From Reuters:
U.S. home buyers grow more cautious, survey says
Americans are stretching their budgets a little less to buy homes, a new survey shows.
About 78 percent of people who bought homes in the last three years said they paid what they could afford, up from 67 percent a year earlier, according to a survey released Thursday by the Wall Street Journal’s online edition.
Only 15 percent of home buyers said they went above their price range, down from 19 percent, the survey said.
“Borrowers are not unaware of trends in home prices,” said Keith Gumbinger, vice president of HSH Associates, a Pompton Plains, New Jersey mortgage information publisher.
“If prices were rising as fast as they were two years ago, you might have found it more beneficial to overstep your budget a little,” he added. “But prices have grown more stable or are even declining, so borrowers can afford to be cautious or more patient because the homes they desire could get even cheaper.”
…
Though fewer home buyers admit to stretching their budgets, the survey said more are seeking fancier options, including mortgages that let them pay less than the principal and interest otherwise due each month.Thirty-eight percent of borrowers said they used “creative” or “pay option” mortgages, up from 33 percent a year earlier.
Fourteen percent used interest-only mortgages, which let them avoid paying principal in early years of the loan. That’s down from 17 percent a year earlier.
Another 12 percent combined traditional mortgages with home equity loans or other lines of credit. Nine percent used mortgages that let them choose what to pay each month, and 3 percent took out mortgages that let them skip some payments.
“Thirty-eight percent of borrowers said they used “creative” or “pay option” mortgages, up from 33 percent a year earlier.”
Don’t act too fast. This will take a few years to unravel. The toxic loan #’s have gone up this year. Write off 2007, not to say there won’t be some bargains. It will get real interesting 2008-2010
Hat tip out to Little Silvered at the Shore Bubble Blog for this piece, a press release from lender New Century.
New Century Financial Corporation to Adopt Additional Lending Best Practices Designed to Enhance Fair and Informed Access to Credit
http://biz.yahoo.com/prnews/061012/lath070.html?.v=78
The changes that the company plans to adopt consist of enhancements to disclosures, controls, product design and underwriting. These changes include:
* Tightening underwriting guidelines for its adjustable-rate mortgage
programs for at-risk borrowers. This includes using the fully-indexed
rate minus 1 percent as the qualifying rate for these borrowers.
* Offering existing adjustable-rate mortgage (ARM) and interest-only
customers who qualify the option of refinancing into a low fee 30-year
or 40-year fixed-rate mortgage. Any borrower having problems meeting
their loan obligations should feel free to contact the company at one
of the following numbers to discuss options for keeping them in their
home: 1-800-509-8071 or 1-866-395-5880.
* Implementing plain language disclosures that go beyond legal
requirements in explaining terms such as prepayment charges,
interest-only features, adjustable-payment features, escrows for
insurance and taxes and other key features of a loan.
* Enhancing its processes for confirming the income information provided
on stated income loans. In addition to the closing certification
currently employed, the company will introduce a new front-end
confirmation early in the loan process to assist applicants in better
understanding the terms of their loan.
The company will implement these changes over the next few months and expects to announce further enhancements to its lending practices.
Looks like alot of people have been doing the CYA in the past few months. They obviously know this bubble is about to burst.
CYA = cover your ass.
SAS
http://www.msnbc.msn.com/id/15198805/
Heh, Greenspan: “I suspect that we are coming to the end of this downtrend…”
Right, for the first time in history a bust cycle will last 6 months:
Yup, things now look normal:
http://graphics10.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
Greenspan is probably senile based on what he is saying. So many people are delusional and refuse to face up to reality.Sad but c’est la vie!
grim never posts positive articles
I wonder why:
http://www.businessweek.com/bwdaily/dnflash/content/oct2006/db20061011_263089.htm?chan=top+news_top+news+index_top+story
he sure does post positive articles. i guess you dont see it that way from where you are sitting.
“I wonder why:”
Me too;
Hov- 40% off its high
Tol- 25% off its high
Ctx- 30% off its high
Len- 30% off its high
Positive??? Are you talking with your wallet or your wishes???
Buy a bottom or simple market retracement???
By the way, how much skin does JP have in this game??? Didn’t you learn during the dot com??
Grim Lies: Greenspan’s opinion on housing? Isn’t this the same guy that didn’t see the bubble in tech stocks? I’m not so sure he would do much better this time around.
Also, I think most people here would be willing to read anything backed up with legitimate data. Grim always seems to encourage opposing views. I’m open to reading positive articles on housing, but I think we have quite a ways to go before any “soft landing” victory can be declared.
My personal prediction is that we will see double-digit price corrections and many foreclosures over the next few years. I suppose there is always a chance this doesn’t happen, but I’ve set my personal financial planning based on this prediction so I’m ready to wait and see how it turns out.
One last thing; Grim “Lies”? I doubt it. Grim is an intellectual, not a liar.
Obviously grim has a point of view. We’ll see who’s right. 6 months ago there were a lot more people like you, only they were claiming that appreciation was not going to stop at all. Appreciation has stopped, and now were into depreciation. Those who were wrong have stopped posting. I expect you’ll do the same in 6 months.
YES!
http://www.bloomberg.com/apps/news?pid=20601103&sid=aLb6ONunIUXw&refer=us
News Alert !!!
Centex slashes quarterly profit forecast
Homebuilder has record cancellations; says buyers can’t sell existing homes
By Alistair Barr, MarketWatch
Last Update: 6:32 PM ET Oct 12, 2006
SAN FRANCISCO (MarketWatch) — Centex reported a 28% drop in orders and slashed its fiscal second-quarter profit forecast late Thursday as the home builder suffered from a record level of cancellations.
Net orders for the quarter were 6,828, 28% lower than last year’s second quarter, the Dallas-based company said.
Housing operating earnings for the quarter will be roughly $230 million, based on 8,525 home closings, the company added.
Second-quarter earnings from continuing operations will now likely be in a range of 65 cents to 75 cents a share. In July, Centex forecast fiscal second quarter earnings from continuing operations of $1.40 a share.
The results reflect “current record levels of home sales contract cancellations,” which have been driven by buyers’ inability to sell their existing homes, Centex explained.
“The housing market continues to adjust rapidly,” Tim Eller, Centex’s chief executive, said in a statement. “Cancellation rates that were well outside of historical levels diminished our earnings visibility this quarter.”
Builder shares have fallen heavily this year on a deeper-than-expected pullback in the U.S. housing market after a multiyear boom. The Dow Jones U.S. Home Construction Index (DJ_3728 : DJ US Home Construction Index
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DJ_3728693.86, +19.02, +2.8%) has dropped by more than a quarter so far this year as investors fret about higher mortgage rates.
Centex shares dropped 4.5% to $52.62 during after-hours trading on Thursday. The stock has dropped by roughly 25% so far this year.
Other big home builders have also reported problems during the third quarter.
D.R. Horton Inc. (DHI : D.R. Horton, Inc.
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DHI24.80, +0.61, +2.5%) , the nation’s largest home builder, reported a jump in cancellations earlier this week, while rival KB Home (KBH : kb home com
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KBH47.43, +1.68, +3.7%) said quarterly orders slumped 43% from a year earlier. See full story.
Centex said late Thursday that it’s focusing on generating free cash flow and building the strength of its balance sheet to prepare for “strategic reinvestment” when housing market conditions improve
Grim lies…lol, thats a funny one.
Well, its good to be challenged I guess, right Grim.
I don’t think Grim lies, but its hard to see any good news regarding RE and NJ.
Is there anytown in NJ that you think will feel the bite from the bust the least? And if so, why are they going to feel it the least?
SAS
grimlies = reinvestor101 ????
CF:
Darn, if I’da known about the “weekly breakfasts with students” [that there was food involved there], I would’ve gone there!
Well I don’t want to beat up on “grim lies”
( although I myself am a little bruised- you know being a subhuman realtor and all) but…. Grim posts the articles, he does’nt write them.
KL
He posts the articles, but seems to always leave out the ones that have a positive tone in the article.
There have been several in the past few days, and none have made it to the pages.
I guess he likes to leave out the ones that go against his argument.
rhymingrealtor Says:
October 13th, 2006 at 10:58 am
Well I don’t want to beat up on “grim lies”
( although I myself am a little bruised- you know being a subhuman realtor and all) but…. Grim posts the articles, he does’nt write them.
KL
rhymingrealtor: I thought I said “most realtors” not all :)
And besides, that little experience I had motivated me to get my license…so we may be in the same boat??
And besides, that little experience I had motivated me to get my license…so we may be in the same boat??
1st Just kidding I dont take it so hard
2nd 90% right
3rd Yes burned in real estate late 80’s
But I enjoy it and make a little money ( little) at it, I love homes, decor styles, and prefer buyers, even when it was easier to have a listing –
KL
gromlies: perhaps you can be so kind as to point exactly which articles youa re talking about.
Would it be Greenspand thinks the worst is behind us as far as housing prices, or that some analyst at JP Morgan thinks HBS’s hchave only one palce to go now,and that is up.
We are aware of these so called positive stories, we just do nto believe them. I do not believe Mr. Bednar is trying to hide any thing.
Trying to hide, then why not post them and let the readers decide.
my point is that he only posts articles that share his opinion, that should be told to all visitors.
grimlies: hs posts articles that share his opinion, because that is why he started the blog because of his belief (which I believe to be accurate) that we were in a housing bubble, and that the fundamentals did nto justify the prices.
One blof vs. the msm as well as the NAR and all sorts of other real estate related entities that were pumping the bubble up.
I think perhaps you should be questionong their motives as opposed to James Bednar.
Sorry should have said one blog vs msm etc.