From the Wall Street Journal:
Mortgage Mess Shines Light on Brokers’ Role
Job-Hopping Mr. Shaikh Left Trail of Lawsuits, Failed License Exams
By RUTH SIMON and JAMES R. HAGERTY
July 5, 2007; Page A1
In 2005, World Savings Bank honored Secure Financial Inc. with a “Top Broker Award.” It was a tribute to the sales prowess of Zak Khan, who arranged more than a hundred mortgages out of the small real-estate firm’s Union City, Calif., office.
But Mr. Khan, a onetime professional cricket player, wasn’t all he seemed. For starters, his real name is Altaf A. Shaikh. Contrary to California law, he never held a license to broker mortgage loans. Still, he managed to find jobs at a variety of mortgage firms since 1997, leaving a trail of unhappy borrowers and a lengthening list of criminal charges and lawsuits filed against him.
As defaults pummel the home-loan industry, Mr. Shaikh represents an extreme case of one of the big vulnerabilities in the business: mortgage brokers. In recent years, these middlemen have assumed a crucial role in handling surging volumes of business for lenders. Today, mortgage brokers are involved in about 58% of home loans, up from 40% a decade ago, according to Wholesale Access, a research firm in Columbia, Md.
Mortgage brokers originate about half of loans made to borrowers with good credit. Their presence is even greater in other segments of the mortgage market where defaults are rising. Brokers originate about three-quarters of subprime mortgages made to borrowers with scuffed credit, according to Wholesale Access. They also originate 70% of so-called Alt-A mortgages, a gray area that falls between prime and subprime. World Savings, which gave the award to Mr. Shaikh’s employer, made prime and Alt-A loans.
Mortgage brokers didn’t set the standards for the many aggressive loans that are now going sour. But they provided the low-cost sales force that made it possible for lenders to quickly ramp up production without hiring employees. As business surged, some brokers put borrowers into loans they didn’t understand, couldn’t afford or were otherwise ill-suited for, one reason defaults have skyrocketed. In the worst cases, brokers have been known to falsify information and resort to other fraudulent means to get mortgage loans approved. Critics say regulators and lenders haven’t done nearly enough to insure the quality and integrity of this independent sales force.
“The mortgage brokers are the wild, wild West of mortgage finance,” Sen. Charles Schumer, a New York Democrat, says in an interview. “We need to bring a sheriff to town.”
From the AP:
Buyers blame Beazer
Fraudulent tactics were so pervasive in a Beazer Homes housing development in Charlotte that corporate management must have participated or condoned the approach, according to a lawsuit filed against the Atlanta-based company.
The lawsuit, filed in Mecklenburg County Superior Court by 10 home buyers, names as defendants a Beazer sales agent, Roderick D. Williams, and Beazer Mortgage, which arranged five of the loans.
“This is an abuse-of-trust case,” said Charlotte lawyer Ken Davies, whose firm represents the plaintiffs, most of whom bought their first homes in Beazer’s Oak Hill development.
“Our clients all say, ‘I should never have bought this house, but I was told I could afford it and I could qualify for a loan.’ They had a right to rely on the professionals to guide them appropriately.”
The home buyers are seeking compensation for losses and punitive damages from Beazer.
Charlotte lawyer Ken Bell, who represents Beazer, declined to comment.
An analysis by The Charlotte Observer shows that at least 14 of 98 homes in Oak Hill have fallen into foreclosure, a 14 percent foreclosure rate. Nationally, less than 3 percent of home purchases end in foreclosure.
The newspaper’s analysis found that 10 of Beazer’s subdivisions in Charlotte had rates of 20 percent or higher. Oak Hill is a newer neighborhood.
From the WSJ:
Number of Unsold Homes Increases
Listings Rise 2.5%
In 18 Metro Areas;
Pending Sales Fall
By JAMES R. HAGERTY
July 5, 2007; Page B8
The number of homes on the market in 18 major metropolitan areas continues to grow.
Total listings of homes in these metro areas at the end of June was up 2.5% from May, according to figures compiled by ZipRealty Inc., a national real-estate brokerage firm based in Emeryville, Calif. The data cover all listings of single-family homes, condominiums and town houses on local multiple-listing services in those areas.
In another sign of weakness for the housing market, the National Association of Realtors reported this week that its index of pending home sales in May declined 3.5% from a month earlier to stand at 97.7. The index, which is down 13% from a year earlier, equates the 2001 level of activity to 100. The group considers a sale pending when a contract has been signed but the transaction hasn’t been completed.
The rise in the number of homes listed in June was broadly in line with historical trends. In recent years, inventories on a national basis have tended to rise in June. On average over the past two decades, though, they have fallen slightly during that month.
The continued growth in supply suggests further downward pressure on house and condo prices in parts of the country. After soaring in the first half of this decade, prices in many markets have been flat to lower over the past two years amid a supply glut and more-cautious mortgage lending.
Thomas Lawler, a housing economist based in Vienna, Va., predicted that the S&P/Case-Shiller home-price index, a national measure, will decline about 7% this year. He said that the housing market is unlikely to start recovering before mid-2008 at the earliest and that the recovery probably will be gradual. Among the wild cards is whether builders will slash production, which would reduce the glut of homes.
From Bloomberg:
Bank of England Raises Benchmark Rate a Fifth Time to 5.75%
The Bank of England raised its benchmark interest rate for the fifth time in a year as accelerating economic growth and surging house prices kept inflation above target.
The nine-member Monetary Policy Committee, led by Governor Mervyn King, increased the bank rate by a quarter-point to 5.75 percent, the highest since April 2001, the central bank said today in London. The decision was expected by 53 of 60 economists surveyed by Bloomberg News. The remainder forecast no change.
Inflation has held above the bank’s 2 percent target for more than a year as a boom in London’s financial services industry and rising home values powered the fastest economic growth in three years. The pound held near a 26-year high on speculation today’s increase won’t be the last.
“There aren’t clear enough signs the economy has reacted to previous hikes,” said Karen Ward, an economist at HSBC Holdings Plc, who left the central bank last year. “We may see another hike as early as September.”
From Reuters:
U.S. mortgage applications little changed
U.S. mortgage applications were little changed from the prior week, with an increase in demand for loans to buy homes offset by a drop in applications to refinance, an industry group said on Thursday.
The Mortgage Bankers Association said its mortgage applications index rose 0.1 percent to a seasonally adjusted 619.4 in the week ended June 29, nearing its lowest level since mid-February.
The MBA’s purchase index rose 2.0 percent to 437.3.
But the refinancing applications gauge dropped 2.6 percent 1,687.2 on a seasonally adjusted basis to the lowest this year.
…
On a four-week moving average, which smooths volatility, the overall applications index is down 0.2 percent at 637.1, the purchase index is up 0.2 percent at 445.4 and the refinancing index is down 1.0 percent at 1,762.6.
From Bloomberg:
Bond Risk May Soar in Europe on Subprime Losses, UniCredit Says
Goldman Sachs Group Inc., the world’s biggest securities firm, yesterday said the value of its collateralized debt obligations, securities backed by bonds and loans, dropped $1.56 billion, or 29 percent, to $3.79 billion in the second quarter. Goldman’s fixed-income revenue fell 24 percent because of home loan delinquencies, the New York-based firm bank said in its quarterly filing with the Securities and Exchange Commission.
“This is another drop in the subprime ocean,” Jochen Felsenheimer, head of credit derivatives research at UniCredit in Munich, said in an interview today. “A few months ago people might not have worried about such a filing, but in the current environment it’s something a little more scary.”
CDOs made up of bonds backed by subprime mortgages will lose $125 billion as defaults rise, Joshua Rosner, a managing director at investment research firm Graham Fisher & Co. in New York, told Bloomberg news last week. Investors may respond by cutting risk across the debt markets, causing the iTraxx Crossover index, Europe’s most widely traded index of corporate credit, to climb as high as 300 basis points from 231.5 basis points, according to Falsenheimer’s report.
JB/Others-
Do you happen to know what year the MBA index is set against?
JM
I believe the baseline for all indicies, 100, is set against a week’s worth of activity sometime in mid-March 1990.
jb
From MarketWatch:
Private sector adds 150,000 jobs in June
Employment in the U.S. private sector grew by 150,000 in June, the fastest rate in seven months, according to the ADP employment report released Thursday.
The report hints that the nation’s nonfarm payrolls rose about 175,000 in June after adding in government jobs, stronger than the 130,000 estimated by economists surveyed by MarketWatch. The nonfarm payrolls figure will be released Friday by the Labor Department.
The report shows “an acceleration of employment,” with the average gain over the past three months rising to 103,000 from 75,000 in the three months ending in April, said Joel Prakken, chairman of Macroeconomics Advisers LLC, which calculates the report from payroll data provided by Automatic Data Processing Inc.
“The acceleration of employment is broadly consistent with the upturn in [gross domestic product] growth early in 2007 and other labor market indicators such as unemployment claims,” Prakken said.
10y yield back up around 5.10% this morning..
jb
I find it mildly amusing that pending sales are falling. Who are these uninformed buyers?
It is simple logic: look at the rise and fall of the last housing crash. Now see this recent one had a much, much higher rise.
Thus, the fall will be much, much greater than last time.
Is it possible these ‘pending sales’ folks are JUST now finding out about the internet and doing research?
I really feel bad for anyone who bought a house from Jan 2007-right now. Their house will have a paper loss of 50k – at least – by year’s end.
I’ve been to a few of those Beazer sites in the Charlotte area. Was not too impressed with the quality of construction and thought a higher then average number of people living in them looked kind of like bumpkins. Not surprised at the high default rates.
There are lots of nice developments in Charlotte whose residents don’t have the bumpkin look.
From NY Post:
PHANTOM JOBS NUMBERS COULD BE FED’S UNDOING
http://www.nypost.com/seven/07052007/business/phantom_jobs_numbers_could_be_feds_undoing_business_john_crudele.htm
Tomorrow’s labor statistics could be decent (maybe even better than that) without there really being an improvement in the economy.
Suddenly my competitors at other publications, like The New York Times, are all over the notion that the government’s labor figures are inaccurate. Well, they’ve just re-invented the wheel and discovered fire.
This column has been saying for years (nah, more than a decade) that the monthly figures on employment and joblessness being put out by Washington were as reliable as an Atlantic City clairvoyant.
The figure coming out tomorrow will be no different, except that the June employment numbers could have a bigger than normal impact on the financial markets because of the light trading volume caused by the July 4th holiday falling smack in the middle of the week.
Wall Street thinks there will be an increase of 125,000 jobs, compared with the healthy 157,000 that were supposedly created in May. (Remember, I don’t believe these growth levels. I’m just playing a guessing game as to what the government will report.)
… there probably wouldn’t have been any job growth in May if the Labor Department hadn’t added 203,000 phantom jobs for companies it believed were too new to count.
“Our clients all say, ‘I should never have bought this house, but I was told I could afford it and I could qualify for a loan.’ They had a right to rely on the professionals to guide them appropriately.”
Personal accountability? Anyone? Anyone?
Since when is a salesperson a “professional” you “rely on for guidance”. It’s their job to separate you from your wallet and your job to be skeptical, ask questions and look out for your own best interests. YOU’RE BUYING A HOUSE. This probably the single biggest financial transaction of your life. What ever happened to caveat emptor?
I really wonder how many individuals believe that mortgage brokers and originators have a fiduciary responsibility/obligation to the borrower.
Perhaps this misconception harkens back to a time when banks and S&Ls were the primary home mortgage lenders. Do borrowers believe these lenders are, “the bank”, so to speak, that these lenders actually have “skin in the game”? Do these borrowers believe that the lenders have done the due diligence for them? The rationale behind the misconception seems plausable.
“Why would the bank have given me the loan if they thought I couldn’t pay it back? Those bankers are smart fellows, they don’t want to lose money. If they thought we couldn’t pay, they wouldn’t have given us the loan.”
Sadly, I don’t think they realize that these lenders aren’t “lenders” at all, they are simply middlemen and toll-takers in the transaction.
jb
JB [14],
Who has more of a fiduciary responsibility than our Fed? Every bandit, mortgage broker was armed [no pun] with data that promoted their case for arm’s. “Don’t believe me?” “Look at what Alan Greenspan says” [Feb,2004];
“American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home.”
“Calculations by market analysts of the “option adjusted spread” on mortgages suggest that the cost of these benefits conferred by fixed-rate mortgages can range from 0.5 percent to 1.2 percent, raising homeowners’ annual after-tax mortgage payments by several thousand dollars. Indeed, recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade”
http://www.federalreserve.gov/boardDocs/speeches/2004/20040223/default.htm
bairen #11,
I’ve been to a few of those Beazer sites in the Charlotte area. Was not too impressed with the quality of construction …
Newbie question: What do you look for when trying to find out the quality of construction? What are some of the tell-tale signs of good or bad construction quality? I hear people say they visited developments and thought the construction was good or bad, just trying to understand the process by which they arrive at that conclusion.
ISM headline comes in strong..
From MarketWatch:
U.S. June ISM nonmanufacturing highest since April 2006
U.S. June ISM nonmanufacturing 60.7% vs. 58.2% expected
What ever happened to past performance is no guide to future performance. In addition to this, AG assumed that Americans are market timers. I guess this assumption was a tranche of the data mining/monte carlo simulation.
#16
You want to see if possible, a house that is new but has been up for 6 months or so. This gives the house time to show signs of bad construction. Gaps in spaces between walls and moldings, light fixture installs, floor and tile jobs being exact and cut correctly. All these are important and some do not show up until after the house has had time to settle. Cracks in paint on walls show foundation settling, which can indicated that proper procedures to ensure that foundations are dug and poured were possibly not followed correctly. Anyone can put some shoe polish on a house to make it look good on day one. It is after a few months that these problems start to appear when substandard materials are used. Sometimes it can take a decade for substandard materials to show, this is where builder reputation is most important.
I actually think mortgage brokers should have a fiduciary responsibility to the borrower.
I think it’s kind of a “social justice” issue. As you move up the wealth scale from lower-middle class to upper class, the less of your net worth is likely tied up in your primary residence and the more exposure you have to other investments such as stocks.
This means that the wealthier you are, the greater the percentage of your net worth is exposed to investments where you enjoy the legal protection of working with investment advisors or brokers who are required by law to act in your best interest.
It seems unfair that for a person who’s only big investment is their home, doesn’t get to enjoy this same protection.
That being said, individuals still need to do their own homework and still need to be aware of what they are signing.
#19 Syncmaster
When I walk around the model homes I do unscientific things like walk around the floors to see if the floor gives, makes noise, tap the walls randomly to see if it feels hollow, look at the outside of completed and sold hoems to see if they are already showing signs of wear and tear. Older homes I check ceilings and basements for signs of water damage, if I can smell mildew, see exposed wiring, does it look like ther have been lousy DIY projects done to the place.
After visitng older homes and developments under construction you kind of develop a feel if something seems really cheaply made or is good construction, well maintained.
Buying in Jan 08 #10,
As you point out its a paper loss which only mattters if you sell during the downturn.
I dont think you need to feel bad for those who bought “Jan 2007-right now” and dont try and sell by year’s end. Paper losses are just like paper gains, which many on this board refer to, they dont mean squat.
I really feel bad for anyone who bought a house from Jan 2007-right now. Their house will have a paper loss of 50k – at least – by year’s end.
Mike NJ, bairen, thanks.
On the topic of ‘builder reputation’, is there a source (like Consumer Reports for consumer products) that collects and analyzes data?
ps. I thought all homes settle with time. Are we saying a settling foundation is a sign of poor constr.? Or that cracks in paint are indicative of more settling than normal?
From the State of New Jersey Commission of Investigation:
The Good, the Bad and the Ugly (PDF)
New-Home Construction in New Jersey
The Commission opened an investigation into new-home construction and inspection issues in July 2002 after receipt of a referral from the Office of the United States Attorney in Newark involving complaints filed by new-home buyers. In subsequent interviews with Commission staff, the buyers referenced a spectrum of problems in new-home construction, including shoddy and negligent workmanship, widespread inspection irregularities, potentially dangerous building code violations, and an unresponsive system of remediation. As the inquiry progressed, the range and volume of these complaints, together with the fact that they involved different housing developments and different builders in multiple New Jersey municipalities, suggested a broad and disturbing pattern.
Rigorous investigation and analysis confirmed an astonishing statewide panorama of waste, fraud and abuse. Casting a broad net that reached into every corner of New Jersey, the Commission found a system in which the public trust has been thoroughly shaken by graft, by greed and incompetence and by the failure of government to fulfill its fundamental duty to protect the safety and welfare of citizens. This is a system mired in the past, a system utterly incompatible with 21st century standards and expectations, a system that, in many respects, is as fractured and as imperiled by structural flaws as the problem-plagued homes it has produced.
for some reason, I have it in my head that the best homes were built in the 1920s or 30s. I know nothing about construction though.
That document should be required reading for anyone considering the purchase of a new home in NJ.
jb
From Fortune:
Subprime contagion?
While Bear Stearns is the most recent financial institution to find itself caught up in the subprime-mortgage quagmire, the three credit-rating agencies – Standard & Poor’s, Moody’s (Charts), and Fitch – may be the next ones to see their good names dragged through the mud. The reason? Ohio attorney general Marc Dann is building a case against them based on the role he believes their ratings played in the marketing of risky mortgage-related securities.
“The ratings agencies cashed a check every time one of these subprime pools was created and an offering was made,” Dann told Fortune, referring to the way the bond issuers paid to get their asset-backed securities (ABSs) and collateralized debt obligations (CDOs) rated by the agencies. These ratings run from AA for debt with the lowest risk of default all the way down to noninvestment- grade bonds, which many pension funds are prohibited from purchasing in their charters. “[The agencies] continued to rate these things AAA . [So they are] among the people who aided and abetted this continuing fraud,” adds Dann.
…
Dann and a growing legion of critics contend that the agencies dropped the ball by issuing investment-grade ratings on securities backed by subprime mortgages they should have known were shaky. To his mind, the seemingly cozy relationship between ratings agencies and investment banks like Bear Stearns only heightens the appearance of impropriety. In addition to receiving fees from bond issuers that want ratings, S&P, Moody’s, and Fitch do not vet data provided by these customers – information the agencies use to make their credit assessments. It’s a bit like a take-home final. Or as Moody’s puts it in its own code of conduct, “Moody’s has no obligation to perform, and does not perform, due diligence.” The other two agencies have similar provisions.
Moody’s and its cohorts might have some wiggle room. “The agencies are on fairly strong ground that their ratings are just opinions, but that doesn’t absolve them from liability risk,” says Steve Thel, a securities law professor at Fordham University.
…
Dann contends also that the ratings are used as benchmarks by institutional investors. He is not alone in this assessment. According to experts in structured finance valuations, the ratings agencies are the central drivers, particularly in the riskier areas of asset-backed securities markets. The pool of buyers would be much smaller without a rating because pension and mutual funds hold only investment-grade bonds, says Christopher Whalen, who sold asset-backed securities at Bear Stearns and is now a principal at Institutional Risk Analytics, which provides tools to credit officers to assess bonds.
“The rating drives everything,” adds Sylvain Raynes, a former Moody’s analyst and currently a principal at R&R Consulting, a firm that examines these securities.
Skep,
The houses that were built in the 1920’s prior to the stock market crash are usually hollow hall construction – no insulation in the walls. The area between the outer wall and the inner wall is open boards and beams.
One of my relatives in Minnesota bought a really nice 1920’s house, but needs to retrofit to get insulation into the walls. There’s a process where they somehow poke holes in the wall and get it in, without taking down the entire wall.
Another thing with the older houses – the room layout can be awkward. With some of those houses, they built the exterior first and then figured out the room layout after the fact.
Graft? In New Jersey??
#28
interesting– so was there any “golden era” of home construction, or is it all pretty much equivalent?
I see some people, FHB, putting their neck out within the last few months on some pretty intimidating lending methods. Even when denied on their first application, they go back to 2 or 3 other places in an attempt (which succeeds) in getting approved for 40-50% of income in places that have seen some and are continuing to see drop in prices.
These are expanding families that are buying places that they KNOW won’t be good for them in the coming years with new additions.
I don’t get it.
sync,
Also…
1] Don’t forget those big holes in the wall behind furniture placed to cover it.
2] Flush all the toilets at once.
3] Check the tiles next to the bath tub. Constant dripping from the tub could have caused some of the wood underneath the tiles to rot.
4] Plug the toaster and microwave in consecutive power slots in the kitchen. Switch them on together and check if the circuit trips.
http://www.cnbc.com/id/15840232?video=407459601&play=1
hehehehehehehehe
If brokers have a fiduciary responsibility to the borrower, that will mean they will no longer be able to sell most kinds of reduced doc loans. If brokers put a borrower into a No Ratio, NINA, or some other program that does not calculate a debt/income ratio, they are doing so because they know the borrower does not make enough income to qualify. Most loan apps start out with the broker trying to do it as a full doc. Where do you work and how much do you make? is one of the first questions. If the answer is, “I make $10,000/year and I want to borrow $500,000”, then the broker will look at a reduced doc option.
I really don’t have an opinion one way or the other on this but if they start requiring a fiduciary responsibility, that will mean a huge change in the way the business gets done.
From Reuters:
H&R Block falls as mortgage unit loses credit line
Tax preparer H&R Block Inc. said the subprime mortgage unit it is selling has lost a credit line, lowering its borrowing capacity closer to the minimum needed for the sale to go through.
H&R Block shares fell as much as 3.9 percent on Thursday.
In a late Tuesday filing with the U.S. Securities and Exchange Commission, H&R Block said Lehman Brothers Holdings Inc. did not renew a “warehouse” facility with the subprime unit, Option One Mortgage Corp., after it expired June 28.
skep,
I don’t know.
But what I’ve heard/read is that some of the houses built in the 1940’s were better than the ones built in the 1950’s.
Scribe,
Really?
I heard that homes built in the 1950’s were better than the ones built in the 1960’s.
:-P
Subprime contagion?
Ohio’s attorney general is investigating the role that credit-rating agencies like Moody’s played in rubberstamping dicey bonds
http://money.cnn.com/2007/07/05/news/economy/subprime.fortune/index.htm?postversion=2007070511
You can find good and bad examples of construction throughout the years. There is no magic year. Keep in mind that older homes were built to standards much more lax than newer homes. While these homes might be well built from a structural standpoint, some still require a considerable amount of upgrading to bring electrical, plumbing, heating, and efficiency-related systems up to current standards.
While some of these old homes tend to have “good bones”, that shouldn’t be a panacea for a potential buyer.
jb
Lenders have a responsibility to protect their interests. Lending money to people who will inevitably default is not a smart business decision. OTOH, if people can’t do the math themselves to determine what they can afford, there’s no hope left for the sheeples. You can’t save people from themselves.
Lenders have a responsibility to protect their interests.
Who are the lenders and what are their interests?
It can be argued that the shift to the “originate-to-securitize” model has created a system in which “responsibility toward the borrower” runs contrary to profitability.
Lending money to people who will inevitably default is not a smart business decision.
If the mortgage industry still operated under the “originate-to-hold” model, I would agree with your statement. Unfortunately, the originators are no longer holding these loans, they profit based on the origination and subsequent securitization of those loans. When your business is “Originate-to-securitize”, the more loans you make, the more profit you make. Or perhaps more importantly, if you stop making loans, you go out of business.
jb
but if they start requiring a fiduciary responsibility, that will mean a huge change in the way the business gets done
Most loan apps start out with the broker trying to do it as a full doc. Where do you work and how much do you make? is one of the first questions. If the answer is, “I make $10,000/year and I want to borrow $500,000″, then the broker will look at a reduced doc option.
Versus today it would be a big change, but what we have today is unsustainable and needs to change. What really change the way business is done is the ability to ship loans out the door so easily. If this is really here to stay, then we need to update the consumer protection laws to reflect the new way business is done.
Not to many years ago, it wasn’t as easy to repackage loans & ship them out to Wall Street before they went sour. The best interests of lenders & borrowers were more closely aligned because a lender had skin in the game and had a vested interest in getting repaid. Because of this, a fiduciary responsibility to the borrower perhaps wasn’t necessary.
It used to be, if you said, “I make $10,000/year and I want to borrow $500,000″, the loan officer would politely smile, offer your kids a lollipop, and send you on your way.
Ok,
Here are some of my tips for checking construction (that may overlap a bit with what others have said):
– Go to the basement and check the sill plate (the piece of material, could be wood or metal, that the framing is attached to). I mean physically touch it, run your hand on it. If it’s wet or crumbles or seems dried out…that’s a flag.
– Check for cracks in poured concrete or where cinder blocks are separating – flag.
– Take a small carpenter’s square (or even a try square) and go outside and fit the house into that. If it’s out of alignment and doesn’t look square, turn around and walk away…
– Open and close all closet and interior doors, as well as any built-in’s drawers or cabinet doors to see if there is any problems closing. This will give you an idea of the overall carpentry work and how much the house is settling (if it’s not obvious).
– Look for signs of new painting in bathrooms to see if they are trying to cover up mold issues.
Sorry, got to run…I’ll post more later if people are interested.
JM
#22 Except you are paying that paper loss every month, plus all the interest, plus it ,may be years before you make up that 50k loss.
Paper or not a loss on a housecan be felt much more than a loss on a stock, and the psychologial impact is devastating.
It does not matter what decade a home was built in if it was not maintained properly over the years.
I’ll never forget that when my husband and I went to get pre-approved for a home loan from our bank, HSBC, the mortgage loan officer tried hard to convince us that we could afford almost twice the size of the loan that I had already calculated was within our affordability.
I had already crunched the numbers and had my mind made up about the loan amount we could afford.
But I left very puzzled, because you would think that a bank, YOUR bank, would give you more responsible information.
And plenty of stories coming about outright cases of fraud committed by lenders, where they switch documents and terms right before you’re about to sign, or even in extreme cases, alter the document after you’ve signed.
“may be years before you make up that 50k loss.”
May I ask how we are coming up with a $50k loss? Where did this number come from? Are we talking about a $50k loss on a $2 million home? Homes lose a percentage of their value, not a fixed amount, so, right off the bat, I know that nobody knows what they are talking about. Everybody does not lose $50k, unless their homes are all worth the same.
Good timing with this CNN/Money piece. No discussion about mortgage broker responsibility is complete without at least touching on YSP.
Yield spread premiums can bite you
The yield spread premium (YSP) is a mystery to most home buyers, but it would pay them to get more familiar with this little understood feature of the mortgage business.
It’s the fee a broker gets for selling a loan above the par rate, or the lowest interest rate a borrower qualifies for. It’s a standard industry practice, but it can also be an incentive for abuse.
couple buys a new house and qualifies for a 30-year fixed mortgage with a 6.5 percent rate. Their mortgage broker gets them a loan at 6.75 percent. The lender then pays the mortgage broker a percentage of the total loan based on the 0.25 percent difference. That’s the yield spread premium.
Even though they paid the extra quarter point, the couple probably got a better deal than they could have found on their own. Brokers can also guide consumers through the maze of confusing paperwork, including filling out loan applications.
That’s why, according to David Berenbaum, spokesman for the National Community Reinvestment Coalition (NCRC), brokers originate up to 70 percent of all mortgages.
But the larger the yield spread, the more a broker earns, and that can tempt them to steer borrowers to higher interest loans.
…
The big money for unscrupulous brokers, however, lies in steering borrowers into higher cost loans. A prime, fixed-rate loan at par may earn a broker a YSP of one percent or less, but a hybrid adjustable rate mortgage (ARM) can pay four percent or more.
The Center for Responsible Lending (CRL) has said that inflated YSPs are included in 85 to 90 percent of all subprime mortgage loans.
Borrowers of hybrid ARMs, nicknamed “exploding” or “toxic” ARMs, often get stuck with prepayment penalties that penalize a borrower for paying off a loan early — which can run into the equivalent of six months of mortgage payments. They guarantee lenders will get back their initial outlay over time and lock consumers into high-priced loans.
It used to be, if you said, “I make $10,000/year and I want to borrow $500,000″, the loan officer would politely smile, offer your kids a lollipop, and send you on your way.
I’ve been in this business for over 15 years. Everything I learned in the first ten was pretty much thrown out the window. The “originate-to-securitize” model has certainly led to some problems over the past few years. It can also change things quickly though. If all of a sudden Wall St. stops buying reduced doc loans, that entire market segment could come to a screeching within days. I’m suprised it hasn’t happened yet. As this crises deepens, it will be interesting to see how that plays out. Companies who originate mortgages now have handed over the power of what they can and can’t do to another party. They’re just order takers along for the ride.
I have some news for everyone: I might (KNOCK ON WOOD) be getting an offer on my house this week!!!!!!
If all of a sudden Wall St. stops buying reduced doc loans, that entire market segment could come to a screeching halt within days.
Sorry for the typo
The difference between 20 years ago and now :
One of my brothers bought a house in the mid-1980’s, for about $125,000.
While he was going through the mortgage application process, he asked them: If I were to increase my down payment by X dollars, what would that do for my interest rate?
They basically sneered at him: You don’t have X dollars more. At that point, they knew everything about you – all of your bank accounts and balances.
So he said: My father will give it to me.
They made my father write not one, but a series, of letters attesting that it was a gift and not a loan. My father was getting ticked off: What about GIFT don’t you understand?
#50, Trol-la-la-la
At what % below asking will you bite?
I am only willing to sell for up to $30k below asking price. If the offer is less than this, I will counter. These people seemed interested and I doubt they will make a lowball. Either they will make a REAL offer or they won’t make one at all.
From Forbes:
Mortgage Lending’s Benevolent Bureaucracy
Borrowers with commercial subprime loans are now ending up in foreclosure twice as often as borrowers with FHA-insured loans, said Brian D. Montgomery, assistant secretary for housing and the federal housing commissioner for the U.S. Department of Housing and Urban Development, at an agency forum last week.
…
A new report by the Government Accountability Office catalogs how dramatic the FHA’s decline in market share was: Between 1996 and 2006, the FHA’s share dropped 25 percentage points, from 32% to 7%, among minority borrowers. That’s the same class of borrowers that (according to the Center for Responsible Lending) provided the single-largest rush into the subprime mortgage market. In census tracts with the highest concentration of minorities and lowest median incomes, FHA market share plummeted 31 percentage points, while subprime’s share rocketed 28 points.
The GAO report linked the drop in FHA’s share of the overall mortgage market (from 19% to 6%) to the popularity of adjustable-rate mortgages and other unconventional loan products generally disallowed in the FHA program, and the hassle of filing the paperwork to do an FHA loan. Of course, it is just those loans the FHA couldn’t insure–adjustable-rate and low-documentation loans–that are now showing the highest default rates.
Greed also contributed to the FHA’s market share losses. Loan officers made fat fees selling borrowers risky interest-only and zero-down payment loans, which the FHA won’t insure. Another factor: The National Association of Mortgage Brokers told GAO that many of its members couldn’t afford to meet the FHA’s financial requirements for brokers writing FHA-insured loans. Yet those requirements don’t seem onerous; a brokerage business must have a minimum net worth of $63,000 and provide annual audited financial statements.
…
But what’s really making the difference for the FHA now is that conservative is coming back in vogue. The agency refinanced 60,400 conventional loans in fiscal year 2006 (ended Sept. 30), up 80% from fiscal 2005. During the first seven months of the government’s 2007 fiscal year, FHA refinancings of conventional loans jumped another 84% compared with the same period the year before.
It turns out the old FHA isn’t obsolete after all.
Can someone with MLS access give me the status of 2707045? Thanks
NNJBubble,
It’s been withdrawn:
ACT ALBEMARLE ST $899,900 2/22/2007
PCH ALBEMARLE ST $874,990 4/6/2007
PCH ALBEMARLE ST $850,000 5/14/2007
W-C ALBEMARLE ST $850,000 6/13/2007
ACT ALBEMARLE ST $825,000 6/13/2007
ACT* ALBEMARLE ST $825,000 6/20/2007
U/C ALBEMARLE ST $825,000 6/26/2007
I meant Under Contract!
Mortgage Lender Implode-o-meter being sued:
Loan Center of California Sues Mortgage Lender Implode-O-Meter; Motion to Strike Filed
Plenty of mortgage fraud to go around. No wonder the country has a negative savings rate!
Real estate promoter pleads guilty in investment scheme
ATLANTA: A real estate promoter pleaded guilty Tuesday to stealing tens of millions of dollars from investors in a pyramid scheme and using the money to pay for jewelry, luxury automobiles, and credit card and tax bills.
http://www.iht.com/articles/ap/2007/07/03/business/NA-FIN-US-Investment-Scheme.php
and this…
Web Help for Getting Mortgage the Criminal Way – New York Times
“There is a whole underground world — an online cottage industry — that has grown up that allows anyone to commit mortgage fraud,” said Constance Wilson, …
http://www.nytimes.com/2007/06/16/technology/16fraud. html?ex=1183003200&en=42af93dc916ca2fa&ei=5070
Sorry, not sure if that last link is valid.
>>Older homes I check ceilings and basements for signs of water damage, if I can smell mildew, see exposed wiring, does it look like ther have been lousy DIY projects done to the place.
most older homes fit at least a couple of these categories. the challenge is determining the extent of the repairs. that’s what a good home inspector is for.
Don’t forget that older homes have 2 important problems that you will not see: Asbestos and lead paint/pipes. Lead and asbestos are both outlawed in the use of home construction today.
The article below may help shed some light on why the housing market is drying up.
http://www.mortgagebankers.org/NewsandMedia/PressCenter/55453.htm
“The percentage of subprime loans used for repeat and first-time home purchase increased from 46 percent to 47 percent. ”
According to an MBA survey of mortgage lenders 47% of purchasers obtained a sub-prime loans to buy a home in the second half of 2006.
With sub prime lenders exiting the market and underwriting standards tightening at the companies still open, fewer and fewer qualified borrowers are available to purchase homes.
Rising interest rates are also starting to eliminate buyers with good credit from the market because they can no longer qualify for loans due to insufficient income.
The reality is that the pool of potential buyer has dramatically been reduced because of changes in the mortgage industry and rising interest rates. This in not going to change anytime soon.
The only way more people will be able to qualify for homes is if one of the following three things happen:
1. They make more income
2. They are able to put a larger down payment together.
3. Housing prices fall to a more affordable level.
I would venture to say that continued falling prices is the most likely outcome
3b,
I guess everyone is different but many here have pointed to the irrelevance of the emotional component of buying. With that logic, a loss that is never realized but only impacts your psyche is also irrelevant.
Paper or not a loss on a housecan be felt much more than a loss on a stock, and the psychologial impact is devastating.
i bought a house built in the late 20’s. not one door on the second floor closed due to settling (and the fact that the prior owners never did anything about it). because of it’s age the settling occurred long ago so it was just an issue of planing the doors or replacing them. if you’re looking at a newer home then you have no idea when or how much the settling will stop.
How to avoid mortgage fraud
It can be as simple as a loan officer asking you to leave a line or two blank on your mortgage application or a real estate agent telling you it’s OK to say you make more money than you actually do.
http://www.thestate.com/269/story/100444.html
posted on Sun, Jun. 24, 2007
‘How to avoid mortgage fraud’ (#67)
This is a good article to bookmark, as it has a comprehensive checklist at the end.
I admit, I’ve got a thing for older homes.
It’s mainly due to the fact that newer homes tend to be devoid of architectural detail as well as (generally) lack real craftsmanship and quality.
IMHO, many newer homes seem like they have more in common with Vegas than reality. Nothing but a shoddy stick-box with a gaudy facade.
jb
I personally hate older homes. Most buyers today want new. Almost anytime a prospective buyer views my house they always ask what year the house was built in. I get this question A LOT. It’s almost like my house loses value every time it becomes a year older.
Boy, I would just love to buy an older home and tear it down……. I have seen some older homes that I would just love to nuke!
Jim,
I couldn’t agree more. I love older homes because of their craftsmanship and detail. I’d take a Victorian of any type over a new cookie-cutter townhouse. The problem is, that there are potentially a lot of structural problems that come with homes that are 100+ years old or more. I’d be afraid of it becoming something I couldn’t afford to fix up the way it needed. But then I guess there’s nothing saying that even a home that’s brand new or 20 years old won’t have it’s share of potential issues.
Since others are chiming in, I prefer homes from the turn of the last century.
Don’t get me wrong, just because a home is old doesn’t immediately make it a candidate for restoration or preservation. There are plenty of old homes that just aren’t worth the time or effort. Not every old home is a gem (and I’m a card carrying member of the National Trust for Historic Preservation).
However, we’re fortunate to live in an area that does have it’s share of gems, many of which are worthy of the kind of dedication that restoration requires..
jb
May I ask how we are all defining old vs. new? Im sure everyone can agree that something built last year is new and that something built in 1850 is old, but there’s a lot of time in between.
lurker,
For my taste, I’m saying 1930’s and older as far as the type of architectural style that was more common back then.
When we looked for our first house we seriously considered a home built in the early 1900s. We changed our mind once & for all when we saw the “beam” by the light of the sky coming through the slate roof in the attic; the “beam” was a tree trunk! I guess we just aren’t that adventurous! I love restored old homes with character.
We had been looking at a 1790’s home with barn in Putnam, for about a period of six months.
Gorgeous details, lovely, huge wrap around porch, lemon yellow with white detail on the outside, lots of quirky wood features inside.
But I was overwhelmed every time I thought about what might need replacing. There were other issues too, with the commute to NYC.
Eventually it sold with a price reduction. But I still remember it.
I prefer older homes too. Many (admittedly not all) seem to have better balanced rooms and windows that offer a homier feel and more interesting detailing. The ones I tend to avoid are those from the late ’40’s and ’50’s as they are invariably poky and the rooms small.
Todays houses, excepting custom, are too cookie-cutter to me.
I am lucky though, my husband has an education in architecture and worked in the construction industry for a while, he has a phenominal eye for problems and potential minefields.
i’d consider newer home those from the 50’s to present, sometimes even the 40’s. with older homes they have that character and charm but they will cost you to keep them that way. older homes are rarely up to date on all fronts so there’s always something to spend money on. in new construction you get everything modernized so there’s supposedly little to worry about. that is until the shoddy construction that seems so prevalent today starts to rear it’s ugly head.
maybe the best of both worlds is to get a well built home from the 60’s or 70’s.
“James Bednar Says:
July 5th, 2007 at 9:40 am
I really wonder how many individuals believe that mortgage brokers and originators have a fiduciary responsibility/obligation to the borrower.”
One of the problems today is that salespeople are specifically trained to sell and present themselves as “consultants” which confuses the less sophisticated.
my house has windows everywhere which is a huge plus. look at today’s construction and the lack of windows is apparent.
I’d draw the line sometime around the 30’s as well. Basis for that being the tail end of the craftsman movement.
jb
“maybe the best of both worlds is to get a well built home from the 60’s or 70’s.”
It might be best to custom build a new home based on the designs of an old home and using reclaimed materials from old tear-downs.
There are some real beauties moldering away in places like Trenton that go for a song. I wonder what it would cost to cart one away and scavange it to build a newer house.
I prefer colonials from the 1930’s and earlier and victorians. If I come across one this winter in good shape at a reasonable price may be tempted.
#83
that does sound ideal. old time style with modern plumbing, kitchen, electrical, etc. there are architects who specialize in this sort of thing in the area, but I’d imagine they are $$$
Most buyers today want new.
Yet it seems many here do not.
#50 At full price I am sure, in fact there may even be a bidding war, right?
#47 The original poster cam up with the hypothetical 50K.
I know a few people already who are 50k to 100k under water, and I know many form the 80’s who lost a lot of money, even in prestigious Bergen County.
But its different this time you say, to which I answer yes, it is different, its worse.
I skipped down, so if this is redundant, I apologize.
skep-tic
I don’t think there is such a thing as a golden era in home building but I can tell you, never buy a house built in the boom times.
As recent evidence shows, that’s when things get ugly. Not only do the builders look to cut corners to get the houses up faster, you have many new people coming into the building trades and getting on the job training, not good.
As the boom turns to crash, the marginal guys (and it is still guys far more than less) can’t find work and have to get out of the industry.
Houses built in the slow times have a much greater chance of having competent trade people doing the work of putting them together.
Best case scenario, find houses built by the little guys or even better the guy who lives there.
My house was built in the 50s by the guy I bought it from. When I had a small addition done the contractor could not stop talking about how well the place was built.
sorry to change topics, but do you any of you know how to see recent land sales in a town. I am looking for recent land/lot sales in Franklin Lakes…any ideas?
thanks.
About preferring new construction homes – I don’t know what the statistics are but I do know that in my neighborhood, you can get identical (aka cookie cutter) townhomes that vary anywhere from brand new to 15 years old. The 15 year old units have been selling for about 10-15% less than the brand new ones. I’m comparing 3bedroom units with garage+basement. Sq footage is about the same (the old ones are slightly larger).
From PR Newswire (no link)
Pennsylvania Banking Department Proposes Regulation to Protect Mortgage Borrowers
To protect borrowers who seek home loans in Pennsylvania, Acting Banking Secretary Victoria A. Reider announced today that the Department of Banking has forwarded a new regulation for consideration by the commonwealth’s Independent Regulatory Review Commission.
“It is projected that the number of foreclosures will skyrocket nationwide as a result of problems in the subprime market,” said Reider. “Let’s be clear: innovative mortgage products can help certain borrowers. The problem is that too many mortgages have been inappropriately sold to people who didn’t understand or couldn’t afford them. The goal of this regulation is to ensure that Pennsylvania families will never again be as vulnerable as they are today.”
The proposed regulation requires mortgage companies to use a department- mandated disclosure form to advise borrowers of, among other things, variable interest rates, balloon payments, prepayment penalties, negative amortization and whether the lender will escrow taxes and insurance for the loan. The regulation also requires mortgage companies to evaluate a borrower’s ability to repay the loan based on income, fixed expenses and other relevant factors.
“If a loan has an adjustable interest rate, the lender needs to make sure that the borrower will still be able to afford the monthly payments as they rise to the fully indexed and amortized rate. It’s not enough just to consider the initial ‘teaser’ payment,” said Reider.
The proposed regulation, which was the subject of public hearings in September, is part of a broader, ongoing effort by the Department of Banking to protect consumers in the mortgage marketplace.
Old homes have great character and an overall solid build feel to them. I rent the 1st floor of a 1920’s Victorian – 9′ ceilings, pine floors, and plaster walls.
Are there any homes built today that have these same qualities? Or is everything press-board and vinyl?
Damn….still kicking myself for taking the Accounting/IT career path instead of architectural drawing.
#88 3b
That is my main concern. I don’t mind too much buying a home and having it drop 10% as the bubble deflates if its a house I plan on living in for 10 or more years, my big worry is having it fall 20%+. that would be devastating. I thik it is impossible to accurately buy somethig right at the bottom, but near the bottom is good for me.
We saw a house that was built by the owner and it was the most godawful place. The layout inside was all weird, clusters of small, interconnecting rooms that gave it a very claustrophobic feel. There was an odd sun room that was obviously some sort of second kitchen and weird nooks and crannies all over the place. My wife said it made her think of Silence of The Lambs.
http://mlsli.com/uniDetails.CFM?MLNum=1947525&typeprop=1&start=1&rpp=100
lisooh, you said:
There are some real beauties moldering away in places like Trenton that go for a song. I wonder what it would cost to cart one away and scavange it to build a newer house.
There are house-moving companies that will lift a house off its foundation and move the whole thing on a flatbed truck.
Years ago, I was part of a group that rented a big white country house in the Hamptons.
The house had been moved from upstate NY and restored and this was a BIG house.
Ah….another Craftsman junkie! I love the craftsman style. I always gravitated towards bungalows but never knew why until I started studying this style. Yes, they tend to be dark, but also very warm and homey. We looked at one in Tenafly when we were house-hunting that was just a bit too expensive and a bit too small. Alas, there aren’t many in Bergen County…
“Yet it seems many here do not.”
Don’t worry about the buyers here. Most of them can’t afford new so even if they preferred new, they would still be forced to buy an older house. Got to kannekt. The buyers there have money and they start fussing if a building is 2 years old since that is not considered “new” to them.
Big Craftsman? You shouldn’t be thinking bungalow, you need to think Hapgood.
http://www.mtnlakes.org/History/
jb
Okay – here it goes,
Attached row homes & 50-60’s ranches 3 bedrooms- kitchen -livingroom – full high basements with garage attached.
Ain’t no accounting for taste (-:
KL
If we consider 6% selling costs (5% commission and 1% NJ transfer tax), anyone who buys a $835K house is $50,000 in the hole straight away. I’m not even considering opportunity costs that don’t apply in specific circumstances.
In a few years, all of the older homes in eastern Bergen County wil be torn down and replaced with duplexes and McMansions. It is already happening. There was an older home down the street form me that I liked a lot because it was HUGE! Just a few months ago, it was torn down and the builder is putting up 2 houses in it’s place.
“If we consider 6% selling costs (5% commission and 1% NJ transfer tax), anyone who buys a $835K house is $50,000 in the hole straight away. I’m not even considering opportunity costs that don’t apply in specific circumstances.”
I bought a hosue for $840k and I am not in a $50k hole. The most I will lose is $30k.
I’ve got my eye on this one here.
http://www.stickleyhomeforsale.com/
jb
New homes are better. If new homes are good enough for the rich people in Alpine, then who is everyone to say that older is better?
FYI: According to statistics, you are 6 times more likey to die in a fire in an older home than a newer one.
JB,
You’re not the only keeping tabs on that one…
What about the Frick house that you love to talk about so much? You know that it was built in the 30’s, don’t you?
jb
“What about the Frick house that you love to talk about so much? You know that it was built in the 30’s, don’t you?”
Yes I do. But I don’t love the house. I love the property and the location. If I bought it, I would tear it down.
Jim that house is incredible!
No, these homes are incredible!!!
http://njmls.com/cf/details.cfm?mls_number=2636642&id=999999
http://njmls.com/cf/details.cfm?mls_number=2718098&id=999999
Feel free to store your POS cape in the master bathroom…..
House p*rn..
jb
JB,
unmoderate
I was on street last weekend that had about 15 raised ranches in a row on it. It was sort of surprising– you would normally see at least a couple of teardowns on a street like this by now.
Design fads come and go and I am sure someday people will wonder how an entire street of McMansions continues to exist
Donald,
The most I will lose is $30k.
Just “closing costs” excluding inflation?
Also, no love for history, huh?
I actually agrre with Robert on something. I hate POS capes too.
I hate old homes. No love for history. I rented a 1940s cape once and a pipe burst at night. It was raining in the basement! I could not find a plummber at that hour and the landord did not care because she wanted to atend some stupid meteor shower. (Here is the scary part, she is a professor at Columbia University). Had I to do everything all over again, I would have just let the entire hosue flood. The same way she did not care, I do not care.
I called a realtor this morning because I was curious about a house in Montclair. The house just came out of attorney review and is under contract. Oh well, I guess. It looked like something I would’ve liked to investigate further as it had a nice yard, was on a quite street and was a true CHC although we’re talking only about 2000 sq. ft. or there-abouts.
So, we got to talking and she was very nice and she told me that anything that comes on the market in Upper Montclair or most of Montclair for that matter pretty much goes “quickly”. She asked me my price range and I told her somewhere in the 550K to 650K area because combined with my savings and equity in my current house that’s about the extreme limit I would (could) pay and still sleep nights. So, when I told her the range I could hear in her voice that that’s really not going to get me much as she didn’t come out and say it but I can sure as h*ll sense it. Yup…. 550K to 650K is NOT going to get much… swirl that one around for awhile.
She wasn’t abrupt or anything but it just further verifies what I’ve been thinking all along. If you’re looking for a house in a desirable nieghborhood then you either need to have a huge down payment (and I’m talking 30% or better) or be making really good dough. I could tell you this first hand because as a married couple both with so-called white collar jobs, with 6 years of equity PLUS the additonal 20% we originally put down PLUS our savings, we would be stretching to buy anything remotely decent in a decent town.
I don’t mean to burst anybody’s bubble but that’s the honest truth. The bottom line is any desirable areas in this part of the country is becoming more and more out of reach and if you’re a first time buyer, you can forget these Bergen or Essex towns unless it’s a sh*t dump and you’re happy with that.
The realtor said there are no shortage of buyers and I believe her because this house was on the market and gone within a few weeks. All this discussion, data, hypothesis, hoping, wishing, tea leaves, eight ball predictions is just that and believe me, I’m one the biggest pom pom waving maniacs there is rooting for slide. Unless you plan on moving to Phoenix or South Florida, it ain’t happening.
How is Montclair considered desireable? Don’t they have a bad school system?
My kids are in a private school, I couldn’t give a f**k about the schools.
>>Don’t forget that older homes have 2 important problems that you will not see: Asbestos and lead paint/pipes.
why wouldn’t you see them? asbestos on the pipes is easy you just visually inspect that in the basement. if it’s on pipes in the walls it’s nothing to worry about as it’s not airborne. asbestos in the paint is always present in older houses and everyone knows it. as long as you don’t have massive chipping around highly used areas (windows/doors) and you aren’t demolishing anything it’s not a problem.
Re: Which era of home building was better ?
1920’s thru 1960’s ?——-
It’s in my opinion very hard to say. Most of them have gypsum plaster for their walls and ceilings. Wood lath (used for about 200+ years) is a big problem in pre-1935 homes*.3/8″ Rocklath board was used for lath from mid-1930’s up to the final switch to dry-wall in the late 1960’s…. US Gypsum Co. was given the patent for “Sheetrock” brand ‘plaster board’in 1909———It took several generations for contractors AND home buyers to accept “plaster board” (drywall) over the traditional plaster (wetwall)….You will generally find most homes built before 1950 with plaster walls……The 1960+ houses were the turning point for drywall acceptance. Very, Very few homes had real plaster in the 1970’s–Except the real die-heart custom home builders and the few old plasterers who would never switch to plasterboard where you could “…put your fist through the wall..”— Most people agree that plaster houses are quieter than drywall…..and when cellulose insulation is blown in to the walls of any plaster wall house, you will have a very good combination of sound attenuation and energy saving…..
I had decided to learn as much about the plastering trade as I could in the early 1980’s from the few old timers who were still active in the business—-That is the biggest problem for plaster wall home buyers: A good contractor for restoration and repair——The other method is to ‘veneer’-3/8’s drywall over the plaster,but you generally lose the detail around the moldings and sometimes the ceilings come out ‘wavy’……….
* Concerning wood lath above: Most homes built before 1930 used this for the plaster base. By the beginning of WWII (1941) wood-lath ended. Since most of these homes had NO insulation installed originally in the walls and attics, most of the plaster ‘keys’ locking it to the lath has dried-up and broken away because of the unbearable summer heat in the empty wall cavities and non-insulated attic through all the years. I have seen ( going on estimates,,) ceilings with chunks of heavy plaster lying on the floor—If someone got hit with it, they would be seriously injured or killed….
So be very careful buying one of those cute Victorian (pre 1901) homes and factor in some costs involved in just one of many (in this case plaster) ‘little’ things (that add-up to big BUCKS..) in the renovation budget !
# Gary 117,
Real estate agents have been known to lie or be overly optimistic. Shocking but true.
Don’t forget how much people were willing to pay for tech and intenet stocks, 7 years later most are still 50% off.
I’ve seen 10% or more reductions in prices in Morris and Union counties in the last 4 months. There was nothing decent under 600k in Feb along the train line towns, now
renovated colonials are listed at 499k.
The price reductions seem to have picked up steam.
gary– did this realtor give a range that she thought would be reasonable to find what you’re looking for?
#110
Nice “structure” but it looks like something out of a 50-cent video…not very inviting.
skep-tic,
No, that was my range because anything lower than that was in the worst part of town and was absolute crap.
I meant how much do you think you’d have to spend to get what you’re looking for?
Say goodbye to older homes and hello to this:
Coming to a street near you:
http://photos.njmls.com/2712688.1.jpg
bairen,
This is my 2nd home and I’ve been through bidding wars and the look-see process so many times. Believe me, some areas are simply always going to be insulated unless you can tolerate small and/or a real handyman special.
skep-tic #126,
For those “desirable” towns in Bergen and Essex, around 600K plus is the starting point for anything decent.
gary #129
Why would you be surprised by this?
Nice houses out west in Podunkville are still listed around $500k.
schabadoo,
Actually, I’m not surprised. I guess I was somehow (I don’t know why) under the impression that prices dropped a little and inventory was making it possible to “haggle” a bit.
most of the stuff I see online between 600-800k looks wildly overpriced. I agree with JB’s comment the other day that there is considerably more value in the slightly higher end. It will take time, but I think there is a much larger glut of those more expensive homes and they will exert downward pressure down the line eventually.
re 127
Much of the housing stock here including that townhouse style is very unappealing to the older end of the boomer market due to the excessive stairs. They’ll all just have to move into elevator buildings.
grim (104)-
Beware sellers who are in love with their homes.
Every house near me has reduced their asking price.
That said, they’re still super-high. Here’s two in the sticks:
http://www.weichert.com/search/realestate/PropertyListing.aspx?P=9939867&cityid=7113
http://www.weichert.com/search/realestate/PropertyListing.aspx?P=10443579
Both $500k, both on the edge of civilization. Can’t imagine these if they were in Upper Montclair…
Coming to a street near you:
I don’t think it’s going to look like Fort Lee everywhere.
No love for history.
That says a lot. But remember, “Those who cannot learn from history are doomed to repeat it.”
jb, unmoderate please
Clot (134)
True. But that’s a very rare home.
JB,
What’s the history on that home: DOM, price changes, etc?
Have you seen the book by Oradell native Ray Stubblebine, “Stickley’s Craftsman Homes”?
Rich
gary,
Houses on the Montclair side of Clifton push near the $550-600k mark.
jb
so does anyone have any idea where i can find information on recently sold pieces of land or lots in frankin lakes?
What’s the history on that home: DOM, price changes, etc?
I don’t think it’s even listed, if it is I can’t find it.
jb
Thanks
I thought they would have listed it by now.
It’s still listed at Historic Properties.
Rich
“I don’t think it’s going to look like Fort Lee everywhere.”
True, but Fort Lee, Palisades Park, Cliffside Park, Fairview, Ridgefield, and Edgewater are already full of duplexes.
What Bubble,
In the last 6 months:
$1,399,000 OFC 884 CIRCLE AVE 2.2acres 1/8/2007
$1,145,000 RES 757 BUTTERNUT DR 1.26ac 5/15/2007
$1,000,000 RES 879 SENECA RD 0.95ac 1/31/2007
$997,000 RES 818 WINNEBAGO DR 1.04ac 2/16/2007
$850,000 RES 20 PULIS AVE 3.72 3.72ac 3/7/2007
$750,000 RES 289 HAVEN RD 2.076 2.076ac 1/30/2007
what bubble,
are you planning on buying a lot in Franklin Lakes?
From Reuters:
Braddock’s Galena mortgage hedge fund to liquidate
Braddock Financial Corp., a top performing hedge fund manager, on Thursday said it will liquidate its $300 million Galena Street Fund after concerns of subprime mortgage exposure triggered investor redemptions.
Redemptions from investors nervous about subprime mortgage crisis increased after the fund posted a loss of about 3 percent in the first quarter, Chief Executive Officer Harvey Allon said in an interview.
Given the performance, “people voted with their redemption requests,” he said.
JB
Have you updated your contracts spreadsheet for June?
If so, could you forward a copy?
Rich
https://njrereport.com/files/contracts.xls
Still waiting on GSMLS to update the June statistics.
jb
JB that house Stickley house is extremely sweet. I know it well, as I use to live in Cedar Knolls and always wanted it for myself. I’m sure they want some serious coin for it, but if I had the money I’d buy it too. If you’re into “mission/craftsman/shaker style” you should check out Stickley’s original workshop. It’s located on route 10 west in morris plains. On display are some really nice pieces–all done in quarter sawn white oak. If I’m not mistaken I think even Barbara Striesand donated a few.
jb,
FYI – 133 Westview Road (behind Applegates Farm); LP was 725K, 19 DOM. I don’t know what price tag it went to contract for.
Who did you talk to anyway?
jb
Gary- in my opinion you are just unlucky enough to be looking in the worst price range (600-800K). Where we are looking we have been utterly ahocked at how quickly subpar places go UC in that range. Up a little higher much is just sitting unless it is perfect. I *am* seeing price declines (100K at a time around the 1 M mark) so I cannot believe that the range below it won’t follow suit soon. I guess that range just has more available buyers right now. But soon no one is going to pay 799 for a poc when 849 gets them a really nice place.
I’m more interested in NJMLS statistics since few Bergen homes are listed in the GSMLS.
commanderbob a nice synopsis on plaster versus drywall. in my home the master bedroom plaster walls were in such disrepair due to bowing and cracking we just threw 3/8″ drywall over it to save time and expense. it’s held up well but to your point the ceiling has that ribbon look. we painted the ceilings an off white color to lessen the visual.
plaster walls have a more solid look and feel to them. the downside of course is irregularities and the extra time/effort to work around them if you’re doing renovation work. those wood laths obviously do not stand the test of time. every house and it’s aging is different but in most older homes (60+ years) you’ll see obvious effects of the plaster separating from the lath and becoming distressed. a house near me recently sold and the new owners ripped all the plaster off down to the studs, removed the laths, redid all the electrical and put up drywall.
>>in my opinion you are just unlucky enough to be looking in the worst price range (600-800K)
very true. it’s the entry price for starter level homes (4BR, 1-2.5BA) in nice towns so the demand is much greater considering most are bringing 2 incomes to the table and can make it work (assuming high pay blue or white collar professions). once you get to $850k+ million range you’re gunning for a different type of buyer.
“Gary- in my opinion you are just unlucky enough to be looking in the worst price range (600-800K).”
I definitely agree that the market for homes greatly dpeneds on the price range, not just the area. Anything over $800k talkes significantly longer to sell. I know this first hand! The cheaper the home, the more buyers there are. But I still think most homes in the $800k-$1.2 million range are overpriced. The only way you are going to get a home that is good value is if you are able to spend at least $1.4 million.
“Another thing with the older houses – the room layout can be awkward. With some of those houses, they built the exterior first and then figured out the room layout after the fact.”
That’s a plus in my book, and is the reason why 99% of newer houses are hideous.
The old timers did it right.
The only buyers in this market who will have the greatest advantage are those who can spend in excess of $800k. Those buying homes for less might not have as much power as they think.
Un,
Why do you see it as a plus? Because it’s more individualized?
Richard,
I believe it was with you that I was discussing the Livingston “downtown” development. Take a peek, surprised to see them coming up for sale so soon..
MLS# 2423255
Bellcourt
OLP: $899,000
Purchased 8/16/2006 – $894,000
jb
From Reuters:
After UBS hedge fund trouble, executives shuffle
UBS late Thursday announced it’s replacing Chief Executive Peter Wuffli with deputy CEO Marcel Rohner, among other executive management changes, following a hedge fund blow-up that proved costly for the investment bank.
Effective today, Wuffli relinquishes all of his functions at UBS. As a result, Raoul Weil will succeed Rohner as Chairman and CEO of Global Wealth Management & Business Banking, UBS said in a prepared statement.
…
In May, UBS, the world’s largest asset manager, shut down its in-house Dillon Read Capital Management after the hedge fund reported a $124 million loss due to bad bets in the subprime mortgage market.
Stepehen Colbert’s home is not that expensive considering he is a celebrity. The zestimate on zillow is only $792,000.
Donald
And you called another poster stalkerish for tracking down your home (after giving sufficient details) on the mls?
OK. Confession. I just had to go look up Stephen Colbert to see who he is.
>>I believe it was with you that I was discussing the Livingston “downtown” development.
jb, i didn’t think they were even occupied yet. maybe the SFH but not the townhouses. they’re still doing work on the front of the property that sits closest to livingston ave. i remember seeing the original sign in the front that said ‘Starting at $699,900″. strangely enough when the RE market turned sour this phrase disappeared.
“And you called another poster stalkerish for tracking down your home (after giving sufficient details) on the mls?”
I’m sorry, but can you tell me where I posted Colbert’s address? It is common knolwedge that he lives in Montclair.
The stalkerish act is seeking out and finding the address, not the posting of it.
Duckie – Zillow is way off the mark for most of Montclair. The ‘zestimate’ for my modest house is easily 100k less that what it is worth.
Colbert does not live in a McMansion, but I’d bet his house would sell quicker than yours.
I’m more interested in NJMLS statistics since few Bergen homes are listed in the GSMLS.
NJMLS stats are at the link JB posted above as well. Second tab.
https://njrereport.com/files/contracts.xls
Rich (138)-
Big whoop. Sticks, stones, a roof and a door.
104 –
Wow, just wow.
#131 Gary prices have dropped more than a bit, and lots of room to haggle
#128 gary NO area is insulated, none, period.