From the NY Times:
Risky Loans Help Build Ghost Town of New Homes
Along the streets of Far Rockaway, many recently built two- and three-family town houses sit waiting for even one family to move in. Some have boarded-up windows, while others have clumps of garbage in driveways that have never seen a car. Desperate developers hoping to cover their bets — and stem their losses — tape up both For Rent and For Sale signs inside windows that face nearly deserted streets.
The same blocks were once home to sprawling single-family houses with wraparound porches. But during the superheated real estate market of just a few years ago, longtime residents sold out to developers who rapidly demolished the old to build rows of plain vanilla town houses sold, it seemed, to anyone who could sign a mortgage application.
But as the market cooled and credit got tighter, many of the new homes sat empty. On a few blocks, developers have built nothing but plywood walls to hide the weed-choked lots after the old houses were torn down.
“Folks just went crazy and got into the feeding frenzy,” said City Councilman James Sanders Jr., whose Far Rockaway office is wedged between undeveloped lots and mostly vacant town houses. “They thought money was going to come to everybody left, right and center. Irrational exuberance is what I call this.”
The empty homes and undeveloped lots, he said, are part of the unacknowledged effects of the larger credit and foreclosure crisis in minority neighborhoods, where subprime and predatory loans were common. Real estate values rose steadily, as did the optimism of aspiring first-time buyers, who entered into mortgages without fully understanding the terms of the loan or the responsibilities of ownership. When budgets got tight, they could always refinance, they were told.
From Reuters:
Wolseley hit by US housing, sees no recovery signs
Building products distributor Wolseley (WOS.L: Quote, Profile , Research) reported its first profit fall in more than a decade on Monday, and warned that weakness in the U.S. housing market was spilling over into repairs and maintenance.
Shares in the British firm fell 5 percent to three-year lows as some analysts cut their profit forecasts for the current financial year by around 10 percent.
Wolseley, the world’s biggest distributor of plumbing and heating products, said profit before tax and goodwill amortisation fell 7.3 percent to 758 million pounds ($1.52 billion) in the year to end-July, slightly below analysts’ average forecast of 761.4 million.
…
“There are no signs yet of any upturn in the U.S. housing market, and the repairs, maintenance and improvement (RMI) market is now beginning to soften,” Wolseley said.
…
In North America, where Wolseley generates roughly half of group sales, trading profit fell 19 percent to 487 million pounds, as its building distribution business Stock saw profit tumbling 75 percent, hit by a weak housing market and one-off charges related to 3,500 job cuts and 46 branch closures.
“It’s very difficult to determine exactly what’s going to happen (in the U.S. housing market),” Chief Executive Chip Hornby told reporters.
“The most challenging part will be winter months … It could potentially get worse before it gets better.”
I always wondered far rockaway while on the A train there are streets, there are hydrants, but there are not buildings.
Did they build and demolish or build the streets and then the people never came?
I had this image of building a really big garden and a house in the sand :)
From Inman News:
Damned lies and median house prices
One of the most commonly referenced statistics in the real estate industry is the median sales price of homes. Many articles are published in newspapers the day after the National Association of Realtors releases its quarterly Metropolitan Area Existing-Home Prices report with conclusions about the healthy or unhealthy state of the local real estate market. Unfortunately the median sale price is frequently taken out of context and misinterpreted.
Even someone who slept through most of their math classes will remember that the arithmetic mean and median statistics are different for the same data set. The average is the sum of the numbers divided by however many numbers you started with. The median is the number in the middle, when the numbers are listed in order.
The reason that the mean or average sale price for a market area can be misleading is intuitively obvious and that’s why it’s rarely cited. A few sales in the extreme luxury segment of a market — think $30 million or more in Bel Air — can push up the average for the entire local market area.
The median sale price can also be misleading particularly in down markets. Let’s consider the San Francisco market. The median home price reported by NAR in the first quarter of 2007 was $748,100. In the second quarter it was $846,800 — a jump of more than 13 percent. Wow, that appears to be a sure sign of a healthy market. Or is it?
To get a truer picture of market conditions, let’s consider a few more statistics: price indexes (using a repeat-sales price methodology), the number of sale transactions, price reductions and inventory growth. From April to June 2007, the S&P Case Shiller Home Price Index showed a decline of just less than 1 percent, not an increase of 13 percent. Likewise the home-price index published by OFHEO showed a decline of just less than 1 percent for the second quarter. The S&P Case Shiller index covers only resale transactions while the OFHEO data covers multiple sale types but only for conforming loans.
…
So what actually happened? Sales transactions increased with a greater proportion on the high end versus the previous quarter. There appears to have been little actual appreciation as evidenced by the Case Shiller and OFHEO numbers, while inventory increased and prices of many listed properties were reduced. So next time you read that median house prices have increased in your area, don’t celebrate prematurely. Conduct more research before you reach a conclusion about market conditions in your area.
From Bloomberg:
Treasury Notes Fall on Concern Fed Rate Cut Will Spur Inflation
U.S. 10-year Treasuries fell on concern the Federal Reserve’s interest-rate cut last week will cause inflation to accelerate in the world’s biggest economy.
Rising defaults on subprime mortgages led policy makers to cut the target for the overnight lending rate between banks by a more-than-expected 50 basis points last week to aide the economy, adding that inflation risks remain. Inflation erodes the value of the returns from fixed-income securities.
“Yields rising in 10-year bonds suggests there may be inflation further down the track given the Fed’s move,” said Su-Lin Ong, senior economist at RBC Capital Markets in Sydney. “It’s about whether there will be more from the Fed and whether that’s appropriate for the economy.”
From the NY Times:
A Reality Check for Home Sellers
By AUSTAN GOOLSBEE
Published: September 23, 2007
ECONOMISTS and other humans don’t always see eye to eye. “Economists tend to think people are crazy because they won’t sell their houses for less than they paid for them — and people think economists are crazy for thinking things exactly like that,” said Professor Christopher Mayer, director of the Paul Milstein Center for Real Estate at Columbia Business School and an authority on real estate economics.
With house prices falling in many markets around the nation, this particular quirk of the human psyche might end up costing the economy a great deal, Professor Mayer says.
Classical economics can’t explain this behavior. That’s because people who refuse to sell their houses for less than they paid for them are violating a cardinal rule of the market: stuff is worth what it’s worth. It doesn’t matter what you paid for it. But when Professor Mayer and his co-author, David Genesove, a professor of economics at the Hebrew University in Jerusalem, studied the Boston condominium market in the 1990s — scene of one of the biggest real estate busts in recent American memory — the actual patterns of human behavior did not seem to follow the standard rules at all.
From 1989 to 1992, prices in Boston fell sharply, with condominium prices dropping as much as 40 percent. For a great many of those who bought condominiums during that period, selling could be done only at a significant loss. And, basically, many people refused to sell.
Their study, “Loss Aversion and Seller Behavior: Evidence From the Housing Market,” appeared in The Quarterly Journal of Economics in November 2001. The professors gathered data on almost 6,000 Boston condominium listings from 1991 to 1997 and showed that for essentially identical condominiums, people who had bought at the peak and were facing a loss generally listed their properties for significantly more than those who had bought at a time when prices were lower.
Properties listed above the market price just sat there. In the Boston market over all, sellers listed their properties for an average of 35 percent above the expected sale price, and less than 30 percent of the properties sold in fewer than 180 days. In other words, much of the market went into a deep freeze as many people held out for market prices that no one would reasonably pay.
In classical economics, that’s not supposed to happen, but the episode did comport with the behavioral economics theory of loss aversion: people have a visceral — some might say “irrational” — hatred of losing money. They try to avoid doing so, even when it goes against their own best interests.
…
What is to be done? Well, if you are holding out for an above-market price to recoup your losses, perhaps you would do well to hear the advice that Professor Mayer gives his own family members.
“If you want to sell your house then you list it at the market price and you sell it,” he said. “If you don’t really want to sell then don’t put it on the market. But don’t say you want to sell and then set the price so high that you spend the year cleaning up every morning, having people walk through your living room and look in your medicine cabinets and reject you. That’s just painful — and expensive.”
His research offers a simple lesson for everyone out there waiting for a high price to push them back into the black: Get real.
Roubinator on Squawk Box, looking like he slept in a dumpster.
HSBC Pares Back in U.S.
U.K. Bank to Shutter
Subprime-Loan Unit;
Tightening Standards
By CARRICK MOLLENKAMP
September 24, 2007
HSBC Holdings PLC’s decision to shutter one of its big subprime-mortgage businesses is the latest step by the British bank to pare back its U.S. home-lending unit, which was the first this year to signal problems in subprime lending.
The bank said it will close Decision One Mortgage, which has operations in South Carolina, Arizona and North Carolina. About 750 employees will lose their jobs in the move, which also underscores how avenues of borrowing increasingly are narrowing as banks and Wall Street firms that several years ago rushed into the market for subprime mortgages, or loans to people with poor credit records, now are exiting the business.
Decision One was a big middleman in the subprime industry. It originated loans through thousands of brokers and then sold those loans to firms that bundled them and sold them as mortgage-backed securities.
Decision One was “a huge buyer,” said Chris Freemott, president of All American Mortgage, a mortgage broker. “The subprime-mortgage market — as the subprime-mortgage market would go — it’s dead.”
Decision One wasn’t the source of HSBC’s subprime problems and the exit reflects more HSBC’s decision to tighten lending standards and scale back its mortgage business. It will continue to originate loans through a network of nearly 1,300 branches in 46 states under the Beneficial and HFC names.
Reposting my question under another article:
ING cut it’s online savings interest rate. What are the other online savings doing? Any cuts?
JB
Why are my posts being deleted?
First to moderation then deleted, I am certainly not a TROLL, if anything I am an advocate for the deflating of the bubble.
I sold my house over 2 years ago then rented.
Jim
lost (8)-
Cuts? Of course. The two banks I do business with (BAC, Sun National) had new rates posted on Wednesday. Saving is now punished…and will be for the foreseeable future.
Didn’t expect GSMLS to rise another 1k in volume this September (?). It hovered around 35k listings all summer. What gives? Is this still going to climb through the winter? Doesn’t look like anyone is pulling their house out for the off-season.
From Bloomberg:
Fed’s Rate Reduction May Give Little Relief to U.S. Homeowners
Americans may be disappointed that the Federal Reserve’s interest rate cut won’t translate into lower monthly mortgage payments and a revival of the housing market.
“Mortgage rates won’t stimulate demand,” said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis. “The Fed may be a little impotent here because what caused this housing crash was overpriced housing, not mortgages.”
The average 30-year fixed mortgage rose 0.01 of a percentage point to 5.95 percent on Sept. 21, according to North Palm Beach, Florida-based Bankrate.com’s survey of banks and lenders in the 50 U.S. states. It peaked this year at 6.42 percent on June 14, Bankrate.com said.
The housing industry, now in the second year of its worst recession since 1991, erased 0.6 percent from gross domestic product in the second quarter. Home prices probably will fall on a year-over-year basis for the first time since the Great Depression of the 1930s, Anderson said.
Investors concerned about inflation following the Fed’s half-point interest rate cut have driven up the yield of 10-year Treasury notes by 23 basis points, or 0.23 of a percentage point, to 4.7 percent. The increase has dashed hopes that lower home-loan costs might entice more Americans to overcome their fear of falling prices and buy homes.
Anth,
Pent-up supply.
Anth (10)-
Can’t pull your house off the market when its sale is forced.
The first big capitulation is nigh.
Spent the most-ever on groceries this past weekend. Two people, $300+, and we didn’t even buy the fancy organic stuff. I can’t imagine what the register tape would read for a family of four or five.
Grim,
Good thing that food is not part of core inflation, eh?
Funny – everybody in NYC region makes 100k+ year and thats supporting home prices:
Here is one of thouse home buyers:
Queens woman victimized in brokers’ mortgage scam
http://www.nydailynews.com/money/2007/09/23/2007-09-23_queens_woman_victimized_in_brokers_mortg.html
Couple of quotes:
On one of the mortgage applications, which she says was filled out by a 2000 Homes-affiliated employee, Murphy was listed as a $9,000-a-month “marketing manager” for a Diamond District jeweler. On another, she’s listed making $7,875 a month at the same job.
Eitan Sror, chairman of 2000 Homes, provided a copy of the sales contract, which was dated May 4, 2006, and signed by Murphy, showing the price of the house was $538,000.
here is you typical 500K+ home buyer, right??
Murphy says she gets $788 a month from Social Security and Workmen’s Compensation, $260 a month in welfare benefits and some extra cash collecting cans.
Also: With an office in Queens Village and 20 licensed brokers, 2000 Homes has been fined $3,900 for violating regulations aimed at curbing aggressive sales tactics, officials say.
Next month, the company faces a hearing and possible loss of its real estate broker’s license in the 2005 sale of a home in St. Albans, Queens, records show.
In that case, 2000 Homes, which was representing the seller, allegedly didn’t disclose that one of its brokers was a principal in the company buying the home – as required by law. The buyers flipped the house five months later at a $160,000 profit.
I have one question: why nobody is in prison yet??? it is clear case of fraud.
Second question – Not in NJ, right??? – no fraud here!?
From Reuters:
Fortress’ subprime unit Nationstar halts loans
The subprime unit of Fortress Investment Group (FIG.N: Quote, Profile , Research), Nationstar Mortgage, said it is no longer accepting any new loan applications from brokers.
Nationstar’s decision to stop all wholesale originations became effective on Friday, according to its Web site. Fortress was not immediately available for comment.
Nationstar is better known as Champion Mortgage in our area.
Grim, you should use coupons…
That was with coupons.
lostinny,
emigrantdirect is still at 5.05%, but they dropped their CD rate to 4.55%.
I’ve noticed a couple on bankrate have dropped. But others are still at or above 5%. Check out bankrate’s MMA/savings account page.
Grim,
No coupons needed. Put the groceries on the credit card and keep transferring it to 0% balance credit cards to infinity. I hear all the “savy” investors do this and besides, debt is the new wealth, haven’t you heard?
Grim,
Are you going to get me started on food prices again? How long have I been b*tching and moaning about them? I’ll tell you, for about a year and a half. We are a family of four and we eat our/order out an awful lot on top of our huge food bill. I also live on a block between 2 delis and drop $50-75 a week there. Our food bill ( and I really should keep better track of it) has surged to riduculus levels- it is eating us up -pun intened.
KL
Cant help chiming in – Debt is the new wealth. Years ago I remember qualifying for additional 1% discount on a car loan because the minimum balance on my combined account was over 15K (which included the value of the loan). Not sure how a loan of which I had yet to pay dime got classified as asset.
But I did not complain as I got a better rate… clearly some creative marketing
rhymingrealtor,
Thank God Bernanke said inflation is tamed, don’t you agree?
From MarketWatch:
Fed’s Fisher: Inflation downtrend gave room for Fed rate cut
Recent downtrend in inflation gave the Federal Reserve “some wiggle room” to cut its overnight target interest rate by a half-a-percentage point, said Richard Fisher, the president of the Dallas Federal Reserve Bank. Fisher said holding rates steady at the Fed’s Sept. 18 meeting would have risked a slowdown. Fisher said he was worried about moral hazard, the appearance of bailing out imprudent investors, but said the Fed faced “an unsettled money market riddled with angst — a money market that, in my view, was going into a defensive crouch in which even the best and most careful depository institutions and market operators feared that the positions taken by their less prudent brethren may come up a cropper and seize up the entire financial system.” Fisher said the Fed’s next move could be in either direction.
That last line is interesting..
Fisher said the Fed’s next move could be in either direction.
From the WSJ:
Northern Rock May Point to U.K. Crunch
By CARRICK MOLLENKAMP and MARK WHITEHOUSE
September 24, 2007; Page A2
The immediate danger for depositors of British mortgage lender Northern Rock may have passed, but the company’s troubles highlight a greater threat ahead: the broader impact of the global credit crunch on the United Kingdom’s housing market and the world’s fifth-largest economy.
{snip}
By tapping capital markets rather than relying solely on typical deposits, Northern Rock was able to expand at great speed. By June, it had about £87 billion in mortgage loans outstanding and had accounted for almost a fifth of new mortgage loans made in the first half. According to brokers, Northern Rock gained market share in part by taking risks — allowing home buyers, for example, to get loans covering as much as 90% of the purchase price.
Their mortgages “were prime, but they were operating at the outer limit of it,” said Howard Cook, a partner at Talbot Insurance Services, an independent financial adviser in Cumbria, in northwestern England. A Northern Rock spokesman said the credit quality of the company’s loans was solid, and that the percentage of loans in arrears was well below the industry average.
Northern Rock wasn’t alone. Other lenders — such as Paragon Group of Cos., which focused on customers who bought homes to rent out — took the business model still further, relying entirely on wholesale capital markets to fund their operations. According to a report from Citigroup Inc., which didn’t name specific companies, such lenders accounted for about a quarter of new mortgage approvals for home purchase from May through July, up from about 5% in early 2002.
The picture for those lenders has changed dramatically. The credit troubles that began with subprime mortgages in the U.S. have led investors to shy away from mortgage-backed securities, all but drying up the markets on which the lenders depended. Northern Rock was the most visible casualty of that change, but others are no less exposed. Subprime lender Victoria Mortgage Funding went out of business this month.
http://online.wsj.com/article/SB119058413986236614.html?mod=hps_us_whats_news
Grocery Bill – if you have a family of 4 you are much better off buying one of the whole-sales memberships – you buy food in bulck, and it helps you with coocking – plan ahead, buy only what you need and such.
but – for example milk went from 2.05 to 2.95 in the same store since march, on talk about gasoline prices – however right now gas prices went down and milk stayed teh same.
Similar increases, also not so dramatic, – of 10-40% are noted for every food in the wholesale stores. (I know it since I keep 2 years worth of receipts and we alsays uy the same brand/amount).
I would say avc=verage family food bill probably went up 20-40% this year alone.
But hey, inflation is at 2.0% right?
because I can easilly EAT flat screen TV’s and computers…
Sorry – don’t know what is going on with my typing today.
ING?
From Reuters:
ING has 28.7 bln euros of Alt-A mortgage exposure
ING Groep NV (ING.AS: Quote, Profile, Research) said its exposure to “Alternative-A” mortgages as of July 31 was $40.46 billion (28.7 billion euros).
The Dutch banking group said on Monday in a filing with U.S. regulators that “Alt-A” mortgage exposure accounted for about 2 percent of its assets and was mainly through asset-backed securities.
The news comes as trouble from the U.S. mortgage market ripples through the world economy. Subprime mortgages, which are of lower credit quality than “Alt-A,” have experienced surging delinquencies.
#13 Clot:The first big capitulation is nigh.
Price Capitulation?
Spent the most-ever on groceries this past weekend
That’s okay though, because inflation is based on a “basket” of goods and services. As long as you head to Best Buy after the grocery store and pick up a cheap plasma TV from China, it all works out.
Took a look at a few open houses yesterday. Saw an interesting listing, pulled back the history when I got back home.
Home is listed at $50k more than it was purchased for in mid-2005. Once you account for the transaction fees on the sale, assuming it sells at asking, it roughly $20k over the 2005 purchase price.
Unfortunately, there is a kicker. The first floor was remodeled extensively. Brand new kitchen, all top of the line. Cabinets, granite, high-end appliances. New bathrooms on the first floor as well, high end fixtures and tile. New finish carpentry, crown and chair rail, high-end carpet and new wood flooring. Quality was very good, definately not a DIY hack-job, tastefully done. I’d conservatively price the cost of the remodel at $75,000-$85,000.
Losses aside, I thought the pricing was realistic. More so than what we would have seen last year, or the year before. Plenty of sellers would have had no qualms about trying to push the listing price up $200k because of that $85k worth of work.
http://www.cnbc.com/id/20883613
US deliquencies seem to be stabilizing.
Al 16
http://www.ajc.com/metro/content/metro/atlanta/stories/2007/09/21/fraud_0922_web.html
your answer to the question as to why there isn’t anyone in jail yet.
Be patient. A small percentage of crooks will have to pay for eberyone else that didn’t get caught.
#34
Grim, care to share what town this was in?
35#, i agree on one point: this time is different than what happens 15 or 25 years ago. current mortgage rate is still at historical low. it significantly affects affordability. take 30 year fixed rate for loan ammount of $400K as example,
rate monthly payment
6% $2,398
7% $2,661
8% $2,935
9% $3,218
10% $3,510
11% $3,809
12% $4,114
or put it the other way, you can afford 10% more expensive house if the rate drops by 1%: it costs $2638 per month for 6% rate of $440K.
i believe everybody here know this simple math. just want to remind you when you hear the talks that we are in 80′s and 90′s again.
#16 – Al
That story is amazing! It’s like open season on the uneducated! The people who did this should be paraded around NYC so that everyone can take a pot shot at them – then thrown in prison!
Regarding food prices: to all you people out there with little kids – just wait until their teenagers! i feel like i live with pac men. (i’m showing my age)
#37 – Kinnelon
Thanks.
#38 bi; Fixed rate mtg rates are not dropping, and in fact are rising;or did you miss that.
Its not a question of interest rates, its house prices, they have/are too high, and as such the high prices cancel out the benefit of low interest rates.
Please try to understand that concept.
From the NY Post:
HSBC YOWLS AS ROSS PROWLS
By PAUL THARP
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September 22, 2007 — As Europe’s biggest bank bailed from America’s risky home-mortgage business, Wilbur Ross dived in as the latest billionaire to go bottom-fishing for bargains created by the subprime mortgage mess.
Ross, armed with $685 million in bankruptcy shopping cash from Goldman Sachs, hopes to use the mortgage crisis to reap a windfall similar to the $4 billion killing he made two years ago from buying up bankrupt and depressed steel factories.
HSBC, Europe’s largest bank, has made major inroads to American banking, but said yesterday it would shut its mortgage unit that made home loans to Americans with weak credit histories.
HSBC said it will also sack 750 people who work at its subprime division, Decision One, including people in Phoenix, Charlotte, N.C., and Fort Mill, S.C.
Last month, HSBC shed 600 jobs from its big Midwest mortgage office in Carmel, Ind.
The nation’s largest mortgage firm, Countrywide Financial, two weeks ago fired 12,000 workers over its mortgage losses and closed numerous offices.
Meanwhile, Ross said he’s ready to pay $435 million for the mortgage collection office of bankrupt Melville, L.I.-based American Home Mortgage.
Ross said American Home’s servicing unit collects payments and holds escrow accounts for about $57 billion in mortgages.
Ross will seek approval of a bankruptcy court Oct. 5 to buy the firm’s assets in a fire sale, using his newly formed AH Mortgage Acquisition Co. He has already loaned the company $50 million to continue operations while it reorganizes in bankruptcy court.
Over 4,000 (njmls) Single Family Homes for sale in prestigious minutes from NYC Bergen County this morning. All crap of course, but still available.
Can anyone help out with an address / history on MLS: 2736566?
Thanks for any help you can provide.
BI:
in the 80s and prior it was common to put down 20%. In the last 5 years it was common to put down nothing. In the 80′s, wages kept up with housing prices. In the last 5 years, they did not. In the 80s, there was a positive savings rate. In the last 5 years, it has been negative or barely above zero.
You can make all of the arguments you want about historically low interest rates, but what is different now than in the 80′s is that people used to save 20% or more to buy a home. Today people don’t even save for their own retirement, let alone for a home down payment.
You can’t just ignore the drop in wages and the negative savings rate and look at interest rates alone. Don’t forget about inflation either.
#7 Grim
I was out in wine country on Long Island this weekend and noticed a “For Rent” sign on an HSBC Mortgage storefront. Quite a few For Sale signs all over the north fork too. I even noticed a family packing out a trailer being towed by a Land Rover…not enough cash to pay for movers?
Site problems JB?
I couldn’t refresh it for the last 1/2 hour.
bi: Don’t try to sell the line MSM used for last 5 years on this board. The RE prices definitely rose significantly higher then rate reductions.
That was exact reason why I did some analysis to prove the MSM was not reporting complete story. They kept harping lines from MSM and FSI saying it was becoming cheaper for people to buy a house, which in reality was not true at all. To give you example, in 1999, OFHEO reported HPI of 114 in NNJ area, and in 2006 it went up to 244. During the same time, 30 year fixed rates went from 8% to 5.5% (min). That 2.5% reduction should result only in 30% to 40% rise in price and not 100% rise. And now you have rates going from 5.5% to 6.5% (even more for Jumbo), the affordability has come down significantly.
http://www.geocities.com/skgala/newark.htm
There is no way for RE to go up now. Its going down. Anecdotally, when I talk to senior folks (age > 60) in NJ area, most want to sell home and retire somewhere else. Actually, I am finding most looking at places like Delaware and PA. You have demographic move that will cause long term price declines in NJ area.
35#, i agree on one point: this time is different than what happens 15 or 25 years ago. current mortgage rate is still at historical low.
True, but this is part of the problem…not the solution.
In the late 80’s early 90’s, mortgage rates fell, cushioning the fall of the housing market. This happened in 2 ways:
1) Those who took out ARMs in the early 90’s did not see a “payment shock”. As long as they remained employed and were not forced out for another reason, many could hunker down and ride out the storm.
2) Falling rates were, in large part, able to help restore affordability without the need for major price drops.
This time around, we are going to see a 2 whole new class of sellers that weren’t around last time:
-Those forced to due to teaser rates expiring
-Those who put nothing down, have nothing to lose & simply don’t care
At the same time, we don’t have the luxury of falling interest rates helping to restore affordability. This time around we only have inflation and falling prices
#49 rent: Agree. I would add howwver that we did have significant price falls in the early 90′s, ( I lived it).
A combination of falling prices and falling interest rates restored affordability.
Thanks for the ING update. Funny – someone mentioned this weekend they were heavy in the ARM loans/subprime business, and they moved their money out.
I’ll be doing the same tonight/tomorrow.
Just called HSBC … 4.94 apr.
Is that the best offer you guys know of?
Pretty interesting argument,
Don’t Worry about US Mortgages
by Adam S. Posen, Peterson Institute
Op-ed in Welt am Sonntag
April 12, 2007
In summary, there will be no large negative impact on growth from the current real estate bust in the United States, though some individual homeowners and communities are suffering. Despite the suspicion being voiced in various quarters on both sides of the Atlantic, sometimes financial innovation is actually stabilizing. In this case, structural change in the US mortgage market has limited the transmission of the real estate shock into the economy as a whole, and it is the transmission of the real estate shock, not the shock itself, that matters.
So, if RE prices going down does not have economic impact, why is Ben reducing rates? Is there something more to economic outlook then what we know?
bank of america has this nj AAA (as in Automobile club nj) fdic money market account that was yielding 5.30% today for balances over $50,000.
i don’t understand why, but it wasn’t really advertised – i don’t think the people in the branches really know about it either. if i’m remembering correctly, it was somehow grandfathered in with the acquisition of mbna – could be wrong though.
48#, SG, good data.
it clearly shows that the affordability is reduced in 2006 due to the interest rate increased to 6.5%. if it was reduced to under 6.0%, the ratio would be down to under 30% from current 38%.
>
2003 167.14 184.2 82.97 173.72 43681 5.83 $11,922.49 27.29%
2004 185.29 187.4 84.41 182.04 45972 5.84 $13,231.47 28.78%
2005 215.37 193.3 87.07 193.40 47419 5.87 $15,429.37 32.54%
2006 244.01 199.8 89.99 205.90 49014 6.5 $18,685.66 38.12%
Apple Bank of New York has an online only account that pays 5.27% and is very good. It is quite low tech, but if all you are looking to do is to park your money, this is a great bank to do it in. Although small, the banks solvency is very highly rated (if you trust Moody’s). There are no tiers and I think the minimum is like $1,000.
Sorry folks, lots of load related server issues this morning.
From nj.com:
Judge clears way for N.J. stem cell vote
A judge on Monday rejected a bid by abortion opponents to halt New Jersey’s plans to ask voters whether the state should borrow $450 million to fund stem cell research for 10 years.
Superior Court Judge Neil H. Shuster found the Nov. 6 ballot question was valid, clearing the way for the referendum that would approve public spending on federally restricted embryonic stem cell research and work on adult stem cells.
The lawsuit, filed last week by the Legal Center for Defense of Life on behalf of the New Jersey Right to Life, argued the ballot question approved by legislators and Gov. Jon S. Corzine in July was misleading.
http://www.youtube.com/watch?v=XTHJdHNy_Zg&eurl=http%3A%2F%2Fhousingcrashtv%2Eblogspot%2Ecom%2F
http://www.youtube.com/watch?v=-rLYph0J7vc&mode=related&search=
hehehhehehehe!
Has anyone worked with FNBO before? According to their website, they offer 6%. BUT that’s only an introductory rate … Friday, it changes.
I called and they said it will go down to ‘market levels.’
Does anyone worry about parking a large sum of money and then having the online bank run into major subprime problems? I know FDIC insured means it’s protected, but still …
gary (25)-
Pay all your debts with inflated, worthless money. It’s all good…
Bath (60)-
Why don’t you buy a large, heavy safe and a couple of pit bulls?
Hate dogs.
grim,
#43 is in moderation
I’ve got no problems chasing yield on CDs.
Heck, at 5.65% for 12mo., I might just throw some money at Mozilo.
Bath (63)-
Figures. How about an M-16 and a couple of Tasers?
grim (67)-
That’s not a CD…it’s a junk bond. :)
what APR is the taser offering?
Bath (70)-
I thought you were looking for safety before yield.
It’s pretty sad when a bunch of adults spends their time trying to find a safe way to make 5% on their money.
O.K., tell me more about this NJ automotive thing rate. Do you have to be a resident?
Inflation is at 3% if you consider any the following?
Gas?
Groceries?
Utilities?
Health Insurance premiums?
Auto insurance premiums?
Daycare?
Housing expenses for buyers?
The only consolation is that rent, the largest chunk of most household budgets is the only expense that hasn’t buffetted you the past few years…for the renters.
All,
I should probably know this but can someone expand the MSM acronym for me?
Also, how about FSI?
TYVM (Thank you very much)
True. It’s not a huge difference. But, if you have $80,000 in online savings at 4%, and you can get it at 5%, why not take the $800 difference?
That’s like a month (or two) of groceries!
http://biz.yahoo.com/prnews/070924/lam116.html?.v=61
CountryWide Saves 35,000 loans from going deliquent by altering on eor more terms of these loans.
Interesting!
Site was having trouble earlier, so I’m going to repost this:
Can anyone help out with an address / history on MLS: 2736566?
Thanks for any help you can provide.
#74
MSM = Mainstream Media
not sure about FSI
#77
Must be a NJMLS #; not coming up in the GSMLS
It is NJMLS, thanks for trying.
I want to thank those for helping me organize this — meeting here today. And
also the heads of the Five Families — New York and New Jersey. Ara Hovnanian from South Jersey
— and ah — Brooklyn – Angelo Mozilo. And from North Jersey, we have
with us Lawrence Yun. And all the other associates that came as far as from California, and
Kansas City, and all the other territories of the country — thank you.
(then, sitting down)
How did things ever get so far? I don’t know. It was so — unfortunate — so unnecessary.
MOZILO
We’re all grateful to Don Bernanke for calling this meeting. We all know him as a man of his
word — a modest man — he’ll always listen to reason…
HOVNANIAN
Yes, Don Mozilo — he’s too modest. He had all the Hedge Fund Managers in his pocket. He
refused to share them…
BERNANKE
When — when did I ever refuse an accommodation? All of you know me here — when did I
ever refuse? — except one time. And why? Because — I believe this saving and investing business — is gonna destroy us in the years to come. Even the lenders, appraisers and pipelines that’ve helped us in the past with liar loans and toxic investments are gonna refuse to help us when it comes to keeping the debt bubble alive. And I believed that — then — and I believe that now.
YUN
Times have changed. It’s not like the Old Days — when we can do anything we want. A
refusal is not the act of a friend. If Don Bernanke had all the politicians and fund managers in
New York, then he must share them, or let us others use them. He must let us draw the water
from the well. Certainly he can — present a bill for such services; after all — we are not
Communists. (laughter)
Doyle,
NJMLS..
75 Vreeland
Current listing is new, but it was listed under MLS# 2636512. OLP/LP was $720k under that listing, DOM was 300.
Hello all,
Can someone look-up 4956294 and 5049567 in Mt Laurel, NJ. I believe it’s in trendMLS but I don’t know about the others.
#54 SG: They can say what tey want, but the reality is this.
Even of you are “fine” and can pay your mtg and other bills every month it will have an impact on peoples spending decesions.
If they now have to come to the reality that the house that they live in that they though was worth 500k, is now only worth 400k, then in theri minds the have lost money/wealth if you will.
Many peoples spending decesions were based (I believe) on what they thought their hosue was worth, not only that, but also the belief that it would be worth more next year, and so on.
That is no longer the case;that will and is having an impact.
#83 3b:
I somehow doubt that over a 10-15 year period of time a 500k will drop and stay at 400k until the time you sell it. Maybe a smaller time frame but not over a decade and a half.
Spent the most-ever on groceries this past weekend. Two people, $300+, and we didn’t even buy the fancy organic stuff. I can’t imagine what the register tape would read for a family of four or five.
Our food spending (Me, Wife, Baby) has gone double as well. $400-$500 a month. Silly. I don’t even like to eat.
Gary #80,
too funny.. now you have to work in a horse’s head somehow.
Agreed about the groceries;
me, wife and baby are running about 600 month and that doesnt include lunches/dinners out;
I think I have to cut out all the steaks.
ADA,
I’m going to start making the sellers an offer they can’t refuse! :)
Make,
Moody’s recent press release doesn’t jive with CW..
Moody’s Survey: Loan Modifications Slowly Taking Effect
A new survey from Moody’s Investors Service claims many servicers are only at the beginning stages of contacting at-risk borrowers in need of mortgage loan modifications.
In its latest report, Moody’s concluded its “survey showed that most servicers had only modified approximately 1-percent of their serviced loans that experienced a reset in the months of January, April, and July 2007.”
Moody’s also warned that while some borrowers have implemented measures to contact borrowers with loan rates scheduled to reset, many others are still relying on passive outreach measures like sending letters as a means to contact at-risk borrowers.
“This is of particular concern given the potential size of the problem – some servicers reported that they could experience in a given quarter interest rate resets on loans which constitute up to 15-percent of their portfolio during the period from late 2007 to 2008,” Moody’s said in its report. “In addition, data from a limited subset of servicers indicated that for loans that were current prior to reset and were not modified, the average delinquency rate after reset was in the 5-percent to 15-percent range. However, these results are for loans that were made in early 2005. Those loans were of generally higher quality than loans that were issued later in 2005 and 2006 and had greater refinancing opportunities as they were not as impacted by the negative home price environment.”
#84 Justin;Two things I am talking short term spending decesions. e.g. Honey lets redo the kitchen, bathroom/ buy car/take vacations after all our house is worth 500K, and next year it will be worth even more.
Now the same couple have to make that decesion or any other financial decesions but they have no come to the realization that the house they thought was worth 500k in 05, is only worth 400k today.
Lots of people made buying decesions not on the money they had, but on the “money” they thought they had.
As far as long term, do not be too sure, I bought at peak of last bubble, and sold 10 years later for less than I paid for it, minus the improvements.
So I can tell you that prices fell and stayed in many instcances less than flat for 10 years, for coops/condos even worse;it happened.
And in those days, you had to qualify for a mortgage.
Is it worth is to chase a slightly extra yield? Even if you have $100K in a high-yield account and yield goes from 5% to 4%, you lose perhaps 0.6% after paying ordinary income taxes on the interest. That’s around $55/month. It’s easier to save an additional $50/month than go chasing yield of an extra 100 bps. Just ask the RSF ticker man.
Wanna save $50/month? Grow your hair for a year.
#81 Thanks Grim. I thought it looked familiar.
Wanna save $50/month? Grow your hair for a year.
If you’re spending $50 a month on hair cuts, you’re definitely in a hairy situation. Pun intended.
I think I’m gettin clipped once every 3 months, usually right before the holidays :).
dream,
I think you’re right. having to maintain another account is not worth the difference. having trouble keeping my Money file up to date as it is.
The scary thing about the food inflation that a home cooked meal with a salad, some kind of decent meat and a side dish costs more than fast food.
It’s cheaper to eat out.
Heh, a gallon of milk down here at Costco is $3.39, at the local stupormarket it’s $4.69.. I’d say invest in a membership most definitely, it’ll pay for itself in holiday gift giving!
No inflation here!
Richie (93)-
Get a Flowbie.
Stylish!
The price declines will definitely hit hard emotionally and on the wallet…if you bought that POS Cape sometime in the last 3 years for the 500K – thats what you owe the bank….if the market value of that POS cape drops to 300K in the next two years – guess what, you still owe 500K to the bank cause thats what you signed up for…hopefully you didnt buy it thinking you were going to get 700K for that POS Cape in the next 3 years!!!!
i cant believe that some of these POS houses even priced in at 500K!!!!!!
Aaron (95)-
Americans eat too much meat, anyway.
#99 Clot: Americans eat too much, period.
3b,
Agreed; I just got back from europe and was amazed at how much smaller the portions were in restaurants.
I’m hungry.
Do men’s haircuts really run that much nowadays? My husband is a barber man – I think he pays $20 including tip. That’s usually every 3-4 weeks.
My cuts, on the other hand – over $100 every 6 weeks. I sometimes go without for 8 weeks just to save b/c the hairdresser is one thing I am bothered by. I am, however, treating myself to one fancy cut before the baby comes, since I know I won’t have time after that and the holidays will be coming up.
My wife used to cut my hair. After an “oops” I now pay 20 and look alot better for it.
NJGal, good idea about the haircut before the baby. My wife got one too. The little fingers have a very strong grip from Day 1.
re: 15
Was noticing that myself, Jim: stuff at the markets seems really pricey, like 100% costlier than they were in, say, 2002. Onions–Spanish, not Videlia or other boutique varieties– “yoostabee” $.39/lb, now they’re $.99; bananas “yoostabee” 3 lb/$1, now they’re $.59/lb; chicken drumsticks were $.69/lb on sale, now I’m lucky if we find them for $1.25.
And, naturally, the cost of living, as indexed by various US government agencies, is only rising at “marginal” rates (but of course, the indices rarely included frivolous luxuries, like housing, education, and health care…).
Al (30) marinated and cooked slowly over a low flame, many flat screen TVs are as tasty as Tyson or Purdue poultry–and, at current rates of inflation, a better bang for the buck.
Otis (96) why don’t Costco sell fat-free milk? But another benefit to Costco membership: WAY better than market MMA rates.
why don’t Costco sell fat-free milk?
I could never figure this one out either.
Clot,
You weren’t kidding.
http://www.cnbc.com/id/15840232?video=528726727&play=1
With tip, I’m dropping about $25/$26 every 4-5 weeks on a haircut.
Almost seems smarter to invest in a nice pair of trimmers, keep it short, and do it myself.
#98
and when people drastically overpay for a house, they tend to lock themselves in because they are loathe to sell for a loss (or can’t because they can’t write the check for closing). it reduces transaction volume even further over the long term. I think many real estate agents may come to regrest shoe-horning people into houses they couldn’t afford when the trade up market is still suffering years from now
NJGal (#103) please don’t get the butch “mommy” haircut! LOL
From tomorrow’s WSJ
Peak in Resets Poses Milestone In Housing Mess
By SCOTT PATTERSON
September 25, 2007
In the same way the relentless expansion of the housing sector amazed Wall Street, its downturn is proving more painful and protracted than all but the most bearish expected.
Today’s fiscal third-quarter earnings report by home builder Lennar is likely to reflect continued pain. Analysts surveyed by Thomson Financial expect Lennar to post a loss of 55 cents a share compared with a $1.30 gain in the year-earlier period.
But one dismal milestone may soon move into the housing market’s rearview mirror, potentially giving rise to hopes for a rebound soon. Homeowners owing $31.8 billion in subprime adjustable-rate mortgages began paying higher interest rates this month, according to Moody’s Economy.com.
That is the highest amount of subprime ARMs due to reset over a one-month period in this housing cycle. By December, resetting subprime ARMs are forecast to drop to $25.2 billion. By the end of 2008, they will have fallen to $3.6 billion, because lenders have largely stopped making such loans to borrowers with spotty credit histories.
The tsunami of interest-rate resets has been a big factor in the jump in defaults roiling credit markets this year. In August, foreclosure filings rose 36% from the previous month and were up 115% from last year, according to RealtyTrac. As ARM resets reach a crescendo, more homeowners will have trouble meeting payments.
That huge pace of resets is one reason why economists expect today’s report on existing-home sales in August to drop by 4.4%. More worrisome, perhaps, may be the supply of houses for sale. Analysts at Bank of America estimate the report will show it would take 9.7 months to sell all of the single-family homes now on the market, near the previous peak set in May 1989.
Optimists might argue that a record supply of homes for sale, combined with a peak in ARM resets, means the housing market is near a bottom. More likely, it means the downturn will get even uglier in the months to come.
NJ Gal,
When are you due?? Is it November? my youngest son was november 7 1997 he is lucky seven baby. He was seven lbs & his first, middle and last name all have seven letters
(he brought that to our attention)we threw quite a seven themed bash on his 7th birthday. I thought I remember something about early November.
Hope your feeling good.
KL
(he brought that to our attention)we threw quite a seven themed bash on his 7th birthday. I thought I remember something about early November.
Hope your feeling good.
Did you clear that with George Costanza first?
“Every Breath Bernanke Takes”
http://www.youtube.com/watch?v=ipJTqCbETog&mode=related&search=
#115,
Priceless.
I wonder if Ben B. had a preliminary peek at the IMF report.
http://www.imf.org/External/Pubs/FT/GFSR/2007/02/index.htm
Poll. If The Roubinator was Fed Chief and he read that report 10 days ago, would he:
A. Rip his tie off and lower rates a half percent,
B. Raise rates a half while shaking his head and babbling incoherently,
c. Do nothing.
Clot?
Did you happen to catch the Man U vs. Chelsea game this weekend? What a waste, the team looked horrible without any guidance. I think you underplayed Jose’s affect on the team. I guess we won’t be able to see what the effect will be until a few more games with the full squad.
Justin – Couldn’t have looked worse than the New Orleans Saints. Ghastly.
Justin (118)-
Just saw a few minutes. Chelsea can look really bad in one game & play like kings the next time out, though.
At the end, they will win it all.