From the NY Times:
AFTER months of searching for a mother-daughter home that they could afford in the Bergen County town where they were renting, Adrian and Rosanna Mercado came upon a Victorian with enough room for them to live upstairs and Mrs. Mercado’s parents to live on the first floor. The only problem was that the century-old house was in serious need of repairs.
A two-family in Closter, the house had sat empty for two years. It was “selling for less than it would go for if it was fixed up,” Mr. Mercado recalled, “so we thought, ‘We’ve got to jump on that.’ ”
“We figured we’d get a mortgage to buy the house, and then another loan to do the renovations.”
But they found banks reluctant to make loans on uninhabited homes — and even less eager to offer home equity loans. In fact, mortgage brokers say home equity products have all but dried up in today’s tight-fisted lending climate.
In the end it was another loan that came to the Mercados’ rescue: the Federal Housing Administration’s 203(k), also known as the F.H.A. rehab loan, which is designed to cover not only buying the home but also renovating it, and is then paid back like a regular mortgage. A hybrid that has been around for more than 30 years, the loan program has recently surged in popularity.
“We’re seeing an explosive grown in these loans,” said Ed Brehm, the branch manager of the Point Pleasant office of Prospect Mortgage, one of the country’s largest processors of 203(k) loans. The demand is being fueled by the numbers of bank-owned properties, he said, “but also from clients who can no longer get home equity loans.”
The National Association of Realtors’ January housing survey, released last month, found that 35 percent of houses on the market were either short sales or foreclosures, up from 32 percent in December and 29 percent in November. Of these, 37 percent were categorized as being “below” or “well below” average condition, sometimes resulting from the ravages of abandonment, others from damage inflicted on homes by disgruntled owners forced into foreclosure. Either way, a buyer of such a home will have trouble securing financing on something deemed less than habitable.
Enter the 203(k), an especially attractive loan for those drawn to the bargain prices but who don’t have the cash to bring the house up to habitable standards. The renovation part of the loan can be used for everything from new floors or appliances to major structural rehabilitation. Also, the loan is available for a variety of house sizes, from one-families to four-family owner-occupied units. Fannie Mae offers a similar combination lending program called HomePath.
The 203(k) is available in two structures: the Streamline K and the Consultant K. The former is for smaller, nonstructural projects that cost less than $35,000 (minus a 10 percent contingency fee that is held in reserve in the event that the project needs additional work). With these projects, the contractor doing the repairs gets paid 50 percent upfront and the remainder once the completed project has been inspected by an F.H.A. appraiser.
…
Because such rehab loans are more complicated and time consuming, not all lenders offer them. But those who do have found a lucrative niche. The Real Estate Mortgage Network, a mortgage company based in Edison, created a whole department around the loans, and even hired someone to serve as the company’s 203(k) concierge, according to Richard Pollock, the network’s area manager for South Jersey, Delaware, Pennsylvania and Maryland.
Friskies
From the NY Times:
Home Prices Declined to New Lows in 2011
HOME prices in the United States, which seemed to begin to recover in 2009, fell to new lows in 2011, according to the Standard & Poor’s/Case-Shiller index of prices.
Seattle and Atlanta were among the metropolitan areas where prices have fallen the most since the national market seemed to hit bottom.
“Prices peaked in Seattle after the rest of the United States, so Seattle is a little bit behind in the correction that will bring prices back in line with income levels,” said David L. Stiff, chief economist of Fiserv, which collects the data and calculates the Case-Shiller indexes. Foreclosures are rising there as they are receding in some areas where problems appeared earlier.
As seen in the accompanying charts, five of the 20 markets tracked by the Case-Shiller indexes peaked in 2007. Four of them — Seattle; Atlanta; Charlotte, N.C.; and Portland, Ore. — are down at least 7 percent from the spring of 2009. Only Dallas has held up relatively well.
…
It is possible that the home price situation is not as bleak as portrayed by the Case-Shiller indexes. A major challenge for any home price index is assuring comparability. Case-Shiller does that by comparing prices of homes with the price of the same home when it was previously sold.
The risk is that such comparisons may overlook changes to the home between transactions. During the boom, that meant the index might overstate gains because a home rose in value in part because of the addition of a new bedroom or swimming pool. Now, it may overstate losses because a disproportionate portion of sales in some markets are foreclosures, which are less likely to have been well maintained and in some cases may have been abandoned and vandalized before a new sale takes place. Mr. Stiff said Fiserv tried to minimize that problem by reducing the impact on the index of home sales that appear to show unusually large increases or decreases.
Another national index, maintained by the Federal Housing Finance Agency, showed a smaller decline in prices in 2011, and says prices hit bottom last February, before rising a little late in the year. That index is based on data from Fannie Mae and Freddie Mac, which are regulated by the agency.
Interesting to see the improved/deteriorated condition criticism come up, I haven’t see it much in the press..
For some additional info:
http://fic.wharton.upenn.edu/fic/papers/11/11-04.pdf
Bargains to be had in the old country.
http://www.independent.ie/business/commercial-property/manager-buys-donegal-hotel-on-market-for-6m-in-2008-for-650k-3037780.html
Morph from previous thread
Morph the papoose is an inaccurate piece of junk. I think there are barrel takedown kits for ruger 10/22s but you would have to check
How can any model be used for our area that doesn’t include calculation for property taxes? How can a lender possibly analyze price to income ratios or affordibility when the monthly tax payment rivals or exceeds the monthly mortgage payment? When the majority of your potential clients fall into the financially dead or dying category due to zero job security nor a pot to p1ss in, how do you conclude that they’re below the threshold of maximum risk tolerance?
Re: underground oil tanks – question.
i’m seeing several houses for sale with underground oil tanks. is there any way to protect yourself if buying, or is the advice to just steer clear?
Another day in hell.
Re: underground oil tanks
There was here before we bought. I believe you just get them to remove and have it certified.
They may offer a giveaback for you to do it yourself, but I don’t like that idea. If there’s contamination it can be a big expense.
tcm- do not buy unless tank removed prior & certified by town. You are on the hook for clean up DEP/EPA all over you. You should also not be able to get a mortgage as bank will not give a loan with tank in ground, they don’t want to be on the hook either as you can just walk away. I had mine tested & filled with sand (abandoned) certified by town prior to my 06 sale, now I understand they want them out of the ground although not 100% on that. Maybe different by town. Bottom line get it out or no deal my buyer split cost with me to do it & put tank in garage as that is where he wanted it, can go outside my preference.
P.S. tcm, steer clean sounds like a good idea, they all don’t go well. Guy up the road had to put house up on blocks & clear soil the whole 10 yards, not the norm but you never know.
mike and schabadoo –
Thanks!!
Sellers must remediate UG tanks, because there are no insurers left in NJ (other than Prudential, and only in a few specific areas), that will underwrite these tanks or allow homebuyers to assume the policies already in place.
No insurance for UG tank? No mortgage.
Back to building a rail gun in my garage…
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Meat 14 Can I come over and help, never mind we would drink to much and it would never get done.
But then again what the hell.
Our multi has a decommissioned tank under the boiler room in the basement. It’s gonna be a pain to sell in 2030. I’m hoping by then, even the concept of performing an oil tank sweep will be obsolete. Without a sweep, there is no way of knowing the tank is there.
#13 –
so in all cases, the seller must remove the oil tank, get the soil tested, if contaminated then remediate, and then get whatever certification is necessary to show that the oil tank was properly removed, otherwise the buyer can’t get a mortgage – yes?
how long does all this take?
why don’t the sellers get this done before they put it on the market?
tcm I waited till I had a buyer, no sense doing it if I did not sell. The again it was06 so different market. I had ins. on tank and could transfer but now it is a different story meat would know. Maybe they do not have the money, in this market I would think that would be a safe assumption.
tcm as far as how long depends on a lot of variables on tank location. In most cases the actual work is like 2 weeks, first the removal guy lets give him a week then the oil company for new tank week 2.
#6 gary: Do you ever feel like you are talking to yourself??? Don’t worry you will get used to it grasshopper.
mikey (16)-
We’d drink too much and then try to fire it.
tcm (19)-
Never assume intelligence in today’s seller.
Go to hell Dook.
3b 22 Gary 6: I hear you, you know I am on the same page.
Clot 23 Sounds like fun.
Clot 24 post of the weekend.
NEW YORK – He was an architect of one of the biggest tax cuts in U.S. history. He spent much of his career after politics using borrowed money to take over companies. He targeted the riskiest ones that most investors shunned — car-parts makers, textile mills.
That is one image of David Stockman, the former White House budget director under Ronald Reagan who, after resigning in protest over deficit spending, made a fortune in corporate buyouts.
But spend time with him and you discover this former wunderkind of the Reagan revolution is many other things now — an advocate for higher taxes, a critic of the work that made him rich and a scared investor who doesn’t own a single stock for fear of another financial crisis.
STORY: Central banks’ $8.8 trillion is a global economic lifeline
Stockman suggests you’d be a fool to hold anything but cash now, and maybe a few bars of gold. He thinks the Federal Reserve’s efforts to ease the pain from the collapse of our “national leveraged buyout” — his term for decades of reckless, debt-fueled spending by government, families and companies — is pumping stock and bond markets to dangerous heights.
Known for his grasp of budgetary minutiae, first as a Michigan congressman and then as Reagan’s budget director, Stockman still dazzles with his command of numbers. Ask him about jobs, and he’ll spit out government estimates for non-farm payrolls down to the tenth of a decimal point. Prod him again and, as from a grim pinata, more figures spill out: personal consumption expenditures, credit market debt and the clunky sounding but all-important non-residential fixed investment.
Stockman may seem as exciting as an insurance actuary, but he knows how to tell a good story. And the punch line to this one is gripping. He says the numbers for the U.S. don’t add up to anything but a painful, slow-growing future.
Now 65 and gray, but still wearing his trademark owlish glasses, Stockman took time from writing his book about the financial collapse, The Triumph of Crony Capitalism, to talk to The Associated Press at his book-lined home in Greenwich, Conn.
Within reach was Dickens’ Hard Times— two copies.
Below are excerpts, edited for clarity.
Q: Why are you so down on the U.S. economy?
A: It’s become super-saturated with debt.
Typically the private and public sectors would borrow $1.50 or $1.60 each year for every $1 of GDP growth. That was the golden constant. It had been at that ratio for 100 years save for some minor squiggles during the bottom of the Depression. By the time we got to the mid-’90s, we were borrowing $3 for every $1 of GDP growth. And by the time we got to the peak in 2006 or 2007, we were actually taking on $6 of new debt to grind out $1 of new GDP.
People were taking $25,000, $50,000 out of their home for the fourth refinancing. That’s what was keeping the economy going, creating jobs in restaurants, creating jobs in retail, creating jobs as gardeners, creating jobs as Pilates instructors that were not supportable with organic earnings and income.
It wasn’t sustainable. It wasn’t real consumption or real income. It was bubble economics.
So even the 1.6% (annual GDP growth in the past decade) is overstating what’s really going on in our economy.
Q: How fast can the U.S. economy grow?
A: People would say the standard is 3, 3.5%. I don’t even know if we could grow at 1 or 2%. When you have to stop borrowing at these tremendous rates, the rate of GDP expansion stops as well.
Q: But the unemployment rate is falling and companies in the Standard & Poor’s 500 are making more money than ever.
A: That’s very short-term. Look at the data that really counts. The 131.7 million (jobs in November) was first achieved in February 2000. That number has gone nowhere for 12 years.
Another measure is the rate of investment in new plant and equipment. There is no sustained net investment in our economy. The rate of growth since 2000 (in what the Commerce Department calls non-residential fixed investment) has been 0.8% — hardly measurable.
(Non-residential fixed investment is the money put into office buildings, factories, software and other equipment.)
We’re stalled, stuck.
Q: What will 10-year Treasurys yield in a year or five years?
A: I have no guess, but I do know where it is now (a yield of about 2%) is totally artificial. It’s the result of massive purchases by not only the Fed but all of the other central banks of the world.
Q: What’s wrong with that?
A: It doesn’t come out of savings. It’s made up money. It’s printing press money. When the Fed buys $5 billion worth of bonds this morning, which it’s doing periodically, it simply deposits $5 billion in the bank accounts of the eight dealers they buy the bonds from.
Q: And what are the consequences of that?
A: The consequences are horrendous. If you could make the world rich by having all the central banks print unlimited money, then we have been making a mistake for the last several thousand years of human history.
Q: How does it end?
A: At some point confidence is lost, and people don’t want to own the (Treasury) paper. I mean why in the world, when the inflation rate has been 2.5% for the last 15 years, would you want to own a five-year note today at 80 basis points (0.8%)?
If the central banks ever stop buying, or actually begin to reduce their totally bloated, abnormal, freakishly large balance sheets, all of these speculators are going to sell their bonds in a heartbeat.
That’s what happened in Greece.
Here’s the heart of the matter. The Fed is a patsy. It is a pathetic dependent of the big Wall Street banks, traders and hedge funds. Everything (it does) is designed to keep this rickety structure from unwinding. If you had a (former Fed Chairman) Paul Volcker running the Fed today — utterly fearless and independent and willing to scare the hell out of the market any day of the week — you wouldn’t have half, you wouldn’t have 95%, of the speculative positions today.
Q: You sound as if we’re facing a financial crisis like the one that followed the collapse of Lehman Bros. in 2008.
A: Oh, far worse than Lehman. When the real margin call in the great beyond arrives, the carnage will be unimaginable.
Q: How do investors protect themselves? What about the stock market?
A: I wouldn’t touch the stock market with a 100-foot pole. It’s a dangerous place. It’s not safe for men, women or children.
Q: Do you own any shares?
A: No.
Q: But the stock market is trading cheap by some measures. It’s valued at 12.5 times expected earnings this year. The typical multiple is 15 times.
A: The typical multiple is based on a historic period when the economy could grow at a standard rate. The idea that you can capitalize this market at a rate that was safe to capitalize it in 1990 or 1970 or 1955 is a large mistake. It’s a Wall Street sales pitch.
Q: Are you in short-term Treasurys?
A: I’m just in short-term, yeah. Call it cash. I have some gold. I’m not going to take any risk.
Q: Municipal bonds?
A: No.
Q: No munis, no stocks. Wow. You’re not making any money.
A: Capital preservation is what your first, second and third priority ought to be in a system that is so jerry-built, so fragile, so exposed to major breakdown that it’s not worth what you think you might be able to earn over six months or two years or three years if they can keep the bailing wire and bubble gum holding the system together, OK? It’s not worth it.
Q: Give me your prescription to fix the economy.
A: We have to eat our broccoli for a good period of time. And that means our taxes are going to go up on everybody, not just the rich. It means that we have to stop subsidizing debt by getting a sane set of people back in charge of the Fed, getting interest rates back to some kind of level that reflects the risk of holding debt over time. I think the federal funds rate ought to be 3% or 4%. (It is zero to 0.25%.) I mean, that’s normal in an economy with inflation at 2% or 3%.
Q: Social Security?
A: It has to be means-tested. And Medicare needs to be means-tested. If you’re a more affluent retiree, you should have your benefits cut back, pay a higher premium for Medicare.
Q: Taxes?
A: Let the Bush tax cuts expire. Let the capital gains go back to the same rate as ordinary income. (Capital gains are taxed at 15%, while ordinary income is taxed at marginal rates up to 35%.)
Q: Why?
A: Why not? I mean, is return on capital any more virtuous than some guy who’s driving a bus all day and working hard and trying to support his family? You know, with capital gains, they give you this mythology. You’re going to encourage a bunch of more jobs to appear. No, most of capital gains goes to speculators in real estate and other assets who basically lever up companies, lever up buildings, use the current income to pay the interest and after a holding period then sell the residual, the equity, and get it taxed at 15%. What’s so brilliant about that?
Q: You worked for Blackstone, a financial services firm that focuses on leveraged buyouts and whose gains are taxed at 15 percent, then started your own buyout fund. Now you’re saying there’s too much debt. You were part of that debt explosion, weren’t you?
A: Well, yeah, and maybe you can learn something from what happens over time. I was against the debt explosion in the Reagan era. I tried to fight the deficit, but I couldn’t. When I was in the private sector, I was in the leveraged buyout business. I finally learned a heck of a lot about the dangers of debt.
I’m a libertarian. If someone wants to do leveraged buyouts, more power to them. If they want to have a brothel, let them run a brothel. But it doesn’t mean that public policy ought to be biased dramatically to encourage one kind of business arrangement over another. And right now public policy and taxes and free money from the Fed are encouraging way too much debt, way too much speculation and not enough productive real investment and growth.
Q: Why are you writing a book?
A: I got so outraged by the bailouts of Wall Street in September 2008. I believed that Bush and (former Treasury Secretary Hank) Paulson were totally trashing the Reagan legacy, whatever was left, which did at least begin to resuscitate the idea of free markets and a free economy. And these characters came in and panicked and basically gave capitalism a smelly name and they made it impossible to have fiscal discipline going forward. If you’re going to bail out Wall Street, what aren’t you going to bail out? So that started my re-engagement, let’s say, in the policy debate.
Q: Are you hopeful?
A: No.
found out from facebook that my former au pair is visiting the Isle of Arran. Forgot that she was tooling about in Scotland. I am hoping that her Christmas gift box comes a bit early this year and includes a little 750ml something for Nom.
Good Morning New Jersey
JJ You have talked about this one in prior posts go figure http://www.ft.com/intl/cms/s/0/70a7a7ac-61f9-11e1-820b-00144feabdc0.html#axzz1o9IQChbc
Morning Mike.
wow:
we are the enemy in NJ. Did anyone here hear of proposed NJ ammo ban? Thank God it is stopped for now
http://www.nraila.org/legislation/state-legislation/2012/02/new-jersey-assembly-committee-puts-hold-on-ammo-ban-legislation-and-more.aspx
A558 has been sent back to committee. I have e-mailed my displeasure on this bill to all members of the committee. You all should do the same. The following link has the E-mail addresses and phone numbers of the members of the committee.
http://www.ammoland.com/2012/01/27/nj-assembly-committee-to-consider-ammo-ban-in-the-name-of-police-safety/
so, as put it in a letter to the republician members of the committee: if, as the US Supreme Court as ruled, the police have no obligiation to protect the public and an unelected official would have to power to ban common target and self-protection rounds, who is to protect myself and my family? You have in effect disarmed me.
So in NJ, we protect our unions at all costs…Police, public “servants”, all are above u and I. We only have the freedom to pay taxes.
F__k this shit. I went to law school in camden: i have seen first hand what happens when you disarm the population and only the criminal element has firearms.
sorry for the rant, I was very pissed off yesterday when I found this out. Since TPTB already know who I am, i will put the NRA sticker on the car today. Might as well. Nothing to lose at this point. According to the NJ, I am the enemy.
thank GOD ANJRPC was all over this issue.
35. Law school in Camden? Hehehe what was the entrance interview like?
here is the rub: I believe that the NJ Assault Weapons ban (AWB) already bans pistols that fire rifle caliber ammo if they are weigh more than 50 oz(??). So what are they trying to accomplish here? If you are worried about a high-powered handgun, the statute is already on the books. Thus, this has to a be a back-door attempt to get around the second amendment. After all, in the law, one has to assume that the legislature is familiar with all the legislation regarding a particular subject. They can’t claim that they are unaware of the NJ AWB.
35: you should have seen graduation…they hand you a degree, shoot you in the leg ,”jump you” and give u a beating…LOL
TBTF play for you JJ?
http://www.rollingstone.com/politics/blogs/taibblog/bank-of-america-in-trouble-20120302?print=true
Moral Hazard of mortgage cramdowns.
http://www.rollingstone.com/politics/blogs/taibblog/bank-of-america-in-trouble-20120302?print=true
1. Gators look like Cat Food today.
Clot:
speaking of the stench of death, try googling DA14.
OT alert,
Some of you may recall that I avoid intercity and tour busses. I used to drive city busses so I know how they are. Good article in Popular Mechanics about this, validating my view that they are unsafe.
Can someone with GSMLS access please check the status of #2908577? Is it UC? I see it on Zillow but not mls and the sign is still in front. Thanks.
I stopped by three open houses today, just to gauge the market compared to last year. All 3 asking prices are in the $350-400k range and were recently adjusted down across the board by $30-60k compared to last year and the realtors were urging us to offer lowballs. I realize this is only anecdotal but if its signaling a wider regional capitulation, maybe it explains the recent jump in sales and if so maybe it leads to another drop in nj prices. Just throwing it out there, not sure if others are seeing similar.
Neanderthal,
Thanks for the info and it’s nice to see you post again! :)
Whats up Gary!
Also, a few more comp killers came out over the last 6 months that bring prices down nearly to 2002 levels.
Where’s nwnj ?
MLS #2908577 went Under Contract on 2/28/12. That’s a nice location in Roxbury.
Impossible to tell what the agreed upon price will be, but it looks like an Estate Sale.
#51 Thanks. I didn’t see that one listed until this weekend. Taxes are nice too. Estate would make sense, it seems like all of the homes we’ve been interested in have either been estates or distressed.
Neanderthal Economist 47 maybe grim can post that old chart with all our predictions just for sh*ts & giggles. By the way how the h*ll are ya.
Whats up mikey! All is well, youre still in waiting i see. Me too. I have that chart, i’ll update and post it again one day soon.
Re: #52
Oh yeah, it hasn’t been just estates and foreclosures, we also spotted a murder house that’s priced aggressively.
TRENTON, N.J. — Children who may have taken breast cancer treatment medication mistakenly distributed by a New Jersey pharmacy instead of prescribed fluoride pills likely won’t suffer any health problems, a pharmaceutical expert said Saturday.
CVS Caremark officials say only a few children ingested pills for breast cancer treatment that they mistakenly received, and company investigators are still working to determine how and why the errors occurred at the pharmacy in Chatham. The pharmacy has acknowledged improperly dispensing Tamoxifen instead of chewable fluoride tablets to children in as many as 50 families between Dec. 1 and Feb. 20.
“Fortunately, it’s very unlikely that this specific drug would cause any serious or adverse effects when used for only a short periods of time,” said Daniel Hussar, a professor with the Philadelphia College of Pharmacy at the University of the Sciences.
Morph 39.
I think you are referring to the .50 cal ban which never passed.
Thanks for sharing informative post. I am going to subscribe rss feeds. Hope to see your regular update. Thanks