If rents get pushed down, despite the increasing foreclosures/tighter lending standards putting more people into rentals, that could put more downward pressure on house values.
The absolute best or worst part (depending on frame of reference) about this is as I'm reading that article on the WashingtonPost and next to it is an advert for a very nice looking house in Loudoun with the line "New Homes from the $200s". Granted it mentions a commute... (I'd link but thumbsnap is misbehaving)
$615k in AZ for a condo seems like a dream / nightmare (again depending on your frame of reference:))
I am currently looking for a new place to rent and I am finding rents to be down 15-20% in my area and the quality of rental is much higher than one year ago. I am able to negotiate rents without a problem because there are many more rentals than renters out there and most of the renters do not qualify for some reason or another. One of the driving factors is that as the prices go down on homes, the owners now feel like they need to rent the property out to try to recoup the losses, where as they were sitting vacant when they were appreciating. Out of all the homes I have looked at, most of them are vacant or never lived in.
Ive watched the list of rentals go from 17,000 on craigslist to over 27,000 in one year. They dont seem to putting out the number of listings anymore though. This is chicago
Its the price of fuel and commuting, and not just the housing market, thats choking the Twin Cities outer-tier suburbs, East Bethel finance director Bob Sundberg said recently. Unpredictable gas prices and unforgiving stop-and-go roadways have kept potential commuters from moving farther away from Minneapolis and St. Paul, he said.
Officials from other suburbs blame the housing market, and representatives from Realtors associations throughout the metro area say they have not heard of gas prices hurting the housing market. But officials at the Metropolitan Council have seen evidence that rising gas prices are influencing peoples behavior, including increased use of transit and park-and-ride lots, so it follows that high prices at the pump could also affect their choice of where to buy homes, spokeswoman Bonnie Kollodge said.
I am able to negotiate rents without a problem because there are many more rentals than renters out there and most of the renters do not qualify for some reason or another.
If they don't qualify to rent, and they may have been foreclosed upon, where do they live ?
Depending on how deep this recession goes, it may change the basic social living situations for lots of people in this country. We have a Census due in a bit over 2 years. That should generate some very interesting statistics.
I thought what I read here about California sounded very dire until I read in the SF Chronicle that state spending is up over 40% since the Governor took office in 2003. 40%! If my spending was up 40% in 3 years - I'd be in dire straits too.
For an example of a politician taking an opposite approach - read this:
I live near the area referenced in the WaPo article and it was HOPPING a couple of years ago. You heard how valuations were skyrocketing, etc. The telling part was driving through at night--only the top floor corner units were occupied and the rest of the lights were out.
I know several colleagues that are getting crushed with mortgage payments on their "investment" properties and the rents they're collecting don't come close to covering mortgage payments...the worst part is rents are headed down because there are so many people in the same boat.
None of this can happen here in Seattle. You see, we're special. All those cranes building all those new condos right now, they're a symbol of our prosperity in our pursuit to become ... San Diego?
Can you imagine a lender not wanting to loan more than the appraised value? How traditional. But Danah's choices aren't find $100K or lose her deposit. Her choices are renegotiate with the builder or walk away.
I think making easily available mortgage loans is going to be the first mechanism that the Govt uses to try to assist housing and the consumer economy (and the Fed might monetize the bad ones).
The problem is that we may be rapidly approaching the point where it's too late.
Toward the end of the real estate bust in Houston when I had no house (late 80s) people would literally tell me things like "Let me give you some advice young man. Whatever you do don't every buy a house. It will be the end of you... financial ruin... personal disgrace. And I promise I'll personally kick your ass if I ever see you in a house you're not renting. Signing a mortgage is signing your own death warrant."
Of course that was one of the best times to buy a house in Houston.
Once housing goes bad, people hate houses with a passion for years. People see houses as prisons and nobody wants to buy one.
If we get to that point before any significant help arrives, there'll be a whole lot of string pushing going on.
Maybe this isn't the greatest country ever? Someone tell our politicians to stop pandering.
I'd take Jimmy Carter in a heartbeat over the current crowd of Republican panderers who tell us that we can solve all our problems by lowering taxes. All Republicans should be ashamed.
Good night. I probably won't read your responses to this, but I just felt the need to say that...
From $615,000 to $515,000 and she still wants to buy? Her investment of $31k has netted her a loss of $69k.
The value of that box will drop another 20 or 30 % in the next 2 years. If she can wait or renegoiate and get credit for her deposit (if the builder stays solvent) then she should stick it out.
When you're developing 40-story condos like Corus is financing all over S. Florida, and you get construction up to the 38th floor and face a market like this, what do you do?
The answer is it doesn't matter -- because any way your construction lender is SCREWED.
The salvage value on a $100 million construction loan could be 20-30 cents on the dollar.
Condo construction lending is the next nightmare and it's going to hammer banks all over. But none like Corus. By having so many high-rise condos going up at the same time in the same region, they committed the cardinal sin of construction lending. Hubris!
Can you imagine a lender not wanting to loan more than the appraised value? How traditional. But Danah's choices aren't find $100K or lose her deposit. Her choices are renegotiate with the builder or walk away.
Umm . . . not quite. The walk away and lose her deposit option is naive -- if walking away is the best option, the developer gives the earnest money deposit back, or the developer/broker/construction lender are sued for damages plus the deposit.
Any purchase contract that is not contingent on appraisal dependent financing is a contract that is either fraudulent or incompetent -- getting the earnest money back should not be an issue.
The earnings estimates that analysts are putting out today are as wacked as the dot.com estimates of 1999. It's like analysts live in a parallel universe where none of the negative events discussed here exist. I'll give you an example.
There's over 20 analysts who cover Circuit City. For the current (holiday) quarter, the consensus estimate is 56 cents per share. The high is 82 and the low is 32 cents.
I'm not an analyst. I just walk around Circuit City stores every now and then. How much will CC report this quarter? This is a company that lost over $300 million cumulatively the last three quarters on an operating basis. And Santa Claus is gonna save them? No. People aren't buying the Asian crap they sell this year.
CC won't earn a dime this quarter. And by this time next year, they'll be gone. If I know this, why don't professional analysts? Oh, you know why.
From David W. above: Unpredictable gas prices and unforgiving stop-and-go roadways have kept potential commuters from moving farther away from Minneapolis and St. Paul, he said.
Slightly OT but what the hell.
I am from the UK and only occasionally visit the US. Your stop-and-go roadworks are INSANE and I think changing it so that one lane has priority and the other gives way (as per the UK) would cut down on your gas bills and MASSIVELY reduce the huge carbon emissions the US has. it just doesn't make sense on quiet roads to make cars constantly stop at all 4 sides ofthe junction??? you crazy yanks...
rich - Let me guess (and I promise to stop picking on Nemo for the rest of the night), is it because the analysts weren't top experts in their field with PhD's from Ivy League universities?
"Moody's May Lower FGIC, XL Ratings; MBIA Outlook Cut (Update1)
By William Selway and Christine Richards
Dec. 14 (Bloomberg) -- FGIC Corp. and XL Capital Assurance Inc., two bond insurers, may lose their Aaa credit ratings at Moody's Investors Service after a slump in the value of the debt they guarantee.
MBIA Inc., the largest bond insurer, and CIFG Guaranty had their outlooks lowered to ``negative'' by the New York-based ratings company today. The Aaa rankings of Ambac Financial Group Inc., Assured Guaranty Corp., and Financial Security Assurance Inc. were all affirmed, signaling no plans to change them, Moody's said. Radian Group Inc. was also affirmed.
``Several of the guarantors still have appropriate levels of capitalization to support the current rating and those that may not are taking active steps to strengthen their position,'' Moody's managing director Jack Dorer said in a statement...
``In the cases in which we moved to a negative outlook or have initiated a review for possible downgrade, capitalization currently falls below Aaa levels or could fall under that level in one of our stress cases,'' Dorer said in the statement.
traderboy - Thanks but your lovely and quite useless Queen and her expensive estates have more carbon emissions than I care to think about. Be a bloody good sport and shove off.
FFDIC, bit harsh no? anyone, no one pays attention to the monarchy over here, the sooner they get rid of it the better.
tj & the bear:
don't even get me started on 55mph...its 70mph over here and should be raised to 90. not sure about autobahns, was once doing 150mph+ and i wasn't the fastest car on the road...! maybe that's a bit much.
I find it interesting that Corus keeps coming up. It's a pure short on condos, since that's all they do.
However, there construction loans are 65% or so of the list price of the condos. In Florida the buyers put up 20% non refundable deposits. There are also vultures circling the buildings that are going to be completed over the next 12 months. The initial buyers, the developer, and the mez layer can all be wiped out before it's the banks turn.
Anyway, I'm not touting the stock. The interesting thing is that the bank went all in on Condos. Absolutely no diversification. Also no sub prime, alt a's, jumbos. Just capital and condos.
The shorts have killed the stock and the company is buying back shares. The president is a large shareholder. At the moment they have no material losses.
I don't know if they will make it, but it has been a very popular short. Sometimes the best company in a bad industry does well. Sometimes no one makes it.
As a short, I would prefer a bank that was well diversified in all the problems areas of real estate.
Great comment on Dana's choics. I am so sick of hearing this story from the morong entitled-to-be-homeowner perspective. Or the don't-own-3%-of-my home-owner's perspective.
"The answer is it doesn't matter -- because any way your construction lender is SCREWED.
The salvage value on a $100 million construction loan could be 20-30 cents on the dollar."
At least it's not like they are going to bleed to death over an extended period. It won't be a close call -- if they go down, the losses will be several multiples of their capital.
Maybe the media who put out this victimolofy drivel are stupid.
And they don't ask the most basic questions that a logical human would ask another human in this situation. In order to create some emotionally heartwringing story of someone who the media (being even dumber than the potential homebuyer covered) they create a character in their stories dumber than themselves. Another negative feedback loop! Like a dumb-mortgage-holder bail-out prposal! Bring on the stupidity!
Thank God for this site that someone has the sense to communicate this story coherently.
I rent a house about 9 blocks from Senate Square. I am not surprised in any way at the plight of these folks. As late as last Spring, people were camping in tents outside of a project office (a temp building) on the site of a future condo project.
Camped out. For days. Like they were waiting for Sprinsteen tickets.
And for what? The priviledge of giving up $30k in useful funds for therights to a condo that may never be completed. I don't get the logic, myself, on paying for something you can't live in for two (or more) years. I gather that everyone just KNEW that the property would be more valuable by now, or two years from now.
Yikes. The median list price for homes has dropped to $380,000 from $499,900 in the District since September 21, 2005. That's when the fellow featured in the article was putting his greens on the barrel. The condos at Senate Square were priced above the median, I think. If they were around the top of the third quartile (probably about right), it has gone from $699,990 to $530,000 in that same period of time.
These are asking prices---They used to get bid up, now sellers take lowball offers. I think DC will have a glut of apartments for a few years, and rents are finally beginning to show it.
Of course if she should happen to "find" 100k she should use 31k to recoup the downpayment and bank the 69k. It's very sad to think about some hard-working nurse loosing 31k, but that's far better than sending bad money after good.
speaking of naivety, good luck with that strategy.
good luck getting a struggling builder to hand back a deposit, especially when the amount of deposit is clearly less than the builder's damages from breach.
you don't think that's enforceable?
pbbbt. I love all the armchair lawyers running around the internets.
Tempting to get lost along with the nurse and look at this as her silly case: how could she have thought that on her salary she could own a $615,000 house!?!
But we are stainless steel this morning and cut right to the chase, right men? Right?
Just how does the government patch this problem?
First by describing it as a "liquidity" problem...showing (where? where?) they know what they're talking about and you don't...and this means you're supposed to buck up and learn it. ie: defend government credibility...while trashing yours.
Secondly, thirdly, fourthly...offering solutions by colluding with the pirateers (from the bottom to the top...consider those Greenspan retiring dinner engagement fees and tell me its not brazen pirating at the top).
Don't expect a solution like the one from the credit card companies where the consumers were awarded a refund on that class action law suit, the lawyers portion of which was in excess of $300M. Being overcharged 2-3% for a decade on foreign purchases is a drop in the ocean compared to the housing heist...but that rumbling sound in the background? lawyers seeing the really big one, the REALLY BIG ONE.
This counts as my one and only kind thing to say about lawyers.
The biggest problem with condos is still denial, and it has two drivers. One is the developer's belief that just because a condo has been "sold," the sale will stick in a falling market. The other is the idea that a developer can always convert condos to rentals to bail out the construction loan. I've attached an excerpt from North Carolina below. This developer thinks that the way to dig out of a hole is to BUILD EVEN MORE CONDOS but with the flexibility to rent them if necessary. It's insane. Condo construction lenders will be left holding the bag. It's dragging down Keycorp right now.
Its not just high dollar homes that are sitting on the market longer due to the rapidly deflating housing bubble. Projects such as Brickton Village, an affordable condominium development under construction in Fletcher, have also felt the slowdown.
The development has sold 75 of its first 168 units, which are priced from $94,000 to $130,000, since starting sales nine months ago, developer Rod Hubbard says. He compared that to his other development, the Grove at Appledorn in Ashevilles Shiloh community. There he built 168 units selling for $69,000 to $130,000 three years ago.
When I did this in Asheville, I was sold out before I went vertical (with construction). That is how serious the difference in the real estate market has become, Hubbard said. And Im selling a product that is superior to what I was building in Asheville.
Because of the slowdown, Hubbard wants the Fletcher Town Council to allow him to revise his plans for a second phase of Brickton Village. Instead of an additional 200 for sale units as originally planned, he wants the town to permit him to build more than 340 units, and the flexibility to rent rather than sell them.
Someone asked where does an RN get the $$ to pay $615k for a condo. How about from a home equity loan on the house she's living in now? Chances are even that she was an investor/flipper that ran out of time.
For many decades, the U.S. has had a collective imperative to create more "affordable housing." It's been as apple pie as anything and nobody ever even tried to argue against it.
You can argue whether $94-130k for a condo in NC is affordable or not (with condo dues on top). But that's not the point.
Underneath what CR is saying in this thread is...
for the first time, it's not in our interest to build more affordable housing. Collectively, our communities and country would be better served if developers and builders paused.
"Leeson attempted to move forward but soon realized she wouldn't make enough profit on the sale of her Loudoun County home to cover the difference. Her neighbors had been lowering prices and taking losses to sell their homes. A $100,000 profit "wasn't going to happen in this market," she said. Leeson did not complete the purchase and is still trying to get her deposit back."
Back when the deal was signed, Leeson may have thought she would make more then $100,000 on her current Loudon County house.
July 2005. Loudon house - market - $300, mortgage - $200
Dec 2007 Loudon house - estimated market - $400
July 2005 Condo Contract - $615
Dec 2007 - estimated market - $750
Takes $200 in equity and applies it to the $615, has a loan of $415 on a condo worth $750. Goes from a 6% fixed to a 4% junk option arm and the payment increase is only $500. Maybe gets a raise. Lots of home equity to tap.
OK.....I'm not saying she is a financial genius, but it may not have seemed unreasonable at the time. A lot of smart people did dumber things with tech stocks in 2000. Market Cap of AOL in 1999 - $170 billion.
She won once leveraging up for the first house, which may have seemed much riskier at the time. Bubbles always seem obvious in retrospect.
" Instead of an additional 200 for sale units as originally planned, he wants the town to permit him to build more than 340 units, and the flexibility to rent rather than sell them.
It won't be over until everyone either figures out they can't build themselves out of a glut or they are broke. Most likely the latter.
Hopefully her contract was contingent on obtaining financing and, as long as she made a good-faith effort to do so and failed, she should be able to get her deposit back.
The D.C. rental market has suddenly gone soft, a marked difference from even six months ago. A lot more listings, and a lot of incentives; one or two months rent free, waived move-in fees, etc.
And most of that, as far as I can tell, is from condos being turned to rentals. Lots of new buildings pulling down the "For Sale" sign and putting "For Lease" up. There is a tremendous quantity of new rental properties in downtown, Pentagon City, Rockville, etc. Most are coming in at the luxury rental price point, but it's causing supply pressures down the pricing spectrum.
Oddly enough, I don't see a lot of specu-vestors renting their units out. Rent is so far below the carrying cost that it's not "worth it", and they seem to be determined to carry them at full cost until the bank takes them back. Their choice.
For once, it feels good to be a renter; I finally have a little bit of leverage. Not much, but I'll take it.
Another DC resident, I agree with Peripheral Visionary's general assessment of conditions here in DC. There's lots of new 'luxury rental' market supply suddenly, mostly from reversions, not speculators. There are still cranes in the sky, too, particularly in the Downtown/Chinatown/H Street corridor, and also in Logan Circle.
My own pre-war building in desirable Adams Morgan currently has 5 vacancies; some have been vacant for months. This is a city that had a 0.5% vacancy rate a few years ago. We recently moved up to a 2-bedroom in our building, negotiating the rent down several hundred dollars because the unit - one of the nicest in the building - had been vacant for three months.
Correction CR:
Negotiate or RUN. Run away!
If rents get pushed down, despite the increasing foreclosures/tighter lending standards putting more people into rentals, that could put more downward pressure on house values.
Gary, yes, RUN! I was very surprised the article mentioned "find $100K". ROFLOL. That would be the worst choice.
Best Wishes.
Me: Hi, mom? Uh...I need to borrow a hundred thousand dollars...
My mom: Oh, hi honey! You what? Bwahaahaaahaahaahahahahaha!
The absolute best or worst part (depending on frame of reference) about this is as I'm reading that article on the WashingtonPost and next to it is an advert for a very nice looking house in Loudoun with the line "New Homes from the $200s". Granted it mentions a commute... (I'd link but thumbsnap is misbehaving)
$615k in AZ for a condo seems like a dream / nightmare (again depending on your frame of reference:))
kudos CR,
Another reference in NPR indirectly via Krugman on your stats regarding Home Equity
Treasury Official Defends Bush's Mortgage Bailout : NPR
"$615,000" condo for a Registered Nurse. $585,000 loan after the downpayment. Insane, unless, of course she's an RN that makes $175K.
check out drudge. CA to declare fiscal state of emergency on lower tax revenue outlook...this is just the beginning
CA to declare fiscal state of emergency on lower tax revenue
Psst.
Wanna buy a California municipal bond? The equivalent yield is verrrrry attractive.
When are you going to cover the WSJ Goldman mortgage article?
Someone asked that I post again if I saw Jim Grant being interviewed.
Here you go:
Fed doing more harm than good | Video | Reuters.com
Yes, "find 100K" reminds me of the cliched "first, assume a can opener" gag.
or
I am currently looking for a new place to rent and I am finding rents to be down 15-20% in my area and the quality of rental is much higher than one year ago. I am able to negotiate rents without a problem because there are many more rentals than renters out there and most of the renters do not qualify for some reason or another. One of the driving factors is that as the prices go down on homes, the owners now feel like they need to rent the property out to try to recoup the losses, where as they were sitting vacant when they were appreciating. Out of all the homes I have looked at, most of them are vacant or never lived in.
Ive watched the list of rentals go from 17,000 on craigslist to over 27,000 in one year. They dont seem to putting out the number of listings anymore though. This is chicago
Fuel for thought:
I am able to negotiate rents without a problem because there are many more rentals than renters out there and most of the renters do not qualify for some reason or another.
If they don't qualify to rent, and they may have been foreclosed upon, where do they live ?
Depending on how deep this recession goes, it may change the basic social living situations for lots of people in this country. We have a Census due in a bit over 2 years. That should generate some very interesting statistics.
CA to declare fiscal state of emergency on lower tax revenue
Privitizing the corrupt prison system would solve that in a heartbeat.
Ministry of Truth: Can you tell us the area, and type of property you're looking at (SFR or condo or apt.?)
I thought what I read here about California sounded very dire until I read in the SF Chronicle that state spending is up over 40% since the Governor took office in 2003. 40%! If my spending was up 40% in 3 years - I'd be in dire straits too.
For an example of a politician taking an opposite approach - read this:
Incredible: Clay County sheriff returns tax funds | Jacksonville.com
I realize it's the big enchilada versus small potatoes - but it does provide some food for thought. Roby
I live near the area referenced in the WaPo article and it was HOPPING a couple of years ago. You heard how valuations were skyrocketing, etc. The telling part was driving through at night--only the top floor corner units were occupied and the rest of the lights were out.
I know several colleagues that are getting crushed with mortgage payments on their "investment" properties and the rents they're collecting don't come close to covering mortgage payments...the worst part is rents are headed down because there are so many people in the same boat.
None of this can happen here in Seattle. You see, we're special. All those cranes building all those new condos right now, they're a symbol of our prosperity in our pursuit to become ... San Diego?
Can you imagine a lender not wanting to loan more than the appraised value? How traditional. But Danah's choices aren't find $100K or lose her deposit. Her choices are renegotiate with the builder or walk away.
I think making easily available mortgage loans is going to be the first mechanism that the Govt uses to try to assist housing and the consumer economy (and the Fed might monetize the bad ones).
The problem is that we may be rapidly approaching the point where it's too late.
Toward the end of the real estate bust in Houston when I had no house (late 80s) people would literally tell me things like "Let me give you some advice young man. Whatever you do don't every buy a house. It will be the end of you... financial ruin... personal disgrace. And I promise I'll personally kick your ass if I ever see you in a house you're not renting. Signing a mortgage is signing your own death warrant."
Of course that was one of the best times to buy a house in Houston.
Once housing goes bad, people hate houses with a passion for years. People see houses as prisons and nobody wants to buy one.
If we get to that point before any significant help arrives, there'll be a whole lot of string pushing going on.
When are you going to cover the WSJ Goldman mortgage article?
shrek | 12.14.07 - 9:26 pm | #
i asked for it twice already, but nada. it will be either something big or you don't talk about Big Elephants...
Kudlow tied it to Ben Stein article
Maybe this isn't the greatest country ever? Someone tell our politicians to stop pandering.
I'd take Jimmy Carter in a heartbeat over the current crowd of Republican panderers who tell us that we can solve all our problems by lowering taxes. All Republicans should be ashamed.
Good night. I probably won't read your responses to this, but I just felt the need to say that...
Find $100K? Heck, the governator has to find $14B!
It's only a billion here in Arizona, but going up by about $100 million a week recently.
From $615,000 to $515,000 and she still wants to buy? Her investment of $31k has netted her a loss of $69k.
The value of that box will drop another 20 or 30 % in the next 2 years. If she can wait or renegoiate and get credit for her deposit (if the builder stays solvent) then she should stick it out.
Or if not, run.
CR,
When you're developing 40-story condos like Corus is financing all over S. Florida, and you get construction up to the 38th floor and face a market like this, what do you do?
The answer is it doesn't matter -- because any way your construction lender is SCREWED.
The salvage value on a $100 million construction loan could be 20-30 cents on the dollar.
Condo construction lending is the next nightmare and it's going to hammer banks all over. But none like Corus. By having so many high-rise condos going up at the same time in the same region, they committed the cardinal sin of construction lending. Hubris!
Can you imagine a lender not wanting to loan more than the appraised value? How traditional. But Danah's choices aren't find $100K or lose her deposit. Her choices are renegotiate with the builder or walk away.
Umm . . . not quite. The walk away and lose her deposit option is naive -- if walking away is the best option, the developer gives the earnest money deposit back, or the developer/broker/construction lender are sued for damages plus the deposit.
Any purchase contract that is not contingent on appraisal dependent financing is a contract that is either fraudulent or incompetent -- getting the earnest money back should not be an issue.
OT
The earnings estimates that analysts are putting out today are as wacked as the dot.com estimates of 1999. It's like analysts live in a parallel universe where none of the negative events discussed here exist. I'll give you an example.
There's over 20 analysts who cover Circuit City. For the current (holiday) quarter, the consensus estimate is 56 cents per share. The high is 82 and the low is 32 cents.
I'm not an analyst. I just walk around Circuit City stores every now and then. How much will CC report this quarter? This is a company that lost over $300 million cumulatively the last three quarters on an operating basis. And Santa Claus is gonna save them? No. People aren't buying the Asian crap they sell this year.
CC won't earn a dime this quarter. And by this time next year, they'll be gone. If I know this, why don't professional analysts? Oh, you know why.
Repartment:
refers to condo-conversions that turned back to be rental units after all.
Let me offer two decidedly non-mainstream comments.
Slate.com - Heckuva Job, Bernanke Is The Fed The New FEMA?
Is the Fed the new FEMA? - By Daniel Gross - Slate Magazine
From David W. above:
Unpredictable gas prices and unforgiving stop-and-go roadways have kept potential commuters from moving farther away from Minneapolis and St. Paul, he said.
Slightly OT but what the hell.
I am from the UK and only occasionally visit the US. Your stop-and-go roadworks are INSANE and I think changing it so that one lane has priority and the other gives way (as per the UK) would cut down on your gas bills and MASSIVELY reduce the huge carbon emissions the US has. it just doesn't make sense on quiet roads to make cars constantly stop at all 4 sides ofthe junction??? you crazy yanks...
rich - Let me guess (and I promise to stop picking on Nemo for the rest of the night), is it because the analysts weren't top experts in their field with PhD's from Ivy League universities?
Slowly easing the pin out of the grenade.....
Moody's May Lower FGIC, XL Ratings; MBIA Outlook Cut (Update1) - Bloomberg.com
"Moody's May Lower FGIC, XL Ratings; MBIA Outlook Cut (Update1)
By William Selway and Christine Richards
Dec. 14 (Bloomberg) -- FGIC Corp. and XL Capital Assurance Inc., two bond insurers, may lose their Aaa credit ratings at Moody's Investors Service after a slump in the value of the debt they guarantee.
MBIA Inc., the largest bond insurer, and CIFG Guaranty had their outlooks lowered to ``negative'' by the New York-based ratings company today. The Aaa rankings of Ambac Financial Group Inc., Assured Guaranty Corp., and Financial Security Assurance Inc. were all affirmed, signaling no plans to change them, Moody's said. Radian Group Inc. was also affirmed.
``Several of the guarantors still have appropriate levels of capitalization to support the current rating and those that may not are taking active steps to strengthen their position,'' Moody's managing director Jack Dorer said in a statement...
``In the cases in which we moved to a negative outlook or have initiated a review for possible downgrade, capitalization currently falls below Aaa levels or could fall under that level in one of our stress cases,'' Dorer said in the statement.
traderboy, you're way OT... but I agree with you and will add that your English roundabouts are a lot more efficient too.
traderboy - Thanks but your lovely and quite useless Queen and her expensive estates have more carbon emissions than I care to think about. Be a bloody good sport and shove off.
traderboy,
I only wish our roads were more like Europe's. In fact, the open stretches out west should be just like the Autobahn (after which they were modeled).
Unfortunately, we're stuck with 55mph left-lane bandits and hybrid-filled diamond lanes. Sigh.
Telegraph - Call to relax Basel banking rules
Call to relax Basel banking rules - Telegraph
FFDIC, bit harsh no? anyone, no one pays attention to the monarchy over here, the sooner they get rid of it the better.
tj & the bear:
don't even get me started on 55mph...its 70mph over here and should be raised to 90. not sure about autobahns, was once doing 150mph+ and i wasn't the fastest car on the road...! maybe that's a bit much.
Not getting the condo appraisal is the best thing that ever happened to the RN.
I'd love to hear dc1000 weigh in - isn't that his neck of the woods?
I find it interesting that Corus keeps coming up. It's a pure short on condos, since that's all they do.
However, there construction loans are 65% or so of the list price of the condos. In Florida the buyers put up 20% non refundable deposits. There are also vultures circling the buildings that are going to be completed over the next 12 months. The initial buyers, the developer, and the mez layer can all be wiped out before it's the banks turn.
Anyway, I'm not touting the stock. The interesting thing is that the bank went all in on Condos. Absolutely no diversification. Also no sub prime, alt a's, jumbos. Just capital and condos.
The shorts have killed the stock and the company is buying back shares. The president is a large shareholder. At the moment they have no material losses.
I don't know if they will make it, but it has been a very popular short. Sometimes the best company in a bad industry does well. Sometimes no one makes it.
As a short, I would prefer a bank that was well diversified in all the problems areas of real estate.
anyone notice CNB got slammed hard today. fallout from DSL or something hidden? serves Florida also.
Great comment on Dana's choics. I am so sick of hearing this story from the morong entitled-to-be-homeowner perspective. Or the don't-own-3%-of-my home-owner's perspective.
Come on sheeple, figure out basic math!@!
"The answer is it doesn't matter -- because any way your construction lender is SCREWED.
The salvage value on a $100 million construction loan could be 20-30 cents on the dollar."
At least it's not like they are going to bleed to death over an extended period. It won't be a close call -- if they go down, the losses will be several multiples of their capital.
This is a list of their projects:
Corus
I have no idea if it is accurate or up to date.
And I think, maybe the people aren't so stupid.
Maybe the media who put out this victimolofy drivel are stupid.
And they don't ask the most basic questions that a logical human would ask another human in this situation. In order to create some emotionally heartwringing story of someone who the media (being even dumber than the potential homebuyer covered) they create a character in their stories dumber than themselves. Another negative feedback loop! Like a dumb-mortgage-holder bail-out prposal! Bring on the stupidity!
Thank God for this site that someone has the sense to communicate this story coherently.
TIP JAR!
I rent a house about 9 blocks from Senate Square. I am not surprised in any way at the plight of these folks. As late as last Spring, people were camping in tents outside of a project office (a temp building) on the site of a future condo project.
Camped out. For days. Like they were waiting for Sprinsteen tickets.
And for what? The priviledge of giving up $30k in useful funds for therights to a condo that may never be completed. I don't get the logic, myself, on paying for something you can't live in for two (or more) years. I gather that everyone just KNEW that the property would be more valuable by now, or two years from now.
Yikes. The median list price for homes has dropped to $380,000 from $499,900 in the District since September 21, 2005. That's when the fellow featured in the article was putting his greens on the barrel. The condos at Senate Square were priced above the median, I think. If they were around the top of the third quartile (probably about right), it has gone from $699,990 to $530,000 in that same period of time.
These are asking prices---They used to get bid up, now sellers take lowball offers. I think DC will have a glut of apartments for a few years, and rents are finally beginning to show it.
Of course if she should happen to "find" 100k she should use 31k to recoup the downpayment and bank the 69k. It's very sad to think about some hard-working nurse loosing 31k, but that's far better than sending bad money after good.
-ck-
speaking of naivety, good luck with that strategy.
good luck getting a struggling builder to hand back a deposit, especially when the amount of deposit is clearly less than the builder's damages from breach.
you don't think that's enforceable?
pbbbt. I love all the armchair lawyers running around the internets.
Tempting to get lost along with the nurse and look at this as her silly case: how could she have thought that on her salary she could own a $615,000 house!?!
But we are stainless steel this morning and cut right to the chase, right men? Right?
Just how does the government patch this problem?
First by describing it as a "liquidity" problem...showing (where? where?) they know what they're talking about and you don't...and this means you're supposed to buck up and learn it. ie: defend government credibility...while trashing yours.
Secondly, thirdly, fourthly...offering solutions by colluding with the pirateers (from the bottom to the top...consider those Greenspan retiring dinner engagement fees and tell me its not brazen pirating at the top).
Don't expect a solution like the one from the credit card companies where the consumers were awarded a refund on that class action law suit, the lawyers portion of which was in excess of $300M. Being overcharged 2-3% for a decade on foreign purchases is a drop in the ocean compared to the housing heist...but that rumbling sound in the background? lawyers seeing the really big one, the REALLY BIG ONE.
This counts as my one and only kind thing to say about lawyers.
Nurses going on strike here per Sutter in Northern Cali (i.e. DUH!).
Now we get the wage inflation, or does crude need to be "pumped-up" to $ 200 a brrl. first?
The biggest problem with condos is still denial, and it has two drivers. One is the developer's belief that just because a condo has been "sold," the sale will stick in a falling market. The other is the idea that a developer can always convert condos to rentals to bail out the construction loan. I've attached an excerpt from North Carolina below. This developer thinks that the way to dig out of a hole is to BUILD EVEN MORE CONDOS but with the flexibility to rent them if necessary. It's insane. Condo construction lenders will be left holding the bag. It's dragging down Keycorp right now.
Its not just high dollar homes that are sitting on the market longer due to the rapidly deflating housing bubble. Projects such as Brickton Village, an affordable condominium development under construction in Fletcher, have also felt the slowdown.
The development has sold 75 of its first 168 units, which are priced from $94,000 to $130,000, since starting sales nine months ago, developer Rod Hubbard says. He compared that to his other development, the Grove at Appledorn in Ashevilles Shiloh community. There he built 168 units selling for $69,000 to $130,000 three years ago.
When I did this in Asheville, I was sold out before I went vertical (with construction). That is how serious the difference in the real estate market has become, Hubbard said. And Im selling a product that is superior to what I was building in Asheville.
Because of the slowdown, Hubbard wants the Fletcher Town Council to allow him to revise his plans for a second phase of Brickton Village. Instead of an additional 200 for sale units as originally planned, he wants the town to permit him to build more than 340 units, and the flexibility to rent rather than sell them.
Someone asked where does an RN get the $$ to pay $615k for a condo. How about from a home equity loan on the house she's living in now? Chances are even that she was an investor/flipper that ran out of time.
For many decades, the U.S. has had a collective imperative to create more "affordable housing." It's been as apple pie as anything and nobody ever even tried to argue against it.
You can argue whether $94-130k for a condo in NC is affordable or not (with condo dues on top). But that's not the point.
Underneath what CR is saying in this thread is...
for the first time, it's not in our interest to build more affordable housing. Collectively, our communities and country would be better served if developers and builders paused.
I went back and looked at the nurse's story:
"Leeson attempted to move forward but soon realized she wouldn't make enough profit on the sale of her Loudoun County home to cover the difference. Her neighbors had been lowering prices and taking losses to sell their homes. A $100,000 profit "wasn't going to happen in this market," she said. Leeson did not complete the purchase and is still trying to get her deposit back."
Back when the deal was signed, Leeson may have thought she would make more then $100,000 on her current Loudon County house.
July 2005. Loudon house - market - $300, mortgage - $200
Dec 2007 Loudon house - estimated market - $400
July 2005 Condo Contract - $615
Dec 2007 - estimated market - $750
Takes $200 in equity and applies it to the $615, has a loan of $415 on a condo worth $750. Goes from a 6% fixed to a 4% junk option arm and the payment increase is only $500. Maybe gets a raise. Lots of home equity to tap.
OK.....I'm not saying she is a financial genius, but it may not have seemed unreasonable at the time. A lot of smart people did dumber things with tech stocks in 2000. Market Cap of AOL in 1999 - $170 billion.
She won once leveraging up for the first house, which may have seemed much riskier at the time. Bubbles always seem obvious in retrospect.
" Instead of an additional 200 for sale units as originally planned, he wants the town to permit him to build more than 340 units, and the flexibility to rent rather than sell them.
It won't be over until everyone either figures out they can't build themselves out of a glut or they are broke. Most likely the latter.
Or when every town gets a repo bus,
Hopefully her contract was contingent on obtaining financing and, as long as she made a good-faith effort to do so and failed, she should be able to get her deposit back.
The D.C. rental market has suddenly gone soft, a marked difference from even six months ago. A lot more listings, and a lot of incentives; one or two months rent free, waived move-in fees, etc.
And most of that, as far as I can tell, is from condos being turned to rentals. Lots of new buildings pulling down the "For Sale" sign and putting "For Lease" up. There is a tremendous quantity of new rental properties in downtown, Pentagon City, Rockville, etc. Most are coming in at the luxury rental price point, but it's causing supply pressures down the pricing spectrum.
Oddly enough, I don't see a lot of specu-vestors renting their units out. Rent is so far below the carrying cost that it's not "worth it", and they seem to be determined to carry them at full cost until the bank takes them back. Their choice.
For once, it feels good to be a renter; I finally have a little bit of leverage. Not much, but I'll take it.
Another DC resident, I agree with Peripheral Visionary's general assessment of conditions here in DC. There's lots of new 'luxury rental' market supply suddenly, mostly from reversions, not speculators. There are still cranes in the sky, too, particularly in the Downtown/Chinatown/H Street corridor, and also in Logan Circle.
My own pre-war building in desirable Adams Morgan currently has 5 vacancies; some have been vacant for months. This is a city that had a 0.5% vacancy rate a few years ago. We recently moved up to a 2-bedroom in our building, negotiating the rent down several hundred dollars because the unit - one of the nicest in the building - had been vacant for three months.