The socialization of risk

From the Bulletin:

Let’s Bail On Financial Bailouts

In his 1994 book, Money of the Mind: Borrowing and Lending in America from the Civil War to the Age of Milken (New York Noonday Press), James Grant presents a tour de force of the role finance played in the building of modern America. The author traced two trends in American finance, one good and one bad. American finance has been characterized by the democratization of credit (the good trend) and the socialization of risk (the bad trend).

But in Money of the Mind, James Grant traced the less advantageous trend in the history of American credit – the socialization of risk.

Almost from the beginning, those who were granted unprecedented access to credit clamored for government assistance when their plans went awry and they could not repay their loans. This process repeated itself over and over again.

The first lenders to a new class of borrowers, often using new credit instruments, would attract the best credit risks and suffer few credit losses. As pioneers in this new area of lending, they would make extraordinary profits.

Copycat financiers were quick to jump into this new market, but the best credit risks were already gone. Nevertheless, it was felt that a new age of finance had dawned. (It is always a new age!)

Recent experience had shown that previously uncreditworthy borrowers could be lent to profitably using new credit instruments. Grant shows that over and over the last in the new market, whether lender or borrower, were always those who suffered the worst losses when economic reality could no longer be ignored.

The evils that flow from these government bailouts are seldom discussed. There is the equity problem. By what right does anyone have to my money to keep himself in a home that he cannot afford? I had nothing to do with his transaction, into which he entered voluntarily if foolishly.

The same for the lender and the lender’s investors. They lent the money and expected to make a profit. They miscalculated. The market will learn the lesson. But let’s not create what economists call a “moral hazard,” which means that similar transactions will happen again and again because both borrower and lender expect the government to bail them out if things don’t go as planned.

Unfortunately, that IS the lesson from previous bailouts, and that is why we have the subprime lending bailout today. In fact, both Pa. and N.J. have institutionalized the creation of moral hazard.

In Pa., we have the Housing Finance Agency.

In N.J., it is the New Jersey Housing and Mortgage Finance Agency.

Neither agency should exist, but spokesmen for both are demanding more “rescue” funds. What else should we expect from bureaucrats whose jobs depend upon rescuing financial disasters with public money? Expect more of the same.

This entry was posted in Economics, New Jersey Real Estate, Risky Lending. Bookmark the permalink.

179 Responses to The socialization of risk

  1. James Bednar says:

    From Bloomberg:

    Toll Brothers Net Slumps on Writedowns, Drop in Housing Demand

    Toll Brothers Inc., the largest U.S. luxury home builder, said fiscal second-quarter profit tumbled 79 percent on declining buyer confidence and writedowns on the value of some of its developments.

    Net income in the three months ended April 30 was $36.7 million, or 22 cents a share, from $174.9 million, or $1.06, a year earlier, the Horsham, Pennsylvania-based company said today in a statement. Revenue dropped 19 percent to $1.14 billion.

    The results came about two weeks after Toll said net income was less than the company previously projected and said it would miss an earlier full-year earnings forecast. A glut of unsold new and existing homes on the market has hurt demand for new homes.

    The average of 13 estimates compiled by Bloomberg projected the company would earn 25 cents a share in the quarter.

  2. James Bednar says:

    From the Daily Record:

    Report: Multi-family housing to see most growth in Morris

    The future of development in Morris County includes more townhomes and multi-family housing, reuse of old manufacturing sites and the tearing down of smaller older homes on adjacent lots so that larger single-family homes can be built.

    The changes were documented in the 2006 Development Activity Report assembled by the Morris County Planning Board and presented to the county freeholders Wednesday.

    The report indicates the impact of the 2004 Highlands Water Protection and Planning Act: the lack of land for development, new state stormwater and clean water standards, a soft housing market, and increased redevelopment activity, said county assistant planning director Arnie Goytil.

    The increased use of tear-downs for development has resulted in new ordinances in Randolph and Chatham to prohibit the practice, Goytil said. The practice involves the creation of a small subdivision by merging two smaller lots, he said.

    The result of such activity is a need for better drainage systems, more elaborate stormwater systems, and more expensive site development costs that drive up the cost of the home that results.

    The development of multi-family housing increased 60 percent in 2006. This is a category that will see the most growth in the future as multi-family developments “fill the gap in the housing market caused by the limited supply of single-family detached housing from subdivisions,” the report said.

  3. James Bednar says:

    From the Albany Business Review:

    Group seeks sponsor for legislation on anti-abusive subprime lending

    A coalition of 131 civic and community groups is calling for New York lawmakers to pass a bill aimed at stopping abusive subprime lending practices.

    The alliance, New Yorkers For Responsible Lending, has drafted the legislation, but has not yet found a sponsor in either the state Senate or Assembly. Bill Ferris, spokesman for AARP in Albany, N.Y., said the coalition is in talks with the administration of Gov. Eliot Spitzer and the banking committees of both houses.

    Provisions include a requirement that lenders verify a borrower’s ability to repay the loan, both at the outset and when the interest rate changes; a legal duty for brokers to act in the borrower’s interest; a requirement that lenders put property taxes and mortgage insurance in escrow; and prohibitions against abusive terms such as balloon payments, prepayment penalties and negative amortization.

  4. Clotpoll says:

    Grim (4)-

    More rate-cut fodder.

  5. James Bednar says:

    More rate-cut fodder.

    We’ll have a clearer picture of that by next Friday. We’ve got one heck of a data week coming up.

    http://briefing.com/Investor/Public/Calendars/EconomicCalendar.htm

    jb

  6. njrebear says:

    http://briefing.com/Investor/Public/Calendars/EconomicReleases/leader.htm

    Payroll readjustment will cause Coincident Index to dip. Will it go negative? Leading index is already negative.

  7. skep-tic says:

    I love all of these well-meaning people whose activism regarding mortgages only serves to restrict credit further, thereby exacerbating the downward trend.

  8. chicagofinance says:

    clot: no rate cut in 2007

    It is more than just a move….it is an entire agenda.

    Believe me, do you know how stocks would blow out? Dow 15,000.

    I’ve had a really bad 24 hours. I agreed with Reech and disagreed with clot. I need a vacation :(

  9. twice shy says:

    Richard (from another thread):

    Thanks for the observation on Drake Pl. I concur.
    Just wanted to get a sense of how overpriced this listing is considering the lot, location and ranch-style house.

  10. skep-tic says:

    not that I’m an expert in these matters, but wouldn’t a rate cut at this point totally blow out the dollar– esp when the bank of england is unanimously voting to raise their rates? seems to me that this might be a much bigger concern than the weakening U.S. consumer

  11. pesche says:

    my oh my , you better have some staying
    power as we go forward.

    still, prices seem high to me.

    Bergen, passaic, very high. Inventory,
    manageable. interest rates, reasonable.

    Shore prices, out of sight, even if inventory is high.

    the bottom could be at hand.

  12. James Bednar says:

    We can’t neglect the shadow inventory of homes that were pulled off the market, “until the market improves”.

    Creating a perception of market stability or even improvement might very well result in even more inventory coming back on the market.

    jb

  13. James Bednar says:

    From MarketWatch:

    Orders for durable goods up 0.6%

    New orders for U.S.-made durable goods increased 0.6% in April, boosted by strong demand for metals, the Commerce Department reported Thursday.

    Orders in March rose a revised 5%, a six-month high, compared with a 4.3% estimate previously.

    Demand in April was held back by a 10.7% drop in orders for civilian airplanes, where new orders had doubled in the previous two months.

    Excluding the extremely volatile transportation category, orders were up 1.5% in April, identical to the increase in March.

    Orders for core capital equipment goods – the best monthly gauge of business investment – rose 1.2% after a 4.4% gain in March.

    Economists surveyed by MarketWatch were looking for no change in durable goods orders in April.

  14. pesche says:

    so much wall street money around passaic,
    essex,bergen will prices really , ever come
    down? and seems to me the building continues and these are not starter homes.

    They are getting bigger, not unusual to
    see a 3600 sq.ft, new one at , let’s say
    1.1 million. Taxes, 20k, no problem,

    and of course the benz,(suv) or station wagon, (very trendy), and the new audi convertible. (extreme)

    Lot’s of new cash to go around in Northern
    NJ. NJ makes the World takes.

  15. James Bednar says:

    From the Record:

    There’s no easy path to riches

    Hoping to profit from the rising tide of troubled mortgages, investors and would-be investors crowded into a seminar on foreclosures Wednesday, sponsored by Bergen County Sheriff Leo P. McGuire.

    But the speakers warned that foreclosures are not the key to easy money.

    “You’re not going to pay $500 for a $1 million property. It’s just not going to happen,” said Undersheriff Sharon McDonald, who often runs the foreclosure auctions, in which properties are sold to satisfy unpaid mortgage debt.

    “There’s a lot of hard work and a lot of knowledge going into it,” said foreclosure lawyer Lenny Zucker of Mountainside, one of the speakers.

    As many homeowners who took out subprime and adjustable mortgages fall behind on payments, Bergen County appears headed toward a record number of foreclosure sales this year. (Only a small number of troubled mortgages actually end in foreclosures; many struggling homeowners sell their homes or settle with the lender.)

    Foreclosure sales, which are open to the public, take place at 2 p.m. every Friday in the Bergen County Courthouse. Properties that are scheduled for sale are advertised every Wednesday in The Record, and a list of properties is also available at the courthouse for free and on the Internet at bcsd.us.

    “Don’t pay somebody $50 for a list of foreclosures,” warned McDonald.

    Foreclosure auctions for Passaic County take place at 2 p.m. Tuesdays at 77 Hamilton St., Paterson.

    The number of properties sold in foreclosures in Bergen County:

    2002: 64
    2003: 129
    2004: 107
    2005: 59
    2006: 95
    2007: 72 (year to date)

  16. John says:

    I agree – When Realtors in rich wall street second home neighborhood never say the “M” word cause no-one gets a mortage anymore you know Wall Street is HOT. You gotta realize home purchases should be 2.5 income to be conserative. A yuppie couple with their MBAs from are easy at 150K base each and in a hot market will be in a 100% bonus pool. I am talking about low level analysts who are 32, that couple has 600K in combined income and can consertively buy a $1,500,000 million dollar home now at 32 and in a few years buy a $1,500,000 Hampton Home for Cash.

    The problem is houses get priced for those wall street couples in the desirable neighborhoods and the seller who want the highest price could care less if they price the teachers/cops/nurses from affording a home in the neighborhood they live in.

    pesche Says:
    May 24th, 2007 at 8:33 am
    so much wall street money around passaic,
    essex,bergen will prices really , ever come
    down? and seems to me the building continues and these are not starter homes.

    They are getting bigger, not unusual to
    see a 3600 sq.ft, new one at , let’s say
    1.1 million. Taxes, 20k, no problem,

    and of course the benz,(suv) or station wagon, (very trendy), and the new audi convertible. (extreme)

    Lot’s of new cash to go around in Northern
    NJ. NJ makes the World takes

  17. 3b says:

    #9 chgofinance; As I ahve said form the begining of this year, no rate cut in 2007, its simply not happening.

  18. gary redfin (a.k.a gary) says:

    pesche,

    Northern New Haughty has become some sort of cult status symbol for the wannabes. This used to be the place where I grew up; now it’s filled with arrogance, egotism and a sense of entitlement. Everybody has their own agenda and could care less as long as they fulfill their own indulgence.

  19. John says:

    FYI 1.1 million is not that much anymore, ask 1.1 settle for one million, At 6%percent that is a $5400 mortgage, throw a few bonuses at it over a few years and you are done. Plus the 35 yo crowd has inheritance money to put to work. That cape that their parents left then that is now worth 700K is 350K each for the two kids and they are rolling that with their started house money into these houses.

    They are getting bigger, not unusual to
    see a 3600 sq.ft, new one at , let’s say
    1.1 million. Taxes, 20k, no problem,

  20. 3b says:

    #15 pesche: Stop writh the Wall St money silliness. for the last time total Wall St employment is around 260K people, many of them already have homes.

    And with all due respect to anybody in Passaic, its not a big Wall St draw.

    Inventories manageable, I don’t know, but they seem pretty high to me in my neck of prestigious Bergen County, and as far as interes rates, well if they ar low, then things should be selling, and they are not.

    As far as the shore, I understand there are bargain summer rentals this year, lots of inventory, and prices dropping.

    The correction will play out over the next 18 motnhs or so.

  21. gary redfin (a.k.a gary) says:

    John,

    God bless you if $1,100,000 is a mere piitance. I’m quite envious.

  22. 3b says:

    #19 gary: yes it has and much of it backed by housing and credit card debt. Eventually a nice recession will clean this all up.

  23. James Bednar says:

    Pesche/John,

    So what both of you getting at? Non-Wall St.’ers should just pick up and leave?

    jb

  24. gary redfin (a.k.a gary) says:

    3b,

    I wish I could be as optimistic as you. :)

  25. 3b says:

    #17 John: With all due respect you are smoking something with those numbers uou are throwing around, I work in the industry, I know, 600k In combined income for 32 year old analysts.

    Stop yourself, you are out of control, not the real world, even for Wall Street, and I would like to point out yet again, that there arre mnay other choices for the Wall Street crowd then northern NJ.

    Believe me Northern Westchester and Conn are much more desireable in their minds.

    But if you know any who are looking, there are 5 houses in my northern wannabe town that are for sale for around ONE MILLION DOLLARS, and they have been sitting for months.

    4 are hedious, 1 is actually beautiful, well designed and built inside and out.

    Alas almost no property, I mean just about none, and it is on the corner of Kinderkamack Rd.

  26. 3b says:

    #16 JB There are over 35 that are scheduled to go off tomorrow in Bergen County, and about the same number the next week, so 72 seems small to me.

  27. BCamp0180 says:

    Wall Street money is usually, not all the time, smart money. Why buy a shore house when you can rent one for far less. A good example is Spring Lake. There is a home listed at $7MM. I’m friends with the listing agent who told me the house can also be rented for $75K from Memorial Day thru Labor Day. Break that out on a monthly basis and thats about $8,500 less per month than the mortgage payment would be at 6% after 20% down………

  28. James Bednar says:

    You’ve got to love quotes like these..

    From Bloomberg:

    China’s Individual Investors Pay Little Heed to Greenspan

    “It’s easier to make money from stock investment than work nowadays,” said Hang Ming, 28, one of about 15 cooks from a local restaurant who were tracking stock prices at the Shenyin & Wanguo Securities Co. brokerage in Shanghai’s Lujiazui district today. “There’s risk, just like in playing mahjong, but I don’t care.”

  29. Richie says:

    Yea, reminds me of the cabbies giving tech stock advice in 1999-2000.

  30. 2008 Buyer says:

    Greed is good – Gordan Gekko

    All of the risk is known by all participants. Borrower – bad credit, foreclosure. Lenders – Investors dry up, increased repurchase request, increased cost of funds, go out of business. Investors – higher losses, decreased returns.

    The socialization of risk comes down to pricing the risk…. higher interest rates for borrowers and higher expected rates of return for investors. In short, we will experience it again because everyone will feel they can more accurately predict (i.e. FICO) the probably of default. Hopefully they wouldn’t layer (No Doc, Investor property) the risk as much next time around.

  31. Richard says:

    twice shy, i’d say the immediate area around drake and anything adjacent to garwood to the east (around columbus) are the most undesirable areas of town. the north side is considered the ‘premier’ side though the south side has some really nice areas around hyslip, lamberts road and shadowlawn. if you need any more opinions let me know.

  32. Richard says:

    >>I agreed with Reech and disagreed with clot. I need a vacation :(

    might be time to change those meds ;)

  33. Richard says:

    >>We can’t neglect the shadow inventory of homes that were pulled off the market, “until the market improves”.

    it’s just another factor in this self-correcting market. it seems sellers are holding out far longer than they’ve been given credit for. sure you can find one here or there that capitulates, but prices and inventory are still high.

  34. skep-tic says:

    #17

    You are living in a fantasy world. $600k income is typical for someone in their early 30s? You do realize that $300,000 puts you in the top 1% nationally, right?

  35. James Bednar says:

    Big upside surprise in the New Homes data..

  36. James Bednar says:

    From MarketWatch:

    U.S. April new-home sales unexpectedly jump 16%

    Sales of new U.S. homes unexpectedly surged in April, rising by 16% to a seasonally adjusted annual rate of 981,000, the Commerce Department said Thursday, far exceeding the 865,000 pace expected. Sales were boosted by plunging prices. The median price of a new home was $229,100 in April, down 10.9% in the past year. The inventory of unsold homes fell by 1.5% to 538,000, representing a 6.5-month supply. In March, the inventory was at 8.1 months. Sales in April were down 10.6% compared with April 2006. Sales in the first four months of 2007 were 20% lower than in the first four months of 2006. April sales were led by a 28% gain in the South and an 8.5% gain in the West.

  37. James Bednar says:

    From the Census Bureau:

    NEW RESIDENTIAL SALES IN APRIL 2007

  38. James Bednar says:

    Looks like NHS are up on significantly lower prices. Some sizable declines in average and median pricing. 28% jump in sales volume for the South markets.

    jb

  39. 3b says:

    And the median price down 10.9% from last year. If existing homwowners want to sell, simply lower the price;its that simple.

  40. d2b says:

    Off Topic a bit…

    In April, Smart Money had a small article on a strategy for mutual funds. It said to purchase the one large-cap fund with the overall best return for one year. After a year, you would sell it and buy the best performing fund for that year.

    They said that I didn’t matter what time of the year you did this. They believe that the theory works because funds don’t do well for just 12 months. A good fund should perform well after the initial 12 months.

    They tracked this performance for previous years and said that the annual return would be about 20%.

    It sounds to good to be true. Has anybody heard of this strategy?

  41. skep-tic says:

    Here is the key line:

    “Sales in April were down 10.6% compared with April 2006.”

    Not as bad as it might have been, but still not good, esp when you consider the deep discounting going on

  42. njrebear says:

    Median new-home price down 10.9% y-o-y, most in 37 years

  43. njpatient says:

    So massive glut in new home inventory combined with 11% price cut combined with stubborn existing home sellers = increase in purchases of new homes. Makes a lot of sense.

    Existing home sellers are going to have to step up or get left behind.

  44. James Bednar says:

    Perhaps builders have come to a realization that the best incentive they can offer is a lower price.

    From CNN/Money:

    New home prices plunge

    big drop in the typical price of new homes spurred much better than expected sales, according to the latest government reading on the battered real estate and home building market.

    New homes sold at an annual pace of 981,000 in April, up 16.2 percent from the revised 844,000 pace in March. Economists surveyed by Briefing.com had forecast an 860,000 rate in April.

    the median price of a new home sold in April plunged 10.9 percent from a year earlier to $229,100. The new price reading was also down 11 percent from the March reading.

    Many builders have been reporting that they were cutting prices and offering incentives such a covering closing costs and offering extras in the homes at no charge in order to maintain sales in the weak market.

  45. 3b says:

    How did the northeast fare? Did not get a chance to go over that.

  46. Richard says:

    >>A good example is Spring Lake

    big $$$ there. great town with a lovely beach i recommend everyone check it out sometime this summer. you pay for a daily pass and can enjoy the water, clean sand and mostly normal people. they have a small town that has a couple of good restaurants. last time i was there i was in a restaurant sitting next to one of the McIlhenny’s, heir to the tobasco family fortune.

  47. Richard says:

    >>Existing home sellers are going to have to step up or get left behind.

    depends on where you are. real estate is so local.

  48. James Bednar says:

    I’ve had a really bad 24 hours. I agreed with Reech and disagreed with clot. I need a vacation :(

    I’ll be off to Scottsdale for a week, leaving on Monday. A quick client meeting and then a bit of a holiday for the wife and I.

    jb

  49. pesche says:

    come on now, we have been talking about
    a fall in NJ house market for two years.

    prices are holding up.

    inventory is moving, slowly but its moving

    perhaps we have bottomed. those who have
    not purchased at the right price,,,left
    behind.

  50. njpatient says:

    skep-tic #42 – thanks for pointing that out; I had missed that sales volume was actually down YOY. It’s interesting: prices are down YOY and volume of sales is down YOY, and what does MarketWatch lead with? Sales volume is up MOM. You’d think that was written by the NAR!

  51. njpatient says:

    Pesche #50

    “prices are holding up”
    – Yeah, if dropping 11% YOY is holding up (not even accounting for inflation or carrying cost)

    “inventory is moving”
    – except that it’s losing pace YOY

    Are you trying to sell?

  52. James Bednar says:

    Mortgage rates tick up a bit this week, expected given the move in the 10y..

    Freddie Mac: 15-yr mortgage averages 6.02% vs 5.92%
    Freddie Mac: 1-yr ARM averages 5.64% vs 5.48%
    Freddie Mac: 30-yr mortgage averages 6.37% vs 6.21%

    With the 10y touching 4.9% this morning, I’d expect the upward trend in mortgage rates to continue.

    Bond market sure doesn’t look like it is expecting a rate cut anytime soon.

    jb

  53. njpatient says:

    have a blast, jb

  54. 3b says:

    #48 So they will not have to step up in Westfield where there are over 200 hundred listings for sale?

    Gee Rich it is really getting old. Existing home owners are going to have to drop prices if they want to sell, period, regardless of where they live.

    Grant it some more than others, some towns more than others, some locations within towns more than others, and some property owners more than others, depending on their situation.

    In your attempts to sound reasonable and balanced, you still cannot bring yourself to that conclusion.

    Repeat after me, if owners want to sell regardless of where they live, they are going to have to lower their prices………………, even in Westfield.

  55. twice shy says:

    Richard (re: Westfield),

    Do you think Wyoming is too far south (off Central almost to the RR tracks) to be considered? There’s a 4/2 Cape in good shape that just came on the market, but the asking of $525k seems on the high side for comps in that area, though not necessarily out of line for 4 bd/2 bth.

    Any insight you can provide is welcome. Thanks.

  56. 3b says:

    #560 young pesche: This is just starting, and in fact its getting fun now.

    Market peaked in late 05, possibly early 06, then the holding erpiod,and end of 06 to recently, the slow declines.

    Going forward the real declines. Did you really believe the process would all be over in only a few months?

  57. gary redfin (a.k.a gary) says:

    Does anybody have any inventory numbers? Are we still building a stock pile of used homes for sale?

  58. 3b says:

    #53 Oh did I mention no rate cut this year. NO rate cut this year, simply not happening.

  59. James Bednar says:

    From MarketWatch:

    U.S. MORTGAGE RATES RISE SHARPLY IN LATEST WEEK

    The benchmark 30-year fixed rate mortgage average rose sharply in the week ending Thursday, to 6.37% from 6.21% last week, according to Freddie Mac.

    “Stronger than expected consumer confidence and recent comments from members of the Federal Reserve raised some inflation concerns in the market, causing it to lower expectations of a Fed rate cut this year,” said Frank Nothaft, Freddie Mac chief economist, in a statement. “This helped push mortgage rates higher this week. We expect a gradual rise in mortgage rates over the remainder of the year with sales slipping further in the second half of the year. A gradual recovery returns toward the end of 2007 with modest increases in sales and construction during 2008.”

  60. Richard says:

    >>#48 So they will not have to step up in Westfield where there are over 200 hundred listings for sale?

    it’s mostly crap, so yes they will have to lower price to move it. the good quality stuff at near 2005 prices is still moving swiftly.

  61. njpatient says:

    “Does anybody have any inventory numbers? Are we still building a stock pile of used homes for sale?”

    I don’t have a number for you, but in the area I’m looking in Union County there are houses coming on line fast and furious for the past six weeks.

  62. twice shy says:

    JB,

    At the risk of sounding like your mother, you should wear your hats and drink lots of water. The desert sun is merciless. My teenage daughter developed sunstroke (after ignoring her dad’s pleas to wear a hat) the night after a gorgeous and scenic 90-minute hike in the area.

  63. R Patrick says:

    1. Skeptic put it correctly in that very very few people are making 600K a year, even 300K. I remember when I orginally got on this board feeling very disheartened when I saw prices in Fort Lee, and wondering when I saw late 20’s early 30’s buying 800K half a houses and having 2 high end cars and kids.

    2. Richard, every post from you makes you sound like someone who is very insecure. Instead of going “Spring Lake, great town, nice beach, hot eye candy, good food, I reccomend Joe’s” it is “Yes Spring Lake, wonderful place, insert name drop here” same thing yesterday with “the view from the top floor”

    I’m not saying the Bergen attitude had/has affected me and feeling like a victorian chimney sweep sometimes in my town but your laying it on a bit thick.

  64. gary redfin (a.k.a gary) says:

    I hope the 10 yr. yield rises a couple of hundred basis points.

  65. skep-tic says:

    JB- if you want some mind-bendingly amazing mexican food you should try La Hacienda in the Fairmont in Scottsdale. I believe it was rated the top Mexican restaurant in all of North America by Conde Nast. Definitely one my top 5 all time meals

  66. James Bednar says:

    Gary,

    The typical inventory trend happened a bit later than usual this year. You can blame that on whatever you’d like. However, now that the trend is in place, it doesn’t seem to show any signs of slowing. Don’t get me wrong, it’s nothing like the pace that we saw a year earlier, but it’s strong and steady.

    GSMLS
    (the usual suspects)
    5/16/07 – 19,458
    5/23/07 – 19,734 (1.4% weekly increase)

    This time last year we were at 17,138 (15.1% increase YOY)

    NJMLS
    (the usual suspects)
    5/16/07 – 8,997
    5/24/07 – 9,208 (2.3% weekly increase)

    This time last year we were at 8,465 (8.8% increase YOY)

  67. Pat says:

    R. Patrick, when you have “10x” what everyone else has (the folks you communicate with on a regular basis), you simply must name drop. This keeps the peons from beginning to foment unrest as their feelings of equality with you grow. You speak to them, but of course, they must remember that they are not your equals.

    Especially when one of the riff-raff appears to agree with you.

  68. 3b says:

    #61 Richard: So almost all of the 200 listings are crap? seems like a lot of crap in a premier town such as Westfield.

  69. afe says:

    re: Westfield

    Hyslip is a nice area. A REA I once used lives on that street. Interestingly a house on her street sold in 1987 for 345k, she bought hers in 1999 for 411k. Amazing how prices over a 12 year period (even in Westfield) rose only 1.5% a year.

    afe

  70. lowball says:

    #50 pesche Says:
    prices are holding up.
    ———————————-

    “Financial experts say that mortgage fraud has become the fastest growing type of white-collar crime, and terrorist organizations have been quick to jump on the trend. But what concerns federal authorities is how regularly mortgage fraud is showing up in terrorism investigations.

    In the past year, several high-profile mortgage fraud arrests have been tied to federal terrorism investigations, most notably a ring busted up in Salt Lake City that is alleged to have direct ties to the late al-Qaeda leader in Iraq, Abu Musab al-Zarqawi. Federal agents have been trying to track the hundreds of thousands of dollars illegally obtained by Sharif Omar and his associates in the mortgage fraud ring. At least $40,000 was transferred to an account in Jordan. From there, federal officials believe that money went to Sharif’s brother, Shawqi Omar, who was seized in a raid by US forces in Iraq in October 2004 and is accused of working for al-Zarqawi’s terrorist network in Baghdad. Shawqi Omar is still in US military custody.”

  71. chicagofinance says:

    Is everyone going to blow off the new homes number?

    I personally am curious about this part of it……people crow about it as a “leading indicator” but I rather have people give anecdotal evidence in this area…..the failure to settle….

    comments?

    “New-home sales, which account for about 15 percent of total home sales, are considered a better leading indicator of the market than existing home sales because they are recorded when a contract is signed rather than when the sales are closed.”

  72. Sacramento 95832 Housing Bust: Anyone want a house at 50% off? Anyone? Anyone?

    watch: http://housingpanic.blogspot.com/2007/05/sacramento-housing-bust-anyone-want.html

  73. Clotpoll says:

    Not looking like Nostradamus this morning, but I’m sticking by my call. Not all the numbers are out, and that new housing number- when parsed and comped YOY- is not great news. Note the market selling back down after the initial report. Like my grandpa used to say, “don’t pi$$ on my feet and tell me it’s raining.”

    Q2 GDP will come in under 1%.

  74. 3b says:

    364 Spring Lake is a lovely town, and a great walking town as well. If you like old churches, I suggets you stop in at the local Catholic Church, which is a replica of the Basillica in Rome.

    The beach and I agree with Richard is great, and well worth the $7 for an all day pass. You might also wnat to check out the pool (beach water), and the whole pool bathroom complex there.

    It is a wondeful example of the art deco style (I believe) form the lae 20’s, early 30’s.

    By the way if you are interested here is what is available in the real estate market in Spring Lake.

    126 Single family homes
    58 condos/coops/townhouses
    5 multi-family units
    67 rentals
    18 parcels of land.

  75. scribe says:

    For Rentlord:

    Mansions may face resale obstacles
    By Jay MacDonald • Bankrate.com

    Are McMansions McOver?

    Opinions vary, even among the experts.

    If recent trends are any indication, however, the bigger-is-better approach to residential real estate may already be giving way to a more reasoned levelheadedness, both in home buying and building.

    No, don’t expect a return to that less-is-more, small-is-beautiful aesthetic from the Age of Aquarius; there is absolutely nothing austere going on here. Rather, call it a redefinition or right-sizing of what we consider luxury living that has more to do with architectural scale, energy efficiency and creating livable space than with gross square footage.

    Like some real estate equivalent of the SUV, McMansions have been the object of scorn and ridicule since they started elbowing their way onto the suburban landscape in the late 1980s and early 1990s. Loosely defined as a house between 5,000 and 10,000 square feet with soaring grandiose entryways and multicar garages, often jammed onto an undersized lot, McMansions quickly went from ostentatious status symbol to something even the Joneses didn’t want to keep up with.

    “I think a lot of people who could well afford a McMansion today would find it embarrassing on aesthetic, environmental and political grounds, rather like movie stars who could afford a Hummer but choose instead to drive a Prius,” says architect James Gauer, author of “The New American Dream: Living Well in Small Homes.”

    More here:

    http://www.bankrate.com

    on the home page today

  76. gary redfin (a.k.a. gary) says:

    jb,

    Thanks for the numbers.

  77. 3b says:

    #74 Clot: A couple of questions. When do you see the next dead cat bounce, and how do you think the almost 11% decline in prices will impact the existing home market/home seller psychology.

    One last question, just for argument sake, if existing homes on the market now in NNJ cut their prices by 10%, what impact would that have on sales, especially 1st time buyers, so called starter homes? Thanks.

  78. HEHEHE says:

    My question is does a 11% drop in prices fuel further drops just as 10% increases did? If I am a buyer don’t I lower my bid more??

  79. James Bednar says:

    Not looking like Nostradamus this morning, but I’m sticking by my call. Not all the numbers are out, and that new housing number- when parsed and comped YOY- is not great news.

    The headline numbers sure look fantastic, but I’ll agree, the YOY numbers aren’t pretty. Sales down 10.6% YOY, Prices down 10.9% YOY. Sure the inventory numbers are showing some improvement, but if the April numbers prove to be an anomaly, those will shoot right back to previous levels.

    However, the recent drops in prices (if not due to geographic issues and tied to the huge jump in South sales) are significant, as it shows some level of builder capitulation. If builders have sufficient margin, they can cut prices pretty deeply. The question is whether or not they’ll do it, and whether the behavior will eat into existing home sales in those regions.

    jb

  80. Richard says:

    >>#61 Richard: So almost all of the 200 listings are crap? seems like a lot of crap in a premier town such as Westfield.

    the town has 30k residents and 11k homes so no that isn’t a lot of crap.

  81. 3b says:

    380 JB: well it looks like they are doing it,slashing prices,and I would think that would have impact on existing home owners, if only psychologically.

  82. James Bednar says:

    I haven’t looked into the associated datasets, but with such a significant jump in South region sales, you can’t discount the possibility that the median and average prices fell simply due to a change in mix.

    jb

  83. Jersey4Life says:

    #35 John,

    I am 36 and I don’t know anybody that has inherited their parent’s home. Off all my friends, all of them have at least one parent still alive.

  84. x-underwriter says:

    Builders are doing what they have to to dump existing inventory before things get worse. John Q. Public isn’t aware yet that the prices may go down even further and is jumping on it. Look at the new bulding permits figure from a week or so ago. That’s the leading indicator that’s way down. Builders dropped prices 11% and were still down. More to come too

  85. BCamp0180 says:

    Rich,

    Using a blanket statement about inventory being crap as a reason for price drops and it not moving sounds like a cop out. Sort of like you may be in denial…….?

  86. chicagofinance says:

    Toll earnings call at 2PM EDT. You may get some color on the new homes number.

  87. pesche says:

    take a look at closter, norwood,demarest,
    tenafly. prices are not coming down.

    building is still going on. In tenafly,you
    can get a nice little townhouse for about
    1million, and a 18k tax bill.

    what downturn, not in Northern Bergen.

    its the wall street money,forget alpine,that
    is rap star territory. Little Kim, you watching?

  88. HEHEHE says:

    Hahaha this lousy Velocity development is trying all the gimmicks, how about not building next public housing next time morons:

    http://blogs.nypost.com/re/archives/2007/05/you_shall_bid_o.html

  89. chicagofinance says:

    New Jersey in an alternate reality where Wall Street money doesn’t course through state coffers…..

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aCh_kuGDT7ZM

  90. New Today! Housing Bubble Hits Home

    http://www.paperdinero.com/BNN.aspx?id=198

    Segment chronicles some of the aspects of the housing mania and subsequent decline that we now know all too well. Features a series of anecdotal stories of personal gloom and doom while tracking a series of “homeowners” from 2005 to today.

    Originally aired on: 4/27/2007 on NOW

    Running Time: 11 minutes 18 seconds

  91. make money says:

    Just in case your’re wondering, This guy is not me.

    http://www.bakersfield.com/hourly_news/story/148844.html

    It’s sad and funny at the same time.

  92. James Bednar says:

    CR has got most of the data graphed, it’s worth a visit. He also makes a good points about historical revisions and “bottom calling” in April of ’06.

    http://calculatedrisk.blogspot.com/

    jb

  93. Rich In NNJ says:

    pesche Says:
    May 24th, 2007 at 11:54 am

    take a look at closter, norwood,demarest,
    tenafly. prices are not coming down.

    Wrong

    Closter, Demarest, Norwood, Tenafly SFH Med$
    2006
    $900,000
    2007 $799,000

  94. ADA says:

    All of the strength in sales came in one region of the country, the Northeast, which saw a surge of 43.1 percent.

    http://www.nytimes.com/aponline/business/24econ.home-AP.html?_r=1&hp&oref=slogin

  95. billz says:

    the NAR will be all over this one…wow! increase in sales…it’s a great time to buy!

    they won’t mention all the perks the builders threw in (pay for closing, add granite tops for free, etc) that don’t get included in that sales price!

  96. James Bednar says:

    jb

  97. UnRealtor says:

    CNN says:

    New home prices plunge, sales soar
    http://money.cnn.com/2007/05/24/news/economy/new_home_sales/

  98. 3b says:

    #96 blitz: Will they mention the price drops? In addition to whtever other incentives they may have used, they also dropped prices, but many realtors
    I agree will gloss over, or simply ignore that. Better to concentrate on sales up.

  99. Clotpoll says:

    3b (78)-

    I think the next “dead cat” comes toward Labor Day, which is traditionally a slow time. I’m basing this call on an expectation of some seller capitulation married to whatever pent-up demand is out there. I certainly don’t see a sustainable rally; just 6-8 weeks of thrash like we had in Jan-Feb.

    Today’s 11% new homes YOY price decline is of enormous significance. It shows that the HBs- as a group- are undercutting resales. The resale market now has no choice but to reposition. This won’t happen overnight, but the sellers who “get it” first will benefit.

    What would another 10% off starter homes do in NJ? Well, coupled with some decent interest rates, it’s begin to get things moving again.

    The next 3-4 months will be very interesting.

  100. njpatient says:

    #96

    You definitely won’t see any of that mentioned in the relevant articles.

    Pesche, do you grow tired of being wrong? There’s something fishy about you…

  101. 3b says:

    Thanks Clot, one final question, any idea why the surge in new home sales was so strong in the northeast (43%)?

  102. chicagofinance says:

    ADA Says:
    May 24th, 2007 at 12:04 pm
    All of the strength in sales came in one region of the country, the Northeast, which saw a surge of 43.1 percent.

    Q: Y’all think it’s non-USD money seeing a nice confluence of FX gains and USD denominated prices drops?

    I am waiting for analysis from the mouthpieces.

  103. pesche says:

    na, i was at the foreclosure seminar
    taking directions.

  104. chicagofinance says:

    Economists Point to Home Data Volatility
    May 24, 2007 11:35 a.m.

    * * *
    We have cautioned that double-digit gains of new-home sales are VERY unreliable monthly data points. (It is mostly due to the way the builders self-report their sales to Commerce)… Whenever new-home sales jump double digits, it usually reflects a mean reversion from the prior (or subsequent) month’s reportage. Indeed, over the past 15 years of data, we found that a mean regression followed nearly every double-digit monthly gains. Typically, the subsequent month’s data was significantly lowered — flat to negative in nearly every case. –Ritholtz Research & Analytics

    * * *
    Nearly all of the strength was in the South, and this depressed prices simply because the South is a lower-priced region. There was a modest decline in the Midwest, and modest strength in the Northeast and West. It remains to be seen if this is a one-month aberration… However, it is clear that indications of a mediocre Spring buying season have been put in some doubt with this report. –Joshua Shapiro, MFR, Inc.

    * * *
    Only homes priced less than $200,000 had stronger sales in April. The sharp increase in sales will help home builders shed some of the huge inventory of unsold homes and could limit further cuts in new construction… Despite the April sales surge, the median number of months that a new completed home has been on the market jumped to six months, the highest since July 1993… Builders will need to maintain aggressive pricing strategies AND lower production levels to shed these inventories. Any recovery in home-building still lies well in the future. –Nomura Economics Research

    * * *
    This was the biggest one-month jump in sales since April ’93, but the margin of error in these numbers is massive, plus or minus 13%. One big monthly change, in either direction, does not make a trend. Note too that the sales number is at odds with the NAHB index, which fell at a steady pace in each of the three months to May, reversing all its prior gain. — Ian Shepherdson, High Frequency Economics

    * * *
    We’re at a loss to explain this spike in sales in light of the recent renewed gloominess among home builders… On the other hand, the Mortgage Bankers Association’s survey of mortgage applications has been showing surprising recent strength. –Morgan Stanley Research

    * * *
    Today’s data do help confirm that the current production/demand imbalance was not as severe as implied by miserable first-quarter sales figures. We greatly doubt that a new buying surge is under way. While the surge in sales reported in April should be discounted, today’s data should add to confidence that some mild progress is being made on inventories at close to the current sales pace. –Steven Wieting, Citigroup Global Markets

    * * *
    Since this is a very volatile and revision-prone series, it is difficult to read too much into any one month’s report. It appears that consumers responded to lower-priced homes in April, resulting in a sharp increase in sales and a decline in the supply of homes. –Bear Stearns U.S. Economics

  105. nynjguy says:

    does anyone here have any experience with a seller who has tried to back out of a deal after the house is UC and concessions have been agreed to?

  106. pesche says:

    uh,oh. now we have a stock market in
    free fall. oh,my. marty. what happened to
    lehman,

  107. Jersey4Life says:

    Do new housing numbers have any significance in NNJ? I don’t see a lot of new construction in the first time home buyer price range not SFHs anyway). Most of it is prior teardowns with a price tag well in excess of $1M.

  108. Frank says:

    #95,
    Yahoo has different numbers, does anyone trusts NYT?

    “The strength in sales was led by a 27.8 percent surge in the South. Sales were also up in the West by 8.5 percent and in the Northeast, where they rose 3.8 percent.”

    http://biz.yahoo.com/ap/070524/economy.html?.v=24

  109. James Bednar says:

    Yahoo has different numbers, does anyone trusts NYT?

    Just a different set of numbers from the same release.

    jb

  110. Rachel says:

    nynjguy Says:
    does anyone here have any experience with a seller who has tried to back out of a deal after the house is UC and concessions have been agreed to?

    If you have specific questions I can get answers from my significant other. He specializes in real estate law. I know there are certain wordings in a contract that if used make it nearly impossible to back out of.

    Rachel

  111. James Bednar says:

    We have cautioned that double-digit gains of new-home sales are VERY unreliable monthly data points. (It is mostly due to the way the builders self-report their sales to Commerce)… Whenever new-home sales jump double digits, it usually reflects a mean reversion from the prior (or subsequent) month’s reportage. Indeed, over the past 15 years of data, we found that a mean regression followed nearly every double-digit monthly gains. Typically, the subsequent month’s data was significantly lowered — flat to negative in nearly every case. –Ritholtz Research & Analytics

    cf,

    Ritholtz has additional data supporting his position over at his blog.

    http://bigpicture.typepad.com/comments/2007/05/new_home_sales_.html

    jb

  112. 3b says:

    #110 JB Are not th enumbers from the 2 sources directly contradicting each other, am I missing something.

  113. Richard says:

    >>Using a blanket statement about inventory being crap as a reason for price drops and it not moving sounds like a cop out. Sort of like you may be in denial…….?

    no, i’m fairly well informed, particularly with my local market. i pretty much know what’s selling and what isn’t and why. when i say crap it’s probably too harsh a statement. i agreed with a poster earlier. a good chunk of the houses that have been languishing aren’t worth the money and prices will need to come down. of course every homeowner thinks they’re house is a palace.

  114. Lindsey says:

    The parsing of NHS has been terrific, and I can’t wait for the revision.

    Just stopped in to note as I did yesterday.

    Jan/Feb sales in Spring Lake: 0

    From the admittedly lagging data provided by the Star Ledger. Sales (in some cases significant numbers of sales) were recorded in 45 of the other 53 Monmouth County towns.

  115. Richard says:

    >>The typical inventory trend happened a bit later than usual this year

    jim, in re to #67 it’s seems clear there’s quite a bit of carryover inventory from last year still on the market. how these carry over sellers react will determine some of the future price direction. will next year show yet higher numbers with minimal price declines or will it come down due to sharper declines? interesting times..

  116. Clotpoll says:

    3b (102)-

    Mean reversion comes to mind. I think when all is said and done, all these surprise upswings are less startling when viewed in any kind of reasonable context.

    One message is loud and clear…prices now MUST come down in the resale market.

  117. pesche says:

    barry’s real good. called gold short
    a year ago.

  118. skep-tic says:

    even if you accept the number at face value, it’s not that surprising. we’re at full employment and new house prices are at least 10% below what they were a year ago (not counting all of the free upgrades). It is not surprising that there would be a bounce in sales, but I still think the interesting thing is that even if there was a bounce, we are still well below peak sales volume. There quite simply aren’t enough buyers at current prices

  119. Rich In NNJ says:

    No worse than saying prices aren’t dropping from a year ago…

  120. Richard says:

    >>What would another 10% off starter homes do in NJ?

    was the median drop in NJ 10%? we need more granular numbers to make any sense of it that is meaningful for folks here.

  121. x-underwriter says:

    nynjguy Says:
    does anyone here have any experience with a seller who has tried to back out of a deal after the house is UC and concessions have been agreed to?

    A friend of mine bought a property several years ago where the seller backed out. Here’s the deal…yes it is a legally enforceable document but you would have to hire a lawyer and go through the whole motion of going to court over it. You have to make the decision as to whether it’s worth it or not

  122. Mike NJ says:

    njnyguy,

    My attorney said this regaridng my sale a few months ago:

    “The only thing I can do is serve them with Time of the Essence, which still gives them two weeks to come to the closing table before they are in breach of contract.”

    I would imagine if they do not come to the closing table in two weeks then you sue for breach of contract. The judge can order them to sell the house and can also award you monetary damages if you incur additional costs due to the delay. All in all though it is a bitch to get the house but if your lawyer approved a rock solid contract then you are perfectly capable of forcing the sale. Try to find out why they are stalling. Offer to walk away for $20 grand. It does not hurt to ask. In this market you will always be able to find another house.

  123. nynjguy says:

    thanks for the responses:

    the contract is airtight, they just fired their original lawyer and are claiming he didn’t have the right to agree to concessions.

    But both realtors and lawyer all know it was agreed upon.

    we think they are just trying to scare us off right now.

    i just want to know if we litigate we can get legal costs reimbursed as well.

  124. Clotpoll says:

    x (122)-

    A suit for specific performance is a buyer’s first remedy for a seller who refuses to close. No lawsuit is easy, but as lawsuits go, these generally go the plaintiff’s way as long as a decent contract underpins the sale.

  125. RentL0rd says:

    scribe #76 – thanks!

    I’m convinced :)
    I’m trying to convince my wife that the older, bigger lot house is the way to go.. and this is good ammunition ;-)

    She’s a blog-o-phobic, so I’ll have to do my due deligence in preparing the case..lol

  126. Mike NJ says:

    nynjguy,

    You absolutely can get those costs back. This is your #1 reason to scare them into capitulating. Breach of any contract, be it a house, car boat, business deal, whatever allows for this. A good lawyer on your part will be worth every penny as he/she will not only get oyu the house but hopefully this will never go to court and they will agree to sell you the house. If it goes to court and your legal costs explode they can be held liable for this. Say goodbye to some of the built up equity. They will know this and hopefully settle well before.

    Good luck.

  127. x-underwriter says:

    they just fired their original lawyer and are claiming he didn’t have the right to agree to concessions.

    I’ve looked at a million purchase agreements. 99.9% of them use a standard form which are not hard to read. Any concessions would have been clearly spelled out in the document. If they signed it, they are responsible for it, not the attorney.
    This reminds me of the so-called victims of the sub-prime mess. If they had bothered to read through it, there wouldn’t be any confusion

  128. 3b says:

    #117 Clot; Thank You. As the only knowledgeable and intelligent realtor thatI perosonally have had any contacy with, your opinion is respected and appreciated.

  129. 3b says:

    nynjguy: Any real idea why they want out of the contract (not buying the cocnessions excuse)

  130. 2008 Buyer says:

    Looks like the majority of the increase (16.2%) in sales can be attributed to the South (27.8%) region. Although its not specific to NJ, the m-o-m increase in the Northeast (3.8%) was not that significant.
    ——————
    Hit current press release (In Excel)
    http://www.census.gov/const/www/newressalesindex.html

  131. Richard says:

    >>i just want to know if we litigate we can get legal costs reimbursed as well.

    absolutely. they’re just trying to shake the tree to see if you fall out. if you do decide you don’t want the house for whatever reasons make they cough up some type of restitution. it’s only fair.

  132. James Bednar says:

    From Reuters:

    New Century says probably overstated 2005 earnings

    New Century Financial Corp. (NEWCQ.PK: Quote, Profile, Research, the largest U.S. subprime lender in bankruptcy, on Thursday said it uncovered accounting errors in its 2005 financial statements, and probably “materially” overstated earnings for that year.

    The accounting mistakes are in addition to those that the Irvine, California-based company previously disclosed for the first nine months of 2006. New Century said it does not expect to restate results for any of the periods because it is liquidating under Chapter 11 of the U.S. Bankruptcy Code.

    In a U.S. Securities and Exchange Commission filing, New Century said it made mistakes in both periods in accounting for losses on loans it repurchased. It said it also made mistakes in 2005 in how it valued some interests in securitizations.

  133. Richard says:

    >>nynjguy: Any real idea why they want out of the contract (not buying the cocnessions excuse)

    i’m going to take a wild stab and say they found another buyer at a higher price. or someone talked into their ear saying they could get more and they were stupid for agreeing to the current structure. they have no wiggle room so stick to your guns. that’s why you pay lawyers big $$$ to negotiate on your behalf.

  134. James Bednar says:

    Masters of the obvious…

    Fitch Study Shows Link Between Falling U.S. Home Prices & Rising Subprime Defaults

    Home prices were virtually unchanged for 2006 subprime mortgages even as subprime defaults rose to double digit levels, according to Fitch Ratings in a new report. In recent years, double-digit home price inflation has helped keep subprime defaults to very low levels.

    Fitch analyzed the default rates, defined as the sum of 90 day+ delinquency, foreclosure, REO and bankruptcy rates, of loans originated in 2002 through 2006 and the cumulative HPI rate following origination. Fitch conducted its analysis at the Metropolitan Statistical Area (MSA) level, rather than using state or national numbers. By weighting the home prices based on the amount of subprime loans in each MSA, Fitch was able to create a more accurate picture of home price inflation levels in the areas where subprime mortgages are concentrated.

    The analysis showed that subprime loans originated in the first quarter-2006 (1Q’06) have experienced only 0.5% of home price inflation after 12 months, but that defaults have jumped to 8.3% of outstanding mortgage balances. ‘This contrasts starkly to 2005 full-year originations which experienced average HPI of 17% after 12 months and very low defaults of 1.7%,’ said Managing Director Glenn Costello.

    The analysis further shows the sensitivity of subprime borrowers to home price inflation by observing the default rates of loans in various HPI ‘buckets’. The analysis showed that default rates for the MSAs that experienced less than 5% HPI were the highest of all the loans in the data sample. In addition, in areas with an HPI of 5%-24.9%, the number of loans in default reached 13% by month 24, only slightly lower than that for loans located in areas that had less than 5% HPI. In contrast, loans in default located in areas that have HPI of 25%-49.9% were much lower and those in areas of 50% or more HPI were a fraction of those in the 5%-24.9% bucket.

    Fitch has previously discussed certain collateral attributes, such as stated income loans and piggyback second liens that were contributing to the high level of early payment defaults for the 2006 subprime vintage. ‘The low HPI is exacerbating the increased risk associated with these loan attributes said Costello. ‘Some of these borrowers are probably experiencing outright home price declines.’

  135. fanshawe says:

    Anyone else see the marketwatch.com homepage today?

    “Greenspan can’t stop blabbing”

    Amusing.

  136. nynjguy says:

    yeah I am pretty sure its a case of seller’s remorse.

    thanks for the advice and I fully expect this to go to litigation as the seller is completely irrational now.

    My wife and I agreed to take this as far as we need to just on principle alone.

  137. x-underwriter says:

    nynjguy,
    This might be a blessing in disguise. Get some compenstion from them to void the contract and wait a few more months. You might be able to find something you like more for less money

  138. x-underwriter says:

    Part of the problem in this industry is that your’re usually not dealing with professionals, at least the two parties in the contract. Sellers do this once or twice in their lifetime as do buyers. Sellers are often times just as much in the dark as you

  139. zane says:

    Re: #95,
    northeas up 43.1%, south down 3.4%, northwest down 28.1% and west down 25.4%, national up 16.1%

    I am a little confused with those number. Does not northeast represents 50% to total market. If not, where the 16.1% come from. I thought south is the biggest market.

  140. gary redfin (a.k.a. gary) says:

    YOY median prices for new homes drop 10% so any seller with enough savvy must realize that their $500,000 (THAT’S A HALF MILLION DOLLARS, KIDS) p*ss-stained dump must drop at least $50,000 TODAY in order to generate any bids. But then again, the average fat, drunk, tightfisted, stingy, money-grubbing, lottery ticket junkie home-debtor will have been too late to the trough and after staggering through yet another stage of denial, will realize that they’ll now have to drop it another 10%.

    But unfortunately, stupidity dwells on both sides of the tracks and there will be some f*cking moron who will buy the POS for $6,500 under the asking price because the realtor, who picked the buyers brain, realized the seller has the I.Q. of a handball and will tell them their ketchup bottle collection would look great in the musty smelling, mold infested, 1968 panel style cellar.

    I need to stop beating around the bush and say what I really feel.

  141. James Bednar says:

    Does not northeast represents 50% to total market.

    Northeast sales accounted roughly 6% of sales in 2005 and 2006. Year to date, the Northeast is running at about 7.8% of total sales.

    jb

  142. James Bednar says:

    New Home Sales that is.

    jb

  143. chicagofinance says:

    gary redfin (a.k.a. gary) Says:
    May 24th, 2007 at 1:57 pm
    YOY median prices for new homes drop 10% so any seller with enough savvy must realize that their $500,000 (THAT’S A HALF MILLION DOLLARS, KIDS) p*ss-stained dump must drop at least $50,000 TODAY in order to generate any bids. But then again, the average fat, drunk, tightfisted, stingy, money-grubbing, lottery ticket junkie home-debtor will have been too late to the trough and after staggering through yet another stage of denial, will realize that they’ll now have to drop it another 10%.

    But unfortunately, stupidity dwells on both sides of the tracks and there will be some f*cking moron who will buy the POS for $6,500 under the asking price because the realtor, who picked the buyers brain, realized the seller has the I.Q. of a handball and will tell them their ketchup bottle collection would look great in the musty smelling, mold infested, 1968 panel style cellar.

    I need to stop beating around the bush and say what I really feel.

    redfin: I think you are channeling a profane version of Boooyaaa

  144. 2008 Buyer says:

    See my previous Post #131

    You are mixing up numbers….Year over Year stat, the Northeast is up 43.1%. However the 16.% (overall) is a month over month stat, of which the Northeast experienced a 3.8% increase.

  145. gary redfin (a.k.a. gary) says:

    ChiFi # 145

    Boyaa Bob will be memorialized as one of the founding members in the housing scam revolution.

    (picture me saluting, feet together, standing at attention as the housing bubble fight song plays in the backround)

  146. 3b says:

    #146 Sorry my mistake.

  147. Steve says:

    HEHE (#89),

    Ouch. Velocity auction starting at $355k for a 2 bedroom? That’s going to wonders for those comps….!

  148. 3b says:

    #147 gary: getting back to one of your earlier posts there is north haughty, and what is even worse than north haughty, is the north haughty wannabe towns.

  149. scribe says:

    Rentlord,

    Doesn’t your wife realize what it would take to clean and maintain a McMansion?

    All those windows…all those stairs …all those bathrooms :)

  150. James Bednar says:

    From the Ledger:

    Paid family leave bill sent to Senate floor

    A Senate committee today approved legislation that could make New Jersey the second state, after California, to provide paid leave for workers to care for sick family members, newborns or newly adopted children.

    The Senate Budget Committee voted 8-6 to approve the bill, with amendments, and send it to the full Senate for further consideration. Among other things, the amendments reduce the paid family leave to 10 weeks, instead of 12 in the original version. California provides up to six weeks of paid family leave.

    The vote followed a two-hour hearing at which labor leaders passionately supported the bill, emphasizing the entire cost would be paid by employees through increased payroll taxes that go into the state’s disability insurance fund. The maximum increase would be $48 a year, or less than $1 a week.

    Businesses countered that they would bear the real cost: lost productivity and overtime paid to other workers filling in for those taking family leave. They warned it would worsen New Jersey’s already bad reputation as a place to do business.

  151. scribe says:

    One of the reasons why paid family leave is really necessary – when someone has cancer, typically, they now stay at home with hospice service.

    The hospitals don’t want to take cancer patients who are not undergoing treatment to fight it until the very end. That’s what we found out when my mother got sick.

    I’m self-employed so I was able to take the time to stay with her full-time.

  152. scribe says:

    It’s a requirement that someone be there 24/7 with the cancer patient.

  153. Steve says:

    >>nynjguy: Any real idea why they want out of the contract (not buying the cocnessions excuse)

    Hmmm… wonder if they realized they couldn’t get financing for a new house they wanted to buy? A stretch perhaps, but would be interesting to know –

  154. 3b says:

    #151 House cleaner, anyone who aspires to be any one today has a house cleaner

  155. James Bednar says:

    More on the opposition to the family leave bill from the Daily Record:

    Senators push making N.J. 2nd state with paid family leave

    Businesses argued the law would hit them hard. Under Sweeney’s bill, companies would be required to give the employees the time off. They would not be required to pay them for the time. Instead the money would come from the state’s temporary disability insurance fund, and workers could receive a maximum of $488 per week.

    Joan Verplanck, president of the New Jersey State Chamber of Commerce, said she’s never seen stronger business opposition to a proposed bill in her 12 years as president.

    “My members tell me they are tired of mandate after mandate being demanded of their companies by state government,” she said. “This, on top of all the taxes they pay and the other astronomical costs associated with operating a business in New Jersey. It is becoming difficult if not impossible for our businesses to survive.”

    Federal law has allowed workers in businesses with at least 50 employees to take up to 12 weeks of unpaid leave since 1993.

    The New Jersey leave would be funded by a 0.1 percent charge against a worker’s weekly wages. Legislative officials estimate that would cost most workers about $1 per week. Most New Jersey workers pay $129 per year in temporary disability insurance through their paychecks.

  156. 3b says:

    #145 chgo: Don’t forget “charm abounds”.

  157. gary redfin (a.k.a. gary) says:

    3b (#150)

    Absolutely, I can’t agree more. There was a time not so long ago when the North Jersey suburbs was just a real nice, quite place to live. Now, it’s littered with this poser mentality and saddens me. It used to be that you grew up in Jersey City or Newark and you worked hard and made your way up into a pretty home and you did it on one blue collar type salary.

    Now, it’s two salaries and exotic, bullsh*t mortgages just to keep from drowning. I’m so old school and this MTV, me-me, I want it now attitude f*cked everything up.

  158. RentinginNJ says:

    A Senate committee today approved legislation that could make New Jersey the second state, after California, to provide paid leave for workers to care for sick family members, newborns or newly adopted children.

    This sounds ripe for abuse. Some people will see this as an opportunity for a 10 week vacation funded by yours truly.

  159. 3b says:

    What happens if you were one of those buyers in April who has not yet closed at this point, put little to no money down, and now see that today prices are down 11% from a month before.

    Seems to me many can and will just walk away.

  160. RentL0rd says:

    #160 – I disagree.
    US has one of the least paid leave, and employers abuse this a lot.

    My wife had only 6 weeks off after each of our kids birth and actually it was not all paid either. And I did not have paid paternity leave either.

    Ofcourse you could take a longer leave with pay-off, but the chances that the job exists after you return are slim.

    Compare this to Germany where I believe you can take 6 months off and your job is guaranteed to be there when you return.

  161. James Bednar says:

    Compare this to Germany where I believe you can take 6 months off and your job is guaranteed to be there when you return.

    These benefits are not without costs. They are paid for by taxes. Like every policy decision, the benefits should be weighed against the costs, and a decision made.

    I’m not saying that I’m either for or against the policy, only asking where the money is going to come from to support it.

    The articles above state that the average tax increase will be less than $1 per week, so lets go with $1 for the sake of calculation. We’ve got 4.5m employees in the state which means this new tax will total some $4.5m weekly.

    This comes to roughly $225m in new taxes a year to support the program. Like I said above, I’m neither for nor against, only pointing out that this isn’t free. Keep in mind these costs totally ignore the additional cost burden on employers.

    jb

  162. 3b says:

    Stock markets down today, strong housing sales number, but not strong price price, and so talk of Fed tightening (again).

    So we have rising sales, falling prices admist fears of higher rates, which will lead to lower prices, ahhh you gotta love it.

  163. SG says:

    Now I am really pissed on newly proposed Immigration Law draft!!!

    The new merits based points system would put undocumented immigrants ahead of the legal skilled graduate degree holders in the queue for available Greencards. The merits based points system would award more points for illegal presence and lows skills and less points to legal immigrants with skills. For example, A Z visa worker who has been undocumented in this USA can score 21 points with 3 years of agriculture experience. A legal skilled immigrant with MBA, MD or Graduate degree would score 20 points for the education. The merits based points system is poorly designed and unbalanced and it puts undocumented immigrants ahead in the queue of those who have waited in the queue for several years under the immigration laws.

  164. chicagofinance says:

    James Bednar Says:
    May 24th, 2007 at 5:29 pm
    Compare this to Germany where I believe you can take 6 months off and your job is guaranteed to be there when you return.

    These benefits are not without costs. They are paid for by taxes. Like every policy decision, the benefits should be weighed against the costs, and a decision made.

    I’m not saying that I’m either for or against the policy, only asking where the money is going to come from to support it.

    grim: it’s not just a monetary cost. If you have these value destroying policies, it can lead to all kinds of [broken record] unintended consequences. One major one is structural unemployment among the young and less employable classes. Why? If you know that when you hire someone, you will need to extend all manner of benefits, protections, and accomodations, you can be damn sure that any person you have the slightest question about is going to be rejected. You force employers to be risk averse.

  165. afe says:

    http://tinyurl.com/2axako

    Sorry if this is a repost…cnn/money article on home prices going south

  166. afe says:

    but SG …do we need MDs and PhDs to immigrate when we can “virtually” use their services? There really is no “virtual” way to pick lettuce and strawberries. Our economy needs the illegals here more than the MDs and PhDs. But I bet if someone with a PhD (or not) can figure out a way to do so, the illegals go.

    I say this as a PhD and someone with at least a dozen relatives who have already received or are waiting to receive their green card.

    The MDs and PhDs need to re-invent themselves and figure out what they can provide in this NEW economy (aside from consumerism). After all ‘fairness’ as defined in the US and increasingly in the global economy is coming down to the dollar.

  167. d2b says:

    The problem with ketchup bottle collections is plastic. Aspiring collectors like myself have seen prices skyrocket on ebay. What’s one supposed to do with a half-completed collection?

    I hear that the smart money is moving to salsa.

  168. Sapiens says:

    Ladies and Gentlemen, We need your help in stopping the Real ID Act.

    REAL ID IS INCLUDED IN THE IMMIGRATION BILL

    THIS INFORMATION NEEDS TO BE SPREAD ALL OVER THE NEWS WIRES TODAY SO THE PUBLIC KNOWS ABOUT IT!!!!!!!

    Senator Joseph Biden spoke of this last night on Hard Ball with Chris Matthews!

    The Real ID Act which is to take effect in May 2008 and is under growing opposition across the country. Missouri Representative Jim Guest created “Legislators Against Real ID” and is currently traveling the States
    encouraging Legislators to prohibit this Law to take effect in their States.

    Rep. Jim Guest 660-483-0900 cell
    http://www.legislatorsagainstrealid.com

    The Senators in favor of this Bill know the growing opposition to Real ID and are trying to sneak it through in the Immigration Bill. Homeland Security has already said they will be sharing the database created by Real ID with other countries making this ID not a National ID but really an International ID.

    Here’s the Big Picture:

    Implement Immigration Bill
    Implement SPP/North American Union
    Implement Amero
    Build NAFTA Superhighway
    Implement Real ID
    Welcome to Nazi Germany

    Now you will not be able to work without having a this International ID card.
    If you are in conflict with what the Government is doing then they can simply turn off your card and make you a non-person.


    Jim Palmisano
    Missouri State Coordinator
    We the People Congress
    jpalmisano@mchsi.com
    cell: 417-496-1973(call anytime)
    hm: 417-459-4234

  169. scribe says:

    3b –

    House cleaner? Boy, that would add a lot of extra expense.

    OK, Rentlord – argue it with the wife as an extra, unnecessary expense :)

  170. Clotpoll says:

    ChiFi (169)-

    Damn, that tranquilizer dart’s gonna leave a mark.

  171. Little Eichmann says:

    #172:

    “Welcome to Nazi Germany”

    Heh. That line alone invalidates the message.

  172. Little Eichmann says:

    “Our economy needs the illegals here”

    Are you serious? Illegals are a net drain on the economy. Businesses love them because they can privatize the benefits. But they don’t bear the costs – the rest of us do.

  173. FLASH: New home prices crash at least 11% nationwide while sales fall 10% VERSUS LAST YEAR

    http://housingpanic.blogspot.com/2007/05/flash-new-home-prices-crash-at-least-11.html

    UPDATED – chart from housingdoom (that the MSM won’t show you)

    For the “there is no housing bubble” and “home prices never go down” crowd, today’s numbers should drive a stake through their hearts.

    And to think we’re still just getting started. It’s a long, long, long, long, long way back down.

    However, watch the MSM and NAR spin today’s numbers (VS. LAST MONTH) as good news, and that we’re “bottoming out”. How many times can we “bottom out” until they realize the bottom is not even in sight? And when will they finally think for a change and do year over year comparisons, the only real thing that matters?

    Also, keep in mind these numbers from your government are untrustworthy, have a massive margin of error, and don’t even include the use of builder incentives, which we know are massive. So take ’em with a grain of salt – even though it’s obvious sales are overstated and prices are down much more than reported.

    WASHINGTON, May 24 (Reuters) – Sales of new U.S. homes rose 16.2 percent in April, the sharpest climb in 14 years, while prices fell a record 11 percent, according to a government report on Thursday that showed home builders taking extraordinary steps to move houses.

    New single-family home sales rose to an annual rate of 981,000 units from a revised rate of 844,000 in March, the Commerce Department said.

    Analysts polled by Reuters were expecting April sales to rise slightly to an 860,000 unit pace from a previously reported rate of 858,000 units in March.

    In April, the median sales price of a new home fell $28,500 to $229,100 from $257,600 in March. That’s the lowest price for a new home since September 2006 when the median sales price was $226,700.

    The previous record decline was a 9.4 percent fall-off in September 1981. Compared with a year ago, April’s sales price was off 10.9 percent — the fourth-largest decline ever. The record 14.6 percent decline was set in July 1970 and the next three largest falls occurred in that same year.

  174. Big drop in home prices predicted
    http://money.cnn.com/2007/05/23/real_estate/prediction_big_home_price_drop/index.htm?postversion=2007052413

    Some economists see steeper drop in store for home prices.
    By Les Christie, CNNMoney.com staff writer
    May 24 2007: 1:37 PM EDT

    NEW YORK (CNNMoney.com) — Most industry watchers agree that home prices will continue to slide before they recover, but now some economists say they’ve got a long way to fall before bouncing back.

    David Wyss, chief economist at Standard & Poors, has forecast a price drop of about 8 percent for the 24-month period through the fourth quarter of 2008.

    His prediction came during a general economic outlook session at the Mortgage Bankers Association’s (MBA) National Secondary Market Conference & Expo in New York this week.

    Housing prices will suffer from a “significant increase in defaults and foreclosures,” he said, with affordability still a major issue. Wyss worried how hard the slump will hit already highly inflated housing markets.

    He said its impact on areas like South Florida, where much of the buying is speculative investment in second homes, could be big. “You don’t need a second home,” Wyss said.

    Overall, he said he expects the U.S. economy to slow this year to a growth rate of about 2.25 percent, down from 3.3 percent last year.

    Celia Chen, Moody’s Economy.com’s director of housing economics followed Wyss’ lead. “We also have an 8 percent decline in median house prices [for the 24-month period ending March 31, 2008], which is consistent with what David Wyss had.”

    “That is quite a bold forecast,” Lawrence Yun, economist at the National Association of Realtors, speaking from his Washington, D.C. office, said of Wyss’s prediction. NAR is predicting a much less severe total decline of 1.4 percent through the slump – prices have already declined three straight quarters – and that a recovery will start to take place in early 2008.

    “The run up,” Yun said, “was an investor-demand driven boom, and it was followed by an investor-driven collapse.”

    more…

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