and are realtors allowed to write their own queries against it?

  116. James Bednar says:

    Sorry, I need to correct myself.

    The scorecard is two logical falacies (straw man and ad hominem) and an informal falacy (false premise).

    jb

  117. pesche22 says:

    Record Dow, Naz,,,

    housing stocks up,,, xhb another nice day.

    oh, well . Pay attention.

    The trend is your friend.

  118. 2008 Buyer says:

    from WSJ Homes section

    In New Jersey, where home sales fell 10% in 2006, the luxury-end of the housing market is expected to be hard hit over the next decade, according to an article published by NorthJersey.com. Detrimental to this segment of the housing market will be a lack of higher-paying jobs, and the transition of baby boomers or empty nesters from larger homes to smaller ones, the Web site says. For example, in Bergen County, it will take two years to sell the inventory of homes priced at $2.5 million, NorthJersey.com says. The Web site also reports that overbuilding in age-restricted communities, vacation properties and condos, and slow job growth over the next decade will create a drag on the state’s overall housing market.

  119. AntiTrump says:

    #pesche22 Says:

    The trend is sure my friend. That’s precisely why I have lots money in stocks and none in housing.

  120. bergenbubbleburst says:

    And the trend for housing is down. Technical plays in th market have no ipmact on the reality of the new home construction.

    Lots of inevntory, little demand, massive incentives to move what inventory that is moving.
    And you believe all is well, just run a house clearance sale from now till April, and then start building again, just in time to catch the Spring market, and then its up, up and away again?

    Not happening, watch listen and learn grasshopper.

  121. BC Bob says:

    pesche,

    Look at the short interest/float of the H-B’s. Is this the beginning of a new trend or the unwinding of a very top heavy short?? It’s hard to imagine any stock continuing to go down with this short interest %. By the way, totally subjective.

    http://finance.yahoo.com/q/ks?s=HOV

  122. 2008 Buyer says:

    S&P Sees End of Bull Market for RMBS
    The bull market in residential mortgage-backed securities in recent years appears to have run its course, according to a new report published by Standard & Poor’s Ratings Services. As evidence, S&P pointed to slowing home price appreciation, diminished profitability for mortgage lenders, widening credit spreads, and an acceleration of negative rating actions. Issuance will decline in 2007 by as much as 10%-15%, bringing the dollar amount to $900 billion-$950 billion, S&P said. However, the rating agency said RMBS issuance will still be significantly higher than in 2003 and 2004, when it totaled $586 billion and $864 billion, respectively. “We foresee further compression of the upgrade-to-downgrade ratio because fewer outstanding transactions are now collateralized by prime mortgage loans, and the recent trend in securitization is toward structures with fewer speculative-grade ratings,” the rating agency said. S&P said it expects more downgrades and fewer upgrades this year. The report is titled, “For U.S. RMBS, 2007 Will Be a Year of Transition for Issuance and Performance Concerns.” S&P can be found online at http://www.standardandpoors.com.

  123. pesche22 says:

    I have my own charts . Thanks.

    The trend is your friend.

    Record Naz, Dow,

    Record emerging markets.

    Sell your house , buy stocks.

    and go short the dollar.

  124. pesche22 says:

    xhb trades on techs. not fundamentals

  125. Clotpoll says:

    Allow me to take this opportunity to announce that I disavow any association with Reechard and the troll-like comments emanating from his computer in his new- and rapidly appreciating- domicile on Jupiter (or is that Westfield?).

    The bull case for RE is not the same as the psychotic’s case for increased medication.

    March thru this field of mud on your own, Reechard.

  126. James Bednar says:

    My gut feel tells me there are very few here who don’t have a position in the U.S. markets. I would even go so far as to wager a bet that a large portion of the regular contributors have positions in the emerging markets as well. Realize that not disclosing those positions is not the same as not having a position. Being bearish on some aspect of the market doesn’t mean you are bearish across all markets, nor does being bullish on one aspect of the market make you an across-the-board bull.

    jb

  127. 2008 Buyer says:

    Interesting comments during Thornburg Mortgage (specialize in $500k+ ARM loans)

    “Loan originations totaled $5.6 billion in 2006, not only exceeding our 2005 production by 13%, but also our annual target by 2%. Our results sharply contrast with the Mortgage Bankers (MBA) projection that the industry’s overall origination activity would drop by 17% in 2006. “While the MBA is projecting a 5% decline in total mortgage originations in 2007, we anticipate that our unique approach to loan originations – with our focus on providing jumbo and super-jumbo ARM loans to affluent borrowers with superior credit directly and through our lending partners – will allow us to continue to gain market share.

  128. 2008 Buyer says:

    Specialize in $500k ARM loans to strickly prime borrowers

  129. James Bednar says:

    From MarketWatch:

    Ryland 4Q Profit Falls 46 Percent

    Ryland Group Inc. said Wednesday its fourth-quarter profit fell 46 percent, as the homebuilder recorded fewer closings amid a slumping U.S. housing market, but results still surpassed Wall Street’s expectations.

    Quarterly earnings dropped to $87.2 million, or $1.98 per share, from $162 million, or $3.32 per share, in the prior-year period. Revenue slipped to $1.36 billion from $1.53 billion.

    Many homebuilders have been forced to write down the value of land holdings or give up deposits on land they planned to purchase. Ryland said it recorded pretax charges of $54.5 million to adjust the value of its inventory of homes and writing off deposits and preacquisition costs. In addition, the company offered additional incentives to entice buyers.

  130. James Bednar says:

    From Reuters:

    Meritage Homes profit tumbles 91 percent

    Home builder Meritage Homes Corp.(MTH.N: Quote, Profile , Research) on Wednesday said quarterly earnings fell 91 percent, brought down by charges related to lower land values, a result of the sagging U.S. housing industry.

    The company said fourth-quarter profit was $9 million, 34 cents per share, down from $102 million, or $3.53 per share, a year earlier.

  131. James Bednar says:

    Meritage reported a 48% cancellation rate, the highest I’ve ever heard thus far.

    It is simply mindboggling to think that almost half of the buyers walked away from contracts.

    jb

  132. AntiTrump says:

    #132 James Bednar Says:

    Precisely my point. Just because I am short housing and wary of some imbalances in the world and our economy doesn’t make me a depressed looser like some re bulls on this forum like to potray people with a bearish outlook on RE.

    I enjoy my work, family, friends, travel, kids, toys, etc, etc. Overall, I’d say that I am content with my life so far.

    And I am certain that I will make money on RE when the time is correct, just like I have done before. Right now, I’d rather put my cash to work else where.

  133. BC Bob says:

    “Record Naz”

    pesche #129,

    ????????

  134. BC Bob says:

    “It is simply mindboggling to think that almost half of the buyers walked away from contracts.”

    JB,

    Just goes to show how weak the links in the chain are. This industry needs a flood of new buyers that are not part of the chain. Tall order?? Indeed.

  135. BC Bob says:

    “Just because I am short housing and wary of some imbalances in the world and our economy doesn’t make me a depressed looser like some re bulls on this forum like to potray people with a bearish outlook on RE.”

    Anti,

    Yeah I guess when you are realistic, prudent and aware you are tagged. That’s fine, what’s the alternative???

  136. RentLord says:

    Can someone give me the scoop on this house:

    14 lehigh drive, kendall park, nj 08824.

    I don’t see it in recent sales on nj.com.

    It was originally listed at 589k, reduced to 559k then disappeared of mls (public view)

    don’t have mls id sorry

  137. skep-tic says:

    the rapid rise of consumer debt distress is amazing given the strong overall economy. it’s not just mortgage debt– auto loan defaults are rising rapidly as well.

    these workout policies are esp interesting given that overall defaults are low, despite the quick rise from virtually zero.

    it’s as if the lenders know there is a sh*tstorm coming

  138. chicagofinance says:

    clot: wise man speak with forked tongue ;)

  139. chicagofinance says:

    Completely OT: if you haven’t checked out life insurance rates recently, you may be shocked

    I just was able to offer to a healthy married couple, husband 38 / wife 37 – clean health record, $315H/$295W from one of the major carriers for 20 year level term $500K each, no investment component

    They are giving it away if you are under 40 nowadays.

    IMHO – you need it if you have a mortgage or have kids….don’t worry about it otherwise – don’t use insurance like the lottery, it is just a tool.

    Commerical crap off…………….

  140. skep-tic says:

    $315H/$295W

    this is annual? if so, wow

  141. chicagofinance says:

    yes

  142. James Bednar says:

    cf,

    Let me know what insurer you plan to go with.

    jb

  143. James Bednar says:

    Jayne and I were looking into 15/20 year term plans a few months back, but never pulled the trigger on anything. We got hung up on trying to decided which company to go with.

    jb

  144. Clotpoll says:

    Grim (132)-

    I’d bet you’re right on that, except for the Taliban wing of the LOD. There are 1 or 2 regulars here- and maybe more than a few lurkers- who look at anything racier than a 6 month CD as pure gambling.

    I’d bet that the more aggressive RE bears (not counting ChiFi and BC Bob, who are paid professional financiers) are long on all kinds of neat around-the-world, emerging market, spec-type stuff.

    And if they’re not, they should be. Gotta tap a multiplier somehow.

  145. Clotpoll says:

    BC Bob (127)-

    Once everybody and his sister are short, who’s left who wants to sell?

  146. Zac says:

    Zak admits he has his 401k totally in a money market fund.

  147. Jay says:

    Mr. Bednar,
    Many thanks for this site.
    _ Jay

  148. scribe says:

    Iselin007

    I know the area, and I know about the Township crackdown on illegal housing. I’ve seen only once instance, though, of a house that was clearly being sublet as a group home near one of my relatives.

    Where is most of this occurring? Any specific areas where it’s concentrated like the old part of town around Correja Ave.?

  149. Clotpoll says:

    Zac (153)-

    Just like my 89 y/o father-in-law.

  150. Zac says:

    they don’t offer a gold fund

  151. New In Town says:

    RE #122
    I thoroughly enjoy those posts. Though he may not realize that that style of argument is more likely to result in a snicker than a hmmm , it is fun to watch as the claims wander from fallacious logic to odd mixed metaphors.

    Circus and the Borg. Treasure it!

  152. d2b says:

    Speaking of insurance… What do I do with a Universal Life policy that you want to teminate?
    I’m 9 years into a policy that was purchased by a company for me. I don’t want to start paying the premiums. Surrender value is almost Face value.

  153. Zac says:

    I had to laugh at this one from Boooooyaaa Bob yesterday: NEXT STOP 2002. ALL ABOARD hehehehehehehehe

  154. BC Bob says:

    Clot[152],

    You are right,if you didn’t tell me what stock that was and just showed me the float/short interest,I certainly would not be short it. That’s just a huge,huge % short. Seems like there has to be some unwinding. It will be interesting to see the next leg after the shorts scurry.

  155. njrebear says:

    Commonwealth, Australia Bank Stocks May Fall on Loans (Update1)

    http://www.bloomberg.com/apps/news?pid=20601109&sid=aosacp9cS5bI&refer=home

    The prospect of rising bad debts and increased competition also tarnish the outlook for National Australia Bank Ltd., Commonwealth Bank of Australia, ANZ Bank and Westpac Banking Corp., the country’s four largest banks. Loan losses are bound to rise, said Jack Chemello of BT Financial Group.

  156. MovingBackAtTheBottom says:

    2298102 – 110k drop from OLP

    2303271 – 100k drop from OLP

    2270294 – 105k drop from OLP

    Still on the Market. I will be back soon!

  157. chicagofinance says:

    James Bednar Says:
    January 24th, 2007 at 6:51 pm
    Jayne and I were looking into 15/20 year term plans a few months back, but never pulled the trigger on anything. We got hung up on trying to decided which company to go with.
    jb

    Grim: unless there are specific reasons, from what I know about your situation, you don’t need it right now.

  158. chicagofinance says:

    d2b Says:
    January 24th, 2007 at 7:51 pm
    Speaking of insurance… What do I do with a Universal Life policy that you want to teminate?
    I’m 9 years into a policy that was purchased by a company for me. I don’t want to start paying the premiums. Surrender value is almost Face value.

    d 2 the b:
    #1 have you been informed by the company whether there is a taxable event for you upon the transfer of the policy; have you been recognizing the premiums during the 9 years as income if you are above the threshhold level?

    #2 not clear cut – you don’t give enough detail – are you insurable? anyway, I assume it is pretty obvious that you should take the money and run, but beware of tax consequences and also the act of terminating this contract would be irrevocable and it may not be as easy to replace as you might think (assuming you have need to replace)….will they allow you to convert to a term policy without going through an underwriting process?

    call the insurer….and your company to find out whether there is either an FAQ or someone availabel to counsel you

  159. James Bednar says:

    Existing Home Sales due out at 10am tomorrow morning.

    jb

  160. njrebear says:

    PHH (850,000 square-foot facility based in MT. Laurel, NJ)Expects Loss of Up to $29M in 2006

    http://corporate.phh.com/phoenix.zhtml?c=187859&p=irol-newsArticle&ID=953524&highlight=

    “.. On a consolidated basis, we expect to record a pre-tax loss of between $10 million and $20 million and an after tax loss of between $22 million and $29 million for the year ended December 31, 2006”

    “… Accordingly, we have taken steps, including a reduction in force, a reduction in IT spending, outsourcing certain back office operations, and a reduction in general and administrative expenses, which we believe will reduce the costs in our mortgage production and mortgage servicing segments by approximately $50 million in 2007.”

    In 2005, the company earned $72 million, or $1.34 per share.

    >>
    PHH Mortgage, previously operating as Cendant Mortgage, is one of the top ten retail originators of residential mortgage loans in the United States

  161. lisoosh says:

    Pat Says:
    January 24th, 2007 at 3:19 pm
    Is Richard two different people?

    EXACTLY!!!!
    I’ve been suffering from disonance with every one of his posts for months. It definitely sounds like two people.

  162. lisoosh says:

    CF – I’d definitely like to know which insurance carriers to look at – Husband 39, Wife 38, two small kids, one income, good health, non smoking.

    We are in the market for life insurance at this very moment and it is daunting.

  163. MovingBackAtTheBottom says:

    Check these listings out. HAHAHA!

    2298102 – 110k drop from OLP

    2303271 – 100k drop from OLP

    2270294 – 105k drop from OLP

    Still on the Market. I will be back soon!

  164. FirstTimeBuyer says:

    I’m really shocked by the comments about WO’s schools. They are very highly rated — comparable with Montclair and other upscale towns in the area.

  165. syncmaster says:

    njrebear # 171,

    Doh! You asked which development, not which town. My bad. Canterbury.

  166. chicagofinance says:

    lisoosh Says:
    January 24th, 2007 at 11:52 pm
    CF – I’d definitely like to know which insurance carriers to look at – Husband 39, Wife 38, two small kids, one income, good health, non smoking.

    We are in the market for life insurance at this very moment and it is daunting.

    L: get my contact info from grim

  167. njrebear says:

    thanks sync!

Comments are closed.