Schiff’s scathing commentary on the recovery

From Forbes:

Great Reflation Produces Mirage Of Recovery In Housing

Investors and politicians are being treated to some of the “best” home price data since the frothy days of 2006 when home loans were given out like cotton candy and condo flipping was a national pastime. The Case-Shiller 20 City Composite Home price index was up a startling 10.9% for the 12-month period ending in March. Prices in all 20 cities were up, with some (Las Vegas, Phoenix, and San Francisco) notching gains of more than 20%. Meanwhile the National Association of Realtors announced that April pending home sales volume reached the highest level in nearly three years.

The strong housing data are taken as proof that the economy has turned around and that a recovery is under way. Cooler heads may simply see how government policies have channeled money into real estate in order to reflate a bubble that has been collapsing for the last five years. Although the money is entering the market through slightly different paths than it did in 2005 and 2006, its effects on housing, and the broader economy, are the same as they were before the bubble burst. When the inevitable happens again, the ensuing damage will be eerily familiar.

After five years of dismal real estate performance and a lackluster economy, it’s hard to fault people for believing that rising home prices are a good barometer of economic health. There can be little doubt that rising home prices feel good. Even single digit appreciation can make modest home buyers feel like mini-moguls.

The truth is that most buyers cannot afford today’s prices without the combination of government guarantees and artificially low mortgage rates. The Federal Reserve has been conducting an unprecedented experiment in economic manipulation. By holding interest rates near zero and by actively buying more than $40 billion monthly of mortgage-backed securities and $45 billion of Treasury bonds, the Fed has engineered the lowest mortgage rates in generations.

At the same time, federal control of the mortgage industry has become nearly complete, with government agencies Fannie Mae , Freddie Mac , and the FHA buying or guaranteeing virtually all new mortgages. In addition, a variety of Federal programs, such as the Home Affordable Modification Program (HAMP) are in place to help keep underwater homeowners in homes that they could not otherwise afford. Taken together, these programs create far more favorable terms for home buyers than those that existed before the crash.

This trend has allowed a recovery in home sales even while the national home ownership rate has dropped to 65%, the lowest rate since 1995 (down from almost 70% during the last decade). Now that most of the available foreclosures have been picked through (with the rest log jammed with litigation and red tape), many of the new classes of investment buyers are striking deals directly with the large home builders to buy homes before they are even built. It is no coincidence that the southern tier markets with the fastest appreciation, and the fastest declines in inventories, have been those with the greatest participation of institutional investors.

The current combination of low rates and investor demand has succeeded in pushing up prices, but that doesn’t mean the market is healthy. For the first quarter of 2013, the Federal Reserve reports a 10% delinquency rate for residential mortgages (those with payments that are at least 90 days past due). This is more than 6 times the rate in the first quarter of 2006. In contrast, credit card delinquencies currently stand at 2.65%, the lowest rate in decades and 31% lower than the rate in the first quarter of 2006. Whether it is by choice, or simply by the ability to pay, Americans are clearly placing a low priority on paying their mortgages.

In the meantime, by blowing more air into a deflating housing bubble, the Fed is misdirecting money into a sector that investment capital should be avoiding. A successful economy can’t be built on housing. Rather, a robust real estate market must result from a healthy economy. You can’t put the cart before the horse. As a nation, we do not need more houses. We built enough over the last decade to keep us well sheltered for years. Private equity funds should be using their investment capital to fund the next technology innovator, not wasting it on townhouses in Orlando and Phoenix.

Of course the real risks in housing center on the next leg down, in what I believe will be a continuation of the real estate crash. We can’t afford to artificially support the market indefinitely. When significantly higher interest rates eventually arrive, the fragile market will again be impacted. We saw that movie about five years ago. Do we really want to see it again?

This entry was posted in Economics, Housing Bubble, National Real Estate. Bookmark the permalink.

90 Responses to Schiff’s scathing commentary on the recovery

  1. grim says:

    Repost from a curious anonymous poster late last night, I don’t want this one missed:

    Multiple all cash bids above asking says:
    June 5, 2013 at 12:22 am

    US Masters is pouring $$$ raised from Australia individuals into Hudson County residential real estate. When Austrialian finance people invest Australian money outside their country, they tend to lose most if not all of it. US Masters will continue the tradition. Westfield bucked the trend, however.

    Tracking what US Masters is up to is easy because the company’s stock is listed on the Australian Securities Exchange, requiring disclosure of detailed financial statements at regular intervals. Plus, the company releases details of each property it buys and what rent it expects. In addition, online tax records make their purchases easy to track. By now, active Hudson County real estate agents know them, and these agents can be helpful sources of information.

    US Masters is raising money faster than they can spend it. They are overpaying with impunity, then launching renovations on which they spend too much and take too long. Rent targets are being missed right and left. Ultimately, the Australian finance guys running this vehicle will have to choose between cutting the dividend or evolving into a Ponzi scheme in which existing investors are paid with the proceeds of newly recruited investors. Perhaps it is a Ponzi scheme already. This stock is going to zero. If I could short it, I would.

    The single family rental model just doesn’t work at scale in the Northeast. It is unmanageable, as Redbrick found out several years ago. A bunch of “really smart guys” with fancy educations raised money to buy homes in places such as Trenton and New Haven. They dramatically underestimated the vacancy loss and the expenses involved in operating the properties and supervising the people operating the properties – just as US Masters is doing today. Things like cleaning up after murder victims weren’t in the pro-forma. Redbrick lost most of its investors money and quietly disappeared.

    The logical owner of single family rentals in the Northeast is a local entrepreneur with:

    1) construction background – repairs and maintenance are cheaper if you can do the work yourself
    2) second language ability – makes it easier to supervise cheap immigrant labor
    3) relationship with building and housing inspectors – many of them are bribeable, especially in Hudson County
    4) muscle – need to kick out drug dealers and other low quality tenants

    Neither the Redbrick nor US Masters masterminds possess these attributes.

  2. grim says:

    From the Record:

    5,300 NJ homeowners to receive foreclosure-related payments

    About 5,300 New Jersey mortgage borrowers are about to receive checks of $1,480 each as part of a $25 billion settlement involving alleged foreclosure abuses by the nation’s five largest mortgage servicers.

    The payments come more than a year after the settlement was announced in February 2012 by federal regulators and 49 state attorneys general. The authorities had investigated practices such as robo-signing, in which mortgage industry representatives signed legal documents without checking them in their rush to evict homeowners in distress.

    “These payments are part of the effort to compensate borrowers for the mortgage servicing abuses they experienced,” state Attorney General Jeffrey S. Chiesa said in a statement.

    Some consumer advocates have criticized the payments as too small.

    “Someone forges documents and you lose your house, and they give you $1,500. That’s quite sad; it’s puny,” said Phyllis Salowe-Kaye, head of NJ Citizen Action, the state largest housing advocacy group.

  3. grim says:

    From LendingTree – NJ Averages the highest down payments in the country:

    http://marketing.lendingtree.com/pr/average_down_payment.pdf

  4. grim says:

    MBA mortgage index out in a half hour, going to be very interesting to see how sharply mortgage apps fell in the wake of the rate spike.

  5. grim says:

    Some good stuff over at CR, looks like new houses are getting bigger again:

    “Back to Bigger,” But on Very Low Volumes

  6. grim says:

    From the Huffington Post:

    HSBC To Be Sued By New York Over Foreclosure Abuses

    The state of New York plans to sue HSBC Holdings Plc for ignoring a law designed to protect struggling homeowners from being thrown into foreclosure without getting a chance to renegotiate their mortgages.

    The lawsuit being filed by state Attorney General Eric Schneiderman in Buffalo, New York, accuses HSBC of ignoring a state law that requires lenders to make a “request for judicial intervention” when they began a foreclosure action.

    That process requires a settlement conference to be held within 60 days to allow homeowners to negotiate an alternative to foreclosure.

    “Companies like HSBC are brazenly ignoring state law, leaving homeowners across New York stuck in a legal limbo where they can’t even get the legally required settlement conference that could help them keep their homes,” Schneiderman said in a statement.

  7. grim says:

    From CNBC:

    Mortgage Applications Drop as Interest Rates Surge

    Interest rates on U.S. mortgages continued to surge last week, rising above four percent for the first time in a year and driving down demand from homeowners to refinance, data from an industry group showed on Wednesday.

    Fixed 30-year mortgage rates climbed 17 basis points to average 4.07 percent in the week ended May 31, the Mortgage Bankers Association said. Rates have risen by 48 basis points in the last four weeks, with the most recent upswing driven by nervousness that the Federal Reserve could slow its economic stimulus efforts sooner than had been anticipated.

    Last week’s interest rate was the highest since April 2012 and the first time rates have been above 4 percent since early May of last year.

    Demand for refinancing was hit hardest by the acceleration in rates, with applications slumping 15.0 percent. The refinance share of total mortgage activity fell to its lowest level since July 2011 at 68 percent of applications from 71 percent the week before.

    The gauge of loan requests for home purchases – a leading indicator of home sales – held up relatively better, falling just 1.6 percent.

  8. 30 year realtor says:

    The Schiff commentary isn’t scathing at all, it is just realistic.

    While I am truly enjoying the benefits of an active real estate market, I am very skeptical. What happens when the Fed begins to take action that increases mortgage rates? The market will slow and appreciation will slow or backslide. If the Fed withdraws artificial supports slowly the process could take a decade or more based upon the fragile state of the world economy. If the Fed acts too aggressively there could be another crash. Realistically speaking the market is active but it is still sick. Tough to remain confident sailing blindly into uncharted waters.

  9. anon (the good one) says:

    @SenSanders: If you are a CEO of a large corporation, you are now making 350 times more than your average employee. http://t.co/oLKQUujkVx

  10. Brian says:

    The fed won’t allow the rates to increase untill UE and housing are “recovered” so, I don’t see how they will be a headwind for the housing market. In fact, if they do rise, I think they could be viewed as a positive economic indicator because they are influenced by the Fed.

    Of course the real risks in housing center on the next leg down, in what I believe will be a continuation of the real estate crash. We can’t afford to artificially support the market indefinitely. When significantly higher interest rates eventually arrive, the fragile market will again be impacted. We saw that movie about five years ago. Do we really want to see it again?

  11. anon (the good one) says:

    yep. i know first hand that this statement is accurate. obviously, can’t provide any details

    [1.]. “When Austrialian finance people invest Australian money outside their country, they tend to lose most if not all of it. “

  12. joyce says:

    I like the comment on the Schiff/Forbes article. It basically disagrees with everything and ends with this:

    “Securitization is our export. Political economists with Obama know there is no better place to invest to catapult American dominance than with home mortgages. Small businesses depend on it. Future dreams breathe its fire. The common man’s capital IS his castle.”

  13. grim says:

    9 – I struggle a bit with Schiff’s position. If government intervention was the cause of the reflation, his recommendation of a government exit from the market is simply not possible, as it would surely trigger a crash. The more correct Schiff is, the larger the resultant crash. If he is right, it’s too late to exit, we’re all in and the only outcome that doesn’t result in disaster is to funnel even more money in to support the market until the economy improves.

    The Krugman piece posted two days back about the new lower standard of definition of economic recovery indirectly argues the same position. Talk of removing support, subsidy is simply premature? Too early to even consider such a thing.

  14. chicagofinance says:

    What a mess we have on our hands……WTF? I can tolerate a new version of crap, but why repeat the same nonsense from just a few years ago?

  15. grim says:

    Coincidence?

    From MarketWatch:

    Colony American Homes postpones IPO pricing

    Colony American Homes Inc. postponed the pricing of its initial public offering Tuesday, citing market conditions, according to a person familiar with the matter.

    The Scottsdale, Ariz.-based firm had expected its IPO of 20 million shares to be priced between $11.50 and $13 each.

    Colony American’s postponement follows a selloff in shares of real-estate investment trusts the past two weeks, as the prospect of interest rates’ eventual rise has dulled the shine of high-dividend-paying stocks. REITs, property-owning companies that pay most of their taxable income to shareholders as dividends, had gained appeal as an alternative to bonds in recent years, as historically low interest rates left investors searching for income.

    The single-family landlord would be the latest in a new class of REITs that have gotten a tepid reception from investors: those formed to buy single-family houses, rather than larger buildings like apartment complexes or office towers.

    Another such company, American Residential Properties Inc. (ARPI), saw its May IPO price at the low end of expectations and the stock has dropped 8.6% since. Silver Bay Realty Trust Corp. (SBY) the first single-family REIT, has fallen 3.7% since its December debut.

    Colony American Homes was formed last year and seeks to buy houses in mid- and upscale neighborhoods with low crime and good school districts. As of April 30, the company owned at least partial shares in 9,931 homes in nine states, including California and Georgia. Veteran real-estate investor Thomas Barrack, founder of private equity real estate firm Colony Capital LLC, serves as chairman of Colony American.

  16. Juice Box says:

    re#13 – My office is now a buzz again with real estate talk. The weather is warm people are smiling and telling jokes. It isn’t 2005 all over again but real estate is no longer taboo subject. Lots of people who bought in the last bubble want to sell and some younger families want to buy first home or trade up. You can’t put life on hold forever is the buzz line I have been tossing around. It seems to stick, a few more fence hangers are getting engaged, we have a bunch of people who are transplanting here from the flyover states for the better jobs etc.

    History Rhymes folks…it won’t repeat exactly but the free money train cannot be stopped. Watch the lenders they will relax standards, when that happens it is time to sell if your timeline is short before the next bubble pop.

    If you are long term like me who went all in at the bottom I will be carried out feet first so I don’t care, I got mine with equity gain already and I only closed two weeks ago.

    See you are the beach or the links…

  17. Brian says:

    My Sister in Law lives in a rental in town. Her landlord is a local contractor. In fact, I don’t think he does any work on houses anymore except for his own properties. I think he bought a bunch of his properties when the housing market took a dump in my area. He spends his days mowing the lawn on his SFH’s and Duplexes and fixing them himself if anything breaks. I remember during Sandy he was worried about all the basements flooding out and was driving around with his generator and pumps ready to go….

    He likes my SIL as a tenant but bellyaches that a lot of his other tenants give him a hard time and keep him really busy. It doesn’t seem like an easy business to be in if you want to stay profitable.

    The logical owner of single family rentals in the Northeast is a local entrepreneur with:

    1) construction background – repairs and maintenance are cheaper if you can do the work yourself
    2) second language ability – makes it easier to supervise cheap immigrant labor
    3) relationship with building and housing inspectors – many of them are bribeable, especially in Hudson County
    4) muscle – need to kick out drug dealers and other low quality tenants

    Neither the Redbrick nor US Masters masterminds possess these attributes.

  18. JJ says:

    Equity gain, HA HA HA HA. I love how folks forget, closing costs, taxes, insurance, mortgage, opportunity costs and the fact they overpaid 6% for property on day one to cover realtors fee.

    They just go I paid 300K and house is now worth 320K I am up 20K!! It is magic.

    Juice Box says:
    June 5, 2013 at 9:08 am

    re#13 – My office is now a buzz again with real estate talk. The weather is warm people are smiling and telling jokes. It isn’t 2005 all over again but real estate is no longer taboo subject. Lots of people who bought in the last bubble want to sell and some younger families want to buy first home or trade up. You can’t put life on hold forever is the buzz line I have been tossing around. It seems to stick, a few more fence hangers are getting engaged, we have a bunch of people who are transplanting here from the flyover states for the better jobs etc.

    History Rhymes folks…it won’t repeat exactly but the free money train cannot be stopped. Watch the lenders they will relax standards, when that happens it is time to sell if your timeline is short before the next bubble pop.

    If you are long term like me who went all in at the bottom I will be carried out feet first so I don’t care, I got mine with equity gain already and I only closed two weeks ago.

    See you are the beach or the links…

  19. grim says:

    So the sfh rental reit bubble is dead before it even started?

  20. grim says:

    17 – Nearly pissed myself when I read this comment:

    Nast Mcugly: Overheard on the scanner: “701 to incident command the absorbent booms are not working we need another battalion, 200 pounds of ice cubes, 10 cases of cigars and all the solo cups you can spare”

  21. Richard says:

    RE US Masters I didn’t realise it was listed.

    As of Dec31 it still had nearly half its fund in cash ($120m), and just raised another $70m. Still lots of buying to do.

    Looks like they did well to buy the last few years, I dont know if they can get any more good deals, I guess that is why they are looking outside Hudson county.

    Can one fund distort a whole counties’ house prices?

    http://usmastersresidential.com.au/downloads/1223580_URF_Successful_Capital_Raising_May_2013.pdf

    http://usmastersresidential.com.au/downloads/130228-URF-Full-Year-Results.pdf

  22. grim says:

    22 – Unless their investors will be satisfied with them sitting in cash, with that much capital to deploy they’ll have no choice but to move into the larger scale multifamily apartment market, which is the sweet spot of the traditional residential reit market. If they are having an impact on the local market, they are going to be victims of their own success, paying the artificially inflated prices they themselves created.

    I know of a few small partnerships that own small to mid-size complexes that would love to unload to these guys at a huge profit, and then re-purchase them back during the fire sale.

  23. Brian says:

    20 –
    I just think doing it on a large scale is asking for trouble. If they were apartment buildings in Manhattan or even a community of townhouses or garden apartments in a suburb it might make sense. I think the sign of health in the housing market, with regard to SFHs, is owner occupied housing.

    That said, Grim, your posts of recent sales seem to show that price gains in some areas of North Jersey are due to individual buyers.

  24. Libtard in the City says:

    JJ…You are right about the equity thing.

    We bought our multi in a private sale. This kept is from paying the 6% commish or more as bidding wars were driving prices up stupidly in late 2004. We paid 480K all in. House immediately assessed at 530K and at the peak was over 600K. So not only did we make 50K off the sale, but a little over a year later, we were up over 120K. We were so house rich, we sunk 75K into the joint. Three years later, we had paid/owed a total of 555K for a house worth between 350K and 380K.

    So the moral of the story here is that if you don’t plan on selling immediately, then you ain’t got nothing.

  25. JJ says:

    Other thing people forget is the old saying you dont have to make it back where you lost it. For instance a “flipper” still owns my Moms house who bought it Spring 2003. The did a big 100K renovation and then tried to put it on the market Spring 2004 for 250K more than he paid for it. Finally in Spring 2006 he put a tenant in it. He still has a tenant in it. Waiting for it to recover as he wont sell a a loss. So Spring 2014 someone gives him his asking price so he does not lose money he will be happy.

    Libtard in the City says:
    June 5, 2013 at 9:41 am

    JJ…You are right about the equity thing.

    We bought our multi in a private sale. This kept is from paying the 6% commish or more as bidding wars were driving prices up stupidly in late 2004. We paid 480K all in. House immediately assessed at 530K and at the peak was over 600K. So not only did we make 50K off the sale, but a little over a year later, we were up over 120K. We were so house rich, we sunk 75K into the joint. Three years later, we had paid/owed a total of 555K for a house worth between 350K and 380K.

    So the moral of the story here is that if you don’t plan on selling immediately, then you ain’t got nothing.

  26. Richard says:

    You dont have to make it back where you lost it.

    That is actually a great quote I haven’t heard before.

  27. JSMC says:

    The logical owner of single family rentals in the Northeast is a local entrepreneur with:

    1) construction background – repairs and maintenance are cheaper if you can do the work yourself
    2) second language ability – makes it easier to supervise cheap immigrant labor
    3) relationship with building and housing inspectors – many of them are bribeable, especially in Hudson County
    4) muscle – need to kick out drug dealers and other low quality tenants

    Sounds like my landlord, he owns about half the 2-family houses on our street.

    Ironic thing about #4: our next door neighbors were busted in the middle of the night in February of last year; turns out the house was a drop-off/pick-up point for crack/cocaine heading up to Albany. They found lots of drugs, automatic weapons, etc. That’s not one my landlord owned.

    House is still for sale, if anyone is interested.

  28. Richard says:

    Found this old article from when 30y rates first dropped to 4%. Amazing what difference a few years makes.

    http://www.businessinsider.com/mortgage-rates-fall-to-a-new-record-low-2011-9

    Amazing what difference 10 years makes. At 7% mortgage rates no one would be buying now. The question is will they return to 7% soon or in 2050? That is the gamble buyers are taking.

  29. Libtard in the City says:

    Speaking of mortgage rates, we close on our two loan refinances on Friday morning. Even though they’ve asked for everything besides my first born, I still swear by Mortgage Masters. This time, they even found me a new insurer for both of my properties, with better coverage, the 6-month rental loss coverage and it still works out to about $400 less than I am paying now.

  30. Juice Box says:

    JJ – realtor fee was 5% and closing costs were less than I spend on a vacation, my house assessed by the bank higher than my offer. I stole my house too since it has over 400k in improvements that the previous owner did during the bubble thinking they could cash out with the fog a mirror buyers back then. I will be in maintenance mode for the next decade.

    But more importantly my wife and kids are extremely happy. I am now going to write that book now “Cool Dad, Rich Dad”. I will sign a copy for you, at the Warren Stt Barnes and Noble.

  31. grim says:

    Regarding long-term local landlords, there are lots of mini property moguls in NJ who purchased properties a long, long, time ago and are collecting a nearly insane rent roll on free and clear properties. In towns like Clifton, there are lots of folks that own multiple 2-3 family homes, not even talking about even small scale multi-unit buildings.

    Stu – You sure you aren’t Polish? Your approach is typical of a Polish immigrant in NJ.

    First house? 2 or 3 family. Second house? A nicer 2 or 3 family (but they don’t sell the first one). Third house? They build a nice two family. Fourth house? Probably another 2-3 family for investment. Fifth house? Maybe the fifth house is a single family, but probably not, since they’ll get ragged on for being “rich”, besides, it’d be stupid to pay the taxes and not get any rental income, so maybe they’ll just put in an illegal apartment in the basement to get a little something.

  32. grim says:

    Adding insult to injury regarding “boomer locusts”, I know a few boomer locusts whose very comfortable retirements are being almost exclusively funded on the backs of their Gen X and Y renters.

  33. JJ says:

    How do you even do 400K worth of improvements to a house? You can build a mcmansion for 400K from scratch.

    Juice Box says:
    June 5, 2013 at 10:46 am

    JJ – realtor fee was 5% and closing costs were less than I spend on a vacation, my house assessed by the bank higher than my offer. I stole my house too since it has over 400k in improvements that the previous owner did during the bubble thinking they could cash out with the fog a mirror buyers back then. I will be in maintenance mode for the next decade.

  34. Juice Box says:

    re # 33 – Grim – My last Hoboken “boomer locust” small time landlord with a dozen or so units was raising rents on units like mine 20% this year and getting it, no vacancies not even for a week. So far he is talking the Gen Yers who are moving into town to the cleaners. That is nothing however compared to large landlords like Archstone etc who can and do raise rents annually at every lease expiration and will have to do so for the next decade to balance out the massive premium paid for the investment properties. The high rises are still being built which means valuations for the higher density apartment buildings have to be going up again as rents are ever increasing.

  35. Juice Box says:

    JJ I have trees that cost more than your bonus.

  36. Libtard in the City says:

    “Stu – You sure you aren’t Polish? Your approach is typical of a Polish immigrant in NJ.”

    1/2 Ukrane and 1/2 German, but too many generations removed to know much more than how to make Mamaliga without the lumps or really good stuffed cabbage.

  37. NJ Apple Fanboy report says:

    ITC Bans Sales of Older iPhones, iPads That Infringe on Samsung Patent

    http://www.pcmag.com/article2/0,2817,2419956,00.asp

  38. JJ says:

    I was not joking seriously how do you spend 400K on a renovation? Unless you are doing stuff like cutting top off house, massive blowouts, building a two car garage how do you do it. I mean I did an entire floor of my house, new bathroom, new laundry room, new den, new sewer pipe, sumppump, oil tank, furnace, new electric, etc for 35K. Guy is coming back next spring to do garage, florida room, middle bathroom for around 15k. But 400K is crazy. My guy did a far rockaway house completely underwater entire house need to be done top to bottom for 120K. It was a four bedroom house.

    Also are you counting 400K as his price or was it really 400K? Those are two different things. Guy I bought Condo from used a licensed expensive contractor that I actually got a quote from once and almost choked. When realtor brought up cost of work owner did I said that guy charges triple my guy so cast does not mean much.

    What did he do for 400K?

    Juice Box says:
    June 5, 2013 at 11:32 am

    JJ I have trees that cost more than your bonus.

  39. Brian says:

    40 –
    Damn, I just had my place appraised and that calculator was right on the money…..

  40. raging bull jj says:

    That calculator is very usefull when bidding on a home.

    http://www.fhfa.gov/Default.aspx?Page=86

  41. Bystander says:

    Grim,

    Please explain the scenario where things improve based on the Feds actions. Everone gets cheap money and yield goes to zero. Asset valuation imbalances have to be artificially created through bubbles to keep it going. Once you have taken a man’s home, whats left? You can’t continually destroy middle class in favor of big corps to create illusion of health and wealth.

  42. Dissident HEHEHE says:

    “They just go I paid 300K and house is now worth 320K I am up 20K!! It is magic.”

    JJ truer words never spoken.

  43. Dissident HEHEHE says:

    Juice,

    I got a bump in rent in Hoboken a little under 20% which put me back at the rent I was paying back in 2008. Would have considered moving but there’s really nothing nice in Hoboken or surrounding that isn’t comparably priced so biting the bullet for a year. Figure by next year or year after this mini bubble will burst again. Not worth the cost of moving to only save $100-150 a month in rent.

    Can’t for the life of me understand who the people are who live in that Archstone building in Hoboken? Unless they are getting a subsidy from an employer they are out of their minds.

  44. Juice Box says:

    JJ – My BIL owns a home remodeling business, mostly high end clients in Westchester, he gave me a breakdown on what it cost for the renovations on my house, before I purchased it, during attorney review. He does high quality work and uses permits and legal workers who pay taxes and carry insurance. I trust his estimate. Nearly any manual labor job out there you can find someone to do it cheaper. Heck there are times when even the hookers offer 2 for one sales, does not mean I would go for it even if it was 1/2 the cost.

    But more importantly other homes in the area for sale weren’t touched or updated in 30 years but were listed slightly less than I the house I purchased perhaps 5% ask lower etc, so even if I got 10% off ask on one of those homes I would still need to dump tons of money, sweat and tears into updating and still get screwed over by contractors etc. Those other homes for sale in the area also needed complete remodels really more updating than I wanted to pay out of pocket for or finance to do it right, and not waste my time on the numerous issues and eventually like many cutting corners. Many of those other homes for sale were also on busy roads or near highway so things like constant highway noise as well others things like living on a road where the speed limit was 40 mph were deal breakers for me even at 25% off.

    Another house sold last year in same neighborhood for 25% less, and the new owner knocked it down and is building a new one one the same foot print, it will cost him way more than 200k to build the new one done right.

    But did it actually cost 400k you will still ask? I do not have their receipts, but it sure as heck I know I would have ended up spending more to get to the same place.

  45. Juice Box says:

    re# 46 Dissident HEHEHE- rent increase for me was $500, it did help in my home buying decision along with the $4500 a month I was shelling our for daycare and preschool. In my old maxwell/shipyard neighborhood people are renting 2br units for over $4k a month for a 2 BR and have 2 kids in school/daycare etc. The money burn adds up to moving quickly. As I have said before the turnover in the schools is incredible..

    https://www.rentometer.com/results/qN9RHsY2

  46. grim says:

    Beige book not out yet, but I have a feeling it’s going to contain some of the strongest positive statements on real estate since the bubble.

    Will anyone care? Has euphoria now transitioned to skepticism?

  47. JJ says:

    JB your BIL sounds like the “licensed plumber” who gave me the quote on my sewer pipe.

    He goes, well I have to pay to advertise, pay for licenses, pay for insurance, charge enough to cover my mortgage, kids school, pay for the truck, cell phones, pay my workers enough so they can go on vacations and out to dinner and you get a licensed plumber sign off. But the licensed plumber wont do the work or inspect the work he just gives you a piece of paper in mail if you need it for insurance or permit or something. So I go I am paying double so your kids can go to Disney world.

    I agree if you live in a snooty town you are screwed. Place I bought has own zoning board, you have to be licensed in their town and the local folk charge a lot and the town inspector has to sign off. I can see things costing a lot there. That is why I did not buy a fixer upper. Just minor stuff. None requiring a permit. Meanwhile in my town where it is a free for all. It is amazing how cheap labor is.

    For example my guy I work with was fighting with insurance over amount they paid him for a roof and siding. He got like 3k and it cost 6k meanwhile that same job cost me $1,500 cash. People often forget a towns zoning and permiting process can add 100K to the cost to own a home over time.

  48. Juice Box says:

    JJ – cash only no permit, no insurance contractor found dead or one of his workers dead in your yard could cost you everything, there is noway homeowners insurance will cover that. If it ever happens are you going to dig a hole and just push him in?

    My BIL actually had a dead homeowner who died walking thru water during flooding and was electrocuted. Widow sued for faulty work even though that part was subcontracted to licensed electrician. He would have lost everything if not for insurance. Insurance has a purpose besides massive profits.

  49. Brian says:

    Juice, hows the commute from hunterdoom?

  50. Ottoman says:

    “I got a bump in rent in Hoboken a little under 20% which put me back at the rent I was paying back in 2008.”

    Every apartment in Hoboken is rent controlled and the max annual increase allowed is more like 7%. Unless there’s a rise in taxes, water or sewer charges, but the landlord needs permission from the rent control board to pass the increase on to the tenant.

  51. grim says:

    Unless there’s a rise in taxes, water or sewer charges

    Pssshhhawww, as if..

  52. Juice Box says:

    re#53 – Ottoman – not so. Rent control does not apply to the newer buildings. A state law was passed in 1987 exempting new buildings of four or more units from rent control.
    Only the very old buildings count.

  53. raging bull jj says:

    Legally, I did all my repairs correctly.

    My town allows “self-contracting” My renovation I did I was “self-contracting’ I was off from work and as home-owner I exercised my legal right to self contract. I was on the job and supervising whole time. Then I entered into a “handyman” contract with my “handyman” who would work under my direction. My “handiman” had a “friend or two help out”, and introduced me to other “handymen”.

    I got questioned once by some inspector and I told him I am “self-contracting” I am owner of house. I hired two of these people you see to assist me in hanging sheetrock and painting. I am preforming “in-kind” repairs that do not require a permit. Additionally, permit filings have been canceled due to Sandy, after repairs are complete I as the self contractor will review work performed and if any are deemed to be non “in-kind’ repairs I will file for a permit. He then asked if he could enter property to look at reapairs being made, I said I would be more than happy to allow you to enter my home to look at my work if you have a search warrant, other than that you are not legally entitled to enter my property.

    If I ever get laid off I am thinking of doing contracting, insurance adjuster work. It is all bs stuff. Get paid a ton of cash. When I was self-contracting 99% of contrators thought I was a contractor. Amazing they would ask so how much you taking those folks for, did you hit them up for this or that. Then I would tell them I am homeowner and they would turn white.

    Cant blame them, Irish guys in boots, jeans and a ball cap with a used Wagon full of tools and equipment what else would I be. It is great job, you drink coffee with owner, drive aound in a GMC truck charge 100K for jobs, pay worker 20K, buy 30k worth of stuff and pocket 50K for nothing. It is like Wall Street with a higher profit margin.

  54. Juice Box says:

    Ottoman – further clarification only old building in NJ have rent control. Anything four our more units built in the last 25 years are exempt all in the name of encouraging construction of high rises.

    http://www.nj.gov/dca/divisions/codes/publications/pdf_lti/new_const_m_dwell_law.pdf

    2A:42-84.6. Construction of multiple dwellings encouraged
    It is the intent of this act to establish
    an experimental program whereby the construction of
    multiple dwellings in this State shall be encouraged, and the marketability of those multiple
    dwellings shall be maintained, to the great
    est extent economically possible, through the
    exemption by law of newly constructed multiple dw
    ellings from rent control, rent leveling and
    rent stabilization ordinances. The
    Legislature, therefore, declares
    it to be public policy of this
    State that, within the limitations
    imposed by this act, the exempti
    ons granted under this act shall
    not be limited, diminished, altered,
    or impaired during the period of
    exemption afforded, in order
    to maintain in this respect a
    predictable environment within
    which the financing, construction
    and marketing of new multiple dwellings can occur, and to permit the Legislature to evaluate the
    results of the experimental program after a sp
    ecified period of time dur
    ing which the program
    shall have been given a fair opportunity for
    success, and during which the coherence of the
    statutory scheme establishing the
    program has been preserved.

  55. Juice Box says:

    re # 56 – Legally who cares, they aren’t looking to put you in jail for wrongful death there is no money in that. If an injury occurs on a homeowner’s property and that injury is attributable to the homeowner’s negligence, the legal case against the homeowner will stick. If your insurance won’t cover you are screwed, a judge or jury can find you negligent and still only award only $1 in compensation for not providing proper safety equipment. Defending that lawsuit alone out of pocket could cost a few hundred grand. Do any of our ambulance chasers care to chime in? I haven’t read the fine print on my umbrella policy, but I am pretty sure they could find a way to deny claims etc.

  56. JJ says:

    If an injury occurs due to homeowner’s negligence you are getting sued either way. Your Brother in law comes to my house to do work. I spill ball bearings down steps by accident he trips with a saw in hand and cuts off his arm. Am I to believe he will say good thing you hired a licensed contractor now I cant sue you. Of course he will sue me.

    Juice Box says:
    June 5, 2013 at 3:41 pm

    re # 56 – Legally who cares, they aren’t looking to put you in jail for wrongful death there is no money in that. If an injury occurs on a homeowner’s property and that injury is attributable to the homeowner’s negligence, the legal case against the homeowner will stick. If your insurance won’t cover you are screwed, a judge or jury can find you negligent and still only award only $1 in compensation for not providing proper safety equipment. Defending that lawsuit alone out of pocket could cost a few hundred grand. Do any of our ambulance chasers care to chime in? I haven’t read the fine print on my umbrella policy, but I am pretty sure they could find a way to deny claims etc.

  57. Ottoman says:

    57 – Juice, Yes you are correct. Although it seems that the 1987 law may not be as unilateral as it appeared:

    “One state law passed in 1987 did make a huge change in the future development of Hoboken.

    That year, new residential rental buildings of four units or more were exempted from rent control for the length of their mortgage. Property owners had to apply for an exemption before obtaining a certificate of occupancy, and there are buildings in Hoboken that failed to do this and are still subject to the Rent Leveling and Stabilization Ordinance. (In 1999 the exemption was expanded to include all new rental multiple dwellings of four units or more regardless of how the building was financed.)”

    http://www.hudsonreporter.com/view/full_story/2386267/article-Three-decades-of-rent-control-After-30-years–is-the-law-still-valid-in-Hoboken-

  58. Ottoman says:

    Re: the discussion not too long ago about urban vs suburban vs exurban vs rural. Pick a town and watch the progress of development over the past 28 years.

    http://earthengine.google.org/#intro/v=40.7902778,-73.95972219999999,10.834004291299793

  59. JJ says:

    JB I think since you now have a mansion you are worried about folks suing you. I noticed contractors, workers, etc. once they see you have deep pockets they come after you. Lawyers too work by address. Someone visiting my house would not rush to sue nor would a lawyer rush to take the case.

    My friends with mcmansions complain all the time about high prices and law suits.

  60. chicagofinance says:

    “Please excuse us as we go toss our iced coffee; a new investigation from The Daily Mail has found that ice from McDonald’s, Burger King, KFC, Starbucks, and more fast-food chains, tested in the U.K., was all more bacteria-ridden than toilet water. “

  61. Key says:

    Ragin Bull #56-Any Homeowner in NJ can build or renovate a single family home they intend to occupy for themselves without having to use a single licensed Contractor, so yes, you can “self-contract”. You are however still required to pull permits and have inspections completed as if a licensed Contractor performed the work. Not sure where you’re home is, but in NJ with a Building Permit, an Inspector has every right to access a property. Doing work without a permit wether you own the home or not, watch how quickly they shut you down.

  62. JJ says:

    It is our opinion that this provision does not confer on the zoning administration inherent legal authority to enter another person’s private property. However, it does provide a zoning administrator with the opportunity to obtain legal authority by the way of a court ­issued warrant to enter the private property. Upon probable cause, a zoning administrator could receive a warrant from a judge to enter property to verify zoning ordinance violations. Without such a warrant, the zoning administrator can only enter private property through express or implied consent.

  63. JJ says:

    A building inspector can’t enter my property without my permission. If I do not file permits he has nothing to inspect. If I do not allow him to enter my property how does he know work is being done.

    I had material delivered to my house in my garage. I did work inside house, no dumpster was used no truck in front of house, no workers visible. How most work if done near me. Every licensed contractor has two prices. One with permits and one without. My kitchen I used a fully licensed contractor with fully licensed plumbers and electricians. He did work without permits. With permits I had to pay extra. Not one licensed contractor on my block after Sandy filed a permit. AND they were FREE, no one wants to deal with headaches lost time.

  64. Juice Box says:

    re # 63 – JJ – sure I don’t want to get sued or create a situation where my insurance will not cover me. From what I have read the need for permits, licensed and insured contractors is usually required in your homeowners umbrella policy that is unless you don’t have one like you did not have flood insurance. Hey what is the chances of another hurricane or somebody’s kid drowning in my pool?

    Ye place your bets ye take your chances.

  65. grim says:

    Zoning Code Enforcement is very different from Building Code Inspection.

  66. Comrade Nom Deplume, Cypriot depositor says:

    I’m seeing a lot of houses go under contract and weeks later land back on the market. I spoke to a realtor today and she griped about appraisals. Apparently, the appraisals come back low and queer the deals. Wonder if this accounts for what I’ve been seeing?

  67. Juice Box says:

    Re: proctology exam no vasoline from the lenders also. Don’t worry
    Things will loosen up

  68. JJ says:

    Talk to folks in Long Beach, Biggest mistake they ever made is to buy flood insurance. Once they pay out in excess of 50% of the replacement cost of your house (not home value, cost to replace home) they tag it ICC. Increased Cost of Compliance and then they want you to raise home or faced 13K a year flood insurance.

    Folks without flood insurance got up to 41,900 in NYS. Now Cuomo is trying to do a program to pay us the difference as if we had flood insurance. Which is only fair considering I am now forced into it.

    But kicker is no ICC, no flood claim listed. So two bungalows in Long Beach, one without flood can get paid 150K and get listed as no flood claim. One with flood gets 150K gets listed as a flood claim and has to raise the house.

    I have a trampoline, pool, dog, live in a flood zone I doubt my insurance company is concerned I dont have a permit for some sheetrock. Heck the fact my house is eight foot BFE and I have a beach house at 11 BFE both now with subsidized flood insurance. Next flood I am using all licensed folks like my neighbors. My neighbor even got his contractor to pay for his vacation they just tacked it on to bill. Insurance companies are dopes if they think they protect themselves with licensed contractors.

    I got a quote after all my work was done to get sign-offs, 3k cash, no receipt. Best is my furnace company, technically a licensed plumber has to install a water heater. They just have the staff do it. There is some fat plumber who does not work who they ship the stuff over to once a week and he signs them at one hundred a pop. He takes the liability supposedly. Not that they would tell me his name or let me see his insurance.

    Juice Box says:
    June 5, 2013 at 4:43 pm

    re # 63 – JJ – sure I don’t want to get sued or create a situation where my insurance will not cover me. From what I have read the need for permits, licensed and insured contractors is usually required in your homeowners umbrella policy that is unless you don’t have one like you did not have flood insurance. Hey what is the chances of another hurricane or somebody’s kid drowning in my pool?

    Ye place your bets ye take your chances.

  69. Anon E. Moose says:

    ChiFi [64];

    Drink only the (sealed) bottled water. Just like any other third world nation.

    We are so f*&^ed.

  70. Key says:

    Look, if you’re doing a small renovation, you can likely work under the radar, but if you’re remodeling a kitchen and a couple of baths why not just make your life easy and pull a permit as a Homeowner? Put a dumpster in the driveway, have your trades (unlicensed contractors) come and go as needed and get the work done. You’ll drive yourself crazy sneaking around.

  71. Dissident HEHEHE says:

    For clarification I am renting a condo in a newer.

  72. Anon E. Moose says:

    Grim [2];

    Sorry this slipped my attention earlier:

    Some consumer advocates have criticized the payments as too small.

    “Someone forges documents and you lose your house, and they give you $1,500. That’s quite sad; it’s puny,” said Phyllis Salowe-Kaye, head of NJ Citizen Action, the state largest housing advocacy group.

    In no particular order:
    A) Community Organizerette/Democrat party hack (read as — can’t get paying gig) has her granny panties in knot. How cute.

    B) If it was “your” house you would have paid for it. Like that Ramsey guy on the radio says: 100% of foreclosed houses have mortgages on them (+/- 0.001%). It never gets close to that far if the payments had been made. (And if Woody had gone straight to the police…)

    C) ‘forged’ documents — sounds good to a bleeding heart J-school grad making $28k. But the documents in question had nothing to do with the borrower — borrowers signature on the note is serious as a heart attack. Notably, no corresponding borrower signature on payment checks.

  73. grim says:

    Lending standards on purchases will drop once rates increase and the refi pipelines are decimated. Lenders will have no choice but to try to build the purchase pipeline in compensation. Or I suppose they could just fire everybody and close their doors…

    The mortgage business is currently 2/3rds refi, and 1/3rd purchase. When interest rates rise, the refi pipeline *will* collapse, no question, lenders stand to lose 2/3rds of their business. When your business is making mortgages, you just don’t stop making mortgages.

  74. Anon E. Moose says:

    Nom [70];

    The guy writing the big check gets a vote, too? How rude.

  75. Dissident HEHEHE says:

    Sorry, newer condo building, 800 sq ft 1 BD/1 BA, about 7 years old, RE Bubble kitchen (stainless and marble), W/D, Central Air, Elevators, Gym etc. My rent has gone from $2100 up to $2200 down to $1850 to 1875 to 1950 to 2300. My suspicion is some realtwhore finally rented the 1 Bd condo next to me in the building that was listed at $2400, the owner moved in with their bf about four months ago and its sat there empty since as a rent or buy, to some sap and told my landlord they could get that much. I was able to talk him down a little.

  76. Libtard at home says:

    Anyone know a low budget mechanic (preferably in Paterson) who wants to figure out where the leak is in my air conditioning on my 95 Civic? I recharged it yesterday and the AC worked great for one day. The car is 18 years old so I don’t want to spend $1,000 to replace a dried out o-ring.

  77. It’s all going down in flames, folks. And soon.

  78. You should see all the RE agents coming into the store, buying bubbly for closings. Sickening.

    Suck in all the latecomers, bar the exits shut, then set it all on fire.

    Great good fun.

  79. I always ask the RE agents if they know what “fraudclosure” was.

    Not a single agent I’ve met in JC has any idea what it means.

  80. “This morning’s 11.5% week-over-week plunge in mortgage applications is the fourth week of fading demand in a row as it appears the bloom is very much off the rose of the second-coming of the housing bubble. This makes it the worst plunge in mortgage applications since June 2009 and the lowest level of activity since December 2011. Wondering how this is possible? We explained in detail here but this collapse in mortgage demand fits perfectly with Mark Hanson’s insights that a number of “large private mortgage bankers had mass layoffs last Friday to the tune of 25% to 50% of their operations staff.” This all feels very deja vu all over again.”

    Any questions?

    http://www.zerohedge.com/news/2013-06-05/worst-month-mortgage-apps-2009-driving-mass-layoffs

  81. Juice Box says:

    Re: #77 Grim – Yup the new and improved sausage machine has been cleaned up and primed. Once risk is off the legacy GSEs and FED no telling what happens next. I predict fog a mirror will be back. What does a decade of losses matter when you are chasing yield for a commission in a trillion dollar annual market?

  82. juice (85)-

    Too bad that this time around, the bad debt has bled upward from the bank level to the sovereign. When it all goes bust, there goes Western Civilization.

    Prepare for fighting in the streets.

  83. We are but zombies, selling each other overpriced cadaver flesh.

  84. grim says:

    84 – That’s all refi, and exactly why the sausage machine will run again

  85. Juice Box says:

    Clot love ya but no. Sheep are no different than the days of Volcker, which was post 60s when the cities burned. History Rhymes my friend, drink up!

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