|July 29th, 2009||#1|
California Foreclosures > National New Home Sales
The Big Picture's quote of the day:
“National New Home Sales, on a monthly basis, don’t even add up to half of the total foreclosure activity in California alone in a single month.”
-Mark M Hanson
Let's go to the chart...
While the Census reported new home sales came at 36,000 for the month on an unadjusted basis, Foreclosure Radar reported:
Notices of Default, the initial step in the foreclosure process, rose by 11.8 percent to the second highest level on record at 45,691 filings. Year-overyear filings increased by 10.0 percent from June of 2008.
Mark is close (and things are horrendous), but they aren't quite that bad. So, please use the following quote going forward:
“National New Home Sales, on a monthly basis, don’t even add up to 80% of the total foreclosure activity in California alone in a single month.”
-Jake (EconomPic Data)
|July 29th, 2009||#2|
Join Date: Oct 2007
Why would one buy a new home when a "used" home that's been foreclosed on is cheaper, and often times better(at least according to my values)?
|July 30th, 2009||#3|
Join Date: Dec 2003
this is a time to save up gold coin, even if just a few, and in a few years you'll be able to buy a farm or a multi-family for it.
If there is little or no available credit, the price of housing will have to come way way way way down, down so low so people can buy it with cash. I'm talking in the 5,000 to 10,000 range.
Ideally, get a multi-family on multiple acres, so you can use your tenants as share-croppers.
Godzilla mit uns!
|August 8th, 2009||#4|
Doesn't suffer fools well
Join Date: Apr 2006
If you need a roof, in my opinion, renting is better than buying, right now...
Don't forget that some notices of trustee sales are a bluff. I'd want to know which sales were actually consummated.
About a year ago, I did go to one of those auctions by a huge outfit that advertises on TV and the staff wears black tie formal. It wasn't the bloodbath I'd expected, as everyone had done their homework and bids were much higher than I'd expected.
My sense is that prices have a long, long way to fall yet and those buying presently are much more optimistic than I am.
August 8, 2009 9:50 AM
|August 8th, 2009||#5|
Doesn't suffer fools well
Join Date: Apr 2006
What if Rent/Buy scenario software was available from these folks...
I owned it on 5 1/4" floppies, so you know it was some time ago. You plugged-in current rents, home prices, interest terms, etc., and you got their answer that, of course, didn't include a lot of things that we might consider. But it was/is useful.
Someone with more time might contact them and see if it is available anymore.
Real Estate Center
College Station, TX
<li class="g">Real Estate Center Data
Homes sales and rural land data for Texas metropolitan areas. ... 2009. Real Estate Center at Texas A&M University. All rights reserved.
recenter.tamu.edu/Data/ - Cached - Similar
<li class="g">Master of Real Estate Program | Mays Business School | Texas A&M ...
Mays Business School at Texas A&M University. ... Our program integrates the studies of real estate and business through a broad curriculum, ...
mays.tamu.edu/mre/ - Cached - Similar
<li class="g">[PDF] A Homeowner's Rights Under Foreclosure
File Format: PDF/Adobe Acrobat
Texas A&M University. Revised September 2008. © 2008, Real Estate Center. ..... Texas real estate market into the 1990s. Even though the ...
http://www.sml.state.tx.us/.../tdsml...oreclosure.pdf - Similar
<li class="g">The Gals Blog : Texas A&M Real Estate Center reports on Existing ...
May 31, 2008 ... EXISTING HOME SALES DOWN IN TEXAS TEXAS (Real Estate Center, ... to MLS data compiled by the Real Estate Center at Texas A&M University. ...
www.austinrealestategals.com/.../texas-a-m-real-estate-center-reports-on-existing-home-sales-in-texas.aspx - Cached - Similar
|August 13th, 2009||#6|
Join Date: May 2007
Location: Southeast Texas
Same with jobs. The media reports and emphasizes the number of jobs lost but don't report the number of new ones. Also, our economy normally turns over a large number of jobs every year anyway, so its only the increase in turnover that is significant.
I still don't think we are really in a recession. I think we are suffering from over-production due to federal programs to "help the poor" and "to help minorities achieve the American dream". The government artificially stimulates production through deficit spending, but the deficit spending devalues the dollar so the people cannot consume the increased production. Thus, the federal government is the cause of the problem, and more of it is not the solution.
|August 15th, 2009||#7|
Join Date: Jul 2007
Commercial Real Estate Faces More Trouble Ahead: LeFrak
Published: Friday, 14 Aug 2009
By: JeeYeon Park
There are new signs of trouble in the capital markets, which will ultimately affect the commercial real estate sector, said Richard LeFrak, president of The LeFrak Organization.
Watch the Full Interview
“The shadow banks have evaporated,” LeFrak told CNBC. “They were supplying 35 percent of the capital in the industry and they just disappeared.”
Other than paper backed by Fannie Mae [FNM 1.03 -0.03 (-2.83%) ] and Freddie Mac [FRE 1.41 -0.04 (-2.76%) ], LeFrak said mortgage funds have "disappeared," including portfolio lenders who are reducing their holdings in hopes of reducing their exposure to the real estate space.
Commercial real estate has been targeted as the next economic shoe to drop, with offices downsizing due to rising unemployment and rent reduction for retailers and hotels. As a result, banks and lenders have been cautious to provide loans to real estate buyers.
“So other than for their very best customers, [banks] are out of the market and there’s a huge gap today in terms of what’s going to be needed,” LeFrak said.
“There’s $800 billion of refinancing that has to be accomplished in 2010-2011.”
The Federal Reserve’s Term Asset-Backed Securities Loan Facility program (TALF), launched in March, was supposed to be a mechanism by which securitization would restart. But the there is not enough money available in the TALF, said LeFrak.
“It’s a very conservative program in terms of the amount of proceeds and there’s a huge gap between what the TALF will do and what the industry needs,” he said.
|August 15th, 2009||#8|
Join Date: Dec 2008
This has changed because the Jewish "free trade/free market" creeps who owned the means of production realized that by selling their workers down the river they could pocket vast sums of money. That's what they really mean when they say "gains from trade." It's good to be at the top of the Ponzi - otherwise you're fucked.
Modern capitalism is thoroughly Jewish and it must be gotten rid of like the cancerous parasite it is.
|August 15th, 2009||#9|
Join Date: Mar 2009
But they (banks & gov.) still give out housing loans to niggers
and they will never pay one cent back........
Just have to love this country......yea right.
|September 1st, 2009||#10|
Join Date: Jul 2007
Commercial Real Estate Lurks as Next Potential Mortgage Crisis
by Lingling Wei and Peter Grant
Monday, August 31, 2009
Federal Reserve and Treasury officials are scrambling to prevent the commercial-real-estate sector from delivering a roundhouse punch to the U.S. economy just as it struggles to get up off the mat.
Their efforts could be undermined by a surge in foreclosures of commercial property carrying mortgages that were packaged and sold by Wall Street as bonds. Similar mortgage-backed securities created out of home loans played a big role in undoing that sector and triggering the global economic recession. Now the $700 billion of commercial-mortgage-backed securities outstanding are being tested for the first time by a massive downturn, and the outcome so far hasn't been pretty.
The CMBS sector is suffering two kinds of pain, which, according to credit rater Realpoint LLC, sent its delinquency rate to 3.14% in July, more than six times the level a year earlier. One is simply the result of bad underwriting. In the era of looser credit, Wall Street's CMBS machine lent owners money on the assumption that occupancy and rents of their office buildings, hotels, stores or other commercial property would keep rising. In fact, the opposite has happened. The result is that a growing number of properties aren't generating enough cash to make principal and interest payments.
The other kind of hurt is coming from the inability of property owners to refinance loans bundled into CMBS when these loans mature. By the end of 2012, some $153 billion in loans that make up CMBS are coming due, and close to $100 billion of that will face difficulty getting refinanced, according to Deutsche Bank. Even though the cash flows of these properties are enough to pay interest and principal on the debt, their values have fallen so far that borrowers won't be able to extend existing mortgages or replace them with new debt. That means losses not only to the property owners but also to those who bought CMBS — including hedge funds, pension funds, mutual funds and other financial institutions — thus exacerbating the economic downturn.
A typical CMBS is stuffed with mortgages on a diverse group of properties, often fewer than 100, with loans ranging from a couple of million dollars to more than $100 million. A CMBS servicer, usually a big financial institution like Wachovia and Wells Fargo, collects monthly payments from the borrowers and passes the money on to the institutional investors that buy the securities.
CMBS, of course, aren't the only kind of commercial-real-estate debt suffering higher defaults. Banks hold $1.7 trillion of commercial mortgages and construction loans, and delinquencies on this debt already have played a role in the increase in bank failures this year.
But banks' losses from commercial mortgages have the potential to mount sharply, and the high foreclosure rate in the CMBS market could play a role in this. Until now, banks have been able to keep a lid on commercial-real-estate losses by extending debt when it has matured as long as the underlying properties are generating enough cash to pay debt service. Banks have had a strong incentive to refinance because relaxed accounting standards have enabled them to avoid marking the value of the loans down.
"There is no incentive for banks to realize losses" on their commercial-real-estate loans, says Jack Foster, head of real estate at Franklin Templeton Real Estate Advisors.
CMBS are held by scores of investors, and the servicers of CMBS loans have limited flexibility to extend or restructure troubled loans like banks do. Earlier this month, it was no coincidence that CMBS mortgages accounted for the debt on six of the seven Southern California office buildings that Maguire Properties Inc. said it was giving up. "During most of the evolution [of CMBS] no one ever thought all these loans would go into default," says Nelson Rising, Maguire's chief executive.
Indeed, many property developers and investors complain there is no way to identify the investors that hold their debt and that it is difficult to negotiate with CMBS servicers. In light of the complaints, the Treasury is considering guidance that would allow servicers to start talking about ways to avoid defaults and foreclosures sooner, according to people familiar with the matter. But investors in CMBS bonds argue that the servicers are ultimately bound contractually to the bondholders.
So Maguire will soon have a lot of company. In a study for The Wall Street Journal, Realpoint found that 281 CMBS loans valued at $6.3 billion weren't able to refinance when they matured in the past three month, even though 173 such loans worth $5.1 billion were throwing off more than enough cash to service their debt.
Mounting foreclosures in the CMBS sector would likely depress values even further as property is dumped on the market. And this would put pressure on banks to write down loans. "What's going on in the CMBS world is a precursor for what might be seen in banks' books," predicts Frank Innaurato, managing director at Realpoint.
The commercial-real-estate market could yet be salvaged by an improving economy and bailout programs coming out of Washington. In addition, capital markets are starting to ease for publicly traded real-estate investment trusts. Since March, more than two dozen REITs have managed to raise more than $13 billion by selling shares.
Still, most of the $6.7 trillion in commercial real estate is privately owned. Also, it is unlikely commercial real estate will benefit much from an early stage of an economic recovery. What landlords need is occupancy and rents to rise, and that means employers have to start hiring and consumers need to shop more. So far, there are few signs this is happening.
Write to Lingling Wei at [email protected] and Peter Grant at [email protected]
|October 16th, 2009||#11|
Have we learned anything?
In The Big Picture, The Great Financial Meltdown Of 2008 Can Be Blamed On The Collapse Of A Series Of Bubbles -- Bubbles In Credit, In Housing, In Asset-Backed Securities. In The Aftermath, We Face A New Threat -- A Knee-Jerk Bubble In Regulation And Government Intervention In Financial Markets. You've Been Warned.
Johan Norberg, National Post
Low interest rates were a key factor in laying the groundwork for the crash of 2008. Now governments are fighting recession -- with more low interests rates. Photography By Spencer Platt, Getty Images
WHAT EXACTLY HAPPENED? How could overly enthusiastic homebuyers in the United States sink the global economy? When the global financial crisis took root last year, many politicians across the world quickly determined that it must have come from inside the financial system, that the reason must have been that market players had been given too free a rein and made too many big mistakes. "Laissez-faire is finished," President Nicolas Sarkozy of France exclaimed in September 2008. "The idea of the all-powerful market, which wasn't to be impeded by any rules or political intervention, was a mad one." At the same time, German finance minister Peer Steinbruck claimed that the crisis revealed that the argument put forth by laissez-faire "was as simple as it was dangerous." German chancellor Angela Merkel drew the conclusion that more financial-market regulation was necessary.
The problem, however, was not that we had too few regulations; on the contrary, we had too many, and above all, faulty ones. Some readers may object that I am mainly quibbling about the meaning of words and fighting an ideological battle. You may have a point. Please feel free to call the problem whatever you like -- just so long as you are aware of what it consists of. Because what would be fatal would be for slogans about "insufficient regulation" to give rise to the idea that the crisis happened because the government was absent, and that the government must therefore intervene and regulate more to avoid a repeat.
Let's look again at the historical background of the crisis. The U.S. housing bubble was pumped up, along with the hunt for even greater risk, when the U.S. Federal Reserve Bank, not wanting the market to set exchange rates, cut interest rates to record-low levels. U.S. politicians pumped up risk-taking and housing prices further through deductions, tax benefits for home savings accounts and restrictions on new construction. By means of legislation, subsidies and government-sponsored enterprises, they managed to generate mortgages even for people that the market deemed uncreditworthy.
The quasi-governmental institutions Fannie Mae and Freddie Mac developed the securitization of mortgages (allowing lenders to package and sell mortgage debt, thus replenishing their capital to make further loans). Wall Street fell madly in love with these mortgage-backed securities once the credit-rating agencies -- which had been given a legally protected oligopoly by the government -- declared them to be safe investments. The central position of Fannie Mae and Freddie Mac reinforced confidence that the government would intervene if the housing market ran into trouble. The Fed's safety net and the federal government's deposit insurance made banks dare to take big risks because they could privatize any gains and socialize any losses.
When home prices began to fall and the market no longer wanted mortgage-backed securities, the financial authorities stepped in and decreed that banks had to write down the value of such securities radically, giving rise to waves of panic selling. This, along with other factors, put such a burden on bank balance sheets that regulations forced them to pile up capital rather than make loans. President Bush and other leading policymakers whipped up a panic to push through laws they wanted. And just as the markets were worried more than ever because they did not know where the big risks were, U.S. authorities banned shorting, thus depriving the markets of liquidity and information when they needed it most.
If this is laissez-faire, then I would like to know what government intervention looks like. If the politicians, central bankers and bureaucrats had intentionally tried to create a crisis, they would have been hard put to find more effective actions.
IT IS A FUNDAMENTAL misunderstanding that the market is rational and at some sort of equilibrium, where all information and wisdom are incorporated in decisions. Neoclassical economic models filled with unrealistic assumptions about humans and the economy should always have warning stickers attached to them. The market is nothing other than all the millions of decisions that we all take as we produce, act and invest -- and the tiniest bit of introspection is enough to realize that we do not behave like the textbook models. Since finding lots of information before acting takes time and costs money, we often go with our gut, following rules of thumb and copying what others have already done. That is why the market has a herd instinct. When others seem to be successful at something and get rich on it, you follow suit. After a while, the hollowness of the enthusiasm becomes apparent, and then it often changes into overblown fear that soon ushers in recession.
A key lesson to be drawn from such events, however, is that borrowers, lenders, bankers and brokers are not the only ones to be affected. Politicians, bureaucrats and central bankers are at least as likely to succumb to the herd instinct -- and they have special power. If you act in a different way from what they have approved, they may take your money or even send you off to jail. This gives them the ability to head the march of the lemmings and set its pace.
Today, the herd is saying that we need strict regulation to ensure that the kind of financial crisis we've endured over the past year will not happen again. Words are cheap. But if it is so easy to avoid crises, why didn't the thousands of new pages of regulation written after earlier crises steer us clear of this one? In fact, the story of this storm in the global markets is the story of how government intervention to solve previous crises laid the foundation for the new one. The Fed started making money cheap in 2001 to avoid deflation and a depression. The credibility of credit ratings became exaggerated because financial authorities believed that government-sanctioned ratings would lead to more stable levels of risk. The capital requirements agreed to under these international banking standards gave rise to increasingly exotic financial instruments and pushed assets off banks' balance sheets. New requirements to mark assets to market were intended to prevent cheating, but in reality they served to amplify the downturn and knock out the investment banks. And so forth.
Nothing looks easier than retrospective regulation to ensure that we do not repeat the particular mistakes that messed things up in the past. But like generals, bureaucrats always fight the last war.
The best outcome to be hoped for is that they will prevent market players from making exactly the same mistake they made last time -- that is, the mistake everybody is focusing on avoiding anyway. On top of that, you also get a whole new battery of regulations that may well make the next crisis considerably worse.
Since no one knows where the next crisis will come from, companies and investors hardly need more bureaucrats looking over their shoulders, trying to guess what they are doing right or wrong. They need room to manoeuvre so that they can adjust or change their strategies as quickly as possible whenever there is new information about what is happening to demand, competition and credit. Nothing is more dangerous than going too far in the search for safety, because that may lead to regulations that block the best paths of action in a crisis.
There is already a dangerous homogeneity in the market in that many rely on the same types of clever computer models that make them buy the same types of securities at the same time as everybody else. We may increase the precision of our models, but the risk is that this will only cause us to rely ever more blindly on them. As Warren Buffet urges us all, "Beware of geeks bearing formulas."
For the same reason, we should also beware of bureaucrats bearing plans. Strict regulations laying down what you may and may not do will add to this homogeneity. If the government prevents market players from holding securities below a certain credit rating, it means that they will all sell at the same time when a security is downgraded past the limit. If the government's capital requirements favour certain ways of holding assets, all banks will hold their assets in those ways, and they'll all be struck by the same type of problems at the same time.
After each crisis, the authorities investigate what worked better at the time and then force the market players to conform to this "best practice." But all these attempts to make the system as safe as possible really make it extremely sensitive to small blows and changes. As professor Lawrence Lessig of Stanford University concludes, a single virus gaining a foothold in a banking monoculture may knock out the market completely. All deviations, diversity and mutations have been eradicated by precautionary principles and regulations, meaning that there's no resistance left anywhere. At a conference in 2007, the risk-management officer of one company said that his firm was fortunate not to have much historical data on business risk, because if it did, the authorities would immediately force the company to use those data to build risk models and act according to those models, rather than use common sense and develop various scenarios for future risks, as the company preferred to do.
As business became increasingly global through the last decades of the 20th century, energetic work was undertaken to develop international rules on capital adequacy, accounting principles and credit ratings. Politics had to catch up in order to increase stability and safety in a new Wild West. But the result was the same as national policies: homogenization of the way banks and companies viewed risk, regardless of where they came from and where they operated. As long as things are going smoothly, this creates predictability and peace and quiet. But it also gives everybody the same Achilles' heel. The likelihood of that particular part of the body being hit is small, but when it does happen, everybody tumbles to the ground in the same way in all countries.
All the salvage operations and bailouts that have been implemented this time will make the problem seven times worse next time, completely regardless of the effect that they may have in the short term to prevent free fall. Banks and companies have learned that the more they do things just like everybody else -- like the rest of the herd -- the more likely they are to be saved by the government if things go wrong. Because then their operations or their market will be too big to be allowed to fail. Those who think differently and do things their own way -- and thus pose no threat of systemic crisis -- cannot hope for any help. A prudent banker is one who is exactly as imprudent as the other bankers, so that he goes bankrupt when others do, as the early 20th-century interventionist economist John Maynard Keynes is claimed to have said. If we really want to make future financial storms less severe, we should be doing the opposite of what is happening now. We should remove the safeguards and untie the safety nets. We should abolish bailout plans and deposit insurance, so that banks would be forced to think about what risks they can really bear and how much capital they need to cover those risks. We should deprive the credit-rating agencies of their official role, so that investors would have to think for themselves about where to put their money. We should systematically put an end to the protections and guarantees that government authorities give to investors and savers, to leave room for their own common sense and their own responsibility. Those who do not trust themselves should not go anywhere near the riskiest markets.
No regulation has had as great an effect on the risk-taking of the banking sector than the lifeguard role of central banks (and now finance ministries, as well). This has taught the major financial players to take hair-raising risks in the knowledge that they can privatize any gains and socialize any losses because they are too big to fail. The dilemma, however, is that they would never have grown so big if they had not had that safety net. Present-day capitalism is sometimes attacked for being nothing more than a "casino economy." But I know of no casino where the head of a central bank and the finance minister accompany customers to the roulette table, kindly offering to cover any losses.
The problem is, we do not have a casino economy. To borrow a metaphor from child rearing, we have a "helicopter economy." Helicopter parents hover over their kids, preventing them falling and hurting themselves. This means their children never grow up and learn to see dangers for themselves. And for this very reason, such children will eventually fall in more serious and dangerous contexts instead, because risk is part of the human condition. The helicopter economy works in a similar way. The government hovers over the banks and investors, making sure they do not get hurt too badly (and cleaning up any messes they leave behind.) Whenever there is an accident, the benchmark rate is lowered, the central bank extends credit and taxpayers' money is pumped in. The players never learn to look out for risks; they just continue their reckless behaviour, and sooner or later they will fall off a ledge that they were not watching out for and pull us all down with them.
Capitalism without bankruptcy is like Christianity without hell -- it loses its ability to motivate humans to be prudent or respect their fears. If completely removing the safety net from under the financial market is not politically feasible, then it is necessary to make a division so that they protect only pared-down banks engaging in simple operations. All other financial institutions should be told in no uncertain terms that the government's only responsibility to them, if they fail, is to wish them luck.
If we chop down the jungle of government support, protection and requirements, investors and savers will be left to their own devices. That is tough. But thinking for yourself should be tough, because the intellectual exercise it provides will train skills that have lain dormant. And they are necessary. Just think about the hedge-fund fraudster Bernard Madoff, who may have cheated his established and well-heeled clients out of an unbelievable $50 billion. Despite the phenomenal returns reported by his fund, the big institutional investors stayed away. One of them explained that the fund made a non-serious impression, "because when you get to page two of your 30-page due diligence questionnaire, you've already tripped eight alarms and said, 'I'm out of here.'" Madoff's con was not rocket science. But how come so many others entrusted Madoff with their fortunes? Like many other victims, the former textile businessman Allan Goldstein said that he trusted Madoff because he trusted the government. "We conducted our affairs in good faith in the belief that the SEC would never allow this sort of scheme to be conducted. ..."
THERE IS A BROAD consensus that the way was paved for this financial crisis by record-low interest rates, huge deficits and large-scale credit-financed consumption. Today, governments around the world are trying to solve the crisis -- by means of low interest rates, huge deficits and large-scale credit-financed consumption. Many people now agree that the Fed's record-low rates of 2001 to 2005 contributed to the financial crisis. Many observers now think it was utterly senseless of Alan Greenspan to cut rates drastically without worrying about the credit boom that might ensue. I would be more understanding of their moralizing if those same observers were not also demanding that central banks do the same today.
Greenspan simply wanted to avoid depression and deflation in the only way he could. For the same purpose -- avoiding depression and deflation -- the central banks of the world have now cut rates significantly faster and further than he did, without worrying about the inflationary boom that may ensue. The feelings, the intentions and the arguments are the same: Now we have a crisis, tomorrow we will worry about when it comes, in the long run we will all be dead.
It was Karl Marx who said that history repeats itself, the first time as a tragedy and the second time as a farce. But he probably could not have guessed that the interval can be as short as eight years. There is no saying where all this will end, but dark clouds are looming.
|November 7th, 2009||#12|
Join Date: Jul 2007
More walk away from homes, mortgages
By Stephanie Armour, USA TODAY
When Sharon Sakson was laid off recently from her job as a television writer and producer, she burned through her savings to pay the $2,400 monthly mortgage on her home. But she soon decided it didn't make sense: Her home was worth thousands less than the mortgage she carried on it.
The home had been appraised at $390,000 when she refinanced in 2006, but she estimates it's not worth the $320,000 it initially cost in 2004. So Sakson did what a growing number of homeowners are doing today: She stopped paying and decided to let the bank take her home.
"I'm walking away from my house," says Sakson, 57, who stopped making payments about six months ago on her home in Pennington, N.J. "The bank can have it."
What Sakson did is called a strategic default, or a voluntary foreclosure, and it's fast becoming a major challenge to the government's $75 billion effort to keep distressed borrowers in their homes. Walking away from a mortgage is serious business — it can knock 100 points off your credit score and make you ineligible for a new mortgage for seven years. Yet, about 588,000 borrowers walked away from homes last year, double the number in 2007, according to a recent study by credit-scoring firm Experian and management consultants Oliver Wyman. While home prices are rising, the increases pale compared with overall drops in home prices since 2005 that threaten to push millions more homeowners into Sakson's predicament, owing more than their homes are worth and seeing little chance of rebuilding equity soon.
More will walk away, which will hamper the housing recovery, reinforce lenders' tight credit policies and drag on the economy's recovery, economists say.
"It's increasingly a more important factor driving the foreclosure crisis," says Mark Zandi, of Moody's Economy.com. "As we move forward, the job market will stabilize, and the big thing will be strategic defaults. People are going to determine it doesn't make financial sense to hold on to their homes. That's going to be a significant problem. Strategic defaults mean foreclosures could be high for a long time."
It's not just economists who are concerned about strategic defaults.
The mortgage unit of Citigroup says one in five borrowers who defaults does so willingly, even though they're able to pay the mortgage. "It's a very large number, and it's a very, very significant risk to the housing recovery," says Sanjiv Das, CEO of CitiMortgage, adding that new government programs to curb strategic defaults may be needed.
Waiting for prices to stabilize
How bad the strategic defaults issue gets may depend on how much more home prices fall and whether the government does more to help homeowners with mortgages larger than their homes' value. Both Zandi and Das suggest further actions to reduce mortgage principal for underwater borrowers.
"A better way to do it may be an incentive to stay current for a period, and after two years of being current, they get a principal reduction," says Das.
Under the government's Making Homes Affordable Program, borrowers are ineligible for refinancings if their unpaid mortgages are more than 125% of the home's market value. Loan modifications under the program do not have any loan-to-value limits.
Nationally, median prices have fallen about 25% from their peak in late 2005, although prices recently have risen compared with prior months this year. The median price in the second quarter — $170,000 — was at roughly the level it was in autumn 2003.
But price declines have been worse in some markets. A closely watched barometer of home prices, the Standard & Poor's/Case-Shiller 20-City Composite Index, shows they have fallen more than 25% in 12 markets and more than 50% in two — Phoenix and Las Vegas — from peaks hit in 2006 or 2007.
Fifteen out of the 20 metro areas saw a rise in prices from July to August, but those increases are not anywhere close to the losses that have already occurred.
The number of borrowers who walk away is expected to increase, along with the rise in homeowners who owe more than their homes are worth. An unprecedented 16 million homeowners currently are underwater, according to Moody's Economy.com. That's about a third of all homeowners with a first mortgage.
Moody's Economy.com estimates the number of underwater borrowers will peak at 17.4 million in the third quarter of 2010.
An even higher estimate comes from Deutsche Bank, which predicted in an August study that the number of homeowners underwater will grow from 14 million (or 27% of all homeowners with mortgages) in 2009 to 25 million homeowners, or 48% of all those with a mortgage, by the time home prices stabilize.
Not coincidentally, strategic defaults have been highest where prices have plunged most, such as California and Florida.
From 2005 to 2008, the number of strategic defaulters went up by 68 times in California, according to the Experian-Oliver Wyman study published in September. During that same time period, the median price for existing, single-family homes in California fell from $522,670 in 2005 to $346,410, according to the California Association of Realtors.
In other geographic regions, the increase in strategic defaulters ranged between 3 times and 18 times more.
The Experian-Wyman study found borrowers with higher credit scores when they applied for their loan were 50% more likely than other types of borrowers to walk away from a mortgage only because they were underwater, even though they could afford to pay. The study was based on an analysis of about 12 million borrowers.
No household would default if the equity shortfall is less than 10% of the value of the house, according to another study this year, done by the University of Chicago, Northwestern University and the European University Institute. But 17% of households would default, even if they could afford to pay their mortgage, when the equity shortfall reaches 50% of the value of their house. That means the market value of a mortgage property is that much below the amount of loan taken against it.
There also appears to be a contagion effect. Borrowers who know someone who defaulted are 82% more likely to declare their intention to do so.
"The most disturbing aspect of this is that it's becoming acceptable to do," says Joel Naroff, an economist with Naroff Economic Advisors. "What does that mean down the road for housing and the economy if people are happy to walk away and destroy their credit? They're saying, 'Why pay a high amount if they can get something, even a rental, for less?' "
Because of the time and expense involved in completing a foreclosure, borrowers who decide to walk away often wind up staying in their homes for months after they stop paying their mortgage.
In most states, lenders can go after homeowners for past-due payments, but many fail to take such action when borrowers abandon their properties, because the legal costs are so high.
Short sales, in which lenders agree to the sale of a home for less than the balance of the mortgage, is an alternative to a strategic default. Many lenders are now encouraging them, but Zandi says that alternative may seem too time-consuming for borrowers who want to quickly get out from under their homes.
Janet Speer, 51, isn't happy to be walking away from her 200-year-old home in Royersford, Pa., but she doesn't feel ashamed. Speer says she was paying about $1,400 a month for her home, which was appraised at about $155,000.
After getting laid off last year, Speer said, she tried to modify her mortgage to more affordable terms but was denied because her unemployment benefits and alimony didn't count as income. Speer stopped paying on her mortgage in September 2008.
She is still living in the home and waiting to be foreclosed upon. Speer is saving her unemployment benefits for an apartment once the bank takes over her home.
"I got letters and calls from the bank at first, but they stopped," said Speer, who now earns commission income from a job in the health care industry. "I have a three-story house. It's way too big. I just want a little two-bedroom apartment. I don't want this place anymore. I would never have chosen to do this, but it's going to work out."
|November 8th, 2009||#13|
Join Date: Dec 2003
I think the time is coming when you'll be able to get a house and even a multi-acre property for the equivalent of 10k or so, so long as you have money up front. Maybe a gold coin will be worth 5 or 10k, so you'll be able to buy a foreclosed horse farm for 10k.
|November 8th, 2009||#14|
|November 9th, 2009||#15|
Join Date: Dec 2003
|December 1st, 2009||#16|
Deeds and Titles
December 1, 2009
REMEMBER! These columns are my opinions only. I think every word I write is true, or I wouldn't write them. So with that warning, let me tell you my opinion about a matter that affects hundreds of thousands of unfortunate homeowners who are in foreclosure. I'm not, and I'm sure you the reader aren't either, but if you know someone who is, this might be of help. I have a client in Hawaii, who I tried to tell this to, and she either didn't do it, or her attorney was and is a fool. Here goes:
You can't sell your car if you don't have a title. The car title, boat title, truck title, tractor title, motorcycle title, locomotive title, airplane title, or whatever, is your proof of ownership. When you finance the item, the lender holds the title till the loan is paid. Agreed?
When you buy a home, it has a deed with it. The deed is the title to the home, proof of ownership, just like a car title is proof of ownership of the car. When you get a mortgage on the home, you assign and give the deed to the lender. When the mortgage is paid off, the lender signs off and gives the deed back to you. If he is owed money, he has the deed till the loan is paid in full. Agreed?
With Freddie and Fannie having 'packaged' and sold 'packages' of deeds, loans, and other paper around the globe to unwary buyers, who knows where the deeds are to homes now being foreclosed upon? The deeds could be in foreign nations' piles of paperwork, or could be totally gone. With failed banks, unscrupulous mortgage brokers and lenders, the deeds to foreclosed homes could be not only unavailable, but even un-traceable. Get the point?
You can't sell a car without the title, and you don't own a home without having the deed to it. How can a supposed 'lender' say he owns the home and wants it back, if he can't prove he owns it by producing a deed to the home? I am not saying he doesn't have a note of some sort, or maybe a copy of a note, but that is no more sufficient than selling a car without the genuine, original title. Can't be done. Or if it is done, the buyer will be unable to get tags, because he doesn't have a real, genuine, original title to the car. Same with a home? Why not? Suppose someone with the deed came along and tried to foreclose, after someone without a deed was successful?
This has been through court several times already, and guess what? The entity attempting to foreclose, has lost. Without the deed, the court has ruled that the entity foreclosing, without a deed, has no grounds on which to foreclose. How can he, if he can't show a deed (title) to the property? Where does that leave the homeowner? As far as I am concerned, he owns his home, or does, till a deed can be produced, which in thousands of cases can never be produced. How can he ever sell? Maybe he can't, but then again, maybe he can live there rent free till the cows come home.
Isn't this just due to the bankers? Let 'em stew in their own self created pot. If you lose the title to your car, you can get a duplicate. If the deed to your home is missing, can you apply for a duplicate? I don't know, but if I were being foreclosed upon, I'd certainly try to find out and explore every nook and cranny before I vacated. I'd hire a good lawyer to defend me too. Pass this on to anyone who may need it.
P.S. I'm so tired of seeing black faces on the news every day, who have committed the most heinous of crimes. The latest is the one who shot and killed four white police officers in a coffee shop, who, fortunately is dead, thanks to a cop. Ask a prison guard which race is the majority of his population. Ask any cop which are his greatest offenders. Black males between the ages of 15 and 35, commit 50% of the crimes, and are but 2% of the population. Recently, a group of dozens of blacks were rounded up who were doing nothing but killing white and Hispanics, because they were white or Hispanic. Grace Kelly's brother was jogging down East River Drive in Philly years ago, and was mugged, "because you're white." Muslim extremists are doing to Muslims, what criminal blacks have done to other blacks, and that is make us afraid of all of them.
Please! If you don't NEED the dollars, do not sell your metals to "take profits." You may never be able to buy them back again at a profit. What is the point in selling true, historic money, for un-backed, printing press scrip? Who knows when there will be a correction? Everyone around the globe is buying and wanting gold, not just in the U.S. Don't gamble with your precious metals!
|December 17th, 2009||#17|
Join Date: Jul 2005
Location: Gone to work on the lemming sites against Big Jew.
Blog Entries: 2
The average kwan is of such low quality that he'd shoot himself if he had any self awareness.
-Joe from Ohio
|December 20th, 2009||#18|
Join Date: Jul 2007
Debtor's Dilemma: Pay the Mortgage or Walk Away
In Down Real-Estate Market, Homeowners Are Deciding to Abandon Their Loan Obligations Even if They Can Afford the Payments
By JAMES R. HAGERTY and NICK TIMIRAOS
PHOENIX -- Should I stay or should I go? That is the question more Americans are asking as the housing market continues to drag.
In good times, it would have been unthinkable to stop paying the mortgage. But for Derek Figg, a 30-year-old software engineer, it now seems like the best option.
Mr. Figg felt trapped in a home he bought two years ago in the Phoenix suburb of Tempe for $340,000. He still owes about $318,000 but figures the home's value has dropped to $230,000 or less. After agonizing over the pros and cons, he decided recently to stop making loan payments, even though he can afford them.
Mr. Figg plans to rent an apartment nearby, saving about $700 a month.
A growing number of people in Arizona, California, Florida and Nevada, where home prices have plunged, are considering what is known as a "strategic default," walking away from their mortgages not out of necessity but because they believe it is in their best financial interests.
A standard mortgage-loan document reads, "I promise to pay" the amount borrowed plus interest, and some people say that promise should remain good even if it is no longer convenient.
George Brenkert, a professor of business ethics at Georgetown University, says borrowers who can pay -- and weren't deceived by the lender about the nature of the loan -- have a moral responsibility to keep paying. It would be disastrous for the economy if Americans concluded they were free to walk away from such commitments, he says.
Walking away isn't risk-free. A foreclosure stays on a consumer's credit record for seven years and can send a credit score (based on a scale of 300 to 850) plunging by as much as 160 points, according to Fair Isaac Corp., which provides tools for analyzing credit records. A lower credit score means auto and other loans are likely to come with much higher interest rates, and credit card issuers may charge more interest or refuse to issue a card.
In addition, many states give lenders varying degrees of scope to seize bank deposits, cars or other assets of people who default on mortgages.
Even so, in neighborhoods with high concentrations of foreclosures, "it's going to be really difficult to prevent a cascade effect" as one strategic default emboldens others to take that drastic step, says Paola Sapienza, a professor of finance at Northwestern University. A study by researchers at Northwestern and the University of Chicago found that as many as one in four defaults may be strategic.
Driving this phenomenon is the rising number of households that are deeply "under water," owing much more than the current value of their homes. First American CoreLogic, a real-estate information company, estimates that 5.3 million U.S. households have mortgage balances at least 20% higher than their homes' value, and 2.2 million of those households are at least 50% under water. The problem is concentrated in Arizona, California, Florida, Michigan and Nevada.
Josh Cotner, who owns an insurance agency, says his mortgage balance is about $100,000 more than the market value of his home in Gilbert, Ariz. Mr. Cotner could rent a bigger home nearby for $600 a month, far below the $1,655 he now pays on his mortgage, home insurance and property tax. He says he recently stopped making mortgage payments because his lender wouldn't help him reduce the principal on his loan under a federal program in which he believes he is qualified to participate. Given the sometimes lengthy legal process of foreclosure, he may be able to stay in the home for at least another nine months without making any payments.
Banks warn they may get tough with strategic defaulters by pursuing legal claims on a borrower's other assets. "We will try to reduce people's payments if they have a hardship," says Thomas Kelly, a spokesman for J.P. Morgan Chase & Co. "But we have a financial responsibility to get people to pay what they owe if they can afford it."
Steven Olson, a loan officer and roof installer in Roseville, Minn., defaulted in 2007 on a plot of land in Florida he had bought as an investment. "I thought I could move on with my life," he says. But the lender, RBC Bank, a subsidiary of Royal Bank of Canada, sued him, seeking to make him pay more than $400,000 to the bank to cover its losses on the loan. Mr. Olson has hired a Florida lawyer, Roy Oppenheim, to resist the claim. An RBC spokesman declined to comment.
States where lenders generally can pursue such legal claims include Florida and Nevada but not California and Arizona, where laws generally prohibit lenders from pursuing other assets of mortgage borrowers. A new Nevada law will protect many borrowers from these judgments if they bought a home for their own use after Sept. 30, 2009.
Another risk for defaulters is that banks could sell the rights to pursue claims to collection agencies or other firms, which could then dun the borrowers for up to 20 years after a foreclosure. Such threats appear to deter some borrowers. A recent study from the Federal Reserve Bank of Richmond found that under-water borrowers were 20% more likely to default in a state where mortgage lenders can't pursue claims on other assets than in those where they can.
Brent White, an associate law professor at the University of Arizona who has written about this issue, says homeowners should make the decision on whether to keep paying based on their own interests, "unclouded by unnecessary guilt or shame." He says borrowers can take a cue from lenders that "ruthlessly seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility."
But it isn't just a matter of the borrower's personal interest, says John Courson, chief executive of the Mortgage Bankers Association, a trade group. Defaults hurt neighborhoods by lowering property values, he says, adding: "What about the message they will send to their family and their kids and their friends?"
In Mesa, another suburb of Phoenix, low prices are helping to draw buyers who may walk away from other homes. Christina Delapp bought a house out of foreclosure in July for $49,000 in cash. She says she will stop paying the mortgage on another home she still owns in Tempe if she can't sell in the next few months for more than the $312,000 that she owes.
Ms. Delapp, who has been jobless for 18 months, says that the new home is part of her survival strategy. "I feel very fortunate," she says. "Regardless of what happens to my credit, we've managed to put together the best safety plan that I possibly could."
Mr. Figg says that deciding to default on his loan was "the toughest decision I ever made." He worried that if he ever loses his job he would be marooned in a home that he couldn't sell for enough to pay off his loan, limiting his ability to find work in other parts of the country: "I couldn't move up. I couldn't move down. I couldn't move out of the city. It was a very claustrophobic situation."
By moving to an apartment, Mr. Figg expects to lower his costs by about $700 a month. He plans to put that into his savings account and says he is willing to rent for the next five years or so.
Lenders are guilty of having "manipulated" the housing market during the boom by accepting dubious appraisals, Mr. Figg says. "When I weighed everything," he says, "I was able to sleep at night."
Write to James R. Hagerty at [email protected] and Nick Timiraos at [email protected]
|December 27th, 2009||#19|
Nice Home. Where’s the Rest of It?
by John Collins Rudolf
The author of the Craigslist posting in Las Vegas made no effort to disguise his or her intentions.
“Stripping House – Before Foreclosure,” the ad declared, offering potential buyers the cabinets and countertops, the sinks and toilets, the doors, the appliances, the sprinklers. Even the palm and citrus trees in the yard were for sale, with a catch.
“You dig,” the author advised.
In Nevada and other states hit hard by the housing crisis, stripping fixtures and appliances from homes in foreclosure has become commonplace. Craigslist, the Web site for classified ads, functions as a bazaar where stripped items are sold openly. Often, the stripping is not done by strangers. It is done by the owner, just before the bank forecloses on the mortgage and takes the property back.
|January 9th, 2010||#20|
[Gary North commentary]
Housing prices rose rapidly after 1996 because of the FED’s policies of monetary inflation under Greenspan. After 2000, they soared.
Rents did not soar. They rose, but not nearly so rapidly as housing prices. Keep this in mind.
A house’s price performs more like a stock than like a roll of toilet paper. Prices are imputed to a house. Lenders lend lots of money to buyers to buy a house. Most houses do not sell in any given year. The prices paid for houses are imputed to other houses in the neighborhood.
Who loses money on a house? The lender, who lends the money to a borrower, who signs a series of documents. The lender buys a dream: repayment. But he loses money.
The borrower buys a house with borrowed money. He loses his down payment, if any. He does not lose any additional money. That was what the lender lost.
Part of this house is like toilet paper. It gets used regularly. But most of the house is a dream. "Housing prices never go down. I’ll get rich." Or "nobody will be able to evict me, because I will pay my mortgage and taxes."
When housing is bought on the basis of "I’ll get rich," the market begins to resemble a stock market. When it is bought on the basis of "I can live here for what I can rent," it is more like the toilet paper market.
The government’s statisticians use an imputed rent to estimate the appropriate number for evaluating the price of shelter. This is the correct procedure conceptually. This is "house as toilet paper," not "house as an investment."
When "house as an investment" took over people’s thinking, we got a housing mania. We got house-flipping. We got a cable show called "Flip This House." We got greed. Now we have fear.
The skyrocketing price of housing under Greenspan was not reflected in the consumer price index. Rents were. This was as it should be.
The collapsing price of housing under Bernanke has not been reflected in the consumer price index. Falling rents have been. This is as it should be.
What went up came down. Housing prices rose rapidly. Rents didn’t. That was why the housing boom under Greenspan was a bubble. He denied that it was a bubble. He was either lying or else he did not understand the economics: specifically, the pricing of capital. The price of a capital asset is based on its expected stream (dream) of income, discounted by a risk factor (default) and the prevailing rate of interest.
"Flip this house" has become "jingle mail": send the lender the keys and walk away.