From Bloomberg:
Subprime Crash Squeezes First-Time Buyers Out of Housing Market
Josh Tullis, who in his eight years as a senior loan officer rarely felt compelled to reject a first-time home buyer’s mortgage application, is saying “no” in 2007.
Tullis’s latest clients are a married couple that banks ought to love. Between them they make $70,000 a year and they’ve been renting the same apartment for three years with zero late payments, he said.
Lenders don’t love them because they have no money in the bank, said Tullis, Virginia sales director at A. Anderson Scott Mortgage Group in Falls Church. With mortgage companies cracking down due to rising subprime defaults, Tullis needs them to sock away two months of payments for the $500,000 townhouse in Fairfax.
“Six months ago, these folks might have qualified, a year ago, definitely,” Tullis said. “It’s a lot, lot harder than it used to be for first-time home buyers.”
Subprime mortgage lenders have tightened credit guidelines so much they’re squeezing about 500,000 first-time buyers out of the market, according to the National Association of Home Builders. A decline of that magnitude would reduce sales of new homes by 4 percent and sales of existing homes by 7 percent, and deepen the worst housing slump since the Great Depression.
…
About 2.5 million people will buy homes for the first time this year, down from 3 million in 2005, said Gopal Ahluwalia, staff vice president for research at the National Association of Home Builders in Washington, who based the estimate on analysis from the U.S. Census Bureau and the National Association of Realtors in Chicago.“The impact will be negative for overall housing demand and keep the housing market in the correction phase for longer than it would have,” said Celia Chen, director of housing economics at Moody’s Economy.com in West Chester, Pennsylvania.
A lack of buyers means fewer sales even in neighborhoods where there are few if any subprime borrowers, affecting companies such as Toll Brothers, the largest U.S. builder of luxury homes.
…
“It appears that the impact of stricter lending standards, primarily arising from problems in the subprime market, is negatively affecting affordability at lower price points,” Toll said. “This in turn can and probably does impact the entire housing food chain including some of our potential customers’ ability to sell their existing homes.”Tightened lending was a factor that “may have served to impede the glimmers of a rebound we had started to see in early February,” Toll added.
…
“It all comes back to the first-time home buyer,” said Gary Balanoff, a real estate broker at ReMax Select in Oviedo, Florida. “If they could buy, we’d see a much better housing situation for everyone because it would start the domino effect.”
…
Subprime lenders have responded by funding less of the purchase prices of homes. Simply requiring a down payment of as low as 5 percent will disqualify one in four of the first-time buyers who were IMPAC customers a year ago, Chawla said.“We’re asking for skin in the game,” Chawla said.
About 5 percent of the loans issued by Countrywide Financial this year will cover the full price of a home, down from 25 percent in 2006, Sambol said.
WMC Mortgage Finance Co., the Burbank, California-based division of General Electric Co., requires a minimum borrower contribution to the down payment of 15 percent, said spokeswoman Brandie Young. Until this year, the company issued loans for 100 percent of the home price.
…
The swinging pendulum has Tullis, the loan officer trying to get a mortgage for the Virginia couple, longing for the good old days of 2006.“They have a 648 credit score,” Tullis said of the couple who were turned down for a loan. “With a credit score of 580, you used to be able to go anywhere and get a stated income loan for 100 percent of the price of the house. Nowadays, first-time home buyers really have to prove themselves.”
From Bloomberg:
Hedge Funds Warn SEC to Watch for Manipulation of Subprime Debt
A group of hedge funds is telling the U.S. Securities and Exchange Commission to be on the lookout for manipulation of bonds backed by subprime mortgages.
Paulson & Co., based in New York, told the SEC that investment banks may pay inflated prices to buy bad loans that are collateral for bonds, said Michael Waldorf, a senior vice president at the hedge fund. Removing delinquent loans may prevent bonds from defaulting and triggering losses in the banks’ investments in derivatives, he said. Waldorf declined to name the other hedge funds that also warned the SEC.
From Bloomberg:
Regulators Kept Quiet as Subprime Lenders `Targeted’ Minorities
The U.S. agencies that supervise more than 8,000 banks haven’t censured any of them for violating fair-lending laws, three years after Federal Reserve researchers began assembling data showing blacks and Hispanics are more likely than whites to be saddled with high-priced home loans.
Minorities stand to be hardest hit by rising delinquencies and foreclosures in subprime loans. While Census Bureau data show that homeownership rates rose to records among blacks in 2004 and among Hispanics in 2005, they still trail whites by 25 percentage points, and the gap may widen in the current bust.
“Black people and Hispanics have been targeted,” said Alphonso Jackson, secretary of Housing and Urban Development, whose department is hiring to expand its own probe of discriminatory lending.
Tighter Standards????? How can this couple making only $70k afford a $500k home? What is this loan officer and the banks thinking!
http://www.markit.com/information/affiliations/abx/history
abx back to Feb lows.
These people don’t even come close to qualifiying now or a year ago. No down payment, LOW FICO, no closing costs and they don’t qualify full doc, these people couldn’t even lease a car!!!! Boy did they find the stupidist Loan Officer in Virginia.
Home prices: More pain to come
Expected drop in home prices nearly double estimate of two months ago; recovery more than year away.
By Chris Isidore, CNNMoney.com senior writer
June 6 2007: 1:01 PM EDT
read: http://money.cnn.com/2007/06/06/news/economy/homes_outlook/index.htm?postversion=2007060613
Behind the Fence Crowd Says:
Tighter Standards????? How can this couple making only $70k afford a $500k home? What is this loan officer and the banks thinking!
Applying the 2.5 X income rule of thumb, these people should be looking to spend $175,000. 3X income would be $210,000. The world has a lot of way down to go.
Just the mortgage payment alone on this will be $3,326, or $40,000 per year.
x-underwriter Says:
June 13th, 2007 at 7:19 am
Behind the Fence Crowd Says:
Tighter Standards????? How can this couple making only $70k afford a $500k home? What is this loan officer and the banks thinking!
Applying the 2.5 X income rule of thumb, these people should be looking to spend $175,000. 3X income would be $210,000. The world has a lot of way down to go.
Just the mortgage payment alone on this will be $3,326, or $40,000 per year.
Probably there is nothing arond 175K where they are living. Hell you will be hard pessed to find any area in he country with starter homes at 175K and decent job market..
And that is the problem with housing as we all know.
WMC Mortgage Finance Co., the Burbank, California-based division of General Electric Co., requires a minimum borrower contribution to the down payment of 15 percent, said spokeswoman Brandie Young. Until this year, the company issued loans for 100 percent of the home price
I remember one of my friends buying a house in 1997. Loan officer laughed into their faces (Him and his wife’s) when they said they did not have 20% downpayment, and only 3!!!! years of stable income!!!
Now just imagine, that 15% downpayment is required to get a loan….
that will be the true reason for bust. as long as they are giving out 100% LTV loans or 97% LTV – market will not crush.
Wow, 70k a year looking at 500k townhome…Now I know how everyone bought McMansions.
“This in turn can and probably does impact the entire housing food chain including some of our potential customers’ ability to sell their existing homes.”
I guess Toll [luxury market] can now lay to rest the notion that they would not be affected by the subprime. Forget about the chain, too many weak links. The chain is busted.
Al Says:
I remember one of my friends buying a house in 1997. Loan officer laughed into their faces (Him and his wife’s) when they said they did not have 20% downpayment, and only 3!!!! years of stable income!!!
I was an underwriter back in ’97 and bought a home with 10% down no problem. I think 95% loans were available too. I had over 700 Fico by the way. The main difference is that there was no reduced doc programs at all back then. You had to prove what you earned, and I never, I mean never, approved a purchase deal with over 45% total debt/income ratio. These people are pushing near 100% by the time the get done with everything.
Talk about loose underwiting….if only Donald would start a blog……Jokes..sorry for the early morning feeding
————-
Hated blogger leaves U.S., threatens lawsuits
Casey Serin, probably the world’s most-hated blogger, rocketed to Internet stardom after disclosing his pending foreclosures, marital strife and unwillingness to find a job. But the 24-year-old’s online fame was hardly flattering: it arose from legions of readers who call themselves “haterz” and frequent his iamfacingforeclosure.com blog to ridicule his financial missteps and urge Serin to pay back up to $420,000 that he owes creditors.
http://news.com.com/Hated+blogger+leaves+U.S.,+threatens+lawsuits/2100-1026_3-6190628.html
this couple should be thanking the mortgage company for saving them from themselves, and the giant financial boondoggle and all associated future misery that they were stupid enough to want to enter into.
It is a really sad commentary on the state of lending industry that the fact that this couple is no longer eligible for a 500,000 mortgage is shocking news.
Lending standards have backed-down from utterly ridiculously loose to just ridiculously loose.
Using the 28% of gross income standard, a couple making $70,000 can afford a $250,000 mortgage (@6.75%), assuming no taxes, insurance or PMI.
Using a traditional loan & adding in the other costs of ownership, they will be paying well over 50% of their income to this townhouse. This, of course, means that they are probably going I/O or Option ARM.
The lender’s answer? They need to have 2 months of payments in the bank? That’s your definition of tightening standards?
They are very luck they were turned down. They probably would have ended up bankrupt & divorced.
From CNN/Money:
Mortgage apps up after 3-week fall
U.S. mortgage applications rose for the first time in three weeks even as interest rates surged to their highest level since mid-2006, an industry group said Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ended June 8 increased 6.6 percent to 666.5.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.61 percent, up 0.26 percentage point from the previous week, its highest level since the week ended July 28, when it stood at 6.62 percent.
Interest rates were exactly where they stood a year ago.
The MBA’s seasonally adjusted purchase index rose 7.2 percent to 464.7. The index was above its year-ago level of 414.6. The purchase index is considered a timely gauge of U.S. home sales.
The group’s seasonally adjusted index of refinancing applications increased 5.6 percent to 1,854.8.
From Bloomberg:
U.S. Retail Sales Rose 1.4% in May; Jumped 1.3% Excluding Autos
Retail sales in the U.S. rose by the most in more than a year in May, easing concern that record gasoline prices and falling home values would damage consumers.
The 1.4 percent increase was twice the median forecast in a Bloomberg survey of economists and followed a revised 0.1 percent drop the prior month, the Commerce Department said today in Washington. Purchases excluding automobiles rose 1.3 percent.
More jobs and rising wages are cushioning the blow from the jump in fuel costs and the slump in real estate, economists said. Resilient consumer spending, along with a pickup in business investment and manufacturing, suggests the economy is poised for stronger growth this quarter.
“The consumer is still providing good support to the economy,” Michael Moran, chief economist at Daiwa Securities America Inc. in New York, said before the report. “The job market remains reasonably firm and household balance sheets are still in good shape.”
That couple at best belongs in a one bedroom coop/condo!!!! Back in the late 80’s housing boom that is what young couples who wanted to own did when they could not afford a house. Now it is a young couples devine right to have something immediately that it took their parents 20 years of hard work to get.
#1
That’s going to be an interesting sub-topic. Most of these loans have been securitized which restricts the type of modifications you can do to a loan. Legislators want to help out their constituents to get the votes. And I would bet there are countless mutual funds who have invested in MBS who would love to see them perform better than they have. However, there are two sides to a trade. It appears that hedge funds made the right bet in that the subprime market would cause the bonds would not perform. This would like allowing a “do-over” IMHO
5.31% 10 year .
Housing meltdown continues.
Lean times are a coming.
babababababa
#6 House: But don’t worry according to the new NAR cheerleader, prices will be going up next year, although later in the year.
Its amazing still all the disinformation and nonsense out there. Thsi bust is just getting started, and yet we have these clowns telling us it will bw over in a year, not only over, but prices marching back up again.
Its disgraceful.
As far as for lending standards loosening/tightening – let the market take care of itself – once china/investors will lose a lot of money on non-performing loans, risks will get properly priced in, and anybody who do not have proper income levels/downpayment, will either pay a lot higher rates or simply not qualify.
As far as this couple is concerned and many other – once you got into your house you can always start looking for Straw Buyer and make few ten-thousand or more :)
I think in 5-10 years we all will be surprised on how much fraud is going on. And of course NJ is different, there is none of that here.
http://www.startribune.com/462/story/1236301.html
http://en.wikipedia.org/wiki/Mortgage_fraud
From Marketwatch:
U.S. import prices rise 0.9% for May; export prices up 0.1%
Prices of goods imported into the U.S. rose 0.9% in May, a smaller gain than in the previous month as the price of imported petroleum climbed at a slower rate, government data showed Wednesday.
Petroleum prices climbed 2.7% last month, following a revised gain of 6.6% in April, the Labor Department reported.
The import price index beat forecasts. On average, economists surveyed by MarketWatch had been expecting import prices to rise by 0.2% in May.
Import prices have increased by 1.1% in the past 12 months. April’s prices were revised slightly upward, to 1.4% growth.
Excluding petroleum, the gain in import prices worked out to 0.5%, the largest increase since November 2006.
Excluding all fuels, the rise in import prices was 0.4%. It was the biggest gain since June 2006.
What Bust? Is anyone still looking at the house prices? It’s been almost 2 years since the peak and I’m still seeing laughable, arrogant, ridiculously high prices. Just wait… in a couple of months I’ll remind everyone again that the only thing that matters… the price… is still at absurd levels. Forget all the technical data, it’s…. all…. about…. the…. price.
Good news out of Trenton for a change. Politicians are actually beginning to do their jobs.
http://www.nj.com/news/index.ssf/2007/06/on_time_and_under_budget_in_nj.html
Gary,
You are absolutely right. However, start paying close attention [I know you do]. The curtain has been raised for Act 3. Price declines will be much more distinct.
Can’t monitor pricing based on asking prices. All you get is a skewed view of the market.
Sorry, but anything priced aggressively is still gone in a few days. Heck, I’ve seen well priced homes go ARIP in 3 days. Unless you constantly monitor every listing, I’m not sure how you could possibly catch these.
Not to mention the total lack of visibility to closed prices. Sure, many homes go for near asking, I believe the last time I ran the number it came in somewhere around 95%. However, many go for significantly less. Asking prices are simply marketing, and nothing more.
jb
gary –
i understand your frustration – i’m frustrated too. but all this technical data “stuff” has to happen before it affects price.
#26 BC Do you believe the peak was 2 years ago, say summer of 05. I am of the belief that the peak was probably Spring 06, any thoughts?
I’ll be looking out in Hunterdon county for something decent under $400k. Right now, there’s nothing. I’ll keep renting until there is. My lease runs out next February and I can go month to month after that. I have all the patience in the world
gary Says:
June 13th, 2007 at 9:07 am
What Bust? Is anyone still looking at the house prices? It’s been almost 2 years since the peak and I’m still seeing laughable, arrogant, ridiculously high prices. Just wait… in a couple of months I’ll remind everyone again that the only thing that matters… the price… is still at absurd levels. Forget all the technical data, it’s…. all…. about…. the…. price.
Unfortunately it is not about the price anymore – it is about monthly payments and expected appreciation.
I think, due to monetary policy of the US government everyone expects inflation to pick up sometimes this decade (2007-2017). The million dollars question is: whether it will trigger hyperinflanatory economic crisis – or it will be controlled gradual inflation and devaluing of a dollar – wages will keep up with inflation or lag not too far behind.
Price matters only in the low inflation enviroment – if expected inflation is high it is good to “own” debt backed up by home, at low interest rate.
So as long as you can hold on to your house for first few years inflation is expected to bail you out.
How it will play out in real life – I do not know.
My perception right now – inflation in my life running at about 6-8%/year.
Unfortunatelly I am not as fortunate as goverment economists – I can not exclude Food and gasoline from my expenses. I also do not buy their statement, that also everything getting more expensive because we are getting better products and therefore goods are cheaper.
If before I could buy a car for 10K, and now it is 15K – its just become 50% more expensive for me to get to work. it does nto matter that technology got better or it has side airbags and 5 CD player standard. Take them off and sell me that car for 10K.
I am not even speaking about gasoline – few days ago I heard one “Economist” on TV – “Well, people still buying Gasoline, therefore it is not too expensive!!” It was 89C/gallon in 1999.
So the houses are about 30-40% overvalued right now, with current inflation at 6% they will be about right in 5 years. That is if wages grow at 6%/year rate.
“It appears that the impact of stricter lending standards, primarily arising from problems in the subprime market, is negatively affecting affordability at lower price points,”
It appears the homebuilder/RE industry is trying to say the cause for the slowdown that is occurring and will last far longer than NAR propagandists can believe is tighter (though clearly not even close to sane, as others have noted) lending standards.
What garbage. Just as RE is all about location, location, location,
this meltdown is about affordability, affordability, affordability.
This couple, like so many others think they’re doing OK, and the reason they’re looking at a $500K condo is because that is what’s out there.
I’m starting to think this is going to be much worse than I thought, and I thought it was going to be horrible.
A piece on the Harvard Joint Center report in the Record this morning:
‘Prolonged slump’ seen in housing
BC Bob,
There was a house in North Caldwell that was listed with a realtor with a name I never heard of and I believe the listing number was not a standard one anyone here can identify. I don’t have the number at the moment. Anyway, the house was listed at $879,000 about 9 months ago; it is a beautiful home but on a main road and with very little backyard. My wife and I said this one needs to drop 20% and the realtor at the open house sort of “winked” in agreement.
Fast forward….the house goes under a new listing with a new realtor since early May and the price was dropped to $859K. For ha ha’s, I decide to email the realtor and find out why the sellers won’t drop the price and asked if they think this house is a little over-priced. I asked in a polite manner, of course. The realtor responded back and said the house is in attorney review and they got close to asking price.
This…. is why houses are staying at absurd levels, because I can guarantee you that some yahoo or wanabee just had to have this house and somebody talked them into “creative” financing in order to put them into their “dream” home. Now, I could care less except that their interests conflict with my interests in the long run and other peoples interests also who live by prudent means and believe in the old tried and true financial models.
This is what kills me and this is my patience is wearing with these morons. I can only imagine if I didn’t own a house right now. I really don’t know how some of you aren’t jumping out of your skin.
#27 JB How do you define aggressive?
Al,
The inflation factor is a good point. Prices will probably just stay flat for years until inflation catches up.
5-10% below existing inventory.
jb
What about retail sales? How are people still spending, where are they getting all this money from. How is this possible?
Yahoo – Consumers brushed off rising gasoline prices and slumping home sales to storm the malls in May, pushing retail sales up by the largest amount in 16 months.
It’s almost sickening…..
June 13th, 2007 at 9:35 am
What about retail sales? How are people still spending, where are they getting all this money from. How is this possible?
Yahoo – Consumers brushed off rising gasoline prices and slumping home sales to storm the malls in May, pushing retail sales up by the largest amount in 16 months.
It’s almost sickening…..
Hoe about first time negative savings rates since Great Depression?? Credit cards and HELOCs!!! Yeeaaa, Baby!!!
#34 gary: I hear what you are saying, but how much of this creative financing is still left out there?
I am hoping that once that dries up, it will kill the last of these morons.
There is a house that I have been following, they have dropped the price 100k since it first went on the market in Fall of 05.
Since its new improved price late last year, it has gone UC 4 times and fallen through, it just came back on the market 2 days ago, after having fallen out of contract 3 times since March of this year.
Any yet the price is still at that new improbed price of late 06. Really nice house, but taxes are 9,500, and will be slightly over 10k after this years tax increase.
You would think that the owners would drop the price further, but as long as they keep getting these people they will hope that the deal goes through, eventually.
I would have to believe that the reason it has fallen out of contract 4 times in less than 6 monts, is because of financing problems on the part of the buyer.
#37 Below existing inventory asking price?
#36 gary:than that will be a long,long ,long, long time.
3b,
I’m going to keep an eye on that house… I’ll try to find out if it closes.
Talk about rising rates and tightening standards. Look at Citibank. They’re not playing, are they?
http://cm2.mortgagewebcenter.com/CheckRates/GreatRates.asp?PID=23&r=1
#31 The stated inflation rate is 3% (bogus), and t the average wage increase is at or slightly above the stated inflation rate, very few people in the real world getting 6% raises very year.
We would be looking at 10 years before wages/inflation catch up to housing prices.
gary –
the way i’m not jumping out of my skin is that i know that i’m not emotionally strong enough to risk financial suicide. i rent for about half the cost of buying in my range. most months i am able to save money, but when i can’t save one month, i remember how much harder it would be if i owned a house and had to pay double.
i’ve owned a house in the past, and know first hand, unlike first time buyers, that it’s more than just PITI.
i don’t jump out of my skin because i know that i’m not ready to give up every bit of fun in my life so that i can pay for a little piece of crap.
i don’t jump out of my skin because my bank account grows larger every month.
i don’t jump out of my skin because i don’t have to worry that property taxes are going to eat me alive.
i don’t jump out of my skin because i can pay for my son’s college education (so far)
finally, i don’t jump out of my skin because i really believe prices will come closer to earth – and if not, i’ll figure something out, and in the meantime, i’ll enjoy my life and stay out of home depot.
$46 tcm: Excellent.
Al’s knocking them out of the park today, but he did miss one.
Unfortunately it is not about the price anymore – it is about monthly payments and expected appreciation.
The expected appreciation train has left the station, even at the backyard barbecues you don’t here talk about that anymore.
46 tcm,
I find it difficult to reel myself in at times. :) And yes, you are right, being a homeowner is WAY more than just the PITI.
Very true, if the house is priced right, it will move. We bought our house in December 2006 for $350,000. Even still, similar houses on our block are asking anywhere from $420,000 to $475,000. The people across the street paid $480,000 only a few months prior.
Owning a house does not mean you have to give up “every bit of fun”, just don’t buy a total train wreck
#50 tbw Are all the hosues you are talking about similiar? By the way River Edge housing market absolutely dead this Spring/Summer.
#48 And the monthly payments have to be the next train leaving.
Tighter lending standards,(which should tighten more), and no more low rate toxic financing, plus 30 year FRM approaching 7% (by the Fall) Whats left?
gary Says:
“The inflation factor is a good point. Prices will probably just stay flat for years until inflation catches up.”
Prices can’t stay flat for years, for the simple reason that entry level has dried up completely. Do you really think that every seller will sit in a house for sale for 5 or 6 years until someone can afford it?
#53 ” 30 year FRM approaching 7% (by the Fall)”
We’re there. Was quoted 7% yesterday on a loan well within my reach. My scores are mid-700s.
#55 allison: WOW! that was faster then I would have imagined. Is that with a down payment?
#24
Gary,
Have faith little buddy. I live in a decent town with good school system. Plenty of houses are for sale and there not selling. I see price reductions and there not selling. We sold our house last year for 305k and it was listed at 339k. We felt lucky getting that. I friends sold there house in Wharton for 265k, it was listed 305k. I was sure they would at least get 300k for it. NJ may be slow to waking up to its prices but take a look North and you will see prices are tanking and nothing is selling. The NRA comments on real estate are irresponsible and possible criminal. There is not going to be any resurge in prices. Nobody can afford these homes. The supply is increasing and the Demand is waning. Simple Supply and Demand principles. Plus the psychology that started the bubble is now popping the Bubble. I dont see any return to normalcy for at least 5 – 8 years.
3b [29],
Hard to say. Looks like transactions in 2005 and prices, either late 2005-mid 2006?
What’s most important, the lethal/final dagger, this spring. Investors walked away, or were carried out, from the subprime debacle. Throw out the new bring back the old. Now, they actually have to qualify, have some skin in the game. It’s a crying shame.
Bloomberg: Regulators Kept Quiet as Subprime Lenders `Targeted’ Minorities
By Craig Torres
June 13 (Bloomberg) — The U.S. agencies that supervise more than 8,000 banks haven’t censured any of them for violating fair-lending laws, three years after Federal Reserve researchers began assembling data showing blacks and Hispanics are more likely than whites to be saddled with high-priced home loans.
Minorities stand to be hardest hit by rising delinquencies and foreclosures in subprime loans. While Census Bureau data show that homeownership rates rose to records among blacks in 2004 and among Hispanics in 2005, they still trail whites by 25 percentage points, and the gap may widen in the current bust.
“Black people and Hispanics have been targeted,” said Alphonso Jackson, secretary of Housing and Urban Development, whose department is hiring to expand its own probe of discriminatory lending.
“Low and moderate-income people get one shot at home ownership,” Jackson said in an interview in Washington. “And if they don’t make it work, they don’t get a second shot.”
Subprime loans — those made at higher interest rates to people whom banks consider risky or who have sketchy credit histories — accounted for more than half of the home foreclosures in the fourth quarter of last year. The Fed’s review, conducted by economists from its research and statistics division, covered lending data from 2004 and 2005, the first two years of expanded disclosure requirements for banks and the final two years of Alan Greenspan’s tenure as chairman.
Closer Scrutiny
http://www.bloomberg.com/apps/news?pid=20601103&sid=a6F6StSPKNig&refer=news
#56 – Just short of 10% dp. I think we’ll save to that mark unless we get a very good deal on the house of interest.
This may be a silly question. How do we define a “flipper?” Seller who has owned less than 12 mos, 24 mos, 36 mos? Their motivation for selling is also a factor, which isn’t always known.
My definition is anyone selling 30 mos or less. After two years they won’t owe cap gains so at or above 24 mos, in the absence of other factors like job transfer, suggests a flipper.
Tighter lending standards,(which should tighten more), and no more low rate toxic financing, plus 30 year FRM approaching 7% (by the Fall) Whats left?
We’re already at 7%. In order for this mess to end quickly(within a year), then we need rates to be at 9% with a minimum 20% down.
Oh, and my mortgage broker tells me that hitting the 10% mark will only buy me down to 6.9%
Not much motivation there, but I can’t see paying these prices and that interest. Ugh.
This is what I get for being financially responsible and squirreling away my dp for the last 4 years instead of buying in 100% LTV in 2003.
(Please note sarcasm on post 63)
#62 MM Oh that would do it, collapse, with even broader implications.
Flipper is never a home occupant.
I just checked my credit union website: they now offer 40 year mortgage at 7.0% interest fixed.
The 30 year is set at 6.731%
Now if I remember correctly , I purchased my home in 2000, the interest rate was a little over 7.00% The cost of the home was 129k. Really nice 4 bedroom colonials were 200k – 250k
So I am thinking that if the interest rate goes past 7% were going to start seeing home prices drop drastically. Or otherwise nobody will be able to afford them.
#58 BC That is what I think , prices peaked in Spring perhaps early Summer of 06, so the down turn in prices is really only a year undewrway at this point.
Although events unfolding in the last 3 months have been significant.
It is a crying shame, as this could all have been avoided.
3B,
“It is a crying shame, as this could all have been avoided.”
How could all of this have been avoided 3 months ago?
I calculated what a 400k home would cost per month with 7,000 in taxes. This is at 7% at a 30 year mortgage.
$3300.000 per month for a 3 bedroom capcod with less than 1/4 acre of land.
With all the other inflationary expenses, the only people who can afford these homes are people who have sold there existing ones.
Make #66,
I guess non owner-occupied does indicate a flipper in most cases. But I have heard of the “camp out” flipper who moves in, fixes up and moves on after 24 mos.
This was probably more prevalent in the first half of the decade. Anyone selling after 2 yrs now may not have much if anything in gains unless they bought for a good price, so a lot of this business may be getting shaken out now.
Now if I remember correctly , I purchased my home in 2000, the interest rate was a little over 7.00% The cost of the home was 129k. Really nice 4 bedroom colonials were 200k – 250k
Do you really think we will go back to 2000 prices? Unless we have a depression, you can stop dreaming.
3b: yes, similar houses
It appears the homebuilder/RE industry is trying to say the cause for the slowdown that is occurring and will last far longer than NAR propagandists can believe is tighter lending standards.
The market is collapsing under the weight of its own excess and shear ridiculousness. The loosening of lending standards simply allowed the party to continue on longer than it should have and delayed the inevitable correction.
Blaming tightening lending standards for problems in the housing market is like blaming your hangover on the bartender that cut you off. “If he just kept serving me, everything would be fine”
This couple, like so many others think they’re doing OK, and the reason they’re looking at a $500K condo is because that is what’s out there.
I think many people are buying the home they think they should be able to afford, instead of what they actually can afford in today’s overpriced market. A couple making $70k in Virginia probably should be able to afford a modest townhouse (if they have a downpayment saved).
Oh, and it is no suprise the River Edge market is dead…who can afford a 550k house with 11k a year taxes? Sorry, the CEO of GE doesn’t want to live in River Edge
#71
The “Flipper” is dead. There won’t be a full time flipper in at least 10 yrs.
There will always be RE investors who buy and then rent for positive chash flow.
gary, if creative financing pisses you off, just keep cheering the rise in the 10yr yield. The creeks are rising.
As t c m says, just keep socking money away, because cash will be king no matter what happens. If the legislators try for a do-over in mortgages, they will have to pull apart the entire MBS business that has flourished over the past two decades. That might help current borrowers on payments, but in my opinion would cause a major credit contraction that would still crater housing prices (by severely constraining demand).
I’m figuring on sticking it out for 4 or 5 more years. If affordability hasn’t improved in a significant way by then, I will get a job in a different part of the country where housing is more affordable.
But I’m still counting on a bust. There are so many people who are up to their eyeballs in debt with very little savings. They might be saving in the company 401k, but have no cushion outside their retirement accounts. It might take very little economic downturn to shake out a large number of people.
If the legislators must do _something_ I think you can make a really good case to make exotic mortgages completely off limits for average Joes. These are essentially complex derivatives being sold to unsophisticated customers. I understand these products are disappearing from the market anyway and it would be a “closing the barn door after…” measure, but that’s what legislators seem to excel at :)
Wow you guys are depressing me. I am just waiting it out till million dollar homes look like million dollar homes not piece of crap fixer uppers.
Plus a couple in Virgina making 70k is a flat out joke, with fannie mae, freddie mac and tons of govt. jobs and law offices what type of jobs do they have that pay 35K each. They need to focus on their careers and education before they worry about a house.
Anyone have the scoop on MLS #2406468. It is not on realtor.com but the century 21 website has it. Curious about the sales price.
“Do you really think we will go back to 2000 prices? Unless we have a depression, you can stop dreaming.”
Make,
IMO, we are going back to 2001. Good chance that it will be further back, overshoot on the downside.
One of the things that makes this bubble different from all of the previous bubbles is that the flippers have been out there in force.
For instance, down the road from my parents’ former house, there’s a house that sold in late July ’06 for about $340,000, about $40,000 off the asking price. Big sign in the front lawn: “Sold by X” – big name RE firm. That was replaced almost immediately by another sign: FSBO.
Everyone in the neighborhood will see that and know what it is.
So if you have a house in that neighborhood and someone offers you $40,000 off asking, your back is going to go up that it’s another would-be flipper who’s looking to lowball you and recoup that $40,000 later …maybe during the spring bounce, or maybe later in the year, when the Fed cuts rates, etc.
For prices to come down, people have to be convinced that there another rebound won’t be right around the corner … but they also have to feel that the flippers have left the market – have been wiped out – and the person offering $40,000 off is a legitimate buyer who actually wants to live there.
Anyone with a house to sell is aware that the person looking for a significant discount could be yet another would-be flipper. The would-be flippers who’ve tried to hustle my elderly relatives include a home healthcare aide and a house painter.
A lot of long-term homeowners think that prices are unbelievable, and they could indeed come down quite a bit and still get what they would consider to be an amazing price.
But no one wants to knock off $40,000 or $100,000 and drive by a week later and see a “for sale” sign planted in the front lawn and feel like a chump.
Sellers really hate the flippers even when they flop. They’re destructive to established, stable neighborhoods.
That house with the FSBO – the sign was in the lawn all fall and winter. Then, this spring, another sign: “For Rent.”
Visible proof of a flip that flopped.
Tighter lending standards also means fewer house painters and home healthcare aides who could get financing for their “get rich quick” flipper fantasies.
But don’t underestimate how sellers get assaulted by would-be flippers trying to score lowballs, and how that creates resistance to lowering the asking price.
It can be hard to tell who’s who. Some of them come with their rent-a-families in tow.
I know of one instance where the buyers brought a rent-a-grandma. Grandma was supposed to live there, but after the sellers moved, they found out from the neighbors that there was no grandma. House was being rented.
If the legislators must do _something_ I think you can make a really good case to make exotic mortgages completely off limits for average Joes.
What I would do:
Let the market decides what mortgage products get offered with the following limitations:
1-Better disclosure
2-Eliminate no docs loans
3-Require borrowers to qualify for the real payment, not just the teaser
4-Give lenders a fiduciary responsibility to act in a borrower’s best interest
#81 Scribe,
Good description of how “flipping” impacts buyers and sellers both. I never really understood that sellers cared but now I think I do. Thanks for the input.
Flippers may be an endangered species but they’re not extinct yet. I know of two would be flips on the market in my range right now, bought in early and late ’06. The late ’06 has been held all of seven mos, with some grainte countertops thrown in and $125k asking over price paid. Too bad, because it’s a nice house and location.
From MarketWatch:
Regulators ask for tools to fight banking abuses
Prompted in part by troubles in the subprime mortgage market, banking regulators on Wednesday called for greater powers to fight unfair and deceptive lending practices and said they’d consider prohibiting some practices.
The Federal Reserve will “seriously consider” whether certain mortgage-lending practices should be prohibited, Federal Reserve Board Governor Randall Kroszner said Wednesday in testimony prepared for a House Financial Services Committee hearing.
Sheila Bair, the chairman of the Federal Deposit Insurance Corp., called for a national standard for subprime mortgage lending.
The committee is exploring improved consumer protection in financial services. The hearing comes a day before the Fed is to hold a hearing about how to curb abusive lending practices in the subprime market.
Kroszner said the hearing will discuss concerns about prepayment penalties, escrows for taxes and insurance, “stated-income” loans and lenders’ standards for determining if consumers can afford to pay their loans.
Rep. Barney Frank, D-Mass., the panel’s chairman, said he thinks federal agencies aren’t adequately staffed or even structured to provide consumer protection in financial services.
Bair, meanwhile, is calling for authority for all banking regulators to write rules about unfair and deceptive practices.
That view was echoed by Comptroller of the Currency John Dugan, whose agency supervises banks holding almost 70% of the country’s banking assets.
In prepared testimony, Dugan said he’s seeking authority to write rules “that define unfair or deceptive practices and establish requirements that are designed to prevent such acts or practices.”
#80 BC Prices are back to 2001 levels?
78 John, you can’t apply NNJ salaries to every area.
70K household income is nothing to scoff at in many areas of Virginia, including the higher income area referenced in the article. Many nurses, young attorneys working for Uncle Sam, brains in public service, etc. make under $60k. A part-time spouse could conceivably make only $20k.
http://www.fairfaxcounty.gov/demogrph/gendemo.htm#inc
From Bloomberg:
Fed to `Consider’ Rules on Loan Abuses, Kroszner Says
Federal Reserve Governor Randall Kroszner said the central bank “will seriously consider” tougher rules to prevent abuses in consumer credit, including whether it should ban some mortgage lending practices.
Kroszner’s comments show the Fed is now balancing its previous preference for unenforceable guidance and improved disclosure with the threat of new rules, which would give consumers the power to litigate against abuses.
“Because some bad lending practices may require additional measures, the Federal Reserve will seriously consider how we might use our rule-making authority to address abusive practices without restricting consumers’ access to beneficial financing options and responsible subprime credit,” Kroszner said in the text of remarks to the House Financial Services Committee today.
“We will also seriously consider whether there are mortgage lending practices that should be prohibited,” he said.
#78, I was just waiting for someone to make that kind of comment about their income. My husband and I are a “young married couple”. We both hold BFA degrees from a respectable school and hold good jobs as designers. Guess what our combined income is… 70K. So please don’t immediately tag them as lacking education or focus. We both love what we do and get by fine on our income, which will only increase as we move up in our field. With that said though, we also have our feet on the ground and know that a 500K house at our income level is ridiculous!
#78 John In most parts of the country 70K is big money.
In my prestigiuos minutes from NYC Bergen County Blue Ribbon school town, the median salary (accoring to US Census numbers, 2005) is 82K.
I vacillate between thinking that prices must crash to what people can reasonably afford vs. the new paradigm is that Americans are comfortable being debt slaves and house prices will never revert to their prior mean. If there is to be a turning point, it is now. Like most of my friends, if it turns out that we are really in a new paradigm, I will be waving bye-bye to the NYC area in a couple of years
#77 Rob 4 or 5 years? I do nto think you will have to wiat that long, more like 2 years.
“Do you really think we will go back to 2000 prices? Unless we have a depression, you can stop dreaming.”
I think affordability will return to 2000 levels, when a family earning the median income could afford a median home. I just don’t know how long it will take.
If it happened today, it would take a 30% drop in home prices.
Of course, its much more complicated than this. The return of affordability will come as a result of the interaction of a number of factors, including:
home prices
Interest rates
Inflation
Real income growth
Property taxes
If inflation picks ups, incomes grow, property taxes come under control, the economy doesn’t stall, you could see affordability return without large drops in prices.
On the other hand, if interest rates continue to rise, property taxes remain out of control, and incomes fail to grow, falling home prices will play a much larger role in the return of affordability.
#75 tbw Well I think the people in town are finally starting to wake up, but it is too late in my opinion. As the town is now saddled with the New Bridge Center.
#73 tbw You did very well than in your purchase.
Four or five years is just an upper limit. That’s based on career goals, kids’ schooling and other things too…
#69 MM Not three Months ago, 3 years ago, when the Fed should have aggressively started raising rates, not the silly 25bp’s at a time.
RentinginNJ Says:
June 13th, 2007 at 11:23 am
“Do you really think we will go back to 2000 prices? Unless we have a depression, you can stop dreaming.”
rent:
Inflation
Real income growth
focus here…the rest is gravy….the easiest way for the market to correct is to work in a manner than the typical actor can rationalize…..to the extent that nominal prices stay constant or recede only slightly for years, it at least allow people to stay fixated on where they bought/sold and not fully have to appreciate their REAL returns.
My wife and I make a collective 80k and I am sure that there are more like us in NJ than not. On the other hand though, we have about $110,000 to put down. I would bet there are not a lot of those in NJ with that to put down.
Carrying on from #46:
I don’t jump out of my skin because I don’t worry about paying escalating property taxes while my house depreciates
I don’t jump out of my skin because I don’t have to worry about coming back from a winter vacation to a driveway I cannot enter because of a snowstorm, or pumping out a basement during summer
I don’t jump out of my skin because I can learn from other friends (recent first-time buyers) who are paying the price for stretching their finances
I don’t jump out of my skin because I can sock away an extra 20% of salary every month, even while wife stays at home with baby
I don’t jump out of my skin because I am a firm believer that there is always regression to the mean, and there is never a “it’s different this time” situation
I don’t jump out of my skin because I will not have to reject a new job offer, just because I am upside down on my mortgage
I don’t jump out of my skin because I stay in a rent-controlled apartment and I don’t have to pick up after my dog sh1ts (our apt overlooks a forested area)
DINJ: a lot of people in NJ have money saved, but it tends to be in tax-deferred accounts were individuals have little or no immediate access. Most sources of funds that have immediate access tend to be “accessed” in a whimsical way….
Chifi: Thank god we can access ours! Cash baby!
I see that 82K number for Bergen and I just don’t get it. I mean the homes in Bergen are all 600K+, they all have expensive cars in the driveway and nice clothes and go on vacation to Disney and the Islands and have no problem wth maids, lawn service, babysitting and friday night dinner dates and plays in the city. 82K taxable income is only around 50K take home after taxes. Plus in a town that is heavily college educated and with a lot of financial services people it makes no sense. Look at my attached chart of bonus money alone. Mind you this includes rank and file. These are the people driving up housing prices in the good neighborhoods within 30 miles of Wall Street.
In 2006 the the average bonus was $137,000 on Wall Street.
Total Average
2006 $23.9 billion $137,580
2005 $20.5 billion $119,390
2004 $18.6 billion $113,450
2003 $15.8 billion $99,930
2002 $9.8 billion $60,900
2001 $13.0 billion $74,140
2000 $19.5 billion $100,530
1999 $13.5 billion $75,010
1998 $9.1 billion $53,040
1997 $11.2 billion $67,800
1-estimated
Source: N.Y. State Comptroller; USA TODAY research
3b Says:
June 13th, 2007 at 11:20 am
#78 John In most parts of the country 70K is big money.
In my prestigiuos minutes from NYC Bergen County Blue Ribbon school town, the median salary (accoring to US Census numbers, 2005) is 82K.
“With interest in Asia-Pacific growing, top banks, established investment houses and even private equity firms are expanding both operations and partnerships abroad. For the right professionals, this might be the time to look East for new career opportunities.”
“Money can be a big part of why some finance professionals are moving there, but the impact on the career can also be the bigger thing,” he notes. “The international arena in this industry is where a lot of the action is.”
http://news.efinancialcareers.com/NEWS_ITEM/newsItemId-10475
re #102
Yes, but the salary graph looks like a hockey stick.
#102: The expensive vacations/cars, etc are very easy to do if you bought pre-bubble. Most of these Bergen County elites bought before the run-up
…for instance, my sister lives in the Pascack Valley area. She bought in 1999. She paid around 200k for her house, so her mortgage is very affordable
“I mean the homes in Bergen are all 600K+, they all have expensive cars in the driveway and nice clothes and go on vacation to Disney and the Islands and have no problem wth maids, lawn service, babysitting and friday night dinner dates and plays in the city.”
John,
One job loss away from a financial disaster.
Plus, half of them are draining that 300k in equity right out of their homes.
#102-“In 2006 the the average bonus was $137,000 on Wall Street.”
Managing Directors, portfolio managers, execs, and top traders take home millions each. What would the median and average look like for the rest of the wall street folks? BTW, most of them already have lavish homes. They would be trading up from large homes to huge homes and probably not impacting the rest of us. I tend to believe that the housing market is driven “bottom-up” rather than “top-down.”
I wonder how many potential buyers have recalculated their monthly payment since rates have gone up about 0.5% since winter/early spring. In the Tullis’ case, their $500K loan probably would increase about $150.
$150 doesn’t sound like much, but considering they were at like 50% debt/income levels every dollar counts.
I was speaking to a realtor who had a listing that had received two offers, 1 included a few contingencies and the mortgage approval letter was from some unknown internet co. so the sellers weren’t too thrilled and the 2nd offer was submitted and then pulled back like two days later becuase they realized they couldn’t afford the house. I wonder if they were pushing the envelope and their purchasing power was based on earlier spring rates. They couldn’t afford the extra $100 after they realized rates went up.
Cash is king.
#102 John: Well where do I start.
1.82K is the median salary for in my ‘prestigius” BC town, it is what it is.
2. As expensive as BC is there are many, many towns with hosue prices far less than 600k
3. As far as maids an lawn service, do not it. In fact I have family members combined income around 60k, and they have both the house cleaner and the landscaper I laugh (to myself), clean your own house, mow your own lawn.
4. Now for the Wall St thing, I have been on the street for many years, and one of my 2 pet peeves is the Wall St thing and the Goldman thing ( I worked at Goldman).
First off less than 2% of NYC population is employed on the Street. Most people in Northern NJ not only do not work on the street, they do no event work in NYC.
The average employee on Wall St gets no where near 137K, period, int eh old days Goldman used to pay 25% across the board to all employees ( a good year), plus if you were on the trading desk, you got an additional bonus.
The glory days are long gone. The bulk of Goldmans profits last year were form over seas, and many of the people getting the head spinning bonus money were over seas( much of the action is overseas today).
Finally ask yourself where is all this bonus money you refer to today? Not out buying.
Wall St money affecting the real estate market dramatically is a realtor myth.
And one final point do not for a minute think that these guyes getting the uber bonus money will blindly over pay for real estate, especially now, with the market in decline, they will bargain,and bargain hard.
80 BC
I would love it especially the overshoot pat as I’d be liking my chops but I don’t see it happenning with these market conditions.
rates at 7% and strong employment=stability.
Bear Stearns’ Subprime Bath
Hit by the subprime market’s collapse, investors in a highly leveraged—and losing—hedge fund find they can’t get out
by Matthew Goldstein
http://www.businessweek.com/bwdaily/dnflash/content/jun2007/db20070612_748264.htm?chan=top+news_top+news+index_businessweek+exclusives
#112, you really threaded the needle when you said a lot of the action in IB is overseas.
My friend finished his MBA from Harvard this spring, When he started the program in 2005, he had already decided that he was going to London after graduating. Prior to that, he was in IB in Asia-Pacific region.
Willingness to relocate overseas for work and cultural experience opens up a plethora number of job opportunities.
I don’t get this article !!
What has lax lending standards to do with this?
I was made to understand by my good friends at NAR and the NAHB and the CEOs of major home builders that the growth in home prices and sales was driven by fundamentals like job and income grown.
Did I miss the memo?
gary (35)-
Because being patient means just that. We’re barely into this decline, and your circuits are already fried.
BTW…why aren’t you selling now, before things get worse?
#11 BC Bob’s comment on Toll:
Over a year ago I was listening to this interview on the radio where a wall street analyst was discussing Toll Brothers. Bob Toll at that time claimed since Toll was a high end builder, the the vast majority of their buyers where affluent people who wouldn’t be affected by increase in interest rates.
Guess he was a bit off in his analysis of his buyers.
“What Bust? Is anyone still looking at the house prices? It’s been almost 2 years since the peak and I’m still seeing laughable, arrogant, ridiculously high prices. Just wait… in a couple of months I’ll remind everyone again that the only thing that matters… the price… is still at absurd levels. Forget all the technical data, it’s…. all…. about…. the…. price.”
Just as I have always been saying, sellers are not dropping their prices. Those who put in a lowball will be in for a rude surprise.
#113 MM Rates at 7% and strong employemnt = stability? Why? what kind of employemnt, salaries large enough to support 500k POS’s at 7.
This is what all the soothe sayers werre saying when FRM’s had a 6 handle, now its 7?
Kind of like 40 is the new 30 etc.
**yawn**
One day, they’ll turn this market upside down.
“China fired a warning shot at U.S. lawmakers on Tuesday, saying that proposed legislation to pressure Beijing to step up exchange rate reform risked politicizing trade and would not sway its priorities.”
“The US Congress could pass this legislation which will lead to the problem of higher tariffs on Chinese goods… If this happens then the Chinese departments concerned will make a response.”
http://www.chinadaily.com.cn/china/2007-06/13/content_893108.htm
Re 112
You will be suprised how much importance bonus is to a comp package since 2002. The rank and file did not get millions last year but they did get 50 to 70% of base in bonus with half cash and half restricted. Just ten years ago operations were lucky to get ten percent. Plus low level jobs now all require a degree, even the goldman clerks have one. So a back office jr. clerk processing credit derivative settlements is making 70K base wtih a 40K bonus is now at 110K and he is the lowest paid person on the floor.
The new Harvard MBA is going to start at maybe 150K with 75K bounus and with two or three years international experience should wind up in home office at 500K plus before his 30 b-day.
98% of people in Northern NJ may not work on the street but it still affects them big time. I orginally tried to get the 4 bedroom, 2 bath colonial/english tudor house on a great street in a tony neighborhood on a good train line as my house. But guess what those 2% of houses are sought after by the 2% who make big bucks and I was thrown into a 1950’s split in a second choice town. When Wall Street was not so hot in 1989-2005 and again in 2002 the non-wall street people could get in the door.
I was on a conference call recently for a FS firm and the analyst asked why the tax number was so high in the first quarter. The IR area responded that SS witholding is a monthly event in January as most employee receive bonus plus a months pay by the end of January which satisfies their SS tax witholding for the year. That means the majority of employees earn 100K by Feb 1st each year. Great and I am competing with these guys for the nice house in the nice neighborhood with a short ride to the city.
Junior clerks do not make 110k.
John #112 Great post.
However, the demand does not mach supply. 2% of homes in surounding suburbs of NYC add up to hell of alot more than all Wall street jobs combined.
you have westchester, NNJ, LI, etc a lot of multimillion dollar homes that can’t possibly be supported by Wall street alone. This is not including Manhattan itself.
if it turns out that we are really in a new paradigm, I will be waving bye-bye to the NYC area in a couple of years
Already did. Couldn’t be happier.
(Well I could, DE could have an IKEA or some good brick-oven pizza shops, but that’s just quibbling. And I could do with less pizza or bagel, to be honest ;}) )
#123 John; I am not going to argue with you, but you are mistaken. in your belief that Wall ST affects real estate so much.
There are a total of around 220K people employed on the street, in any capacity, from top to bottom.
What is the population for the NYC Metro area ( NYC, North Jersey, Westchester, Rockland, Nassau, Suffolk)?
As far as needing a collge degree that has been the case in all the “good” firms for the last 20 years, all the old timers with only a high school degree were cleaned out 20 years ago.
As far as the remaining clerks, let me put it to yout his wasy, in the area I was in at the height our operations area had about 50 people total (they were located on the trading floor).
By the time I left the entire operation was down to 4 people.
Please stop yourself, there are not tons of clerks running around making 70k plus a 40K bonus, those days are gone, and not to mention all the traders and sales people who are gone, replaced by technology.
#124 BC Bob Precisely but what do I know, I only work there.
#127 –
don’t forget CT.
from Bank of America website TODAY:
“You can buy a home with little to no down payment.
You don’t necessarily need a large annual income or substantial down payment to purchase your own home. If you’re ready to own, we’re ready to help. We offer a range of tools and services, including mortgages with little or no down payment, which will help you find the Bank of America home loan that is right for you.”
http://www.bankofamerica.com/loansandhomes/promos/jump/littletonodown2/index.cfm?cm_sp=CRE-Mortgage-_-Learning-Center-_-LMI-countdown
#129 tcm; You are right, forgot Conn
Wall Street does not affect 98% of real estate in the tri state area. But Sadddle River, Ho Ho Kus, Alpine, Harrison, Greenwich, Manhasset, Garden City, Park Slope and Southampton it affects a lot. I am pretty sure Wall st has no affect on Trenton NJ or Levitown NY as well as all the middle class neighborhoods. But I hate to say the towns I want to live in all are affected by Wall Street and prices are still high.
3b Says:
June 13th, 2007 at 1:19 pm
#123 John; I am not going to argue with you, but you are mistaken. in your belief that Wall ST affects real estate so much.
3b [129],
I’m looking at a resume right now. Order room supervisor for a major firm, MBA, 7 years exp with 5 licenses. Seeking 70k.
Junior clerk at 110k, total nonsense.
Check out this Bank of America loan product:
1-Month ManyOptions® ARM Choice of up to four monthly payment amounts – a minimum payment, an interest-only payment, or a choice of principal and interest payments
John,
I see a major shortcoming in attempting to link North Jersey housing prices to Wall Street. After the Dot-Com bubble burst, bonuses dropped off significantly for a few years, yet area home prices continued to escalate at a record pace.
For example, 2002 aggregate Wall Street bonuses were half of what they were in 2000, yet area home prices increased by 24% between 2000 and 2002. If the 2 were really correlated, shouldn’t we have seen a drop as Wall Street bonuses were cut in half and many jobs were lost?
here’s a fifth payment option:
“no payment”, also known as the “default” option
#130 – “You can buy a home with little to no down payment.”
Ironic. When I was shopping around rates the other day, I gave BOA a call. The loan officer I spoke with tried to convince me to put less down and use the money to buy points and do home improvements. She was only too happy to suggest a 100% LTV mortgage, even though I told her I had money in the bank.
from marketwatch
Senate bill would allow dumping claim for cheap currencies
Senators unveil bill changing U.S. approach to China yuan
tbw and Allison: Scary that this crap is still out there, scary and totally irresponsible on the part of BOA.
I ended up giving her a lecture about fiscal responsiblity. Seriously. I couldn’t help myself.
She backed off pretty quickly when I made it clear that I was informed and responsible and not interested in suicidal debt.
if it turns out that we are really in a new paradigm, I will be waving bye-bye to the NYC area in a couple of years
Already did this myself, in NM now with mild sunny winters and world class skiing an hour or two away.
I only come to this board out of morbid curiosity. (renting a home in ABQ for half of what the mortgage would be)
Donald #119
Don’t need you to drop your price when developers seem more than willing:
Toll Brothers Has a Secret
By Nicholas Yulico
TheStreet.com Staff Reporter
6/13/2007 6:46 AM EDT
Toll Brothers (TOL – Cramer’s Take – Stockpickr) CEO Robert Toll said on the company’s recent earnings call that sales of the company’s Brooklyn condos have been going “pretty strong,” but he made no mention of the pricing problems at the developments.
In recent weeks, the homebuilder slashed prices by nearly 20% to sell a block of condo units that have less-than-desirable views in the first tower of Northside Piers, TheStreet.com has learned. What’s more, the company appears to be having trouble selling the remaining 11 units that also suffer from poor views at North 8, a nearby project that has had these units on the market since October 2006.
#140 I know what yur mean, I cannot help myself at times either, but in t e interests of peace. I have learned to say REALLLLLYYYY?
#143
I know, I know, but I’m still pretty new to all of this and the shock factor has not yet worn off.
Clotpoll 117,
If I sell now, where am I moving to? A bigger mortgage for practically the same house? When and if the real estate universe comes back in line, then I’ll price aggressively as Grim has suggested and will sell. Whatever I make is what I make, I already have additional money saved. I’ll take whatever the market gives me but I refuse to pay for somebody’s POS at these prices.
I have data center people with 60K base, 30K OT and 15 cash Bonus and 15 Stock bonus with Devry tech degrees for a total of 110K. Why would any MBA apply to be an order room supervisor for 70K when you can get 55K right out of college? Plus that is the back of the back office. That is like Metro Tech, LIC or Pavonia bs job. I mean a semi-real home office support WS job, controller, audit, accounting, product controller, PMO, HR, Compliance etc. What are you going to dig up coupon clippers, data entry and margin clerks salaries next? I mean once like an idiot I answered a BONY for an MBA to manage 40 people. I figured with that staff it is good bucks, I get there and it is like some call center data entry area with very scary looking clerks and they wanted to pay 45K!!! What the heck is an order room? Sounds like my days at EF Hutton.
BC Bob Says:
June 13th, 2007 at 1:33 pm
3b [129],
I’m looking at a resume right now. Order room supervisor for a major firm, MBA, 7 years exp with 5 licenses. Seeking 70k.
Junior clerk at 110k, total nonsense.
rent:
Inflation
Real income growth
focus here…the rest is gravy….the easiest way for the market to correct is to work in a manner than the typical actor can rationalize…..to the extent that nominal prices stay constant or recede only slightly for years, it at least allow people to stay fixated on where they bought/sold and not fully have to appreciate their REAL returns.
I agree with this. I see an initial price drop as those who know better or are forced out though foreclosure, panicing flipper, ARM resets or other typical reasons (jobs loss etc.) sell at a loss.
After this, I expect to see a “cold war”, where sellers who have the financial ability to stay put simply refuse to take a nominal loss.
These “sellers” (and I’m thinking of a certain troll around here of the genus Anas) don’t understand the implications of nominal versus real losses, carrying costs, opportunity costs, etc. They will sell 10 years from now at or above today’s nominal prices and be happy they “broke even” or, in their mind, turned a small profit.
Beige Book is out:
http://www.federalreserve.gov/FOMC/BEIGEBOOK/2007/20070613/default.htm
OH Donny Boy, (Goes to the tune Danny Boy)
The prices, the prices, are falling from Cliffside Park to down da Jersey Shore. The party’s over and all the ARMS are rising, tis you, tis you, who wants to sell but we can wait.
John.. Very close relative graduated this year from Harvard MBA prgm. A TTL Wall street package of 105K..not to mention all of the travel he would have to do for venture capital..he would never be home…He took a job with a non Wall street firm same pay less hours no travel…
“I mean a semi-real home office support WS job, controller, audit, accounting, product controller, PMO, HR, Compliance etc.”
Junior position? Over 110k? You are being fleeced.
30k in OT is the Key BC
here’s what I see in terms of income in this area.
you’ve got a lot of middle class boom time legacy households who have owned their homes for 20-30 yrs and bought when it was possible for middle class people to easily afford this area. They skew the income figures downward.
then you’ve got a large number of post-college young people (esp in the city and places like Hoboken) who will stay for a couple of years and eke out a meager existence on some entry level job, often with help from Mom and Dad. By age 25, most of these people bail out back to where they came from. Nonetheless, they skew median income downward.
the younger people who stick around the NYC area past 25 generally seem to be high income. People are not stupid and if your profession is nursing or teaching or something like that, the argument for leaving the area is very compelling. This is why, except for NYC, there is massive outflow of people in their 20s and 30s from the region.
So outside of senior citizens and those close to it, and the post-college crowd, you’ve got a highly stratified society of very high income younger people (late 20s to early 40s) and illegal immigrants.
30-year fixed-rate mortgage rose to 6.61 percent from 6.35 percent
Anecdotal, but still interesting:
A coworker just announced she was moving to Florida (non-bubbly area).
She called PSE&G to get her utilities shut off. Customer service asked “where are you moving”? In other words, if you still need service, we will just transfer your account.
When she said she was leaving NJ, the customer service rep said, “What’s going on? Is everyone is leaving NJ? I’ve been getting so many calls over the past few months were people are leaving the state”.
Completely OT, but interesting nevertheless from the Ford CEO’s recent visit to Consumer Reports:
British-born and unfailingly polite, Champion delivers even his harshest opinions cheerfully, and Mulally, according to a spokesman, was thankful for the “unvarnished feedback.” Other automakers aren’t so grateful. When Consumer Reports discovered, after polling its readers, that Mercedes-Benz is the least reliable car brand sold in America, a Mercedes spokeswoman complained that “there’s something wrong with the survey.” But Champion was not to be swayed. In reply, he observed that Mercedes’ quality is so bad that a brand-new Mercedes SUV is less reliable than a nine-year-old Lexus LS 400.
House of Cards aka Bob aka Booyaa Bob, anecdotal evidence suggests that the recent increase in mortgage was way more dramatic than that. I am friends with two couples that are getting married and house shopping (in spite of my advice).
Both have excellent credit and sold income. One locked in a 30 yr fixed at exactly 6% a month ago and the one shopping today cannot find a 30 yr fixed for under 6.85 (which they’re going with, but hey, citi promised to waive $500 in fees at closing because of an employee discount, great deal!)
DT,
Mercedes is going the way of Jaguar after ’89.
“Mercedes is going the way of Jaguar after ‘89.”
That is sad. Benz used to be the symbol of high class qualtiy product.
I heard the German Made S-Class still has high qualtiy! How happened when they moved production to US????
CC
skep-tic Says:
June 13th, 2007 at 2:26 pm
here’s what I see in terms of income in this area.
You know what I agree 100% with you. You hit the nail on the head, two out of three of my neighbors in their 40’s went to NC last year, one was a newly retired cop and the other a route driver they both sold homes they bother 15 years ago for 500K profit and were replace by a lawyer in one house and a business owner in the nother. The route driver spent 60K for his house many years ago and sold it for 620K, he had three kids and a stay at home wife and I guess he is the legacy lower income person who could not buy at todays price and wants to cash out. He gets paid the same for his route down south so why live in NY. However the lawyer if he moved down south would be out $100 an hour so it makes sense for him to pay to live here.
#159 Mercedes became a status symbol for rhe masses, and the quality declined. When you can go to your local CVS and see 8 or 10 of them in one lot, well there you go.
It’s funny how NC has become the spot for people leaving this place. That’s all you hear anymore. So and so left NJ and moved to NC.
It will be interesting to see if the same mistakes get repeated in NC’s state government.
I know among the places I could find similar employment, Charlotte, NC is the only one where the cost of living is significantly lower (other than Chicago, but I honestly cannot deal with the winter and the midwest in general). No real upside to moving to Boston or San Francisco
Charlotte obviously isn’t as nice as New York, but when you work 70 hrs per week, I’m not sure it makes much difference
Condos selling for 50% off in Ft. Myers Florida, Desperate Homedebtors freaking out
Watch this video.
http://housingpanic.blogspot.com/2007/06/condos-selling-for-50-off-in-ft-myers.html
Condo appraised for $310,000, sold for $185,000.
Recent buyers screwed and outraged.
50% off firesale.
Yup, this is what a housing crash looks like.
Homedebtors, lesson #1 in a housing crash: You’ll always lose to the builders.
Always.
Lesson #2: You should have listened to HousingPANIC.
skep-tic & John are correct with the demographic changes in the NYC Metro area.
The upper middle class / professional group is growing and it drives up the NYC suburb RE prices. Living in good/decent/nice suburb towns have become competitive. It has become diffcult for solid / lower middle class to survive here.
The solid / lower middle class have to compete to immigrants. NC is more friendly to middle class.
CC
ChaoticChild 166,
Yeah, I really think that’s the case. My feeling tells me we’re insulated and the best you’re going to see is flat prices for a spell.
ChaoticChild Says:
NC is more friendly to middle class.
I was in Alpharetta, GA touring around neighborhoods that the upper middle would drool over here in NJ. Mostly Camry’s and Accords in the driveways, meaning the middle class in many other places lives like the upper class here
market was clearly oversold and has bounced back today. yields heading down. need a couple of more weeks to see what range they settle into.
Want to make yourself sick?
http://yahoo.reuters.com/news/articlebusiness.aspx?type=ousiv&storyid=2007-05-14T184938Z_01_N04192581_RTRUKOC_0_US-USA-SUBPRIME-BROKERS.xml&WTmodLoc=HybArt-R3-MostViewedBiz-3&from=business
Gary 167,
I would go that far. I am convinced that the housing bubble is bursting. Like most folks here, I am expecting to see 25%-30% numerical reduction.
However in most NNJ good/decent/nice towns, 3 bed townhouses are 400k – 650k and 3 bed 2 bath Cape / Split houses are 500k – 750k.
With 30% reduction, townhouses 280k – 455k & houses 350k – 525k.
With property taxes, childcare or one parent work partime, retirement saving, college saving & car payment. It is still not easy for lower/solid middle class with 75k – 135k to make it here.
CC
>>Price declines will be much more distinct.
more promises heaped upon missed forecasts. yawn.
It will be interesting to see if the same mistakes get repeated in NC’s state government
Maybe so. But at least you can get in at an affordable point.
If 10 years from now, NC has a NJ style property tax problem, at least you are only dealing with high property taxes. You still have a very reasonable mortgage payment. In NJ, a first time buyers today is dealing with a crushing mortgage for a POS cape AND ridiculous taxes.
>>Owning a house does not mean you have to give up “every bit of fun”, just don’t buy a total train wreck
it’s just another fear factor example to help homeowner wanna be’s feel better about their position. others must be miserable so i feel better.
>>We’re already at 7%. In order for this mess to end quickly(within a year), then we need rates to be at 9% with a minimum 20% down.
keep dreaming buddy.
#173 Richard: What missed forecasts? There you go again. There can and will be no price declines. Because Richard said so? Because Richard has never saw one, and therefore it cannot be? Or becasue Richard bought at the peak,a nd is now sorry?
You attempt to be “fair and balanced”, but at then end of the day you refuse to believe that prices can and in fact are going down.
You will learn grasshopper;they all learn in the end.
Richard Says:
it’s just another fear factor example to help homeowner wanna be’s feel better about their position. others must be miserable so i feel better.
The article that this thread was started on shows that many people bought houses over the last few years that take up nearly 100% of their income. I don’t envy them one bit. Don’t think that these people in the article are a statistically insignificant minority.
#175 Richard I would say that applies to you rather than wannabe homeowners, and better a wannabe homeowner, than a potential bag holder.
And if we are so wrong, and so mistaken,and so pitiful,than why do you frequent this site.
We may not be right yet, but we are certainly not wrong.
And if you were looking to buy in 05 but did not, you certainly have not lost any thing by waiting at this point.
Can the people who purchased in 05 say the same thing? No.
keep waiting 3b. what you’re missing is you have to get into the game to start paying off the big chunks of principal on a 30-year mortgage. 10-12-15 years in it really becomes worth it to own as you pay off more principal and in effect assuming you stay in the same house the largest expenditure has been shielded from inflation.
>>Don’t think that these people in the article are a statistically insignificant minority.
i do. look at other areas like foreclose data. while they keep spewing records what % is that to the overall population? statistically insignificant.
#170 ANd int eh nesxt couple of weeks we may have more information that will lead to even higher rates.
And the market did not over sell, the bond market finally got to where it should be, after the silly notion was finally discarded that the Fed would ease any time soon.
The stock market rallying on good retail sales numbers for May (lame excuse to rally in my opinion), is already yesterdays news as we are 1/2 way into June already.
Richard Says:
i do. look at other areas like foreclose data. while they keep spewing records what % is that to the overall population? statistically insignificant.
Tell you what, if the numbers start going down over the next few months, or even stay level, then you’re right. If not, then I’m right. Agreed?
I think everyone on this board is in general agreement that this downward slide is just beginning. This is the 3rd round of a 12 round fight
“And if you were looking to buy in 05 but did not, you certainly have not lost any thing by waiting at this point.”
3b,
Those that capitulated in late 2006 need to accomplish one thing; try to convince themselves that they are not a financial buffoon. I guess their crystal ball must have been murky at that time.
#180 Richard, I think you are missing the point. Folks can wait another 2-3 years and the way things are laid out right now, they don’t lose much by waiting a little longer.
In 3 years, one would pay back only 3% of principal on a $500K mortgage, and run the risk of a 9% price decline in, if house prices stay flat. I am not even talking of declining nominal prices here. So tell me Mr. Overbought, how is that a favorable risk-reward ratio?
“what you’re missing is you have to get into the game to start paying off the big chunks of principal on a 30-year mortgage.”
Richard,
What about those that are finacing with a 10 or 15 year? How about no mortgage?
Now I can list on MLS for free as a FSBO!!!
Free MLS listing – Iggys House
Iggys House offers a valuable service for owners who want to sell their homes themselves: free access to the multiple listing service (MLS). The MLS is a database of information about on-the-market homes that real estate brokers share. Real estate agents use the MLS to connect buyers with sellers.
Today some 70 percent of all houses are sold through the MLS. In the past few years discount real estate brokers started selling access to MLSs for a flat fee starting at around $300.
According to Joe Fox, founder of Iggys House, some 1.2 million people went the for-sale-by-owner route in 2006. About 800,000 of them were successful. “The new service is a no-brainer for people like that,” he says. “It will open you up to more exposure.”
He adds that clients have trouble accepting that this Iggy’s is a free service. “People love free,” he says, “but they keep asking about the catch. There is no catch.”
Sellers are free to load up their listings with as much description, data, and photos of the property as they care too, including video tours.
Fox hopes, but does not require, that clients who use the free service will migrate to his other site, BuySide Realty, which acts like a traditional real estate broker except that it rebates 75 percent of its commissions back to buyers at closing.
#180 Richard: You theory makes no sense, why would one over pay by 100k to then try and rapidly pay off the mtg?
It is a simple concept, but if one over pays, one will havd always over paid, not to mention of course all the additional interest paid on that extra 50 or 100k.
So your advice is to over pay so that you can get in the “game” quicker to pay back quicker the amount you over paid?
Anybody that has waited for at least the past 2 years at this point is why ahead of the game versus any kind of aggressive pre-paying on an over inflated mortgage.
Surely this cannot be your justification for over paying?
Richard advocating that people should over pay just to get in is mindless.
#175 BC I would say the same thing for those who bought in 05. A
nd the way things are going I will be saying 04, maybe late 03 by the end of the year.
3b your logic only works in hindsight and assumes the future is already determined.
Richard, you said:
“keep waiting 3b. what you’re missing is you have to get into the game to start paying off the big chunks of principal on a 30-year mortgage.”
What 3b is missing is the distinct possibility of being upside down on a mortgage.
My brother talks about the people he knows who bought during the mid-80’s bubble and then had to move – and had to bring checks to the closing. Being upside down can be a real nightmare.
With current price levels, imagine being $100,000 or $200,000 upside down …
Richard’s been watching the charts very closely. He needs a ‘dragonfly doji’ knock on his head to bring him back to his senses.
Why the hell would anyone pay an extra 5-10% on a house to get in the game early? I know, just to say ‘I own, not rent’. But pssssss…my pillow is financed through my HELOC.
3191 My logic only works in hindsight? Your thinking is flawed.
You can buy cheaper now in many towns (except Westfield of course)than you could in 05, thats a fact.
We are not talking about over paying by 10, 20, 25K we rar talking really significant amounts of money.
If you can others wish to be that cavalier amount that amount of cash, that is of course your business.
So your advice is to over pay,and hope for the best, and there are no points in a cycle where it is more advantegous to enter the market than at other points?
Well if it makes you feel better, than what can I say. All the discussions in the world with you will not change your mind set.
But this declining market of course will.
>>My brother talks about the people he knows who bought during the mid-80’s bubble and then had to move – and had to bring checks to the closing. Being upside down can be a real nightmare.
again you’re assuming a similar experience.
>>Why the hell would anyone pay an extra 5-10% on a house to get in the game early?
extra? when was it guaranteed that house prices are dropping 5-10% and then you’ll buy? if you’re looking historically you’re assuming all house prices dropped 5-10%.
you can all keep trying to convince yourselves and others that the housing market bubble burst will make the 80’s look like candy land and there will be weeping and gnashing of teeth and you’ll sit there smug and say i told you so and swoop in and buy at 50% off today’s prices. wishful fantasy. unemployment is strong, credit is still cheap and plentiful and people don’t have aversions to living their lives on negative savings/debt living. sure you would think this would catch up with people at some point but it’s amazing how the consumer just keeps chugging along with nary a clink in the armor. i won’t bet against them but you folks sure are. that’s been a losing bet for how long yet somehow you’ll be vindicated in some future? good luck with that.
History does have a way of repeating itself.
This time, when people end up upside-down, the amounts will be so large they won’t be able to bring a check to the table – and the end result will be more foreclosures.
It’s already visible. There’s a foreclosure down the street from me; one down the road from my brother; one across the street from my uncle. And this is just the start.
Richard, you said:
the consumer just keeps chugging along with nary a clink in the armor.
Should I post a digital photo of the house down the road with the sherriff’s notice nailed to the front door?
keep waiting 3b. what you’re missing is you have to get into the game to start paying off the big chunks of principal on a 30-year mortgage.
I’d rather let the falling housing market give me a smaller principal balance to start.
If I take out a $500k mortgage today, in 2 years I will have paid off $11,000 and still owe $489,000.
If prices drop by 10% over the next 2 years, I’ll take out a $450k mortgage 2 years from now; owe less for the same house & avoid 2 years of high mortgage payments.
Richard Says:
June 13th, 2007 at 4:38 pm
“Unemployment is strong”
For a change, you’re correct…but only if you’re in Zimbabwe.
John,
Commission rebates to the buyer are not allowed in NJ.
jb
Wow, you vulchers need to be nicer to Richard.
A few points:
1. The whole philosphy of homes that are price right will sell is a myth. If you want to sell today, you have to give away the house for at least 15% under value. The overwhelming majority of sellers will not do this and that is why there will be no massive price drops.
2. I am amazed at the high depreciation rates you think we will see. 10%. $100,000. Please, give me a break.
3. Foreclosures are not going to have a major affect on the market. They are the equivalent of a tiny ding. The main culprit is record high inventory. I know the houses that are for sale in my area and none of them are foreclosures. It is common knowledge that foreclosures in NJ are mostly confined to the slums of Newark and Paterson.
“people don’t have aversions to living their lives on negative savings/debt living.”
Nor did they in the 1920’s.
“If prices drop by 10% over the next 2 years, I’ll take out a $450k mortgage 2 years from now; owe less for the same house & avoid 2 years of high mortgage payments.”
One problem: Home prices are not going to drop 10% We will not see double digit depreciation.
#203 There were 2 Sherriffs sales in Saddle River last week, and 1 in Ridgewood. No comment necessary.
#205 YounG Donny: We are already seeing it, what a newbie
#200 rent; These guys just refuse to understand that;its like talking to the wall.
1. The whole philosphy of homes that are price right will sell is a myth. If you want to sell today, you have to give away the house for at least 15% under value.
So what you are saying is that home prices have already fallen 15%
3. Foreclosures are not going to have a major affect on the market. They are the equivalent of a tiny ding
Have you ever heard of the Resolution Trust Corp?
jb
“#203 There were 2 Sherriffs sales in Saddle River last week, and 1 in Ridgewood.”
What’s your source?
Donald,
http://www.bcsd.us/sheriff_sale.aspx#sales
jb
“So what you are saying is that home prices have already fallen 14%”
No that is not what I am saying. You have some buyers that are willing to pay close to asking price, but many of them are bargain hunters looking to pay well under value. If I go to a Lexus dealer and try to negotiate $20,000 off the price on a $65,000, does that mean the car is only worht $45,000?
What if I make Russell Simmons an offer of $5 million on his $23 million mansion? Does that mean his home depreciated from the $13.5 million he paid for it to the $5 million I offered him? Absolutely not. Just because someone makes a ridicilous offer does nto mean that is what the product is worth.
Would anyone else here be worried if there was a plan to build lower income housing 0.5 miles from your current place of residence?
With current price levels, imagine being $100,000 or $200,000 upside down …
Not hard to imagine with the bubble combined helocs founded on phony appraisals…
Thought experiment.
I have a shiny widget. I love it and I think it’s worth $1,000,000.
I try to sell it, and only one buyer comes forward. That buyer offers me $1.
What is it worth?
jb
#197 Richard All because you say so? People having no aversion to maxing out debt is a recipe for disaster.
That cannot and will not go on. Surely Rich you should see the fallacy in that behavior, and be intelligent enough to understand that it does not make for a sound arguement.
The employment arguement, just more rhetoric. What kind of employment, jobs with salaries that can support these prices, NO.
As far as us talking about this forever, well thats just not the case. You made that same inaccurate statement yesterday.
It is far more likely that we will be proved right than yourself. You base your arguements on sound bites, rhetoric, and the old its different this time.
Stick around Rich, much of this will play out in the next 12 months or so. We will see who is right or not. And in your case, I will try really hard, not to , but I probably will be smug;very smug.
“I try to sell it, and only one buyer comes forward. That buyer offers me $1.
What is it worth?”
You wait for second buyer to come and offer you more.
#211 Thanks JB.
That philosphy is flawed JB. If that is the case, I should borrow some money from my relatives and offer Russell Simmons $1 million for his house. Does that mean his house is only worth $1 million and depreciated by $12.5 million. Please don’t tell me you actually think so.
Donny the Sherriffs sales are listed int eh Bergen Record every Wednesday, Usually 20 or so to a page 3 or 4 pages worth.
in Richard’s defense– it does seem possible that we will never go back to traditional affordability measurements (2.5x income or 28-33% gross income)
in other parts of the world, people spend a much higher percentage of their wages on basic necessities. It is possible that the future could be like this in the US as well
“You wait for second buyer to come and offer you more.”
Wait for a second buyer when there are 4.5M other shiny widgets for sale?
#220 skeptic: And my question to you with all due respect would be why?
Specualtors and flippers, and toxic mortgages and loose lending standards drove prices high, and now that they are high, they must stay high?
I understand what you are saying, I just don’t buy it.
Yeah, I guess you are right njrebaer. Tough luck for Simmons. Whatever a buyer offers is what the product is worth. I find this theory to be so true that I am going to Sotheby’s tomorrow to put in a lowball and make his house depreciate $12 million.
“quacks” and are in the business of selling false hope to ill-informed people who may be genuinely suffering. Most would consider such a practice highly unethical.
Who quacks? as ‘Church Lady would proclaim “Could it be satan”??
JB [211],
That can’t be. Not with our employment levels, cheap and plentiful credit and the teflon steel consumer. I sure would not bet against this Joe 6 Pack. Happy Days are here again. LOL. Pipe dream/nonsensical.
Donny,
nobody’s saying an offer alone determine intrinsic value. What determines value is what it sells at. Sure you can (and probably should) turn away the guy that offers $1 for your million dollar widget. But if after waiting a substantial amount of time you can’t find anyone willing to pay more than $5 for it, its tough to argue its (current) true value is any higher than $5
gary (146)-
Why not sell and rent, a la BC? That’s what I was getting at.
If you’re convinced it’s circle-the-drain time, all that waiting and pricing aggressively has in store for you is a bigger, fatter loss than the one you’d take now.
3b #222:
I am not saying that we are on a permanently high plateau, but it is possible that we won’t fully mean revert. There are some things that are genuinely diff’t now: e.g., new mortgage products aren’t going away forever, even if they do get a bit more strict in the short term.
With respect to consumer finances, there is an unbroken trend of Americans increasing debt levels over the past 30 yrs. I agree with Richard that there is no reason to think this will stop now.
Plus, we have flat wages for most Americans while the cost of goods continues to rise. Americans may be forced to consume less eventually, but what will they choose to exclude? It is reasonable to think that they will try to maintain their standard of living with respect to basics such as food, clothing and shelter and do away with more superfluous items similar to Europeans
“If I sell now, where am I moving to? A bigger mortgage for practically the same house? When and if the real estate universe comes back in line, then I’ll price aggressively as Grim has suggested and will sell. Whatever I make is what I make, I already have additional money saved. I’ll take whatever the market gives me but I refuse to pay for somebody’s POS at these prices.”
Gary,
I am in a similar situation. If I were you, I would list the house at a price you are comfortable with today just to test the water. Who knows, you might get lucky and find a buyer within a month. There are homes out there that sell witin 2 weeks, even in this market.
If you don’t get your desired price Gary, then I would take the house off the market and wait it out.
As a proud graduate of the Falls Church High Class of 1985, I would like to offer my support to the young couple wanting to buy in my hometown. 15 miles from the capitol of the free world and home to the famed “frozen dairy bar” on Route 50, they have the right idea. Property in that area is a good bet, even now. Great neighborhoods, great schools, and wonderful bike trails.
#228 skeptic; Time will tell, but we shall see. They did by the way have these I/O mortgages back in the 1920’s.
They were common place, and they did go way for many,many years, that could certainly happen again.
Donald,
If you’re the only one that offers 1M for Simmon’s home and he waits waits waits waits say 2yrs and your’re still the only one then gues what?
IT’S ONLY WORTH 1M.
Gary,
Whatever you do don’t listen to Donald as he’s a bag holder himself.
“Donald,
If you’re the only one that offers 1M for Simmon’s home and he waits waits waits waits say 2yrs and your’re still the only one then gues what?
IT’S ONLY WORTH 1M.”
Your an idiot. If you are so confident of this why don’t you outbid me and offer $1.1 million? Think of the gorgeous and beauthiful house you will be getting for only $1.1 million! What a steal!!!!
For Knicks fans and Starwood Hotel users…
http://auction.starwoodhotels.com/cgi-bin/ncommerce3/ProductDisplay?prrfnbr=83935564&prmenbr=67280009&aunbr=84282274&topPic=&MoreSubs=N
There’s many who thought that SUNW was a steal at $40. Unfortunately, today it is trading at $5.
“Gary,
Whatever you do don’t listen to Donald as he’s a bag holder himself.”
And this is coming from someone who says that a 35,000 square foot house in Saddle River is only worth $1 million?
“For Knicks fans and Starwood Hotel users…”
JB does not like us posting advertisements. Maybe he should send you an invoice and charge you for that link.
sounds like Shubik’s dollar auction
from Wikpedia
“The Dollar auction is a non-zero sum sequential game designed by economist Martin Shubik[1] to illustrate a paradox brought about by traditional rational choice theory in which players with perfect information in the game are compelled to make an ultimately irrational decision based completely on a sequence of rational choices made throughout the game.”
If Simmons’ house is only worth $1 million, I fell bad for the guy that biught the teardown in Cliffside Park with a view for $1.1 million. And I also fell bad for the guy that bought Nixon’s teardown in Saddle River for $3.5 million. They got screwed. They could have had one of the nicest houses in NJ for less than what they paid. Oh well…
I feel bad for the guy who paid 850k for a piece of property that would bring in 4K a month in rent. What moron would pay approx 18X rental income, with 13k in taxes? Sorry, rhetorical question.
http://www.bloomberg.com/news/marketsmag/pensions.pdf
If I go to a Lexus dealer and try to negotiate $20,000 off the price on a $65,000, does that mean the car is only worht $45,000?
If you are the highest offer…yes, that is what the market will bear. Realistically, the dealer would turn you down because they can be reasonably assured of getting a better offer.
Take a look at the incentives offered on large SUVs now. Gas prices went up, demand for large SUVs dropped, so prices on large SUVs had to drop.
Do you really think GM can smugly say, “I don’t care about gas prices or demand. Were not lowering the price or offering incentives” GM is entitled to get MSRP!
No. They would have lots overflowing with rusty Hummers.
#175 Richard –
don’t reflect your distorted view of feeling good on anyone. i said that i don’t want to give up every bit of MY fun – i get no pleasure in other people’s misery – you give up fun – you don’t give up fun – what do i care. it doesn’t help me at all that you are miserable because you bought at the top.
From Bloomberg:
`Use It or Lose It,’ Frank Tells Fed on Authority
U.S. House Financial Services Committee Chairman Barney Frank threatened to take away the Federal Reserve’s legal power to write consumer-protection rules, telling an official the board must “use it or lose it.”
“If the Fed doesn’t start to use that authority to roll out the rules, then we’ll give it to somebody who will,” Frank, a Massachusetts Democrat, told Fed Governor Randall Kroszner during a committee hearing today in Washington.
Congressional overseers are intensifying pressure on the Federal Reserve over what they consider a lack of action on consumer protection. Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said June 7 he wants the Fed to write tougher regulations to curb abusive mortgage lending. Dodd’s pressure prompted the Fed to schedule a public hearing tomorrow in Washington to examine its authority to write new consumer-protection rules in subprime mortgage lending.
“I think that Barney Frank is deadly serious, and that the regulators will take it so,” said Chuck Muckenfuss, a partner specializing in financial institutions at Gibson, Dunn & Crutcher LLP in Washington. “I would anticipate that we see serious activity.”
I’m not going to uproot the family and rent and then up and move again. If and when the time is right (whatever radar that is), I’ll sell for whatever and that will be that. Current area comps would have to fall 50% for me to get my original 20% DP back. And again, the next DP doesn’t necessarily have to come from the sale of my current house.
RentinginNJ Says:
June 13th, 2007 at 2:09 pm
rent:
Inflation
Real income growth
focus here…the rest is gravy….the easiest way for the market to correct is to work in a manner than the typical actor can rationalize…..to the extent that nominal prices stay constant or recede only slightly for years, it at least allow people to stay fixated on where they bought/sold and not fully have to appreciate their REAL returns.
I agree with this. I see an initial price drop as those who know better or are forced out though foreclosure, panicing flipper, ARM resets or other typical reasons (jobs loss etc.) sell at a loss.
After this, I expect to see a “cold war”, where sellers who have the financial ability to stay put simply refuse to take a nominal loss.
These “sellers” (and I’m thinking of a certain troll around here of the genus Anas) don’t understand the implications of nominal versus real losses, carrying costs, opportunity costs, etc. They will sell 10 years from now at or above today’s nominal prices and be happy they “broke even” or, in their mind, turned a small profit.
Rent: Exactly…it is a natural way for people to process information….you hear it today….”…I know someone who bought in 1987, and it took them until 1998 to break even…actually no…they got severely soaked…”
Why do you all even bother to respond to Donald. I am convinced that he is a retard. I don’t want to offend him by arguing with him.
Donald, don’t believe the bears on this forum. Hold on to your asking price even if all the others around you lower and sell their house. We need a few brave men.
Donald should try selling his place on eBay.
Hey Richy and Donny? Have you boys considered trying to find yourselves a good therapist? Life’s to short to wasting your time trying to convince the blogosphere that you’re not in denial. Perhaps a few good sessions on shrinks couch may help you redirect your energies towards living life again. Or….. better yet, really make a difference! Perhaps you two buffoons could start you’re very own 12-step program and help out all the other buffoons in crisis. Call it something like….Delusionists anomymous. You boys could make a difference!
#248 Chgo: I thonk we are already at the cold war stage,and have been this entire Spring selling season.
#247 gary? DP, Comps
“Hold on to your asking price even if all the others around you lower and sell their house.”
Nobody else in my area has lowered their asking prices genius. I am priced in the same ballpark as they are.
Mahwah
Starting at a loss:
SLD RAE AVE $825,000 9/30/2005
ACT RAE AVE $819,000 6/12/2007
….
Chasing the market down:
ACT CHURCH ST $799,900 6/9/2006
EXP CHURCH ST $799,900 12/13/2006
ACT CHURCH ST $779,000 9/18/2006
PCH CHURCH ST $749,900 11/4/2006
W-C CHURCH ST $749,900 1/30/2007
ACT CHURCH ST $719,000 3/19/2007
PCH CHURCH ST $699,000 5/1/2007
PCH CHURCH ST $675,000 6/12/2007
….
Cliffside Park
ACT HILLTOP TER $1,375,000 2/6/2007
U/C HILLTOP TER $1,375,000 2/20/2007
SLD HILLTOP TER $1,180,000 5/15/2007
Cliffside Park
ACT ADOLPHUS AVE $829,000 6/23/2006
W-U ADOLPHUS AVE $829,000 6/29/2006
ACT ADOLPHUS AVE $799,000 7/6/2006
EXP ADOLPHUS AVE $799,000 3/6/2007
ACT ADOLPHUS AVE $749,000 4/17/2007
….
PS Donald, Even if you DO get asking, you lost. $30k over your purchase wouldn’t cover inflation let alone closing costs.
Pack it in.
If you look at the comps, my home is priced correctly. The competition is priced between $859k and $899k. I am at the lower end. None of the comps have lowered their price and I don’t consider the example above a comp due to the large price difference.
“PS Donald, Even if you DO get asking, you lost.”
As I said before, with lower property taxes, I will make back ther loss in less than 3 years. I lose in the short term but come out ahead in the long term.
Tell me of how many houses you know of with property taxes under $4,000 a year. I will be getting a great deal. Thank you Alpine!!!!
I don’t consider the example above a comp due to the large price difference.
Same neighborhood, number of bedrooms, number of full baths PLUS a 1/2 bath
But you’re right. Comps are SOLD listings, not asking. And NOTHING has sold in your range in the past year.
Does your agent even talk to you?
I meant the home that was sold for $1,180,000 fool.
I know the house you mentioned and it is much older and smaller. Please do not be fooled by what the house sounds like on paper. You can have a 10 year old 4,000 square foot 5 bedroom home and a 50 year old 2,000 square foot 5 bedroom home. Newer homes demand a premium.
There is much more to a house than the number of bedrooms/bathrooms the MLS lists.
“Does your agent even talk to you?”
Yes, just spoke to him yesterday. He said that even if we lowered the price another $30,000, it would not make a difference.
My house is well priced. I just looked up 2 Lafayette Avenue in Cliffside Park, which sold for $1,150,000 back in 05. From the zillow satellite, the house looks like a shack. I wonder why it sold for such a high price. And the buyers were real estate agents since I met them once.
#262, Donald maybe you should reduce it $60,000… it ‘might’ make a ‘slight’ difference.
Your house is on skid row…get over it and move on.
So I should be the first one to drop my price? I think not.
“He said that even if we lowered the price another $30,000, it would not make a difference.”
“My house is well priced.”
Same person, two different posts. Classic.
Re: #203
“It is common knowledge that foreclosures in NJ are mostly confined to the slums of Newark and Paterson.”
A statement made by a totally uninformed, irritating fool.
I’ve recently been to 2 sheriff’s sales. Areas include Manalapan, Howell, Millstone, Cream Ridge.
These areas are NOT slums. Fool.
Donald,
Thanks for giving us insight into the mind of a seller facing a loss.
A year or so ago we discussed how a seller facing a loss might act. We hypothesized that his inability to drop prices could be a reason behind the “sticky downward” pricing phenomenon.
You really are a fascinating case study.
jb
Sticky is a term used in the social sciences and particularly economics to describe a situation in which a variable is resistant to change.
For example, a variable that is “sticky downward” will be reluctant to drop even if conditions dictate that it should.
Source: Wikipedia
These are the same folks who held onto JDS Uniphase, Cisco and the like.
People who fail to cut their losses (especially on a leveraged position) eventually bleed themselves into insolvency.
So I should be the first one to drop my price? I think not.
You absolutely should be the first to drop.
You become the best priced option among a bunch of overpriced neighbors. You might even generate multiple offers. Take advantage of the fact that your neighbors are asking unrealistic prices and undercut them today.
You don’t want to chase price reductions. Many sellers find themselves chasing their neighbors price reductions, always just a little too expensive to clear the market.
The first to drop their prices and sell will get the best price.
In a falling market, the last sale will become the starting point for the next round of discounts. The next buyer will be looking for a better deal that what the last buyer got.
***
Then again, I’m guessing you’re the type of guy that will refuse to lower his price. Assuming you can remain solvent, in about 8 years from now, you will probably get your asking price.
You will then pat yourself on the back for refusing to give in, “showing those low balers a thing or two”, not really understanding that you really got hosed when you factor in inflation, opportunity costs and the fact that you “overpaid” property taxes for years.
Yes, just spoke to him yesterday. He said that even if we lowered the price another $30,000, it would not make a difference.
Unfortunately, he’s probably right.
You’d have to go lower.
Because no way in hell anyone’s going to pay what you did in 2005.
I meant the home that was sold for $1,180,000 fool.
But yet you mention the competition priced between $859k and $899k.
Which is why I posted this one?
ACT ADOLPHUS AVE $829,000 6/23/2006
W-U ADOLPHUS AVE $829,000 6/29/2006
ACT ADOLPHUS AVE $799,000 7/6/2006
EXP ADOLPHUS AVE $799,000 3/6/2007
ACT ADOLPHUS AVE $749,000 4/17/2007
That one to far out of the competion? How about this?
SLD HIGHRIDGE AVE $810,000 3/16/2005
ACT HIGHRIDGE AVE $1,049,000 8/8/2006
PCH HIGHRIDGE AVE $999,000 8/24/2006
PCH HIGHRIDGE AVE $969,000 8/28/2006
PCH HIGHRIDGE AVE $929,000 9/29/2006
W-U HIGHRIDGE AVE $929,000 10/5/2006
ACT HIGHRIDGE AVE $928,888 2/3/2007
PCH HIGHRIDGE AVE $899,000 3/6/2007
PCH HIGHRIDGE AVE $858,000 3/29/2007
Looks like it’s something in the water because as I said before, NOTHING has sold in your range in the past year.
My house is well priced. I just looked up 2 Lafayette Avenue in Cliffside Park, which sold for $1,150,000 back in 05. From the zillow satellite, the house looks like a shack. I wonder why it sold for such a high price. And the buyers were real estate agents since I met them once.
One, it’s a 2-family.
Two, for your sake I hope they aren’t YOUR realtor, they have a $980,000 mortgage and are only collecting rent for one unit for a mere $1,500/month.
Four, this place HAS panoramic views of NYC.
What does this have to do with your place?
Your’s is a SFH with no views.
Do you understand the meaning of “comps” in real estate?
It’s RECENT sold units within in your neighborhood that are “COMPARABLE”.
Folks, what you are witnessing is FUTILITY.
Arguing with a man who is clearly in denial.
Why bother?
sl
One, it’s fun when I’m on the road.
Two, I like to count yet SKIP three.
Four, you’re probably right.
Funny sh8t at 2 am, sleepless.
Funny sh8t at 7:30.
Love the case study reference.
RentinginNJ is exactly right about pricing/ seller psychology. I had to sell my (new construction) house last year to move for a new job. I had only been in said house for 18 months. In hindsight, I had overpaid by probably 50% for the lot (we “fell in love” with it). I listed the house for over six months at a price that would get me to “break even” after paying the commission, figuring that there was a greater fool out there. Finally, I faced reality and undercut the neighbors by a few thousand dollars. I had a buyer in 3 days. I lost the 10% I put down and brought a check to closing to pay the agent’s commission.
“Lucky” for me, this was a part of the country where 10% of the cost of a house is not a ruinous amount of money to lose.
Other than the point about the lies that I was telling myself, I would point out that the people I meet up here in NJ are completely amazed that such a thing could happen, i.e. lose money on a house. How could anyone lose money on a house when you build equity by paying a mortgage they ask?
=>Video: LUXURY Home/McMansion Foreclosures ~~~~~~~~~~~~~~ !!!
Watch http://www.paperdinero.com/BNN.aspx?id=222
New Today! Luxury Foreclosures
Sad CNBC segment chronicles a poor bastard in Maryland who got caught up in the mania in 2005. He bought a waterfront property in the hopes of subdividing it, creating a luxury “dream” home for himself and another to sell for profit. Unfortunately, he is stuck with a luxury vacation home no one wants and his unfinished dream home and ready for auction.
Originally aired on: 6/13/2007 on CNBC
Running Time: 2 minutes 30 seconds
Mortgage rates: biggest spike in 4 years
Rate on 30-year fixed mortgage gained 21 basis points in past week, to 6.74%, highest level since July 2006.
By Rob Kelley, CNNMoney.com staff writer
June 14 2007: 11:54 AM EDT
NEW YORK (CNNMoney.com) — Mortgage rates made their largest upward movement in nearly 4 years, and the 30-year fixed-rate reached its highest level since July 2006, Freddie Mac said Thursday.
The average rate on 30-year fixed-rate loans climbed to 6.74 percent for the week ending June 14, from 6.53 percent the previous week. That marked the biggest one-week increase since July 2003.
Current Mortgage Rates
Type Overall avgs
30 yr fixed mtg 6.39%
15 yr fixed mtg 6.09%
30 yr fixed jumbo mtg 6.60%
5/1 ARM 6.06%
5/1 jumbo ARM 6.16%
Find personalized rates:
Quick Vote
Are you worried that the value of your home is declining at a faster-than-expected pace?
Yes, looking to sell soonNo, still expect a big profitNo, don’t care Not sure or View resultsLast year at this time, 30-year mortgage rates averaged 6.63 percent. The rate is the highest since July 20, 2006, when it averaged 6.80 percent.
The 30-year rate stood at 6.15 percent on May 10th, just before it turned sharply up.
New home foreclosures hit record
Doug Duncan, chief economist for the Mortgage Bankers Association (MBA), expects mortgage rates to top out near 7 percent by the end of the year.
Rising rates, among other factors, have caused the MBA and the National Association of Realtors to push back their forecasts for a home price recovery. Both groups are now looking to early 2008, compared with a previous outlook for mid-2007.
Home prices and mortgage rates are closely connected. If rates go up, would-be home buyers face higher monthly mortgage payments, cutting into overall affordability.
The 0.59-percentage point increase since May 10 represents a jump of $115 a month on a $300,000 loan.
“Mortgage rates moved sharply upward this week, with rates on 30-year fixed-rate mortgages jumping more than 20 basis points, the largest upward movement in over three years,” said Frank Nothaft, Freddie Mac vice president and chief economist, in a statement. He said that inflation pressures and economic strength have led to rising yields on Treasury securities and mortgages.
Rates: Latest problem for a sluggish market
“Higher mortgage rates may weigh on the housing market’s gradual recovery. While demand appears to have stabilized, inventories of new homes remain high, putting downward pressure on construction and home prices,” he added.
The rate on 15-year loans averaged 6.43 percent, up from 6.22 the previous week, Freddie Mac (Charts, Fortune 500) said. A year ago, the 15-year rate averaged 6.25 percent.
Five-year adjustable-rate mortgages rose to 6.37 percent from 6.24 percent last week. The five-year ARM averaged 6.23 percent a year ago.
One-year ARMs averaged 5.75 percent, up from 5.65 percent last week and 5.66 percent a year ago.
Mortgage rates, of course, are only one third of the affordability equation that plays out in the housing market. There’s also home prices themselves and household incomes, both of which have been positive lately for buyers, according to DeKaser.
Looks like the age of free money is over. Maybe Ben can start that helicopter drop. BTW check out http://www.jerseylegalforums.com