Fri 16 May 2008
This is the time and place to post observations about your local areas, comments on news stories or the New Jersey housing market, open house reports, etc. If you have any questions you wanted to ask earlier in the week but never posted them up, let’s have them. Also a good place to post suggestions, requests for information, criticism, and praise.
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May 16th, 2008 at 5:54 am
From the Wall Street Journal:
Fannie Is Poised to Scrap
Policy Over Down Payments
By JAMES R. HAGERTY
May 16, 2008; Page A3
Fannie Mae is expected to announce Friday that it is scrapping a policy requiring higher down payments on home mortgages in areas where house prices are falling.
The change comes in response to protests from vital political allies of the government-sponsored provider of funding for mortgages, including the National Association of Realtors, the National Association of Home Builders and organizations that promote affordable housing for low-income people.
Those various groups have said the policy is hurting an already feeble housing market by shutting out too many potential buyers.
The current policy, adopted in December and now due to end June 1, limits loan amounts in areas with declining home prices, including most of the densely populated parts of the country.
For instance, if a loan program normally allows people to borrow up to 100% of the estimated property value, the maximum is cut to 95% in “declining markets.”
Under the new policy that is taking effect next month, Fannie will have the same maximum loan percentages across the country for people purchasing single-family homes that they intend to occupy, according to people familiar with the plan.
For borrowers approved by Fannie’s automated underwriting program, the maximum generally will be 97%. For those approved by other means, the maximum will be 95%. (Fannie also has some loan programs, typically offered through state or local housing agencies or nonprofit groups, that allow certain borrowers to make no down payment.)
…
By softening the down-payment policies, Fannie and Freddie are taking more risks.
Borrowers who put just 3% to 5% down in many areas are likely to find within a year that they owe more than the homes are worth because prices have fallen, a situation known as being underwater.
In some cases, deeply underwater borrowers are choosing to walk away from their homes rather than trying to find a way to keep on paying, Patricia Cook, Freddie’s chief business officer, told analysts this week.
But Fannie officials have argued that they have tightened lending standards in other ways — for instance, insisting on higher credit scores for people who make small down payments — to reduce default risk. Officials have also argued that underwater borrowers don’t necessarily choose to walk away.
The concessions from Fannie and Freddie illustrate the conflicting pressures that they are facing. Many critics say they are taking far too many risks, increasing the danger that taxpayers may end up having to bail them out.
May 16th, 2008 at 5:56 am
From the WSJ:
Bernanke’s Bubble Laboratory
Princeton Protégés of Fed Chief
Study the Economics of Manias
By JUSTIN LAHART
May 16, 2008; Page A1
PRINCETON, N.J. — First came the tech-stock bubble. Then there were bubbles in housing and credit. Chinese stocks took off like a rocket. Now, as prices soar on every material from oil to corn, some suggest there’s a bubble in commodities.
But how and why do bubbles form? Economists traditionally haven’t offered much insight. From World War II till the mid-1990s, there weren’t many U.S. investing manias for them to look at. The study of bubbles was left to economic historians sifting through musty records of 17th-century Dutch tulip-bulb prices and the like.
The dot-com boom began to change that. “You were seeing live, in action, the unfolding of lots of examples of valuations disconnecting from fundamentals,” says Princeton economist Harrison Hong. Now, the study of financial bubbles is hot.
…
Bubbles emerge at times when investors profoundly disagree about the significance of a big economic development, such as the birth of the Internet. Because it’s so much harder to bet on prices going down than up, the bullish investors dominate.
Once they get going, financial bubbles are marked by huge increases in trading, making them easier to identify.
Manias can persist even though many smart people suspect a bubble, because no one of them has the firepower to successfully attack it. Only when skeptical investors act simultaneously — a moment impossible to predict — does the bubble pop.
…
In housing and the credit markets, the innovation was slicing and dicing loans in novel ways. As investors bought the resulting mortgage securities, they provided abundant capital for home buyers; buoyed by this and falling interest rates, house prices surged.
Betting against house prices is hard; only a few sophisticated investors found roundabout ways to do it, in derivatives markets. Most skeptics about the housing boom just sat it out; the optimists were unchecked.
At some point in a bubble, optimists’ enthusiasm runs its course. Prices turn down. There’s an expectation that at this point, investors who were skeptical may see prices as more reasonable and start buying. If they don’t, that’s a signal that prices had gotten way too high — and then they tumble.
May 16th, 2008 at 5:58 am
How can you write a piece on Scholes and not say a word about the LTCM debacle?
Scholes, Nobel Laureate, Says Credit Crisis May Not Be Over
Myron Scholes, chairman of Platinum Grove Asset Management LP and 1997 winner of the Nobel Prize in economics, said the worst of the crisis in credit markets may not be over.
“From my perspective, I think that we don’t know if the storm has passed or if we are still in the eye of the storm,” Scholes said in an interview with Bloomberg Radio yesterday. “Are there other shoes to drop and new events or new shocks that will come to the fore?”
Scholes’s warning reflects financial markets that Federal Reserve Chairman Ben S. Bernanke this week said remain “far from normal.” Financial institutions have been reluctant to lend to each other, driving up bank borrowing costs, since a flight from risk in August sparked by defaults on subprime mortgages.
“In my view, this is probably as bad or worse than the 1989-1990 crisis and may even rival the worst crisis we’ve seen since the end of the Second World War,” Scholes said. Former Fed Chairman Alan Greenspan has also said the turmoil is the most “wrenching” since the war.
May 16th, 2008 at 6:02 am
From the Record:
Banks rein in home equity
Large lenders such as Bank of America, Countrywide Financial and J.P. Morgan Chase & Co. have withdrawn home-equity lines of credit they previously extended because of falling real estate prices.
The action leaves some homeowners — in New Jersey and elsewhere — with less borrowing power than they thought.
Many lenders in recent years let homeowners borrow against 100 percent or more of the value of their homes. But as home prices have slipped, lenders tightened policies, generally allowing loan-to-value ratios — including first and second mortgages — of only 85 percent or less of the updated market val-ue.
Bank of America lowered its loan-to-value ratio in New Jersey to 85 percent this year, said David Bradley, a company spokesman. The previous limit was “somewhat higher,” said Bradley, who declined to be more specific.
“It can be a hardship for people, but it really represents a prudent risk position we’re taking,’’ he said.
Tom Kelly, a spokesman for Chase, said the bank tightened mortgage lending standards in general and has reduced existing lines of credit “on a limited basis.”
…
Phyllis Salowe-Kaye, executive director of consumer watchdog and non-profit debt counselor New Jersey Citizen Action, said some New Jersey homeowners are feeling the pinch and have come to her organization to complain.
“There are people looking to use home equity lines, and they find they have no equity in some areas,’’ she said.
…
Chase dropped the limit on its loan-to-value ratio for new loans this year to 80 percent from 100 percent in all but two New Jersey counties, Kelly said. The limit was dropped to 85 percent in Atlantic and Cape May counties where the real estate market is comparatively strong. In parts of Nevada, where home values have dropped significantly, the cap has been slashed to 60 percent, he said.
May 16th, 2008 at 6:10 am
From Newsday:
For sale: many Long Island mansions
It’s not every day you see a Gold Coast mansion go on the market - though it does seem lately like it’s at least every few weeks.
Recently, the Old Westbury estate of the late horse breeder Cynthia Phipps was put up for sale at the hefty price of $13 million. A few days later, the nearby house that once belonged to famed architect Thomas Hastings went on the market for $12.5 million. And then, just three weeks ago, another Old Westbury estate, this one belonging to heiress Cornelia Guest, went on the block for $20 million.
“It’s where I grew up, but I just don’t spend enough time there,” Guest says. “It’s an equestrian estate, and it needs a family that loves horses. I spend a lot of time in Los Angeles now, and I want to create my own family home.”
May 16th, 2008 at 6:12 am
From the LoHud Journal News:
Jobless rates climb in Lower Hudson Valley
Unemployment rates for April reached four-year highs in the Lower Hudson Valley.
It was the latest evidence that workers are finding fewer job opportunities as the region feels the effects of a slowing national economy and tighter credit markets.
In Westchester County, the jobless rate rose to 3.9 percent in April from 3.2 percent a year earlier, according to data released yesterday by the state Labor Department. In Rockland County, the jobless rate climbed to 3.9 percent from 3.4 percent. And in Putnam County, it jumped to 3.6 percent from 3.0 percent.
“It continues the theme of what has been happening in recent months,” said Johny Nelson, a state labor market analyst in White Plains. “There is no doubt that the job market is slowing.”
The finance and insurance sector was one of the hardest hit, losing 1,000 jobs in the three-county area during the past year.
May 16th, 2008 at 6:25 am
From the Long Island Business News:
Lenders offering a way out
Escalating foreclosures and a recessionary economy have forced lenders to lower rates or extend the terms for mortgages on the verge of default.
The move comes as the number of homeowners either in default or at least 30 days late in their payments rises to an alarming rate. There were 3,352 foreclosure-related filings on Long Island in the first quarter, up 11.6 percent from the same period a year ago.
The trouble is, more foreclosures mean the lenders are being saddled with the responsibility of selling these homes. And in a down real estate market, that’s not an appetizing task.
For example, median home price on Long Island have fallen about 11 percent since April 2007, according to the Multiple Listing Service of Long Island.
In Suffolk County, the median home price fell 13 percent to $362,000 since April 2007, and in Nassau County home prices fell 10 percent to $440,000.
Peter Elkowitz, director of the Long Island Housing Partnership, said banks are so uneasy about taking on more properties that they’re willing to take small writedowns to avoid foreclosure, and potentially larger losses.
May 16th, 2008 at 6:26 am
From Bloomberg:
Housing Starts in U.S. Probably Fell to 17-Year Low in April
Builders in the U.S. probably broke ground last month on the fewest houses in 17 years as slumping sales forced deeper cutbacks, economists said before a government report today.
Housing starts in April fell to a 939,000 annual pace, from 947,000 a month earlier, according to the median forecast of 73 economists in a Bloomberg News survey. A separate report today is forecast to show that Americans’ confidence sank to a 26-year low this month.
Lower prices and bigger incentives have yet to revive demand, indicating builders will need to come up with even more discounts to attract buyers. Stricter lending rules, job losses and growing pessimism about the economy signal sales will not rebound quickly.
“Starts have nowhere to go but down,” said Michael Gregory, a senior economist at BMO Capital Markets in Toronto. “The problem with housing is demand has fallen just as sharply as production has fallen, which means that even more correction has to be done on the housing-production side.”
The Commerce Department’s construction report is due at 8:30 a.m. in Washington. The projected reading would be the lowest since March 1991.
May 16th, 2008 at 6:29 am
From the Record:
Xanadu debut delayed 8 months
The opening of the $2 billion Xanadu retail and entertainment center was pushed back Thursday by at least eight months to midsummer 2009 from November.
Complex construction for several unique tenants — the project includes an indoor snow dome, a 3,400-seat concert hall and an aquarium — was cited by the developers as the chief cause of the delay.
However, business and shopping experts blamed the shaky national economy, which may have made retailers skittish about signing lease commitments.
Either way, the delay could prove beneficial for residents who have worried that an opening this fall could snarl highways in the area. The project now is likely to open after a $185 million rail link to the complex is completed in the spring. It also buys more time for a series of road improvements planned for the area.
May 16th, 2008 at 6:37 am
From MarketWatch:
Goldman Sachs ups 2008 H2 oil forecast to $141 from $107
May 16th, 2008 at 6:52 am
From NYT/CNBC:
“Stealth Layoffs” Sweep across Wall Street
People on Wall Street seem to be vanishing overnight.
Thousands are losing their jobs as hard-pressed banks cut deep. But while layoffs are nothing new in the financial industry (they come with almost every downturn), this round seems different: it is eerily quiet.
While the financial markets have found a bit of a footing lately, banks are pushing ahead with plans for some of the deepest job reductions in years. Since last summer, banks worldwide have announced plans to cut 65,000 employees.
But exactly how many jobs have been or will be eliminated is unclear. In the past, banks typically made sharp reductions all at once. After the 1987 stock market crash, for example, employees were herded into conference rooms and dismissed en masse.
This time, companies are making many small cuts over the course of weeks or even months. Some people who have lost jobs, and many more struggling to hold them, say banks are keeping employees in the dark about the size and timing of layoffs.
Citigroup, for example, said last year that it would eliminate 17,000 jobs, or about 5 percent of its work force. Then in January, Citi said it would dismiss 4,200 more people. In April, it said an additional 8,700 would go.
By contrast, after the financial upheaval of 1998, when many Wall Street banks pared payrolls, Citigroup eliminated 10,600 jobs, or about 6 percent of its work force at the time.
The idea that banks will slowly wield the knife again and again unnerves many employees. People know the cuts are coming — they just don’t know when or where.
“Nobody knows who is coming in; nobody knows who is going out,” said JoAnne Kennedy, who was laid off by JPMorgan Chase this year. “They want to keep it all as quiet as possible.”
May 16th, 2008 at 6:58 am
From the SF Business Times:
WaMu reduces home equity credit to homeowners
Washington Mutual Inc. has slashed or suspended $6 billion in available home equity credit to its customers in an effort to reduce its risk in a flailing housing market.
If they haven’t already been notified, WaMu’s customers across the country will learn of the change to their credit availability in a letter mailed to them in the next several days. The bank declined to disclose how many customers will be affected.
If a borrower’s home has depreciated — regardless of credit history — the line of credit will likely be reduced because the equity has fallen.
May 16th, 2008 at 7:12 am
#1 Those dopes in the GSE’s will bust us all. We’ll get stuck bailing them out, just on a larger scale then I thought.
With no skin in the game iF you buy a place with no money down and it drops 20% how many 720 credit scores will feel inclined to keep paying? Especially as there are more and more stories of people no longer paying their mortgages and banks taking 6 months or more to throw them out.
May 16th, 2008 at 7:14 am
#11 How many of those Wall St jobs never would have existed if it hadn’t been for the housing bubble?
May 16th, 2008 at 7:15 am
# 1 “Borrowers who put just 3% to 5% down in many areas are likely to find within a year that they owe more than the homes are worth because prices have fallen, a situation known as being underwater.”
No chance at all that any of these loans could go bad once RE drops another 10% or so. Yeesh, have we learned anything at all?
Also, from yeaterday:
“njpatient Says:
May 15th, 2008 at 10:47 pm
“no drummer had anything on Bill Ward”
Neil Pert?”
Not a bad choice either, nor is Bonzo, or Moon. Still, for my money, I will take Ward any day; watching him on Children of the Grave (New NAR theme song?) is a real treat.
May 16th, 2008 at 7:27 am
Borrowers who put just 3% to 5% down in many areas are likely to find within a year that they owe more than the homes
What a silly statement.
Borrowers who put just 3-5% down, in *all* areas, find themselves underwater immediately upon leaving the closing table.
Why?
Transaction costs, 5-6% commission, realty transfer tax, closing costs on the mortgage, etc.
In the “good ol’ days”, you needed to live in a house for 4-5 years just to gain enough appreciation to break even on the sale.
May 16th, 2008 at 7:32 am
Grim are you reading “Nudge?” While this comment was made in the investing section I found it to quite telling “Humans are loss averse. Roughly speaking, they hate losses about twice as much as they like gains.”
Let’s pretend half of the folks with homes for sale are Econs and half are Humans.. . that means 1/4 of the people with homes for sale aren’t going to drop their prices if they will sustain a loss.
May 16th, 2008 at 7:40 am
#17 Cindy,
Warren Buffet noted something similar. He said something like many people ride their losers and sell their winners.
He also said you don’t have to make it back the same way you lost it.
May 16th, 2008 at 7:43 am
# 16
Grim,
Clearly the trouble with you, and folks of your ilk, is that you apply logic and clear analytical reasoning to issues of finance. You just don’t seem to get it that a home is part and parcel of the American Dream and it cannot be subjected to cold hard financial analysis? WHere would this country be if people like you had any hand in the granting of mortgages.
Transaction costs, opportunity costs, taxes; indeed! It is time to get with the program and stop with all this fussy logic nonsense.
(tongue firmly planted in cheek)
May 16th, 2008 at 7:45 am
Is Kannekt in the FHA contest?
May 16th, 2008 at 7:47 am
(18) bairen
It just seemed relevant because so many are suprised that folks won’t drop their prices.
There must be a portion of the population that just won’t. They would probably rather live in the place forever than sustain that loss. (Buffet is obviously an “Econ.”)
May 16th, 2008 at 7:47 am
Not a “blog”
May 16th, 2008 at 7:48 am
Speaking of profiles in courage and leadership in our elected officials. We can all rest easy knowing that those farmers making a mere $750,000 a year profit will find some relief:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/16/MNMG10N32I.DTL
(05-16) 04:00 PDT Washington - — The Senate passed the $290 billion, five-year farm bill by a strong veto-proof margin Thursday, ensuring that the measure becomes law despite President Bush’s threatened veto, which would be the first presidential veto of a farm bill since Dwight Eisenhower’s in 1956.
The 81-15 Senate vote followed overwhelming bipartisan passage of the bill in the House Wednesday. The measure continues $25 billion in direct payments, mainly to grain growers despite record prices; contains $3 billion in first-ever research and marketing money for California produce growers; and creates a new “permanent disaster” program that will subsidize wheat growers who plant marginal prairie land now set aside for wildlife and watershed protection.
Democratic presidential contender Sen. Barack Obama of Illinois, who has based his campaign on a promise to end special-interest politics in Washington, issued a statement praising the farm bill, which is laden with special-interest subsidies. Obama said the bill will “provide America’s hard-working farmers and ranchers with more support and more predictability.”
[snip]
May 16th, 2008 at 7:48 am
Cindy,
Sounds like a plausable foundation for “sticky downward” pricing theory.
May 16th, 2008 at 7:51 am
Add in a dash of misinformation, and a heaping scoop of hope, and you’ve explained the current housing market.
May 16th, 2008 at 7:52 am
Oh you have to allow alternate opinions to be a blog?
May 16th, 2008 at 7:52 am
#21 Cindy
I’m surprised to that people won’t drop the price. i can’t stand lines like “I’m not giving myhouse away” and “I’m not dropping out of respect for the neighborhood”
It’s really amazing to me. The same people who claim you should buy because you are putting your life on hold or throw money away when you rent are refusing to drop their price. They really are putting their life on hold since they most likely can’t buy until they sell. And if they are forced to rent it out and are cash flow negative, every month they get a nice reminder about their financial prowess as they throw money away.
May 16th, 2008 at 7:53 am
Since this is a weekend discussion, and this involves a family, which lives in a house, here is some weird news to make every parent freak out a bit next time the kids have an aching abdomen:
9-year-old girl’s twin is found inside her stomach
Thursday, May 15, 2008
9-year-old girl’s twin is found inside her stomach
Thursday, May 15, 2008
http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2008/05/15/international/i045832D00.DTL
(05-15) 12:52 PDT ATHENS, Greece (AP) –
A 9-year-old girl who went to hospital in central Greece suffering from stomach pains was found to be carrying her embryonic twin, doctors said Thursday.
Doctors at Larissa General Hospital examined the girl and surgically removed a growth they later discovered was an embryo more than two inches long.
“They could see on the right side that her belly was swollen, but they couldn’t suspect that this tumor would hide an embryo,” hospital director Iakovos Brouskelis said.
The girl has made a full recovery, he said.
Andreas Markou, head of the hospital’s pediatric department, said the embryo was a formed fetus with a head, hair and eyes, but no brain or umbilical cord.
Markou said cases where one of a set of twins absorbs the other in the womb occurs in one of 500,000 live births.
The girl’s family did not want to be identified, hospital officials said.
May 16th, 2008 at 7:54 am
#23 That’s it. If I vote this year its either for Teddy Roosevelt or myself. Maybe grim.
May 16th, 2008 at 7:58 am
(27)barien
This analogy may help - a “Human” - Homer Simpson - automatic system…
an “Econ” - Mr. Spock from Star Trek.-reflective system
May 16th, 2008 at 7:59 am
I wonder how much of the hostility to falling RE prices has to do with the fact that RE seems to be the only large asset that most people ever acquire. True thre are are people have piddly $100,000-$400,000 IRAs etc. (see how long that lasts in retirement), but the home has achieved mythic status as a vehicle for wealth generation. Were houses viewed as a tool, a place to seek shelter, cook, sleep, etc., and not as worth-generating vehicles (or status symbols) prhaps we would not be in this mess.
May 16th, 2008 at 8:01 am
# 29 TR there you go. HE was a President, not a president.
May 16th, 2008 at 8:01 am
“Goldman Sachs ups 2008 H2 oil forecast to $141 from $107″
They must be short.
May 16th, 2008 at 8:03 am
#30 cindy,
Yeah. Most people are irrational and reactive. Buffet and Spock are rational and reflective.
May 16th, 2008 at 8:04 am
“Nobody knows who is coming in; nobody knows who is going out,” said JoAnne Kennedy, who was laid off by JPMorgan Chase this year. “They want to keep it all as quiet as possible.”
Sounds like that front door, back door scenario. The IB’s have kept this very quiet. Walk down WS, an hour before the open. The silence is deafening.
May 16th, 2008 at 8:05 am
Xanadu is too big for it’s own good. At first, it was supposed to be an entertainment destination. Then it turned more towards a retail destination. Now that stores aren’t signing leases, I smell them turning it into something else.
May 16th, 2008 at 8:06 am
“Borrowers who put just 3-5% down, in *all* areas, find themselves underwater immediately upon leaving the closing table.”
JB,
Bingo. I’m surprised the industry hasn’t latched onto my idea; requiring gap insurance at closing.
May 16th, 2008 at 8:07 am
Housing rescue deal stalls in Senate
By JULIE HIRSCHFELD DAVIS – 10 hours ago
WASHINGTON (AP) — A key senator postponed action Thursday on a homeowner rescue package that could help half a million strapped borrowers get government-backed mortgages, as negotiators inched toward a bipartisan deal.
The delay on the action until next week clouded the prospects of an emerging compromise between Sen. Christopher J. Dodd, D-Conn., the Banking Committee Chairman, and Sen. Richard C. Shelby of Alabama, the panel’s senior Republican. It also highlighted the tricky political calculations involved in reaching a bipartisan housing deal in an election year when the two parties are competing intensely to appeal to voters who cite the economy as their top concern.
May 16th, 2008 at 8:08 am
JB,
Check your email.
May 16th, 2008 at 8:08 am
Dollar weakens ahead of housing data
May 16th, 2008 at 8:10 am
Are Democrats making peace with the ‘burbs?
The Democrats need to end the war.
The war against the suburbs, I mean. It’s getting out of hand.
“We’re discouraging jobs in this economy,” says state Sen. Ray Lesniak. “It’s dumb. Stupid, stupid, stupid.”
Lesniak, who is a Democrat, was talking about the latest affordable-housing scheme. The Corzine administration recently signed off on new Council on Affordable Housing regulations that call for more than 100,000 new housing units to be shoehorned into the suburbs. Worse, the plan lists parks, schoolyards and even the Garden State Parkway right-of-way as available for development. And even worse than that, the Democrats plan to send the bill for much of this construction to anyone who wants to build a new business in the state.
May 16th, 2008 at 8:12 am
Builder unwraps plans for near rail station
BY JOYCE J. PERSICO
WEST WINDSOR — Developer Steve Goldin is filling in the blanks about what he wants to build on 25 acres he owns along Washington Road: 450 market-rate housing units and 72,000 square feet of re tail space.
“Fundamentally, this allows people to make a decision as to where they are on redevelopment,” Goldin said in announcing the numbers yesterday.
Goldin also said his current zon ing, which would be changed under redevelopment, would require 250 affordable housing units for non- seniors. But under new COAH rules, demolition of the Washington Road offices Goldin owns on Washington Road would give the township 31 credits for affordable hous ing. Building within a half-mile of a train station would give West Windsor another 33 percent affordable housing credit. His plan, Goldin said, would require a one- third less affordable housing obli gation than would housing on his site’s current zoning.
Mayor Shing-Fu Hsueh was re luctant to weigh in on Goldin’s numbers.
“It is too early for me to comment. I have to see exactly what he will present. We need to get New Jersey Transit and DOT involved. NJT has 27 acres next door to Goldin’s property. We have to see what COAH really means to this site,” Hsueh said. “We have to take all of that into consideration. NJ Transit plays a major role.”
May 16th, 2008 at 8:13 am
Builder touts senior housing
Developer says he wants feedback from Greenwich Twp. board.
Thursday, May 15, 2008
By ANDREA EILENBERGER
The Express-Times
GREENWICH TWP. | Developer Matzel & Mumford, contract purchaser of property behind the Greenwich Center, appeared before the township planning board Wednesday night to discuss development possibilities there.
The developer has appeared before township officials in the past with pitches for more than 290 homes there, but Matzel & Mumford representative David Fisher did not come armed with a proposal. He talked about the merits that some form of senior housing could have for the township.
May 16th, 2008 at 8:14 am
This whole collapse has the feel of a systematic fleecing scheme. It is hard to believe that the likes of us, here, saw the unsustainability of what was happening and the powers that be at the various IBs, et. al, did not. Even though unsustainable, they kept sucking out bonuses and commissions as they packaged debt they must have known was going to come to no good end. If they could not see the fall that was going to come, they have worthless analytical skills and taking the money they “earned” constitutes a theft.
As long as the ignorant were willing to jump in with both feet, there was money to be made; screw the consequences. Even if one’s IB collapses, which the Fed will do everything to prevent, one can live reasonably well on $200,000,000.00 or so banked during the good times.
It is hard not to look at all this and not see rats.
May 16th, 2008 at 8:16 am
Regulatory Implications of the Housing and Mortgage Bubble and Bust
By Alex J. Pollock
Resident fellow Alex J. Pollock testifies before the Joint Economic Committee about the regulatory implications of the housing and mortgage bubble and bust. In light of the recent clamor for increased regulation of mortgage lending, Mr. Pollock reminds Congress that regulatory reform will not prevent all future financial busts, and that the heavily regulated, pre-securitization banking system experienced disasters in the 1970s and 1980s. He outlines eight sensible ideas for reform of the mortgage finance system.
May 16th, 2008 at 8:16 am
# 41 “Garden State Parkway right-of-way as available for development.”
I dunno, maybe there is something to this. It would cut down on coommuting issues; just pull out of the parking spot onto the Parkway.
May 16th, 2008 at 8:18 am
Will we drive all futures business to ICE[London]. Govt intervention is the last variable that WS needs to contend with.
“Oil Traders Draw Congress’ Ire”
“Capitol Hill is taking aim at what some see as rampant speculating. But the U.S. can’t control a complex, sprawling global oil market”
http://www.businessweek.com/bwdaily/dnflash/content/may2008/db20080513_272469.htm?chan=top+news_top+news+index_news+%2B+analysis
May 16th, 2008 at 8:19 am
Housing Woes In U.S. Spread Around Globe
The collapse of the housing bubble in the United States is mutating into a global phenomenon, with real estate prices swooning from the Irish countryside and the Spanish coast to Baltic seaports and even parts of northern India.
This synchronized global slowdown, which has become increasingly stark in recent months, is hobbling economic growth worldwide, affecting not just homes but jobs as well.
In Ireland, Spain, Britain and elsewhere, housing markets that soared over the last decade are falling back to earth. Property analysts predict that some countries, like this one, will face an even more wrenching adjustment than that of the United States, including the possibility that the downturn could become a wholesale collapse.
May 16th, 2008 at 8:20 am
“How can you write a piece on Scholes and not say a word about the LTCM debacle?”
this kind of stuff always astounds me. We were talking about failing upwards the other day, and the media are complicit in it. Every five minutes the media pass along financial advice from James Glassman or Kevin Hassett without mentioning how their previous advice turned out. Same with Scholes. I’m sure we’ll get John Meriwether on CNBC any day now talking about risk management. And media promotions over the past three years are a Who’s Who of those who have been repeatedly horribly wrong on the major foreign policy issue of the day. Those who are right get banished (quiz for the day - whatever happened to Ashleigh Banfield?)
May 16th, 2008 at 8:22 am
Here is one more reason to live in the North (or st least to hire smarter cops):
http://www.wftv.com/news/16288519/detail.html
VOLUSIA COUNTY, Fla. — A Volusia County deputy got a painful lesson in what it takes to trap alligators. He was bitten while trying to wrestle an eight-foot gator at an apartment complex in Deltona.
The deputy will likely survive after the bite. He was in serious but stable condition at the hospital.
It must have felt like a night out of an Animal Planet television show for the woman who came home to the Brightside apartment complex after a long day of work and found an alligator in the parking lot.
“I pulled up in my car and I saw an alligator there,” said Jaasmin Harris who found the gator.
With an eight-foot alligator right next to her car, Harris decided to sit tight for a bit. But after ten minutes of waiting for the gator to move, she called Volusia County deputies, worried the reptile might hurt someone.
“We heard cops laughing or talking or something and we happened to look over and there was a gator over there,” said Carlos Martinez, an eyewitness.
The laughing quickly stopped as witnesses say the deputies moved in on the alligator with a broomstick and a towel. During the scuffle, the gator mauled one of the deputies.
“So we went over there and a few cops tried to wrestle it and one got bit on the leg,” added Martinez.
“So then they decided they were gonna throw a towel on the thing and try to jump on it, and the dude that tried to jump on it got bit by the alligator,” said Harris.
Even as that deputy rolled off the gator’s back, witnesses say it kept coming after him. That’s when one of the other deputies pulled out a gun and shot it twice in the head.
The bullets didn’t actually kill the gator. A trapper came in and shot it with a bang-stick, killing the gator. The trapper said it was one of the most agile gators he’d ever seen.
The wounded deputy was flown to Halifax Medical Center.
May 16th, 2008 at 8:24 am
U.S. housing bust not so special: report
The United States may be suffering its worst housing bust since the Great Depression but by international standards it’s not so special.
A new report by Goldman Sachs suggests the United States is going through a garden variety housing downturn that will involve a sharp slowing in overall economic growth and a sluggish recovery that equity markets will nevertheless sniff out well ahead of time.
Indeed, as far as house busts go, Canada can claim some fame. Our December 1989 to September 1998 slow motion crash was the fourth-longest of 24 busts among OECD countries, Goldman said.
It came in at 35 quarters, behind only Japan’s 67-quarter marathon during the 1990s, Germany’s post-unification slump of 52 quarters and Switzerland’s 45-quarter downturn during the 1990s.
In terms of price declines, Canada’s 1990s slump was the second-smallest. At a 16% decline in real prices, it came in ahead of Germany’s first property slump - a decline of 15% during the 1980s.
U.S. equity prices have also been atypical, rising even after the initial price bust and only acknowledging the damage a year after the bust began in late 2006.
In general, equity prices tended to peak nearly two years ahead of house prices. The trough in equity prices occurred on average around five quarters after the bust began, ahead of the trough in GDP and well before the housing bust ended.
Of course there is always a chance the current U.S. bust ends up making the Big Five the Big Six crashes but Goldman does not expect so - so far.
Interesting comment to link Equity market with Real Estate Market. I think initially large part of RE boom was due to Stock market crash and people feeling RE as safer investment.
May 16th, 2008 at 8:25 am
““Stealth Layoffs” Sweep across Wall Street ”
Just to note that the banks I deal with that are up front with their employees about layoffs are coincidentally the same ones that are not getting hurt by the housing/cdo/credit mess.
Not a coincidence.
May 16th, 2008 at 8:26 am
““Stealth Layoffs” Sweep across Wall Street ”
My company sells software to many industries. Financial Services vertical - This week large layoff. Almost 50% staff gone.
May 16th, 2008 at 8:30 am
“How many of those Wall St jobs never would have existed if it hadn’t been for the housing bubble?”
bairen - further, how many bonuses were paid in 2003-2007 that wouldn’t have been paid if it hadn’t been for the bubble? These folks got a windfall to the extent they’re not getting clawed back on those bonuses (and of course they’re not).
May 16th, 2008 at 8:33 am
From MarketWatch:
U.S. April housing starts up 8.2% to 1.032 million
U.S. April housing starts much higher than 939,000 expected
U.S. April single-family housing starts fall 1.7%
U.S. April building permits rise 4.9% to 978,000
U.S. housing starts down 31% in past year
U.S. April multifamily housing starts up 36%
U.S. building permits down 34% in past year
May 16th, 2008 at 8:33 am
Here is something to make any homeowner cringe: http://www.wftv.com/slideshow/news/16250628/detail.html
May 16th, 2008 at 8:34 am
From MarketWatch:
Housing starts surge on apartment construction
U.S. home builders broke ground on 8.2% more homes in April, led by a 36% increase in multi-family units, the Commerce Department estimated Friday. Housing starts rose to a seasonally adjusted annual rate of 1.032 million, far more than the 954,000 estimated for March or the 939,000 expected by economists. Starts of single-family homes declined for the 12th straight month, falling 1.7% to a seasonally adjusted annual rate of 692,000, the lowest since January 1991. Building permits increased 4.9% in April to a seasonally adjusted annual rate of 978,000.
May 16th, 2008 at 8:36 am
From Bloomberg:
U.S. Housing Starts Jump on Condos; Houses Drop to 17-Year Low
Construction of U.S. single-family houses in April dropped to the lowest level in 17 years, even as building of condominiums and townhouses rebounded.
Builders broke ground on 692,000 single-family homes at an annual rate, down 1.7 percent from March and the fewest since January 1991, the Commerce Department said today in Washington. Total starts jumped 8.2 percent to a 1.032 million pace that was higher than forecast as construction of multi-family units increased 36 percent following a 35 percent drop in March.
Lower prices and bigger incentives have yet to revive demand for houses, indicating builders will need to come up with even more discounts to attract buyers. Stricter lending rules, job losses and growing pessimism about the economy signal sales will not rebound quickly.
“Buyers are asking: `Why buy now when I can buy six months from now at a lower price?”’ Avery Shenfeld, a senior economist at CIBC World Markets in Toronto, said before the report. “There’s still a clearing out of inventory of unsold homes that needs some further months to run.”
Building permits, a sign of future construction, rose 4.9 percent to a 978,000 pace, reflecting gains in both single- and multi-family units.
…
Starts increased in three of four regions, led by a 24 percent jump in the Midwest. Construction rose 19 percent in the West and 3.6 percent in the South. Starts dropped 13 percent in the Northeast.
May 16th, 2008 at 8:37 am
# 55 “U.S. April housing starts up 8.2% to 1.032 million”
Is this a matter of builders, who have already sunk cash into land, trying to do something to recoup some of those otherwise lost monies?
May 16th, 2008 at 8:38 am
44 shore
“Even though unsustainable, they kept sucking out bonuses and commissions as they packaged debt they must have known was going to come to no good end. ”
This is it in a nutshell from the financial end.
If you scam $50M in bonuses that you never have to pay back, is it relevant to you that the whole thing is a house of cards?
May 16th, 2008 at 8:39 am
48
“The collapse of the housing bubble in the United States is mutating into a global phenomenon”
That CAN’T be true!! All real estate is local!!
May 16th, 2008 at 8:39 am
More detail:
http://www.census.gov/const/newresconst.pdf
May 16th, 2008 at 8:45 am
bob: ““Capitol Hill is taking aim at what some see as rampant speculating.”
but I thought there was no speculation!
Anyway, I love this quote (from Herbert Meyer, former Vice Chairman of the CIA’s National Intelligence Council):
“Second, there’s a lot of market speculation going on right now. If you were wondering what those greedy imbeciles who wrecked the housing market with their sub-prime mortgage gimmicks and funds are up to these days — well, they’re speculating in commodities”
May 16th, 2008 at 8:47 am
Is this a matter of builders, who have already sunk cash into land, trying to do something to recoup some of those otherwise lost monies?
Looks like an increase in multifamily, apartment, condos, townhomes, etc.
Perhaps just a logical response to the demand for lower priced housing and increased demand for rentals?
We can’t really expect developers and builders to stop building on their own volition. To do so is the equivalent of willingly putting yourself out of business.
May 16th, 2008 at 8:50 am
Hot off the wire, details to follow:
Fannie Mae announces single, national down payment policy
May 16th, 2008 at 8:51 am
# 63 Here is a link to his whole piece:
http://www.americanthinker.com/2008/05/the_bum_rap_on_biofuels.html
May 16th, 2008 at 8:51 am
# 65 Send what you can, when you can, if you can?
May 16th, 2008 at 8:52 am
From Fannie Mae:
Fannie Mae Announces Single National Down Payment Policy;
Replaces Policy Regarding Markets Where Home Prices are Declining
Fannie Mae (FNM/NYSE) today announced a new, national policy on down payment requirements for conventional, conforming mortgages the company will purchase or guarantee. Starting June 1, 2008, Fannie Mae will accept up to 97 percent loan-to-value ratios for conventional, conforming mortgages processed through its Desktop Underwriter® (DU®) automated underwriting system, and 95 percent loan-to-value ratios for loans underwritten outside of DU, in all geographic locations in the United States. The new national down payment policy will supersede the policy the company adopted in December 2007 that required higher down payments in markets where home prices are declining.
“As another part of our ‘Keys to RecoveryTM’ initiative, we are today announcing that we will be equalizing the down payment requirements for borrowers in all parts of the country, regardless of local market conditions,” Marianne Sullivan, Senior Vice President, Single-Family Credit Policy and Risk Management, said. “This new down payment policy reinforces our goal to support successful home-owning, not just home-buying, as we seek to bring liquidity to all communities and help the housing market recover.”
The new national down payment requirements of 3 or 5 percent will apply to loans for purchase of single-family, primary residences. Down payment requirements will vary for other occupancy, property and transaction types. The company will implement systems and operational changes over the summer to accommodate the new national policy.
“We are able to adopt this new, national down payment requirement, even in markets where home prices are declining, because our new automated underwriting risk assessment model DU Version 7.0 will limit risk layering and assess each loan more precisely,” Sullivan added. “At the same time, we believe that equity matters, especially in this market. Down payments are a critical success factor in homeownership — and responsible lending is good business.”
May 16th, 2008 at 8:53 am
News Release
May 16, 2008
Fannie Mae Announces Single National Down Payment Policy;
Replaces Policy Regarding Markets Where Home Prices are Declining
WASHINGTON, DC — Fannie Mae (FNM/NYSE) today announced a new, national policy on down payment requirements for conventional, conforming mortgages the company will purchase or guarantee. Starting June 1, 2008, Fannie Mae will accept up to 97 percent loan-to-value ratios for conventional, conforming mortgages processed through its Desktop Underwriter® (DU®) automated underwriting system, and 95 percent loan-to-value ratios for loans underwritten outside of DU, in all geographic locations in the United States. The new national down payment policy will supersede the policy the company adopted in December 2007 that required higher down payments in markets where home prices are declining.
“As another part of our ‘Keys to RecoveryTM’ initiative, we are today announcing that we will be equalizing the down payment requirements for borrowers in all parts of the country, regardless of local market conditions,” Marianne Sullivan, Senior Vice President, Single-Family Credit Policy and Risk Management, said. “This new down payment policy reinforces our goal to support successful home-owning, not just home-buying, as we seek to bring liquidity to all communities and help the housing market recover.”
The new national down payment requirements of 3 or 5 percent will apply to loans for purchase of single-family, primary residences. Down payment requirements will vary for other occupancy, property and transaction types. The company will implement systems and operational changes over the summer to accommodate the new national policy.
“We are able to adopt this new, national down payment requirement, even in markets where home prices are declining, because our new automated underwriting risk assessment model DU Version 7.0 will limit risk layering and assess each loan more precisely,” Sullivan added. “At the same time, we believe that equity matters, especially in this market. Down payments are a critical success factor in homeownership — and responsible lending is good business.”
Since the housing correction began, Fannie Mae has expanded its mortgage guaranty business to serve the market’s urgent need for stability, liquidity and affordability. The company also undertook steps to help protect borrowers, manage the increased credit risk in the market, and fortify the company’s capital position. Among these steps, the company has continued to assess and establish new pricing, eligibility and underwriting criteria for its business that more accurately reflect the current risks in the housing market and guard against the potential for foreclosure. These changes have been incorporated into DU and have included adjustments to credit risk assessment, loan-to-value ratios and down payment requirements, among other factors.
Among the changes in response to market conditions, in December 2007 Fannie Mae adopted a “Maximum Financing in Declining Markets Policy” that restricted the loan-to-value ratios on properties in markets where home prices are declining, essentially requiring higher down payments in these markets. The new single national down payment policy announced today will supersede that policy.
Fannie Mae Senior Vice President Jeff Hayward stressed the company’s commitment to special affordable lending programs to support homeownership for families of modest means. “We are stepping up to provide more liquidity and affordability to some of the most distressed communities while also seeking at least a 3 percent down payment investment through our Desktop Underwriter system from borrowers to help ensure their success.”
Fannie Mae will continue to provide support for homebuyers that need down payment assistance, and will continue to allow loans with Community Seconds® up to a maximum 105 percent combined loan-to-value ratio. Community Seconds allow a borrower to obtain a second-lien mortgage to help cover down payment and closing costs, with funding typically provided by a state or local housing agency; an employer; or a nonprofit organization. Fannie Mae also offers MyCommunityMortgage® and Flex mortgage products, which permit down payment assistance programs in the form of gifts and grants.
“We recognize that down payment assistance programs remain a viable tool for borrowers who can afford a mortgage long term, but might need a little help getting started,” Sullivan said.
As part of its “Keys to Recovery” initiative, Fannie Mae is expanding its partnership with the National Council of State Housing Agencies. The company will provide up to $10 billion in financing to help Housing Finance Authorities (HFA) serve first-time homebuyers of modest means. In some cases, Fannie Mae will purchase HFA mortgages that have greater than 97 percent loan-to-value ratios.
The first “Keys to Recovery” initiative that Fannie Mae announced on May 6, 2008 also includes: streamlined refinancing for Fannie Mae borrowers whose mortgage balances exceed the value of their homes; improved pricing for jumbo-conforming mortgages to help borrowers in high-cost areas; and a neighborhood stabilization initiative with the Center for Community Self-Help for targeted areas with high home foreclosures.
May 16th, 2008 at 8:54 am
Your fingers were faster than mine lol.
http://www.fanniemae.com/newsreleases/2008/4370.jhtml;jsessionid=KDVSLLYXKUVPHJ2FECHSFGQ?p=Media&s=News+Releases
May 16th, 2008 at 8:54 am
#4 grim;said some New Jersey homeowners are feeling the pinch and have come to her organization to complain.
Complain about what?
May 16th, 2008 at 8:54 am
“We are able to adopt this new, national down payment requirement, even in markets where home prices are declining, because our new automated underwriting risk assessment model DU Version 7.0 will limit risk layering and assess each loan more precisely,”
Sounds like one hell of a black box.
May 16th, 2008 at 8:54 am
grim Says:
Fannie Mae announces single, national down payment policy
The mortgage insurers must also be on board. If Fannie gives you a 95% loan but you can’t get the M.I., it’s useless.
May 16th, 2008 at 8:56 am
Ahhhhhhh. More smoke blon in an effort to APPEAR to be doing something.
May 16th, 2008 at 8:58 am
blown, anyway
May 16th, 2008 at 8:59 am
Actually, I think it is more of a quiet shift towards risk-based pricing for individual loans.
May 16th, 2008 at 8:59 am
I would like some opinion on my experience in making an offer for a house last weekend.
MLS ID: 2491018 (it’s an old listing that says withdrawn, but there is a new listing for it)
OLP: $285,900
LP: $268,999
I came in with an offer of $225,000, 84% of the current list price, as a starting point for negotiating. The response I got was “come back when you’re serious.” Was I really that unreasonable with my offer? It’s a 3 bed, 1 bath ranch on a 50×100 lot. There’s no back year to speak of because there is a detached garage, and the house is in major need of upgrading (green shag carpet being enemy #1)
I didn’t think my offer was that unreasonable given my personal observations on my own street in Hillsborough. My next door neighbors house has been for sale for over a year and have dropped the list price 16% and is now under contract for the 4th time, because the buyers couldn’t get financing the previous 3 attempts. A house across the street that sold last summer went back up for sale in the winter. Why? I don’t know. My neighbor across the street that moved in almost 2 years ago, still hasn’t been able to sell his house in another section of town. Another house down the street was repoed because the guy that was looking to flip it didn’t pay his property taxes. A house next door to that one is back on the market after being under contract, because the buyers couldn’t get financing. So given the carnage I’ve witnessed on my half mile of road, am I really that unrealistic on my offer?
May 16th, 2008 at 9:00 am
New York City gaining jobs.
Slight decline in financial activities jobs (NY state #).
Slight increase in professional and business services (NY state #).
This contrasts with mainstream media reports about jobs because the mainstream media reports about jobs are sensationalist and misleading. Witness posts #6 and #11. The journos aren’t doing their jobs very well.
http://www.labor.state.ny.us/workforceindustrydata/Pressreleases/prtbjd.txt
May 16th, 2008 at 9:03 am
Now, lenders want proof of income, proof of how much money you have, and proof of where that money is coming from. Banks are just picking apart the appraisals.
How am I supposed to get a mortgage now? Oh no!
May 16th, 2008 at 9:07 am
# 77 My approach, which, admittidly, is quite hard @s$ed in negotiations, would be as follows:
I would forget about this house and not look at it for another few weeks, at least.
If by mid July it has not gone UC, I would approach them again, with an offer that is $1,000 lower than the first one — reflecting the continuing slide in RE values.
If they countered with something reasonable, I would then decide how far I was willing to go for that particular property.
If they were again insulted, I would walk away and let it sit. Maybe I would go back with an even lower offer later on, maybe not.
There are lots of properties out thee and this one does not sound like a unique gem, so no need to worry. What one does not buy today will only be worth less (but one hopes not worthless) a few months from now.
Others here might negotiate differently, but that is my approach.
May 16th, 2008 at 9:07 am
#55 grim: Of course Kudlow and his merry gang and all the rest will be spinning this.
They will simply ignore the decline in SF starts, and just scream housing starts are up, no recession here.
There will be no mention that the increase was in multi-family starts,and ironicaally many of these mult-family increases may be for rental units.
May 16th, 2008 at 9:10 am
Was I really that unreasonable with my offer?
Did you present a written offer, through your own agent, with a check and prequal/preapproval attached? Did your agent attempt to sell your offer, or was it “presented on a garbage can lid?
May 16th, 2008 at 9:11 am
GetAClueNJ [77],
Tell the listing agent and/or party who made that remark that your offer will drop by the same dollar amount when they have to re-list and drop the price again.
Also let them know that you’re not insulted and understand their frustration. Let them know you’re there for them and will take the property off their hands when they reach despair.
May 16th, 2008 at 9:12 am
Thanks for advice grim. I also forgot to mention the house is located in Somerville.
I’m a first time buyer at the ripe old age of 25. I stumbled across this blog this week and am verry happy to see there are other people here in NJ that share the same economic views that I have. I hope to become a contributing member to conversations that take place here as I find them to be very well thought out and logical ones.
May 16th, 2008 at 9:12 am
#69 grim; Simply incredible!! Have we learned nothing/ Here we go again? Housing collapse the saga continues?
May 16th, 2008 at 9:12 am
http://www.wftv.com/video/15817645/index.html
That web site you gave also had a scary girl fight video
May 16th, 2008 at 9:13 am
# 78 “The journos aren’t doing their jobs very well.”
So, why should this story be any different than any number of others. Having the pleasure (?) ow working closely with a number of major national and international media outfits has only caused me to realize how little we can expect from the news media. The lack of analytic ability in so many reporters and editors, and the inability of most to do much beyond regurgitate press releases is a real problem, and one that is transparent to much of the news-consuming public.
Add to this the fear that many in the media have about “losing access” to policy makers, etc., if they actually engage in even-handed but hard-hitting reporting, and one has to question the work product being put out in the name of news.
May 16th, 2008 at 9:14 am
#82,
Yes, I had the $1,000 deposit check and the prequal letter from the mortgage broker and a 20% down payment. The seller’S agent told my agent that the seller wants to do a quick closing and have everything said and done in 4 weeks, so I figured they would at least be willing to negotiate. He also said there was another offer, but I’m sure there’s always another offer when you go to put one in.
May 16th, 2008 at 9:16 am
376 grim:risk-based pricing for individual loans. Risk based? Based on what? Not amount of down payment, that is for sure.
And to me at least, that is how you determine risk. The larger the down payment, the more skin, in the game, and the more likely people will pay their mtgs.
At least that is how it used to be.
May 16th, 2008 at 9:17 am
# 86
Journalism at its finest. Just add Jell-O.
May 16th, 2008 at 9:19 am
Keep up the good work, folks. I have to go fire someone.
May 16th, 2008 at 9:20 am
Just a thought, I wonder how $4 dollar gas will effect home sales at the Jersey Shore and the Hamptons. I called about that short sale in the Hamptons to go and see it and then realized to drive their and look around a bit is a 200 mile trip. Firing up a minivan or 4 by 4 every weekend is expensive. I know the Hamptons have stated (I believe them) that Hotel Occupency will be at an all time record this summer. That often happens when airfares are sky high. But that is different then committing to going on a 200 mile round trip 20-30 weekends a year for the next few years. Who knows Gas might be the final kick in the pants of vacation homes you have to drive to.
May 16th, 2008 at 9:20 am
#78 pret; So my financial head hunter friend who has been in the business 25 years, and expects this down turn in Wall street jobs to be the worst she has seen in her career, is wrong?
May 16th, 2008 at 9:20 am
He also said there was another offer, but I’m sure there’s always another offer when you go to put one in.
Always.
I advise my buyers to play the same game.
They always have another offer on the table.
“With all the inventory on the market, you don’t really think this is the only house they are interested in, do you?
We expect to hear back from the other party by the weekend, so we would appreciate if you could get back to us quickly.”
May 16th, 2008 at 9:21 am
#78 - The majority of the y/o/y gains ( as a %) were in Edu/Health & “Natural Resources & Mining” (!?!). Fairly static overall though, esp. given that this covers the entire state.
At what point do the media again pick up “underemployment” as an ongoing theme?
That is the full-timer cut to part-time; still employed but at no where near the same salary.
May 16th, 2008 at 9:22 am
John,
You drive to the Hamptons?
May 16th, 2008 at 9:25 am
3b,
Instead of requiring a larger down payment, to reduce loss rates, you simply raise the cost of the loan (rate) so that additional interest income will cover the increased losses. Net result is the same.
So instead of increased downpayments and lower rates in declining markets, we see a flat downpayment policy and increased rates.
Super.
May 16th, 2008 at 9:27 am
This is only anectdotal evidence from someone who sells primarily to plumbing and HVAC contractors doing new construction work.
The ONLY thing going on in new residential construction right now is multifamily work and retirement homes. And I would say that runs about 70% apartments vs. 30 % condo / townhomes. Every contractor who focused on SFH construction has laid off his staff, sometimes up to 90% on some of the big, non-union players.
This has reverberated throughout the supply industry as well. Building materials, plumbing, and HVAC wholesalers are laying off people in droves. Most of these companies are smaller and privately held so they don’t make the headlines.
Commercial construction is just OK, nothing outstanding, but not as devestated as SFH construction. I’m fortunate in that I focused our efforts os multifamily work a few years ago and our company has a very strong commercial presence.
May 16th, 2008 at 9:27 am
#97 grim: Man we are just simply the best.
May 16th, 2008 at 9:30 am
“bob: ““Capitol Hill is taking aim at what some see as rampant speculating.”
Jamil [63],
I never stated that there was no speculation. I was astonished to hear that this was taking place on an exchange.
Help me with this one. If speculation was overly rampant why don’t commercials sell 5X their production forward? In adddition to this, why don’t we release reserves from our SPR?
May 16th, 2008 at 9:33 am
#98
Strange. You would think the reduced construction would lead basic materials prices to fall, but they have skyrocketed. The world just doesn’t make any sense anymore. They always did use the term “rational consumer” in my economics classes. Now I know why.
May 16th, 2008 at 9:35 am
Another option is a higher credit score requirement in previously noted “declining markets”. I could even see increased rates across the nationwide in an attempt to cover the increased losses in those “declining markets”.
May 16th, 2008 at 9:37 am
Clue,
A bit dated, from January, but it drives the point. From Reuters:
Lumber prices hit 5-year low, cutbacks seen
North American lumber prices fell to a five-year low on Thursday as the slow down in home building has wood piling up at lumber mills, industry experts said.
As a result, the big lumber mills in Canada, which ship much of their production to the United States, are losing money and will likely cut production, they said.
At the Chicago Mercantile Exchange, which prices North American lumber, lumber futures for January delivery fell to $208.70 per thousand board feet, the lowest since November 2002.
May 16th, 2008 at 9:37 am
President Bush said Tuesday he was disappointed in “flawed intelligence” before the Iraq war and was concerned that if a Democrat wins the presidency in November and withdrew troops prematurely it could “eventually lead to another attack on the United States.”
How did this moron get elected twice, let alone come from the same gene pool as his parents?
May 16th, 2008 at 9:39 am
Bob (100#):
“why don’t we release reserves from our SPR?”
Strategic reserve is not for inconveniences or price manipulations, it is for major (disastrous) disruptions, such as oil embargo.
May 16th, 2008 at 9:39 am
#101
Basic materials are now a global commodity.
ABS pipe is on an allocation basis here in the US now, some major manufacturers have sold or gotten out of the business. This really only effects residential construction in a few areas of the US, NJ being one of them.
PVC tracks oil prices to a degree
Copper and steel apparently still have a strong global demand.
May 16th, 2008 at 9:42 am
Framing lumber prices have increased since those January lows, but remain considerably lower than during the housing market peak..
http://www.nahb.org/generic.aspx?genericContentID=527
May 16th, 2008 at 9:43 am
stu: do you think it is a good idea to let Al-Qaida to get a safe heaven in Iraq? How did that turn out in Afghanistan in the 1980’s? Obama has promised to invade Pakistan and attack Iraq if Al-Qaida gets safe heaven there and I don’t think that policy make any more sense.
No matter what you think about the decision to go to war, now we are there, and somebody is going to win (Al-Qaida, Iran or US).
May 16th, 2008 at 9:46 am
#103
http://www.kitcometals.com/charts/copper_historical_large.html#6months
What about copper though? The price of that is up, and people know it. I always see thefts of copper and other metals in the newspaper because the scrap price for it is so high. Going into vacant homes and stealing the wiring and copper tubing is also popular.
http://online.wsj.com/article/SB120959221333557457.html
Or this WSJ article where cities around the country are having bronze statues stolen for scrap money. Anybody know how we can get the Statue of Liberty to the scrap yard? I bet she’s worth a pretty penny.
May 16th, 2008 at 9:47 am
grim Says:
May 16th, 2008 at 9:25 am
3b,
Instead of requiring a larger down payment, to reduce loss rates, you simply raise the cost of the loan (rate) so that additional interest income will cover the increased losses. Net result is the same.
So instead of increased downpayments and lower rates in declining markets, we see a flat downpayment policy and increased rates.
Super.
In view of probably 90% starter home buyers buying homes even now with 3-5% (may be 10%) down, I’d say - BRING 10% mortgage rates on!!!
As a first time home buyer I would love nothing more than to see mortgage rates skyrocket to 10-12%. Since no first time buyers are buying homes with cash anymore, affordability will plunge and house prices would have to drop significantly (30-50%) in this case.
This was I’d rather pre-pay my mortgage instead of having fat savings account and instantly get something like 7% return (not 10% due to mortgage interest deduction).
As some of my older friends used to say - well when we bought our first home in 1980’s interest rates were in teens - it should be easy for you to buy it now with 6% interest… I would ask them - how much did you pay - 70K!!!
How much would you sell it for now - 350K!!!
Here you go!!!
SO please please please - bring on 12%+ rates.
May 16th, 2008 at 9:48 am
Just a thought, I wonder how $4 dollar gas will effect home sales at the Jersey Shore and the Hamptons. I called about that short sale in the Hamptons to go and see it and then realized to drive their and look around a bit is a 200 mile trip. Firing up a minivan or 4 by 4 every weekend is expensive. I know the Hamptons have stated (I believe them) that Hotel Occupency will be at an all time record this summer. That often happens when airfares are sky high. But that is different then committing to going on a 200 mile round trip 20-30 weekends a year for the next few years. Who knows Gas might be the final kick in the pants of vacation homes you have to drive to.
John,
If you can’t afford $100 in gas what makes you think you can afford a home in Hamptons?
Hotel business is gonn abe big you’re right but the house rentals will get beat up.
May 16th, 2008 at 9:50 am
to all of the builders / contractors on this board, here is a NYT article that tells the other side of the story:
http://www.nytimes.com/2008/05/15/garden/15contractors.html?pagewanted=1&_r=3&ref=todayspaper
May 16th, 2008 at 9:51 am
Somebody will win Jamil and we will lose either way. So what if we beat Al-Qaida in Iraq (or an insurgency that is really more concerned about themselves than in supporting Bin Laden). Where does this leave us? What stops wealthy children of Saudi families from attacking us. A U.S. victory (too late for that in actuality) in Iraq and our establishment of military bases there will actually serve to solidify Bin Laden’s stance.
Someone said it yesterday. Stop relying on Fox to think for you. Think for yourself for once. If some members of congress and the senate did this on occasion, we would not be in this mess.
Politics Off!
May 16th, 2008 at 9:51 am
Pretorius is absolutely right! Jobs are being lost everywhere else, but here. See look at the link!
http://www.bloomberg.com/apps/news?pid=20601087&sid=aU1HmbTvKJaQ&refer=home
May 16th, 2008 at 9:55 am
Jamil [106],
Thanks, you learn something new every day, on this site.
Why are we adding 70,000 barrels in day if we are in the midst of an irrational bubble?
May 16th, 2008 at 9:57 am
“3b Says:
May 16th, 2008 at 9:20 am
#78 pret; So my financial head hunter friend who has been in the business 25 years, and expects this down turn in Wall street jobs to be the worst she has seen in her career, is wrong?”
Yes. The case of a New York City jobs carnage is based on reports by mainstream media outlets and personal anecdotes.
We’re almost a year into the financial crisis. If there was going to be a jobs carnage in New York City, then employment numbers would be crashing by now.
May 16th, 2008 at 9:58 am
From Brian Bethune at Global Insight (no link):
Brian Bethune
Chief U.S. Financial Economist
Global Insight
Bottom Line
Overall housing starts rose by 8.2% in April, but that was entirely due to a sharp upward bounce in noisy multi-family buildings – single family starts declined by 1.7%.
Total building permits also rose by 8.2%, with both single and multiple unit permits moving up.
The number of homes under construction declined by 0.7%.
Outlook
Starts and permits bounced upwards in April, but most of this upward momentum is likely connected with statistical anomalies. With respect to starts, there was a huge upward bounce in multiple family starts, a sharp recovery from relatively depressed levels in March. The bounce in multi-unit permits reflected the rebound in multi-unit starts. Finally, the uptick in single family permits was likely connected with the unusual timing of Easter in March.
We would not read too much into the April housing report beyond statistical noise. The overall pace of housing activity continues to trend downwards as market conditions remain weak and inventory levels remain excessive. This is reflected in declining levels of homes under construction and housing units completed. The housing market overall has not yet reached a trough — Global Insight does not expect activity to stabilize until the end of 2008.
The only potential good news to take away from this report is that the rate of decline of housing activity is likely to decline in the months ahead — permits have fallen well below the 1 million mark and are down 55% from their peak in early 2006. However, it is definitely too early to uncork the champagne on the long and winding road to more healthy housing market conditions.
May 16th, 2008 at 9:58 am
#110
You are exactly right, and that is the reason why I am so frustrated and discouraged by the current housing market. Nobody knows how to save anymore. Of the few friends of mine that have bought houses, none put more than 3% down, some even 0%, or got a piggyback loan for the 20% downpayment. I actually have a 20% down payment in cash, but at the current price levels, even after putting 20% down, the monthly payment is still unaffordable. I have no credit card debt. I have an auto loan that is going to be paid of tomorrow morning. My only expenses will be cell phone, car insurance (paid for the year), and gasoline. I snuck in under the stimulus payment threshold by $900, so according to the government, I border on making a lot of money, yet I still can’t afford a home in an area where I don’t have to worry about being robbed or shot.
On top of everthing, the price of every basic necessity, such as food, gas and electricity, is skyrocketing. So what do we do? LOWER interest rates! Ben Bernanke is killing me. I may need two dartboards, one with his face on it, and another with Greenspan’s.
May 16th, 2008 at 9:59 am
Pretard,
There’s a fine line between being contrarian and retarded. Congrats, you just crossed it!
May 16th, 2008 at 10:00 am
STU: eh fox bashing. Stop reading NYT and think yourself. Why do you think Drive-By Media is not talking about Iraq anymore?
Surge was a success, “benchmarks” have been met, things are now going on very well in Iraq. Al-Qaida is largely defeated and (more importantly) rejected by iraqis. Iraqi army is getting things done. Iranian attempts to set up Hezbollanistan (via sadrists) in Iraq failed. If this continues, Iraq will be a good place (and ally) in middle east (instead of being like Gaza strip and base of AQ or Iran). Appeasing dictators and surrendering in war has rarely produced anything good.
May 16th, 2008 at 10:00 am
My only expenses will be cell phone, car insurance (paid for the year), and gasoline.
No food? Let me know how you do it, it’s getting expensive to fill the cart.
May 16th, 2008 at 10:03 am
Jamil,
When we withdraw from Iraq like we did from Korea and Vietnam, then tell me about our success.
May 16th, 2008 at 10:04 am
From MarketWatch:
Consumer sentiment falls in May, lowest since 1980
Consumer sentiment in May fell from the prior month, reaching its lowest level since 1980, according to a Friday media report. In recent months, high fuel and food prices, along with falling home values have pulled down sentiment. The U.S. consumer sentiment index in May fell to 59.5 from 62.6 in April, according to a Friday report from University of Michigan/Reuters. Economists surveyed by MarketWatch were looking for a result of 61.0.
May 16th, 2008 at 10:04 am
#121
I’m still with Mom and Dad. I know, I know. They should have thrown me out by now. I have a bowl of cheerios in the morning, work picks up my lunch, and the ‘rents give me dinner. So I only pay for food when I go out, which is less and less these days, as my friends are finally realizing they need to cut back on expenses and that credit cards are killing them.
May 16th, 2008 at 10:06 am
pret [115],
Simply clueless.
May 16th, 2008 at 10:07 am
So Grim and others,
Were you aware that Nouriel Roubini wholeheartedly supports the Frank-Dodd proposal? This surprised me a bit, but I understand where he is coming from. Essentially, he believes a minor government bailout is much greater than a huge government bailout, a la the Great Depression. Sort of like Bernanke’s logic on bailing out Bear.
It certainly surprised me, although I still think that the moral hazard issue irks me to no end.
May 16th, 2008 at 10:08 am
Grim, why do you always post fluff articles about layoffs but ignore the underlying data that shows that the employment situation really isn’t that bad?
May 16th, 2008 at 10:11 am
#121 stu:
Yes, I agree with you. if we withdraw too soon, it will be a failure and win for AQ or Iran (or both), and Obama will attack Iraq (let’s see how it goes then), as he promised (if AQ gets in Iraq).
This is the reason we must stay there and finish the job. We are still in Germany and Japan. I expect the next few years to be the most critical. Then we can stay in bases, in an arrangement similar to Germany/Japan/UK/UAE, to provide strategic security guarantees.
May 16th, 2008 at 10:12 am
#79
Now, lenders want proof of income, proof of how much money you have, and proof of where that money is coming from. Banks are just picking apart the appraisals.
How am I supposed to get a mortgage now? Oh no!
We just sent in the paper work to be pre-approved only a couple of days ago.
They wanted 2006/2007 W-2’s
ALL banks statements (all pages)
ALL Retirement info (all pages)
Payment stubs
Photo IDs
It was a 37 page fax.
May 16th, 2008 at 10:14 am
#115 pret:personal anecdotes.
Not to be insulting, but I put much more credence in the personal anecdotes of a highly regarded wall st head hunter in the busienss for years, than the new kid on the block, who’s only point of reference is he had a tough time getting a job after the dot com bust.
It is amusing that you and others now blame the media for faulty journalism, now that the environemnt has changed.
Were you faulting the media when the housing market and wall st was booming?
How come it is only the media’s fault when housing/economy gets bad or slows down, but when housing/economy was booming, the media was just reporting the facts.
May 16th, 2008 at 10:16 am
Patience Pretorius!
The tech bubble took years to burst. It lasted from February 2000 to September of 2002. That is 31 months. The credit crisis in the financial markets are at 9 months. Just 5 months ago, these same people were receiving record bonuses instead of pink slips.
Just as Jamil (like his hero president called all combat operations in Iraq accomplished) makes his early calls, you too need to give it some time. In another 11 or so months, then we can more accurately weigh the outcome of employment on wall street.
I suppose you can say that the lack of terminations so far, has served to support prices (mostly high end) in Northern NJ. But even then, I thought the high end was the area showing the greatest percentage declines.
May 16th, 2008 at 10:19 am
#121
I’m still with Mom and Dad. I know, I know. They should have thrown me out by now. I have a bowl of cheerios in the morning, work picks up my lunch, and the ‘rents give me dinner. So I only pay for food when I go out, which is less and less these days, as my friends are finally realizing they need to cut back on expenses and that credit cards are killing them.
Same scenario for us. The only difference is we “were” renting and moved back in with the parents to help them out until they sell their house. They insist on cooking dinner every night. We have no credit card debt at all and are only paying for my wife’s car and what’s left of school for her along with car insurance. We also give my parents money to help pay their bills. I will say this though, it seems every time we go to the store and buy even just a couple of hand held baskets of stuff it’s nearly $100! It’s out of control.
May 16th, 2008 at 10:23 am
Suze Orman says financial institutions should be forced to freeze borrowers payments at their initial amounts.
Forced.
http://money.cnn.com/?cnn=yes
May 16th, 2008 at 10:23 am
3b,
The velocity of calls I receive from headhunters hasn’t slowed. My company is hiring aggressively. We’re leasing more space.
I spend a lot of time with New York office building owners and brokers, who unanimously confirm that 2001 & 2002 was a lot worse. For sure, leasing activity has slowed, but compared to 2001 & 2002 more companies are looking for space and very few are trying to sublease space they don’t need anymore.
The employment data shows that there is no jobs carnage in New York City. The doom-and-gloom scenario - for New Jersey home prices and New York City jobs - simply isn’t playing out.
May 16th, 2008 at 10:23 am
“I will say this though, it seems every time we go to the store and buy even just a couple of hand held baskets of stuff it’s nearly $100! It’s out of control.”
So when (and a big if) the dollar strengthens, should we expect prices to come down?
ha ha ha
May 16th, 2008 at 10:27 am
This contrasts with mainstream media reports about jobs because the mainstream media reports about jobs are sensationalist and misleading. Witness posts #6
#6
In Westchester County, the jobless rate rose to 3.9 percent in April from 3.2 percent a year earlier, according to data released yesterday by the state Labor Department. In Rockland County, the jobless rate climbed to 3.9 percent from 3.4 percent. And in Putnam County, it jumped to 3.6 percent from 3.0 percent.
…
The finance and insurance sector was one of the hardest hit, losing 1,000 jobs in the three-county area during the past year.
Pre,
How are these numbers misleading?
http://www.labor.state.ny.us/workforceindustrydata/index.asp?reg=hud
Private sector employment in the Hudson Valley Region increased over the year by 3,200 or 0.4 percent, to 752,000 in April 2008. Employment gains were largest in educational and health services (+3,000), professional and business services (+2,100), and natural resources, mining and construction (+1,400). Job losses were centered in financial activities (-1,700), and manufacturing (-1,300).
http://www.labor.state.ny.us/workforceindustrydata/PressReleases/pruistat.htm
Putnam-Rockland-Westchester: Since April 2007, the number of nonfarm jobs has increased by 4,600, or 0.8 percent, and the number of private sector jobs has increased by 3,500, or 0.7 percent. The area’s unemployment rate was 3.9 percent in April 2008, compared with 4.4 in March and 3.2 in April 2007.
May 16th, 2008 at 10:27 am
#98 This is only anectdotal evidence from someone who sells primarily to plumbing and HVAC contractors doing new construction work.
Anectdotal evidence is not allowed. Only evidence that is backed up with multiple graphs and reams of statistical data from approved sources is permitted.
I am sorry and feel bad, but we can only have this almost “scientific” type evidence as proof.
I am old school like yourself. I believe that there is no better type of information than that provided by the people who are involved in the business every day, no matter what the business is.
May 16th, 2008 at 10:29 am
Pre,
Why didn’t you provide numbers here? Why did you take it upon yourself to use a subjective description instead of objective data?
Slight decline in financial activities jobs (NY state #).
Slight increase in professional and business services (NY state #).
Financial Activities Jobs -3,400
Professional and Business Servies Jobs +1,100
May 16th, 2008 at 10:29 am
#134
So when (and a big if) the dollar strengthens, should we expect prices to come down?
ha ha ha
Well, even sellers have pipe dreams :)
May 16th, 2008 at 10:29 am
The carnage is coming. I just received my second bank owned listing in less than a week in the Upper Newstead section of South Orange.
May 16th, 2008 at 10:30 am
139 was actually me. Stop using my computer, Stu!
May 16th, 2008 at 10:35 am
Getaclue:
FYI: There’s a LOT more to “groceries” than food… there’s things you don’t think about like salt and flour, things you don’t shake out of a box into a bowl…and cleaning items like detergent, soap, razors…they cost a lot!
Also, utilities have a way of creeping up in price. You have hot water and lights on, and that takes money.
Life is a bunch of little expenses that we never add in…
May 16th, 2008 at 10:36 am
#133: While I believe that Wall Street (and NYC) loses jobs, I have to second pret. My company is hiring a lot of people (including a lot of people from Wall Street) and we are expanding rapidly. Relocation teams are working overtime moving people here (including from India, China, Europe, and southern US). Many buy NYC condos (without any fees, closing costs etc) right away. (though I heard that they complain about being the only one in their floor).
So yes, Wall Street loses jobs but there are plenty of other jobs. I would love to see massive Wall Street job losses and eliminate them from the housing market but so far it does not look good. If things don’t improve (meaning job losses and price drops), I’ll be out of here.
May 16th, 2008 at 10:38 am
Has anyone ever watched a controlled implosion (other than the Gary Hart campaign or the Elliot Spitzer or Jim McGreevy administrations)? In the first little bit after the charges go off, nothing happens. It is as if the detonations have had no affect on the structure at all. After what seems like forever — at that moment anyway — then everything crumbles.
To analogize to the current economic situation, we are early in the process, just after the plunger was pushed. It may be hard for this instant-results culture to accept but it takes time for the results of economic dislocations to work their way through the economy.
May 16th, 2008 at 10:39 am
Seeking Alpha:
Don’t believe Paulson: S&L 2.0, the Bank Failure Redux
http://seekingalpha.com/article/77584-don-t-believe-paulson-s-l-2-0-the-bank-failure-redux
“Now, for those banking CEOs, homebuilder CEOs (ex. Mr. Hovnanian), monoline CEOs and government officials (ex. Mr. Paulson), who claim that the worst is behind us - I can smell you guys!”
Great graphs as well.
May 16th, 2008 at 10:41 am
#133 pret; I will defer to you on the commercial real estate aspect of this discussion, since this is your line of business.
That being said some points to consider.
1. We will see more office space once JP Morgan