From the Wall Street Journal
By RUTH SIMON
May 18, 2006; Page D1
“Soaring housing prices and aggressive mortgage lending have saddled home buyers with ever greater levels of debt, and early signs are now emerging that more people are unable to keep up with their monthly mortgage payments.”
“Recent studies by several Wall Street firms point to rising delinquency rates on home mortgages that were issued last year, a period when lenders were pushing hard to keep business going as interest rates and home prices were rising. The increase in late loan payments comes as more buyers have been forced to stretch financially to afford ever costlier houses in recent years, and many homeowners have increased debt by tapping their home’s equity. Analysts say that laxer lending standards on the part of mortgage lenders also resulted in higher debt loads, which some borrowers are now struggling to repay.”
“Mortgage delinquencies historically peak around three years after loans are made, which means some of the more aggressive loans made last year might experience their biggest problems in 2008. However, some borrowers with adjustable-rate mortgages could see problems sooner. Others, who took out exotic mortgages such as interest-only loans and option ARMs that hold down monthly payments in their early years, could run into trouble later, when payments reset. Still, there are early signs that even some of these non-traditional mortgage loans are starting to be squeezed by rising interest rates.”
“Borrowers who took out mortgages in the past two years are likely to be more vulnerable should home prices fall because they could wind up owing more than their home is worth. Twenty-nine percent of borrowers who took out mortgages last year have no equity in their homes or owe more than their house in worth, according to a study completed this year by Christopher L. Cagan, director of research and analytics for First American Real Estate Solutions, a unit of First American Corp. That compares with 10.6% of those who took out loans in 2004.”
“An analysis by Bear Stearns found that delinquencies on loans originated in 2005 were in most cases far higher than on loans issued in previous years at the same point in their life cycle. “The numbers are clearly worse,” says Gyan Sinha, a senior managing director at Bear Stearns. The reason: Lenders were “able to generate a lot more volume in the face of rising rates” by loosening lending standards, Mr. Sinha says. “More aggressive lending was clearly taking place,” he says.”
“A separate study by Credit Suisse reached similar conclusions. That study looked at borrowers with good credit who were at least 90 days late on their mortgages. Credit Suisse found that borrowers who took out adjustable-rate mortgages in 2005 were three times as likely to be delinquent on their payments after the first year as those who took out ARMs in 2003 and 2004. Payments on ARMs can adjust after as little as a month, or after several years, depending on the terms of the loan. (The study didn’t include borrowers with option ARMs.)”
“Overall, roughly 4.7% of residential mortgages were delinquent in the fourth quarter, the Mortgage Bankers Association says. Excluding the effects of Hurricane Katrina, delinquencies were 4.55%. That is up from 4.44% in the third quarter and 4.38% at the end of 2004, it says.”
“Mortgage lending standards tended to be looser in 2004 and 2005 than in the previous three years, according to surveys done by the Federal Reserve Board. One example: Piggyback loans have become more common, enabling borrowers to use as much as 100% debt to finance a home purchase.”
“And with competition for borrowers increasing and profit margins shrinking, the move toward looser standards is continuing. Roughly 10% of mortgage lenders said they had eased credit standards in the three months ended April, according to a Fed survey released this week. Only one of the 53 banks surveyed reported any tightening of standards.”
a bit OT, but here’s the link to the web site for all the Solomon Dwek case documents…
http://tinyurl.com/ly4yb
I think all of the banks involved with this will be scrutinizing any slow, late payers once their lawyers dig through this…
JM
From FT:
Fed chief urges caution on mortgages
Ben Bernanke, chairman of the US Federal Reserve, on Thursday called on banks to be more cautious about mortgage lending despite “clear” evidence that the domestic housing market was cooling.
Mr Bernanke cited a need for lenders to be vigilant in providing so-called non-traditional mortgages such as interest-only loans, which accounted for 30-40 per cent of approvals last year, well above their historical average.
Mr Bernanke noted that some of these products had previously been the preserve of wealthier borrowers, but were being increasingly extended to lower-income buyers.
He said the federal reserve planned to issue guidance to banks, stressing the need for them to evaluate their exposure to the sector, particularly at a time of rising interest rates which could expose them to higher default rates.
“It seems pretty clear now that the housing market is cooling,” said Mr Bernanke, pointing to the recent slowdown in key measures such as sales, permits and new starts. “[But] this looks to be a very orderly and moderate cooling at this point.”
“29% of borrowers who took out mortgages last year have no equity in their homes or owe more than their house in worth…”
Realtors say: “Come on in, the underwater is fine!”
“The situation is even grimmer for recent borrowers. Of those who bought or refinanced homes in 2005, 29% had zero or negative equity, and 15.2% were underwater by 10% or more.”
So morons that purchased in 2005,
15.2% of them already are underwater by 10% or More!
BOYCOTT HOUSES!
Want to be a bagholding mtg slave go ahead buy a bloated overpriced house.
Boooooooyaaaaaaa
Bob
An ABC News video report:
“The combination of a cooling market and rising interest rates, is putting many homeowners in a bad bind.”
Long link:
http://abcnews.go.com/Video/playerIndex?id=1949064
Short link:
http://tinyurl.com/pg38z
“Want to be a bagholding mtg slave go ahead buy a bloated overpriced house.”
Won’t the ultimate bagholders will be the banks that lend the slaves the money they can’t pay back?
I cant help but laff at the people who didnt have the financial foresight to buy a house and they are now jellous of smart ones like me who probably found this site by googling “nj real estate bubble”
That’s why the banks and lender had the bankruptcy laws changed just recently.
‘Aggresive Lending’ Leaves Borrowers ‘Struggling’
Thw Wall Street Journal has this report on loan delinquencies. “Soaring housing prices and aggressive mortgage lending have saddled home buyers with ever greater levels of debt, and early signs are now emerging that more people are unable to keep up with their monthly mortgage payments. Analysts say that laxer lending standards on the part of mortgage lenders also resulted in higher debt loads, which some borrowers are now struggling to repay.”
“Twenty-nine percent of borrowers who took out mortgages last year have no equity in their homes or owe more than their house in worth, according to a study. That compares with 10.6% of those who took out loans in 2004.”
“An analysis by Bear Stearns found that delinquencies on loans originated in 2005 were in most cases far higher than on loans issued in previous years at the same point in their life cycle. ‘The numbers are clearly worse,’ says Gyan Sinha at Bear Stearns. The reason: Lenders were ‘able to generate a lot more volume in the face of rising rates’ by loosening lending standards, Mr. Sinha says. ‘More aggressive lending was clearly taking place,’ he says.”
“Credit Suisse found that borrowers who took out adjustable-rate mortgages in 2005 were three times as likely to be delinquent on their payments after the first year as those who took out ARMs in 2003 and 2004. The study didn’t include borrowers with option ARMs.”
“Credit Suisse also found that borrowers who were delinquent were more likely to have lower credit scores and to have taken out piggyback mortgages, which combine a mortgage with a home-equity loan or line of credit. It also found that delinquency rates were shooting up in California.”
“In another sign that some borrowers who stretched are now feeling pinched, a study by Lehman Brothers of subprime borrowers found that the increase in delinquencies is being driven by home buyers, rather than by people who are refinancing, and by those with little equity in their homes.”
2 more acquitances leaving New Jersey. One owned and sold his Mechanic business the other a large insurance producer. Both going to Arizona.
Asked them why they are going to leave. Main reason..taxes and affordability. Also in one case their kids moved to Az last year becasue of affordability.
The mass exodus continues out.
House prices in NJ are going down quickly.
Arm adjustment along with failure to make Bush tax plans permanent will cause pain during the later part of this decade. If Bush tax plans are made permanent we will face more pain in the future. It’s either now or later.
Interesting thread on LONG ISLAND market here.
http://www.liweddings.com/chat/lastpost.aspx?TID=302626
I’ve a question on home equity loans –
If you trade stocks using a margin account (which works almost the same as a home equity loan) you will get called for margin if the total value of your owned assets drops below a certain ratio of total account value (owned + borrowed).
Are home equity loans susceptible to ‘margin’ calls?
minutesfromNYC: You pointed out correctly, the more people come to this site, they will get more clear idea on buying a house.
I think, it would be awesome if this site comes up with just “NJ REAL ESTATE” on Google list.
How about using Google Bomb to make this site come up on the top??
http://en.wikipedia.org/wiki/Google_bomb
I am guessing what is needed is many sites to link to this site using exact same Anchor word. for e.g.
NJ Real Estate
Negative amortization loans have something that is similar to a margin call.
Take for example, a payment-option ARM with a teaser rate.
During the teaser period, additional principal is added to the mortgage. Each time a minimum payment is made, additional principal is added.
In theory, if the borrower only pays the minimum payment each month, the principal will continue to grow. They’ll never pay their mortgage off.
Let me now introduce you to the margin call of option loans, the negative amortization limit.
Once the Neg-AM limit is reached (say 110% LTV), the loan now recasts.
Yes friends, the payment option loan now recasts. The minimum payment becomes reset to a value that will fully amortize the loan over the remaining term.
BOB: You will love this site.
http://www.boycotthousing.com
>>Once the Neg-AM limit is reached (say 110% LTV), the loan now recasts.
Thank Grim. Is LTV calculated quarterly based on current RE?
In other words, how do banks compensate for diminishing value of a property?
The paper by Chris Cagan is being referred to and quoted again and again. FWIW, here is the link to the original pdf article.
Mortgage Payment Reset – Rumor & Reality – By Chris Cagan
http://www.loanperformance.com/infocenter/whitepaper/FARES_resets_whitepaper_021406.pdf
CNS
Again, it is
http://www.loanperformance.com/infocenter
/whitepaper/FARES_resets_whitepaper_021406.pdf
CNS
Sorry guys – I am slow on the uptake. One last time
http://tinyurl.com/mqesc
CNS
Newsday has this article.
How to hedge your housing bets
You can take out insurance on your diamond ring and your car. You can account for floods, terrorism and a host of other natural disasters. But you’re virtually unprotected if the economy shifts and home prices start free-falling. You could easily find yourself sitting in a home that isn’t worth what you paid for it – with nothing to do but wait. For builders, mortgage bankers and real estate investors, such a problem is magnified.
But what if you could hedge your bets? On Monday, the Chicago Mercantile Exchange will be starting to offer that opportunity, through housing futures contracts. Such contracts will allow investors to predict the future prices of housing – both nationally and in 10 different metropolitan areas, including New York – at given intervals.
Just as they would invest in futures contracts on copper, gold or oil, these participants can basically bet on whether those prices will go up or down by buying and selling the contracts. And the Mercantile Exchange isn’t alone; others are getting into the act as well.
It sounds like a good deal, especially at a time when the future of real estate is incredibly uncertain. But it’s more complicated than it looks, as the betting is risky, often requiring significant leveraging, and housing may not be volatile enough to make such contracts fly.
Only time will tell in a market that is far different than anything the Mercantile Exchange has tried before. As an associate director at the exchange said: “Here, we are in uncharted territory.”
Anon @ 3:34,
Currently, Banks do not account for diminishing value of the property by redoing each loan with every borrower every quarter. Loan portfolios are typically insured by mortgage insurance. It will be interesting to watch how financial institutions issue new guidelines adapt to a slowing market.
Grim gave you an example of how a neg-am loan works. The recast is tied to the ratio of the loan amount currently owed to the original loan amount. At no point is the home value reappraised.
Of course, if a home needs to be refinanced – it needs to be reappraised.
CNS
From Businessweek –
London’s Real Estate Boomlet By Stanley Reed
Wed May 17, 9:47 AM ET
Americans who are lying awake at night worrying that the prices of their homes will fall off a wall like Humpty Dumpty can take some comfort in the experience of Londoners. After house prices in the British capital racked up double-digit gains seven years in a row through 2003, most forecasters predicted a nasty snapback. So far it hasn’t happened. In fact, there are signs that prices are beginning to resume their upward climb.
Sure, last year London’s real estate market saw a sharp slowdown. Buyers, no doubt influenced by all the crashonomics, kept their powder dry. But that only caused demand to build up, and now the spark is back. First-quarter sales grew 41% from a year earlier, and prices are on track to grow 6% or more this year.
Not-So-Humble Abodes. It’s starting to feel like the feeding frenzies of three or four years ago. Instead of seeing houses languishing on the market, brokers — or estate agents, as they are called in England — say they can’t find enough to sell. “There is an incredible shortage of property,” says Lisianne Newman, director of Goldschmidt & Howland estate agents in Hampstead, a tiny North London neighborhood. “That has led to price rises of about 10% in the last three months throughout the entire market.”
Newman says the action is hottest for houses priced at around 1 million pounds, or about $1.9 million, or higher. Each of those houses and well-appointed apartments attracts such a crowd that the agency is seeing multiple would-be buyers submitting sealed bids in envelopes.
Brokers and economists attribute the change in psychology to several factors. With private equity and M&A in high gear, the City, London’s financial center, had a strong year in 2005. That led to big bonuses in early 2006 from banks and other financial institutions. Russians and other newly wealthy foreigners consider a London house an ideal place to stash some spare cash. And when you consider that Brits themselves like nothing better than to put money into property and that London will host the summer Olympics in 2012, you have the key planks in a possible floor under the city’s prices.
Rate Cut. It also helped that in August the Bank of England cut rates to 4.5%, down from 4.75%. Potential buyers had been spooked by Bank of England Governor Mervyn King’s earlier warnings that the market looked dangerously frothy. But the bank’s trim suddenly took the worry out of the rate outlook. “That removed a lot of uncertainty from the market,” says Ed Stansfield, property economist at Capital Economics in London.
Capital Economics counted among the many real estate bears, forecasting a steep drop of 20% in British house prices — but the dreaded bust has yet to materialize. According to the Halifax Index, kept by mortgage lender HBOS, prices in Greater London rose by an average of 2.1% in 2005. That may have been disappointing to sellers following the 16.6% pyrotechnic gains of 2002 and a 12.8% rise for an encore in 2003, but it was far from a plunge off a cliff. Now Capital Economics is forecasting 6% average price increases this year for London and 3% to 4% for 2007.
Brokers say the current boomlet began last fall after the Bank of England cut rates. It is too soon to tell whether it will last, but posher neighborhoods are showing signs of gathering strength. In the verdant west London borough of Richmond upon Thames, for instance, the average selling price of a stand-alone house was 29% higher than a year ago in the first quarter, or $1.89 million, according to the Land Registry, the official recorder of property transactions.
Riskiness Lurking? In Camden, where Hampstead is located, the average selling price of a residence rose 18% — to $943,000 — from the fourth quarter of 2005 to the first of 2006. Sales volumes in greater London rose 41% year on year in the first quarter. With price increases in the less swanky neighborhoods more restrained, the Halifax says overall London prices have risen 7.2% over the last 12 months.
Of course, London house prices can and do fall. They did it for four years in a row in the early 1990s, and some homeowners didn’t match the prices they paid in the 1980s property boom until near the end of the last century.
There’s cause for caution today, too. Stansfield of Capital Economics, for instance, says it now costs 53% of an average Londoner’s income to finance a home purchase. That’s well above the 30-year average of 45%.
Looking Healthy. “The risks are strongly biased to the downside. You obviously couldn’t rule out fairly significant falls in prices,” says David Miles, a Morgan Stanley economist specializing in Britain.
One reason: The new boom has caught Mervyn King’s attention and helped make it likely the next move on interest rates will be upward. “The level of house prices still seems remarkably high,” said King recently. But today’s British economy, with its relatively low rates and robust employment numbers, still looks healthy. It will take more than a few cautionary words from King to scare off house-mad Londoners.
CNS
Grim & Anon @4:40
Thanks a lot!
anon @ 4:45
In my opinion, comparing Britain or any other country with US is like comparing apples and Oranges. Economies of all countries except maybe Cuba and North Korea are tied to how the US fares. If the US trips, the rest of the world will roll over and fall dead.
The rest of the world survives on Americans swiping their credit cards.
Yes I read the article about London as well.
and, mind you, their interest rates are pretty similar to ours:
http://uk.biz.yahoo.com/mortgage/
(ignore the short terms gimmicks and see what they pay for the long haul)
There are some cautionary statements made, however it typically costs 45% of the average Londoners income to finance a home purchase (and is now 53%).
Let’s assume that the 45% is the norm. – who is to say that this isn’t the new norm for us here in the US? That we will have to save more and wait longer before we can purchase a home.
Latest published HOI (Housing Opportunity Index) shows how affordibility has declined in NNJ area. HOI is calculated by taking median house price to median income.
NAHB-Wells Fargo Housing Opportunity Index (HOI)
Newark-Union, NJ-PA
1995 = 48.1
2000 = 53.6
2006 = 28.7
New York-White Plains-Wayne, NY-NJ
1995 = 37.7
2000 = 42.1
2006 = 6.1
Edison, NJ (not much data since this MSA was just created in 2005)
2005 = 42.8
2006 = 30.8
HOI Definition
There is a space constraint in UK and Japan.
If you were to move everyone in the US to Texas, each one of the 300 mil Americans will end up owning more than 0.5 acre plots.
http://www.netstate.com/states/geography/tx_geography.htm
Well, there is a space constraint in NJ as well, hence the likelihood that the same thing can happen here as in London.
Hey moronfromNYC
1:41PM
if your so smart how come you cant spell…no spellchecker here.
some of the comments on this blog are despicable. if you want to hold the opinion that there is a bubble, then fine. but if you read these comments it is almost as if you people are cheering for a crash so that millions of people can suffer, so that their families can suffer, etc. If you need to get such joy out of someone else’s potential misery then you need to look in the mirror and re-assess.
One person calls people who bought a house in 2005 a “moron”, another says to “boycott houses”…well since you speak the gospel, I guess we should all listen to you.
Where is the person to stand up and say we live in one of the greatest metropolitan areas in the world, there will always be jobs here, people will always need to live here, etc.
Data is just data…statistics can be interpreted in a thousand different ways to suit one’s own needs, but to stand on the sidelines and cheer and root for other people’s suffering is absolutely disgusting, and Grim should regret letting such people post. I understand it is his site, but have a rational, mature discussion, taking into account all factors…don’t let people perpetuate crap and gloat in other’s problems.
If you look at the charts Grim posted, you will see any downturn in the new market of new homes sales was not a “crash” but a bump (at most 10%), and if you look at the resales numbers there are only bumps…now, noone can expect the huge gains we’ve seen to continue, but I think a slow downturn with stagnant or steady price rises are reasonable.
But you won’t see me sitting here cheering for people to go bankrupt or lose their houses…how bankrupt can you be?
You are despicable!
It is your ilk that promoted suicide loans and Just buy it ‘s always a good time to buy a house deserve everything coming to you.
Now Grim has done a great service to the public to warn about the “SHILLS” that work in the real estate industry.
Free markets work in both directions. It’s 0kay if prices go up alot but it is not okay when it goes down.
Get off your throne and stick it up your …..
Well it’s time for people that have made sacrifice and saved a down payment to now get rewarded for acting rational in an irrational market.
Price are going Down!
BOYCOTT HOUSES!
Booooyaaaaaaaa
Bob!
BOYCOTT HOUSES!
Freee Markets Correct excesses.
People who make BAD fianncial decisions need to pay the price for their “dumb” decisions.
This is way the system should work. Those that misrepresented products or services should be punished in promotion of this Bubble.
Boycott Houses!!
Boooooooyaaaaaaa
Bob
i see huge regulation and congressional investigations involving real estate in the next few years as this Housing Bust implodes.
Wiseup! You ain’t entitled to a ever increasing home value every year. Sometimes they go down alot like they did in 1991-1994 across NJ.Bankruptcies were widespread.
Booooooyaaaaaaaa
Bob
The truth hurts.
And thank god there are people like Grimster and this blog that are spreading the truth NOT A bunch of self-serving “SHILLS” that say one thing BUY BUY BUY using suicide loans.
Noone wants anyone to self-destruct but those that listened to the “SHILLS” will have to pay the financial price for their poorly thought out and unresearched decision.
Free markets work. patience is the key when things are irrational.
Times are irrational right now. You do not have to do anything if uncertain. take a deep vreath and take a walk or a trip and think it over.
prices are going down down down.
wiseup USE some COMMON SENSE!
Boycott houses and do NOT be a bankrupt bagholder.
Why do you think bankruptcy laws have been changed recently?… lenders know things can go real sour. their lobbuyist groups push this bankruptcy law through before the BUST!
Booooooooyaaaaaaaa
Bob
bob:
noone is disagreeing that there is a slowdown. but, once again, (maybe I’ll put it into caps so you see what I’m saying) TO CHEERLEAD FOR OTHER PEOPLE’S MISERY IS DESPICABLE…YOU ARE THE SHILL.
Bob:
Also, the new bankruptcy laws (however ridiculous they are) truly have little or no effect on foreclosure, mortgage defaults, or those who are forced to file bankruptcy due to mortgage defaults. yes the bankruptcy laws imposed a “mean” test for chapter 7 filings, but chapter 13 filings are an option and the ability to pay your debt basically remained the same (with a $100 limit instituted).
you shouldn’t talk about what you don’t know.
keep up the chatter One -Way “SHILL”.
As this housing Bust unfolds Hopefully many will have listened and not compounded their poor decisions.
If it seems to good to be true IT IS!
Booooyaaaaaa
Bob
Bob:
You continue to show your ignorance. I am no SHILL for anyone. I have a difference of opinion (though I do not believe housing prices will keep rising nor do I believe they will completely crash). If someone who has a difference of opinion with you is just a shill then you aren’t worth talking to.
Hopefully Grim just doesn’t let you post anymore as you add nothing to this site or the conversation and just continue to prove my original point.
anon @ 6:02
I don’t think anybody here feels that house prices will crash just because they are overpriced. The reasoning behind the assumption of a crash are numerous and one of them is because the current boom in market (jobs, consumer confidence, you name it) is because of all the houses that are being traded, refinanced & built. If the housing market slows down to historic levels all the extra jobs created to manage the excess pace will not be needed. The job lose could cause a sell off.
The other reasons are adjusting ARMs, Tax cut expires at the end of this decade, higher interest rates, because of the slow pace RE investors switch to more attractive investments….. The list goes on.
always remember your first loss
more than likely will be your best loss.
Anonymous –
Millions of people have been suffering throughout this boom who have been faced with taking a nonsesical and irrational loan to buy an overpriced property or forced to live in cramped conditions with their families.
Millions of young couples have been priced out of a small fixer-upper in a safe neighbourhood by wealthy developers and greedy speculators.
Millions of renters have been pushed out of their homes by landlords looking to “cash in”.
Millions of recent homeowners are drowning in debt because of the deceptive practices of mortgage brokers and real estate agents and risk losing everything they have worked for.
And you support this?
Have you no humanity?
Where is your shame?
And you accuse others of moral bankruptcy?
Shailesh Gala,
Can you please explain what is HOI 6% versus 30% in layman terms so the morons like me can understand.
The Housing Opportunity Index (HOI) for a given area is defined as the share of homes sold in that area that would have been affordable to a family earning the median income. Therefore, there are really two major components — income and housing cost.
For income, NAHB uses the annual median family income estimates for metropolitan areas published by the Department of Housing and Urban Development. NAHB assumes that a family can afford to spend 28 percent of its gross income on housing; this is a conventional assumption in the lending industry. That share of median income is then divided by twelve to arrive at a monthly figure.
On the cost side, NAHB receives every month a CD of sales transaction records from First American Real Estate Solutions (formerly, TRW). The data include information on state, county, date of sale, and sales price of homes sold. The monthly principal and interest that an owner would pay is based on the assumption of a 30 year fixed rate mortgage, with a loan for 90 percent of the sales price (i.e., 10 percent downpayment). The interest rate is a weighted average of fixed and adjustable rates during that quarter, as reported by the Federal Housing Finance Board. In addition to principal and interest, cost also includes estimated property taxes and property insurance for that home. This is based on metropolitan estimates of tax and insurance rates from the 2000 Decennial Census, as estimated by NAHB from the Census Bureau’s Public Use Microdata Sample (PUMS). Mortgage insurance is not currently a component of the HOI.
Therefore, for each record, there is an estimated monthly cost and available income share. The HOI is the share of records in a metropolitan area for which the monthly income available for housing is at or above the monthly cost for that unit.
HOI Definition
In nutshell, HOI 30% indicates that with median income, you can only buy house that cost 30% of the median price. For NJ, even 30% was too low, that now in near NY area you are down to just 6%.
Is this data relevant to new homes only?
I don’t know which anonymous but are you going to move every job, industry, and buisiness to Texas?
Rich in NJ:
From the data it appears the Median Price is from all (New & Old) houses.
For Newark, Union MSA, for Q1 of 2006, it counted total of 7708 sales and median price of $365,000. Median income used was $85,400. This resulted in HOI of 23.39%. I don’t believe there were 7708 new houses built in Q1 or 2006, so my assumption is they use all sales.
Correction in my earlier example:
HOI = Median Income / Median Price
The example with 30% HOI earlier is not correct interpretation.
Millions of young couples have been priced out of a small fixer-upper in a safe neighbourhood by wealthy developers and greedy speculators.
Millions of renters have been pushed out of their homes by landlords looking to “cash in”.
Millions of recent homeowners are drowning in debt because of the deceptive practices of mortgage brokers and real estate agents and risk losing everything they have worked for.
And you support this?
Have you no humanity?
Where is your shame?
And you accuse others of moral bankruptcy?
I believe these series of statements above pretty much sums up the feelings of most on this forum and explain the giddiness and celebratory mood in anticipation of a supposed housing decline. There’s a class war being played out in this blog between those who own real estate and those who’ve been priced out. Those who wish to own are extremely resentful of the situation and those who were able to buy. I’ve spoken out several times on the constant calls to boycott houses and what that means. I think it’s wrong to do that.
Now, I’m not trying to throw brine in any wounds here, but you guys need to realize that those who were fortunate to buy before the runup had absolutely nothing to do with the type of loans this boom spawned. Real estate investors didn’t acquire property just to make sure people got priced out and we didn’t cause people to go out a bite off more than they could chew financially. All we tried to do was make money to take care of our families and ourselves. Why should we be despised and hated for that?
Moreover, those who feel they’ve been priced out have a number of options before them, the primary one being the ability to move. NNJ prices have been driven a lot by outmigration of boomers from NYC and as I’ve stated before, NNJ is really now a borough of NYC, one of the premier cities of the world. The bottom line is that one is going to pay a premium to be here. It’s always been the case that not everyone could afford Manhattan. Manhattan has now extended itself to northern NJ. Some of you need to deal with that reality and accept it.
tank you reinvestor the R. E. market is what it is. you need a place to live and you should be an owner not a renter. Be in and win. No matter what they say 40 years ago I bought and sold R. E. for less than $20,000.00 yes less than a new car today!
I wonder how many prospective home buyers thought they were “priced out” in 1988..
..only to find themselves priced back in, in 1995.
Caveat Emptor!
grim
Sorry, it’s just business.
As the bubble inflated, speculators and sellers had an opportunity to make money.
Now as the bubble deflates, sellers and speculators will take their losses.
Don’t blame buyers when carrying a flip house for 6 months is bleeding you dry, or the mortgage payments are late and foreclosure is imminent.
It’s just business.
murph@8:03
I don’t know which anonymous but are you going to move every job, industry, and buisiness to Texas?
300 mil Americans move to Texas and each one gets 0.5 acre plot. We could move all the businesses to Arizona :) We still would have 48 states of free space.
If ‘RE investor’ is nice to us we can sell him a quarter acre plot in northern NJ for less than a million dollars.
What I’m trying to get at is that Brits and Japanese don’t have the same kind of luxury. Comparing RE in Britain and Japan with US is like comparing Apples and Oranges.
A building lot in NJ is worth 1/4 $250.000.00 Don’t you get it! There is very little buildable land in NJ
MinutesfromNYC,
You ARE kidding, right?
You use the words laff and jellous, but you’re the smart one?
jw
I agree with Unrealtor 100%: This is purely a matter of business. I can’t wait to see the housing market come down. Why? Because it’s the only way I’ll be able to afford a home. Does that mean that I gleefully look forward to the financial demise of others? Absolutely not! Furthermore, I don’t think anyone here does. The reality that others may lose money if the housing market goes down is not relevant to me. In a capitalist society people need to take responsibility for their own decisions and live with the consequences—at least that is what pro-capitalists tend to say. Execept I think they usually mean it most when they’re making money, not losing it—but that’s another conversation
Does that mean that I gleefully look forward to the financial demise of others? Absolutely not! Furthermore, I don’t think anyone here does.
You don’t believe that anyone is gleeful here about the prospect of a price reversal? Please. I guess you’ve not read Bob’s unceasing “booya” and “pa pa panic” posts or unrealtor’s constant refrain about boycotting open houses. There’s so much mirth and giddiness here that one could easily mistake it for Christmas!
Well, I’m sorry to play Scrooge here and place a ba humbug on the proceedings, but there ain’t gonna be a wholesale collapse of real estate prices.
“You don’t believe that anyone is gleeful here about the prospect of a price reversal? Please.”
RE “investor” — I’m certainly not gleeful about the prospect of saving $200,000+ on the purchase of my next house. It makes me sad, just as you were saddened by the profits you may have made before the bubble ended.
BoycottHousing.com
Of course I’m giddy about house prices crashing.
Have you ever been stuck in traffic and seen cars turn onto the shoulder to pass? You start to notice that they are zooming way ahead and you start to wonder if you should to. But it is a greedy impulse, and not the proper way to drive. Well, you decide not to drive on the shoulder even though it seems like everyone else is doing it. Eventually you see that all the shoulder-drivers have been pulled over and issued tickets.
How do you feel about the fate of these drivers?
Reinvestor, what about those of us who AREN’T priced out but think prices are crazy? What is your argument there? I can well afford NNJ, Westchester, LI – but frankly, I’m not drinking the koolaid – real estate isn’t about your monthly payment but about value. NYC is a great city, and you will always pay a premium to live near it, but was that not true during the real estate collapse of the 1990s? What has made NYC so much better in 5 years that prices should double? 9/11? Yeah, that was just AWESOME. Really, why is it “different this time?”
Nationally prices may not collapse but there’s a correction of some kind coming in our area – to deny it and ignore it and not plan accordingly is just plain stupid.
Reinvestor101 – It’s called a parody of the post by anon.
Duh.
Of course those who will be helped by price drops are giddy at the prospect. Just as those helped by price rises were giddy at the prospect.
In each scenario some win and some lose, how you view it depends on which side of the fence you are on.
Reinvestor, Yes! There are probably many of us here who are “gleeful about the prospect of a price reversal.”
But you’ve been accusing us of being gleeful at the prospect of the financial demise of others.
There is a big difference between the two, and I’ve noted that in other posts.
And yes, I’ve seen all the posts by boooooyaaaaa Bob. And the only person who takes him seriously and literally is you!