Oh, uh? Sorry. I was listening to NPR. A story about Lee County, Florida where people are walking away from their mortgages. Lee County, Fla., Suffers Foreclosure Glut : NPR
Funny how everyone knows all about this except the mortgage lenders.
I don't know why people don't just lease their house to the neighbor across the street for $500 a month and rent their neighbor's house for $500, and everyone just stop paying the banks.
It would be a pain in the ass to move across the street but whole developments could live for a long time like this before the system worked through.
Tanta, are you going to live blog your trip to the Amish market today?
Sadly, no. The Amish Market is only open Thursday-Saturday, and the concensus here on the east coast is that it's Monday.
I am going to attempt, however, to do some transcribing of Lew Ranieri's presentation to the conference later today. I have an audio link, and CR is attending another session at the same time as Ranieri's. So it'll be basically Rerun Blogging for me.
My brother in law lives in an upscale part of Mesa, AZ and says people are disappeaing in the middle of the night. He also sees a lot of moving vans in the daytime. He doesn't think the "walking away" is over.
I guess he didn't look at the NODs (notice of defaults) sent out by the lenders; up 140-odd percent last quarter in CA. The percentage of NODs that fail to cure is also going up. It appears that there'll be an elephant following the pig through the snake.
OT - A reporter found a bona-fide victim of predatory lending. The irony is that the lender also is a market leader in reverse mortgages, which might have been just the thing for Mr. Ferguson.
The IMB spokesman has the money quote: "...its kind of like taking a medication that isnt intended for what its meant to do, and sometimes there are bad side effects."
isn't intended for what it's meant to do. um, yeah.
In Germany in the '30s, people would disappear in the middle of the night, and no one knew where they went. Neighbors would whisper 'Gestapo'.
In USSR in '30s to the '70s people would vanish, and they'd blame the KGB.
In America in the 21st century, they go missing in night and the prime suspect is Ameriquest, Countrywide, WaMu, et al.
There's a parallel here, but it's Monday morning; when I wake up I'll think about it.
It's accelerating.. Have in law on verge of it down in Inland empire because CFC never returns a call about a workout. They have'nt missed a payment. Stopped paying 2 months ago. Cant afford the adjustment.
LTV is the big issue though.
She also mentioned not every broker wants to do an FHA due to small fees..
The walkaways may be ending, but now we have the live-ins to deal with (in all seriousness, why walk away when you can live there for months on end rent-free without being evicted?)
Has anyone ever produced anything close to an estimate of the number of ruthless default/"walk aways"? The L.A. Times had another article about someone planning to "walkaway" since their mortgage was adjusting to a clearly unaffordable level and they were underwater so they couldn't refi.
If someone said, most of the speculators who bought at the top had now lost their spec homes I would believe them but there still will be a lot of people "walking away" because they don't want to say they are being foreclosed.
Waiting for San Diego County's supposed housing bubble to burst? You will wait forever, said Alan Nevin, a longtime local real estate specialist.
Asked where he would recommend buying real estate in the North County coastal area, Nevin replied: "Everywhere. There's no negatives."
Nevin's talk was reassuring, said Frank Mercardante, Southwest president and chief executive. "He emphasized there is no bubble and there won't be, because of the demand for real estate here in San Diego County," Mercardante said.
It's an article from the North County Times entitled "Real estate guru: Local housing market stable", dated 9/14/2005.
It opens thus:
"LA JOLLA ---- Waiting for San Diego County's supposed housing bubble to burst? You will wait forever, said Alan Nevin, a longtime local real estate specialist."
Other choice words:
Asked where he would recommend buying real estate in the North County coastal area, Nevin replied: "Everywhere. There's no negatives."
. . .
Nevin's talk was reassuring, said Frank Mercardante, Southwest president and chief executive.
"He emphasized there is no bubble and there won't be, because of the demand for real estate here in San Diego County," Mercardante said.
Mercardante said that as a banker, he has to think of problems that would keep him up at night, and asked Nevin what would keep him up at night about the economy.
Mal-your correct-multi-tasking here-should have read- they never missed payment, adjustment came up and CFC will not return calls to modify after initial contact. So they didn't pay last two payments to see if CFC would be more responsive.
Now it's just a matter of the pig going through the snake.
I remember this picture from florida where a python tried to swallow and alligator, it killed the gator but the snakes stomach burst open before it had time to digest its prey.
LA JOLLA ---- Waiting for San Diego County's supposed housing bubble to burst? You will wait forever, said Alan Nevin, a longtime local real estate specialist.
From Oceanside to downtown San Diego, the economy is so well diversified it is nearly invulnerable to collapse, Nevin said. That diversification and the stabilized real estate market makes prospects for the region almost scarily good.
"The economy is basically healthy. There don't seem to be any weak spots," Nevin said in after-talk remarks. "Right now, there's no one employer that has more than half of 1 percent of the jobs in the county."
Nevin sketched a portrait of a county bringing in new housing and renovating old and even dangerous neighborhoods, a county possibly on the way to becoming an internationally favored place to live by the well-to-do ---- bringing in yet another source of wealth to sustain the real estate market.
Asked where he would recommend buying real estate in the North County coastal area, Nevin replied: "Everywhere. There's no negatives."
Walk aways won't slow down or stop until all of the recently originated loans go through the reset cycle and the housing market stablizes. Making the assessment as to whether or not you walk away comes at a time when you can't make the mortgage any more and at roughly the same time you have to decide if you home is worth what you are continuing to pay for it...This isn't rocket science.
Rests continue for the next three years and the housing values will continue to decline until banks are willing to write loans again for middle income buyers.
I'm not sure it's possible to get good info on the number of walkaways.
How do you determine of they walked or left because they knew they would be evicted?
Is it based strictly off the house being empty at eviction time? If so, maybe people walked and left stuff they didn't want in the house.
Is it based on walkers letting the bank know ahead of time their intention to stop paying even though they have the capability of paying? This would give us a good count of the number of morons who walked, but not the entire number.
In other rosy news, Mercardante confirmed that gasoline prices are rapidly dropping, the Templars have re-taken Jerusalem, and Mighty Lord Cthullu ate slightly fewer souls in Q1 than he did in Q4 last year.
Also, in a surprise update to previous mythology, Mercardante revealed that the sun is not only a super-powerful semi-divine being pulled across the heavens in a chariot of fire, but that he will soon shower the earth and its grateful inhabitants with up to $1200 CASH MONEY with no strings attached.
Just because hordes of people purchased houses they cannot afford doesn't mean they can eventually learn of their predicament and act rationally. It won't take many renters in the neighborhood paying half as much every month to make people run the numbers from a new perspective. It won't take being 10-15% underwater for people to realize they can do a lot better by walking and renting. The usurious fees the REIC puts on transactions make the math work even for people with single digit positive equity. For some number more than half but less than 2/3rds staying put makes sense because they are paying less to live in a house they own than equivalent rent. Some others will stay for reasons of family, school, etc.
Every month that goes by we will hear the bottom called because every month that goes by is one more payment rather than deficiency. After all what would have happened if in Oct 2006 someone spoke with authority that over the next two years homes recently purchased would lose 20-40% as sales more than halved. The result would have been a market panic. That's why you won't hear that over the next two years prices could fall another 20-40%. Spoken with authority that would cause the housing market to implode. The game is to keep as many as possible paying in as much as possible for as long as possible with the lest return on that investment as possible
What's the difference between an exercised put option walkaway and an irresponsible homeowner in foreclosure?
About 100 Fico points.
In Denver, some of the hardest hit entry level neighborhoods seem to have bottomed out, and are now stabilizing -- at least until the next cycle of foreclosures.
Right now, I'm working on a report for a purchase in an older north metro suburb; values fell 30-40% between 2006 and now, but there are lots of sales and under contracts -- the REO inventory is being absorbed at a steady rate, thank you very much.
On the other hand, in the million dollar scrape off neighborhoods, things are not looking so good -- lots sitting vacant, active listings of new specs outnumbering sales by 4 to 1, and generally weak demand. I would not want to be a custom home builder with a spec McMansion right now.
The next big test will be the Option ARMs coming due. Since they were the rocket fuel of the California appreciation, it will be interesting to see how the media spins the fallout.
Rob Dawg despite the name I'll have to agree. The powers that be have to manage fear in the market. Otherwise there will be a stampede the exits doors.
"Walk aways won't slow down or stop until all of the recently originated loans go through the reset cycle and the housing market stablizes."
Yep. But even after that, if prices continue to drop, the "water line" will continue to rise. So that even those who bought in '04 with stable loans will find themselves underwater. Then '03, then....
Potentially, anyway. These later walkaways might walk away "ruthlessly," but also because of divorce, job loss, etc. Expect the walkaway situation to peak and then trail off slowly for several years.
And I think the mortgage powers that be know that. I agree with Rob Dawg, above. All the propaganda is simple intended to keep people in their mortgages as long as possible, even against their own best interests.
Let's hope a few of the snakes explode before the pigs all get digested. I for one would like to see some carnage at the top of the mortgage chain instead of just at the bottom of the housing pileup.
Comedian is too nice of an occupation for these guys to be lumped in. What said by the comedians are intended as jokes. What said by these scums are implicit lies and deceptions -- anything for a quick buck.
I've got a closing this afternoon where the seller is having to borrow $20,000 on a personal line to sell her house.
The sales price is about $150,000. The county has the property assessed for $187,000, which is about what she paid for it a couple of years ago.
Except that this not a non-recourse state, I'd have damn sure walked away, and left the heloc holding the bag. My local paper keeps touting the strength of our non-San Diegoish (no big run-up in prices) real estate market. Hmmph!
CBIA Chief Economist Alan Nevin notes that the San Joaquin Valley produced 12,000-15,000 jobs in the 2002-2004 period with most industries showing modest gains. [Then, in 2005, there was a wave of new homebuilding and buying unrelated to new-job creation.] SPECULATORS
(Central Valley) In 2007, employment growth has gradually returned to a more normal level, adding more than 15,000 jobs. [Most of those job gains are support jobs servicing the rapidly expanded inventory of housing] Oh great.
Bob Dobbs writes:
"Potentially, anyway. These later walkaways might walk away "ruthlessly," but also because of divorce, job loss, etc. Expect the walkaway situation to peak and then trail off slowly for several years."
I posted about this yesterday on the housingbubbleblog. One other point is that this could keep prices down for a long time.
"I think the evidence we have seen is that it takes quite a few foreclosures to drive the price down substantially. What I am saying is I think a steady rain of foreclosures, even at a fairly low rate, will KEEP the prices down and I think the depth of underwaterness will keep that rain coming for a long time."
Funny. I just found out that our friend the real estate agent (who help us buy and sell 2 homes over the last 12 years) is planning on walking away from her home. I think there's a lot more people waiting until someone knocks before they walk.
DonKei writes:
I've got a closing this afternoon where the seller is having to borrow $20,000 on a personal line to sell her house.
...My local paper keeps touting the strength of our non-San Diegoish (no big run-up in prices) real estate market. Hmmph!
I keep warning that "Flyover America" is not immune to the aspects of the bubble that were national in nature. Could very well turn out that moderate appreciation was a bubble compared to what would have happened without loose credit morals.
Anybody remember the picture of the "hat" in the early pages of The Little Prince?
When Nevin looks at this pig (elephant) going through the snake, I think he really does see a hat.
His background and job REQUIRE that he see a hat so he does.
Come to think of it, the Fed could actually raise rates on Wed despite the rally in the markets over the past month. There's nothing to fear. After all, the PPT can always intervene to prevent any unseemly reactions in the free markets.
Are rate resets on 2/28 ARM's really still an issue with LIBOR so low? I've heard of instances where payments are actually going DOWN at the reset, not up. With Bernanke set to lower the Fed Funds rate again, when do rate resets stop being an issue for these borrowers? Yes, there are option ARM's, but how many of those are really being recast now? When people say someone is walking away because the reset is unaffordable, what kind of loan are these people in?
Big bank woes just beginning, Morgan Stanley analysts say
April 28, 2008
(Reuters)Morgan Stanley analysts Monday told clients to "sell the rally" in financial stocks, slashing forecasts for big bank earnings and warning that the current credit crunch is only just beginning.
In aggregate, Morgan Stanley reduced its estimates for 2008 large bank earnings by $17 billion, or 26%, and reduced 2009 forecasts by $13 billion, or 15%. The analysts expect higher loan losses and expenses, offset by higher net interest income, though profits could fall further still if the Federal Reserve stops lowering interest rates.
"More capital hikes and dividend cuts (are) coming as our credit deteriorates and forward earnings decline," analysts led by Betsy Graseck wrote in a report. "We think we are only in the third inning of the credit cycle and expect this credit cycle will be worse than (the slump in) 1990-91."
lama writes:
Canadaman writes:
walkaway's won't start declining in numbers until Wall Street IPO's "youwalkaway.com" IMO
Canadaman | 04.28.08 - 10:55 am |
This comment is simple brilliance.
I'm there with lama. Brilliant comment. Until wall street can leave the next FB holding the bag, it isn't over.
So the article's writer found Alan Nevin at a SoCal social event, right? Where some very young lady was getting a pony? And Nevin was the guy in the blue hair and big shoes giving attendees balloons and telling funny stories about animals, right?
I was talking about this issue with another real estate lawyer a few days ago. Both of us have many more clients who are thinking about/getting ready to walk away than who have actually pulled the trigger.
High-income walk-aways will usually take their time to (1) apply for all the consumer credit they need now before the hit to their credit scores (2) find another place to live.
One client is waiting until the end of the school year since he'll probably move out of the district.
All this takes a while. Another source of delay is trying to negotiate a short sale.
Here is something to ponder: Much of California is down 33%+ from 2006 prices, especially new SFH in the distant suburbs and new condos and conversions.
In order to sell without bringing money to closing, the value of a house that has dropped 33% would have to increase 59% from today's prices if you include the RE agent's fee.
That means a lot of people have little hope of disposing of their home without bring money to closing for a long time, even if the market stops declining and starts to recover.
The greatest thing about the resets is that before the reset, most people were making the albeit-small payment each month. But as cd has pointed out regarding a relative, as the mortgage adjusts higher, people stop making any payment at all.
Wasn't it better for CFC to receive that small payment than none?
What about...said: "When people say someone is walking away because the reset is unaffordable, what kind of loan are these people in?"
Only the worst kinds or ARMs, not the ordinary kinds. Like loans with extremely low "teaser" rates or loans with a "pick-a-payment" feature where the borrower was paying less than the full equity+interest payment.
You can see here that Libor rates are down over 100 bp since the beginning of this year alone and over 200 bp lower from the same time last year.
I keep warning that "Flyover America" is not immune to the aspects of the bubble that were national in nature. Could very well turn out that moderate appreciation was a bubble compared to what would have happened without loose credit morals.
Rob Dawg | Homepage | 04.28.08 - 12:22 pm | #
The difference is we don't have the 'rent advantage'. In much of flyover rent options are either more expensive of very inferior (and I mean VERY inferior) or both.
That tends to change the calculus for a lot of walk aways - the 'away' is really FAR away, not to another near by rental. With the job losses in automotive & housing components/mat'ls more than a few will be forced to leave - but they will leave the region too, not just their development.
Seb's been trying to make that point but big city 'coasters' just don't get it (just like the rube's can't imagine having that much affordable rental inventory available & that big of a price differential btwn buy & rent).
Its two different worlds, two different situations - but a lot of empty houses just he same.
Seb, it's not the rate adjustment as much as finding out that the guy renting the same house is paying $1500 a month while your paying $3000 a month while equity is growing negative. This will take years to play out. She doesn't want to leave as she has kids in school.
Why would she not walk away when your neighborhood is ground zero..
CD, another calculation people might want to make is that it's better to walk away from their 800K 5.5% 30-year fixed mortgage and buy a similar house for 500K down the street, even if their foreclosure means they have to pay a 8.5% subprime rate.
cd said: "Seb, it's not the rate adjustment as much as finding out that the guy renting the same house is paying $1500 a month while your paying $3000 a month while equity is growing negative. This will take years to play out. She doesn't want to leave as she has kids in school."
That relationship of rent to mortgage payment is uncommon, except in California.
even if their foreclosure means they have to pay a 8.5% subprime rate.
What? What sort of half-assed advice is this? First of all, IF you can get another loan. Now with an FC on you, you can forget about getting any sort of subprime that even approaches that rate. You'd also have to wait at least a year or more before anyone would look at you, now that the credit markets are still freaked out.
Also it's not just the cost of that loan, it's the coast of ALL CREDIT, as you're going to start paying north of 20% for ANY credit card you already have, once they run a check on you (as they can) and find a seriously delinquent note on you. You'd want to factor that into your equation too.
And you'd better be either planning on living where someone isn't likely to pull a credit report on you for rent, or renting from someone you know.
You make it sound like it's go easy. It isn't, nor should it be. If you couldn't afford it you shouldn't have bought it. I have zero sympathy, as if you can't tell. Another example of the stunning lack of consequence and acceptance of personal responsibility here.
Awgee stole my thought. Ha! Regarding the article - These type of real estate people continue saying the same things over and over and over again hoping that eventually it will merely change the trend and thought processes. Becoming a self-fulfilling prophecy if you will.
Question of the day:
Is a person with an Option-Arm making neg-am payments every single month in a steadily declining real estate market still considered to be current on their mortgage? How in the world could they?
I guess that would depend on what your definition of "IS" is.
Save almost 300K starting loan 4 years later at 8.5%...most likely will be able to refi to lower rate in less than 2 years..
What are you one of those mortgage brokers "you can refinance in 2 years" sort of guys? Did your difference in a monthly payment cover the fact that ALL credit will be much higher? Including any debt outstanding now? Did it include costs of moving, rent, etc for that time? How about those people for whom credit is checked at the workplace?
Since when did this blog turn into a place for crazies and those with no sense of personal responsibility or ethics? I thought that's what everyone complained about. If this is the way you think, then you shouldn't mind if I say it's OK for the government to bail this person out, right?
That relationship of rent to mortgage payment is uncommon, except in California.
The list you reference has 30 markets where it's cheaper to rent than to buy(which also have 20 of the 30 biggest MSAs); the markets where it's cheaper to buy are in TX, OK, the dying midwest and the sunbelt.
Unfortunately the only way most humans learn is rather through painful experience. If the government does bailout, how will we learn to buy only something that we can afford?
"30 markets where it's cheaper to rent than to buy"
Yep, and Cali, NY, DC, Seattle, Portland and Sarasota where the ratio is above 1.28:1, as opposed to the 2:1 ratio posited in CD's post, which the list was used to refute.
Of course, the ratio is also based on (80%, 30-yr fixed) mortgage for a SFR versus rent for a 3-BR apartment, so it's apples and oranges. And really depends on 3-br apts being available in the market.
Friend in Wyoming finally got FCed. His brother was renting to him, and got NOD at the end of '06. Friend stayed trying to find a way to get money to buy it out (as his brother tried to work it out), but thankfully (due to implosion in Aug) he couldn't.
Here we are 18months later and the CA lender has finally asked him to walk. At least he's saved ~$10k in rent, but he's spent some of that on actual maintenance and stuff.
His uncle who had owned for years was HELOCed and under water ~$60k based on current appraisal (from $200->140), and the rent was only covering half of the monthly payments. I personally doubt it was ever worth $200 based on pricing of nicer houses nearby.
Ipodius- No I'm not a mrtge broker, I run sales for a successful software co. You take is correct in some ways but your obviously disconnected from the mortgage market and credit right now. FHA is buying at 5.6% with 2 year old bk and 560 fico score. A friend runs a credit reporting company and gives me updates on what is happening on the mrtge side. As for credit I guarantee I've seen more credit apps over the last 20 years than you've seen breakfast, lunch and dinner during the same time.
You can fix credit extremely fast now days. Obviously your not aware of it because your trying to keep the "Crazies" from breaking out..
Credit can be manipulated just like the stock market.
The govt is bailing out so nothing new there...
As far as ethics, I'm pretty sure the line I stand in is straight. Yours I can't vouch for...
Advising someone to stop paying is a bailout too, isn't it? The idiotic post above basically says "hey there's no consequence if you just walk away". So I guess, then, looting is also OK, so is shoplifting, and eating the produce in the grocery store as you walk around before you pay.
Frankly I think anyone that does this should be barred from being on a loan app for at least 7 years.
Great cd, so it's OK if I use your software and don't pay for it because, you know, it's too expensive and my company can't afford it. So we'll just jigger with the licensing or just lie. It has to be ok, if it's ok to just screw the lender and walk away outside of a BK filing (which, btw, i think is fine), a short sale, or having to pay back the amount of the difference (which is also what I think people should have to do outside of a bk).
Alec said: "The list you reference has 30 markets where it's cheaper to rent than to buy(which also have 20 of the 30 biggest MSAs..."
In cd's example, the mortgage payment was double what rent would be, which is an extreme. Within the U.S. that disparity is most common in California MSAs, it even drops off substantially within some parts of CA.
"I think anyone that does this should be barred from being on a loan app for at least 7 years"
No, the proper way is through appropriate pricing. Prohibitions have too many externalities; make the loans expensive enough, or limited enough, but keep them available.
God I'm peeved about that post. It points to everything that made the entire bubble happen...lotto mentality. Something for nothing. Everything's disposable, even your contractual obligations. There are mechanisms to deal with all of this: you can work it out with bank, and if not you can BK. You did it, now take the right way to dispose of the problem instead of running away in the middle of the night. None of these people should be let near a mortgage again without a hefty, hard-cash deposit.
A walk-away should mean zero credit ability for a long, long time. Just to drive home that there are consequences for your actions. Flippin' entitlement strikes again!
Im with CD. Its make sense to just walk away and comeback when the property is cheaper. As far as morals and ethics I think that both have left the equation years ago and now its everyman for themselves.
I's agree with you zaleriana actually. Make it PUNATIVE pricing that reflects the reality of the loss involved in the "walking away". I bet a lot of people would handle it the right way if they knew they wouldn't see a credit card under 25% for seven years and a mortgage with double-digit interest requiring over 20% down.
That relationship of rent to mortgage payment is uncommon, except in California.
Seb - move on - you can't change people's mind.
BTW - the house next door to me is a rental, I know the owner well, I watch his place (sort of).
It is an older three bedroom 1 bath two floor - needs work but is functionally adequate. The owner used to live there but is a city employee and buys homes & rents them - his IRA. He bought the place & moved out 20 years ago when he found a bigger one he'd rather live in than rented this one ever since. I believe he owns about eight homes now - seven he rents. All are 100% paid for mostly occupied 100% of the time.
He wanted the cash out to pay his kids college tuition & tried to sell the house next door during 'the bubble'... asked $140K and didn't get an offer - not one - over an 18 month period. A similar house around the corner (REO) just went for about $80K. 'Splains everything - locals might not be as smart as Californians but they aren't dumb either.
He rents the place for about $1200/month & renters pay utilities... take away tax, insurance and out of pocket maint (he does labor & there is A LOT of it) the place nets about $10K/year... if you use the $140 number - that means it goes for about a 7% cap... at $80K (the similar REO) it goes for 12.5% cap.
So considering alternative options - he keeps it for now even though he is getting older & the maint sucks - renting seven wrecks is a full time job plus his other full time job.
Now from other local home owner perspectives - assuming you still have a job & can make payments... are you gonna walk away from a home selling for $80K-100K even if its underwater to rent a similar home for $1500/month PLUS utilities? I don't think so.
That's the non-California flyover extreme... there are a bunch of people everywhere in between. Walk away isn't a slam dunk for everyone, everywhere by ANY stretch.
If a home in my part of the world goes empty it isn't due to walk away - they get thrown out the old fashioned way.
Its make sense to just walk away and comeback when the property is cheaper.
Yes, and it makes sense that no one write you a loan for less than 10% with 20% down and give you no credit under 25% for the next seven years. Right? It also makes sense for me, your employer, to get rid of you, as you've just demonstrated to me what sort of ethical risk you are to have around, right?
"The walkaways may be ending, but now we have the live-ins to deal with (in all seriousness, why walk away when you can live there for months on end rent-free without being evicted?)"
I think there is something to this. Think hard, you're going to lose the house and you have a butt load of credit card debt. What to do?
a) Keep throwing money down a rat hole trying to get current on the mortgage. Get foreclosed on anyways.
b) Walk away.
c) Disparately try to arrange a short sale and then take a huge tax hit come next march?
d) Stop paying the mortgage, live rent free for a year, pay off your credit cards and put money in the bank for a first and last?
Yes, and it makes sense that no one write you a loan for less than 10% with 20% down and give you no credit under 25% for the next seven years. Right? It also makes sense for me, your employer, to get rid of you, as you've just demonstrated to me what sort of ethical risk you are to have around, right?
WHY DO YOU THINK IT IS HARDER TO GET A HOME MORTGAGE. EVERYONE SUFFERS UNFORTUNATELY.
I can't believe that "walkaways" has become so in-fashion that a term has to be invented for it. I knew people back when I was in California who were so succumbed to the idea of accumulating homes. I asked them "when is enough?", for which they replied "you're missing out!"
Perhaps they all thought that life is just a game of Monopoly, wherein you quickly buy properties to get ahead in life.
Problem is, they missed the most important lesson in Monopoly that I have been teaching my kids: That at the end of the game, all monies and properties will go back in the box. This game has a long ways to go...
Seb,
Your correct regarding market. It's inland empire...But that's playing out in many markets and beginning to start leaking into other higher end markets. Example East Bay, Ca- I pay
$1500 rent on condo, owners near me pay $2850..
Ipodius, I agree on no bail out and my advise to the in-law on purchase 3 yrs ago was Don't. As a underwriter in the 90's I wouldn't buy a bk under 15% unless health problems contributed to it..In 05 I was discussing current programs with underwriter freind for fieldstone a "c" paper lender, they were buying bk at 7.5%. I knew that things were going to get bad. When I had hot little re agents I know telling me to buy a home, yet thought equifax was a new online fax product, again my conviction was to stay away.
Here I sit with 20% down, great income and no debt waiting for prices to get back to reality. I'm not advocating walking away, just throwing in my 2 cents on why many will. Personally if I was underwater 200K and it affected my family while a neighbor was paying 1/2 to rent same house, it would be awfully tough to stay..
I agree with your stand but realize the govt will do everything they can to prop the home and stock market..
Why not? In certain circumstances, it is entirely appropriate to do. A real estate sale is a secured contract. In the event you cannot make the payments, the bank takes possession of the collateral. They lent the money, received monthly payments, and now, have their collateral back.
There is little point in arguing the ethical issues when there are remedies available to the bank.
FWIW here in Bham Alabama, my wife works for an attorney. We were over at a friend that does independent contracting work for lawyers typing documents. She said that foreclosures were covering her up, a massive increase.
And I think the mortgage powers that be know that. I agree with Rob Dawg, above. All the propaganda is simply intended to keep people in their mortgages as long as possible, even against their own best interests.
I agree with RobDawg and with Mr. Dobbs. The powers-that-be are probably hoping that happy talk will postpone a meltdown until...until what exactly?
Their only strategy is postponement, because they have no strategy for the meltdown itself. If the ocean liner is sinking and there aren't enough lifeboats, you tell the band to keep on playing. Might as well.
Dumbest comment ever. He is pretending (hoping) pricing is static. Any drop in prices results in a further wave of defaults. Defaults put more downward pressure on prices. This guys is an IDIOT.
Here in flyover land, "point-one-four" is more likely to be used as a descriptor for drunks than lots.
Point-one-four acres - for $875,000!?!
It continues to amaze me that anyone in southern CA, to say nothing of the Dean of Real Estate Feasibility Studies, could have been a bubble-denier with those kind of prices.
Shnaps,
Do not mistake wishing price for selling price. They can probably only get $750-$780k for that house. Subtract another $100k if the buyers find out about the hotel going up to block their view.
How many of these do you want? We have Riverpark to the west and Village at the Park to the east. Tiny lot McMicroMansions with crushing HOAs and taxes. I would not consider them worth considering until they are in the $300s.
lama writes:
Canadaman writes:
walkaway's won't start declining in numbers until Wall Street IPO's "youwalkaway.com" IMO
Canadaman | 04.28.08 - 10:55 am |
This comment is simple brilliance.
lama | 04.28.08 - 12:32 pm | #
Zaleriana,
I put very little 'stock' in Sebs comments but if you start eliminating California and then Phoenix and most of Florida and Massachusetts and... well the problem is that if rents are in national equilibrium what happens to KC rents when SoCal rents change? Seb wants things contained. Too late.
2:1 rent ratios or 200x rates are not uncommon nor limited to California.
I was looking for a better rate on my HELOC from my friendly banker here in the Chicago suburbs. I asked him about his lending activities, and he said there wasn't much since all the appraisals were coming back way low. I wonder if anything is starting here.
Just because lower LIBORr may have made the first reset a non-event for many 2/28s does mean the bullet is dodged forever. Most of those loans reset again every year or even every six months. Unless and until the holders can refi into a fixed or a longer term ARM, higher interest rates will continue to be an ongoing threat to those who hold them.
Rob,
Just to add to your point: After all the comparable rent calculations by market by sq. foot, it really comes down to arithmetic and perspective. A $700,000, 4 bedroom house in an average middle-class town with $100,000 avg household income is not sustainable. The pay cannot make an amortizing payment within an average person's standard purchase to retirement time frame of about 30 years.
The perspective, supported by law of numbers, is that the price will revert to it's long term price to income ratio of 3-4 times.
PLEASE, I WANT WHAT NEVIN IS SMOKING, THIS IS MORE LIKE AN ELEPHANT GOING THRU A SNAKE AND THE SNAKE HAS JUST STARTED LICKING IT...........THIS JUST STARTED GUY..........THIS EXPLAINS WHY CALIFORNIA IS THE BEGINNING.........
When people get stuck underwater by $100K, $200K and see the house next door getting sold at 60% off and the entire rest of the community coming down with similar prices, yup, they're going to walk. Especially if they've only just been able to pay the mortgage and it's about to reset from that lovely "teaser" rate to something much higher.
...""LA JOLLA ---- Waiting for San Diego County's supposed housing bubble to burst? You will wait forever, said Alan Nevin, a longtime local real estate specialist.".....
Apparently longtime local real estate specialist = Giant Douchebag.
Nevin is Correct, people have STOPPED walking away from their homes. They are now running away from their mortgages. These people are now called runaways (not to be confused with sprintaways, ridaways and flyaways).
Runaways are trademarked by REPUBLICANS ARE TRAITORS, inc. It cannot be reused, recopied or retransmitted without the express permission of RATS, inc.
el primero
Article from the future is this from 2013?
walkaway's are just begining
Good troll.
walkaway's won't start declining in numbers until Wall Street IPO's "youwalkaway.com" IMO
Slight correction -
Anybody who's going to walk away from a house or condo AT THIS PRICE LEVEL has already done it,
Still true at prices 10% lower than today's?
Oh, uh? Sorry. I was listening to NPR. A story about Lee County, Florida where people are walking away from their mortgages.
Lee County, Fla., Suffers Foreclosure Glut : NPR
Funny how everyone knows all about this except the mortgage lenders.
Tanta, are you going to live blog your trip to the Amish market today?
Now it's just a matter of the pig going through the snake.
What?
Sorry Nevin, did you miss the memo that said the country is no longer run on hope?
I don't know why people don't just lease their house to the neighbor across the street for $500 a month and rent their neighbor's house for $500, and everyone just stop paying the banks.
It would be a pain in the ass to move across the street but whole developments could live for a long time like this before the system worked through.
I just pity the mailman.
ok, that's good enough for #1295
thanks mr. nevi
Tanta, are you going to live blog your trip to the Amish market today?
Sadly, no. The Amish Market is only open Thursday-Saturday, and the concensus here on the east coast is that it's Monday.
I am going to attempt, however, to do some transcribing of Lew Ranieri's presentation to the conference later today. I have an audio link, and CR is attending another session at the same time as Ranieri's. So it'll be basically Rerun Blogging for me.
As long as you have folks discovering that they have significant negative equity, foreclosures will increase.
I would like to nominate "we are at the bottom" for phrase of the year of 2008.
Not cause it is accurate, just based on the number of times i've heard it.
Seems to tell me that we are no where near the bottom and have the accelerating downtrend coming up soo
My brother in law lives in an upscale part of Mesa, AZ and says people are disappeaing in the middle of the night. He also sees a lot of moving vans in the daytime. He doesn't think the "walking away" is over.
I am going to attempt, however, to do some transcribing of Lew Ranieri's presentation to the conference later today.
exciting! try not to melt your keyboard.
"people are disappearing in the middle of the night."
These aren't walkaways, they're alien abductions.
So, I better buy now before I am priced out of the market, right?
It's a matter of the MORTGAGE pig going through the snake. (nice mental image for a Monday)
Do snakes crap?
If I were Nevin, I'd be more concerned about the poo-eating snake going the wrong way through the pig.
We have a 'walk away' bottom!
I guess he didn't look at the NODs (notice of defaults) sent out by the lenders; up 140-odd percent last quarter in CA. The percentage of NODs that fail to cure is also going up. It appears that there'll be an elephant following the pig through the snake.
An economist paid by the real estate community.. lies in public? This never happens!
Tanta - I need an xls of mortgage pig working his way through....
In Amerika, mortgage pig eats you!
I don't know. Nevin vs Stiglitz & Buffet... My money is on Stiglitz and Buffet...
OT - A reporter found a bona-fide victim of predatory lending. The irony is that the lender also is a market leader in reverse mortgages, which might have been just the thing for Mr. Ferguson.
The IMB spokesman has the money quote: "...its kind of like taking a medication that isnt intended for what its meant to do, and sometimes there are bad side effects."
isn't intended for what it's meant to do. um, yeah.
In Germany in the '30s, people would disappear in the middle of the night, and no one knew where they went. Neighbors would whisper 'Gestapo'.
In USSR in '30s to the '70s people would vanish, and they'd blame the KGB.
In America in the 21st century, they go missing in night and the prime suspect is Ameriquest, Countrywide, WaMu, et al.
There's a parallel here, but it's Monday morning; when I wake up I'll think about it.
It's accelerating.. Have in law on verge of it down in Inland empire because CFC never returns a call about a workout. They have'nt missed a payment. Stopped paying 2 months ago. Cant afford the adjustment.
LTV is the big issue though.
She also mentioned not every broker wants to do an FHA due to small fees..
The walkaways may be ending, but now we have the live-ins to deal with (in all seriousness, why walk away when you can live there for months on end rent-free without being evicted?)
"They have'nt missed a payment. Stopped paying 2 months ago."
Is it me, or are these two sentences self-contradictory?
Has anyone ever produced anything close to an estimate of the number of ruthless default/"walk aways"? The L.A. Times had another article about someone planning to "walkaway" since their mortgage was adjusting to a clearly unaffordable level and they were underwater so they couldn't refi.
If someone said, most of the speculators who bought at the top had now lost their spec homes I would believe them but there still will be a lot of people "walking away" because they don't want to say they are being foreclosed.
I've got a pig eating snake for sale. Then it would be: just a matter of the pig going through the snake through the pig.
Malaclypse writes: "They have'nt missed a payment. Stopped paying 2 months ago."
Its kind of like taking a medication that isnt intended for what its meant to do.
oops, make that a snake eating PIG.
BMIT has more on the same article and derides Nevin for being a flat out idiot, which he is.
http://tinyurl.com/6fwdfv
Here are some nice quotes from and NCTimes article in '05:
http://www.nctimes.com/articles/2005/09/15/business/news/14_57_539_14_05.txt
Waiting for San Diego County's supposed housing bubble to burst? You will wait forever, said Alan Nevin, a longtime local real estate specialist.
Asked where he would recommend buying real estate in the North County coastal area, Nevin replied: "Everywhere. There's no negatives."
Nevin's talk was reassuring, said Frank Mercardante, Southwest president and chief executive. "He emphasized there is no bubble and there won't be, because of the demand for real estate here in San Diego County," Mercardante said.
Yes, Nevin is quite the visionary.
Tanta,
Can you update your post with this link:
Real estate guru: Local housing market stable
It's an article from the North County Times entitled "Real estate guru: Local housing market stable", dated 9/14/2005.
It opens thus:
"LA JOLLA ---- Waiting for San Diego County's supposed housing bubble to burst? You will wait forever, said Alan Nevin, a longtime local real estate specialist."
Other choice words:
Asked where he would recommend buying real estate in the North County coastal area, Nevin replied: "Everywhere. There's no negatives."
. . .
Nevin's talk was reassuring, said Frank Mercardante, Southwest president and chief executive.
"He emphasized there is no bubble and there won't be, because of the demand for real estate here in San Diego County," Mercardante said.
Mercardante said that as a banker, he has to think of problems that would keep him up at night, and asked Nevin what would keep him up at night about the economy.
"He said, 'Nothing,' " Mercardante said.
Mal-your correct-multi-tasking here-should have read- they never missed payment, adjustment came up and CFC will not return calls to modify after initial contact. So they didn't pay last two payments to see if CFC would be more responsive.
deb writes:.....
Good find, GREAT STUFF ! ! ! What a comedian....
~
Now it's just a matter of the pig going through the snake.
I remember this picture from florida where a python tried to swallow and alligator, it killed the gator but the snakes stomach burst open before it had time to digest its prey.
I think that image is more proper here.
"I would like to nominate "we are at the bottom" for phrase of the year of 2008."
Hey! That was the motto in the business pages for 1992, about the time I bought a small business.
That hissing noise is the sound of the hot air leaking out of the balloon.
Only took me three years to pay off that venture.
Want to laugh?
The Bubble Markets Inventory Tracking site posted a link to Nevin's comments in Sept. '05:
http://www.nctimes.com/articles/2005/09/15/business/news/14_57_539_14_05.txt
LA JOLLA ---- Waiting for San Diego County's supposed housing bubble to burst? You will wait forever, said Alan Nevin, a longtime local real estate specialist.
From Oceanside to downtown San Diego, the economy is so well diversified it is nearly invulnerable to collapse, Nevin said. That diversification and the stabilized real estate market makes prospects for the region almost scarily good.
"The economy is basically healthy. There don't seem to be any weak spots," Nevin said in after-talk remarks. "Right now, there's no one employer that has more than half of 1 percent of the jobs in the county."
Nevin sketched a portrait of a county bringing in new housing and renovating old and even dangerous neighborhoods, a county possibly on the way to becoming an internationally favored place to live by the well-to-do ---- bringing in yet another source of wealth to sustain the real estate market.
Asked where he would recommend buying real estate in the North County coastal area, Nevin replied: "Everywhere. There's no negatives."
"Now it's just a matter of the pig going through the snake."
Thank goodness I live in NH! We don't have those kind of snakes up here. Phew.
He's on glue...
Walk aways won't slow down or stop until all of the recently originated loans go through the reset cycle and the housing market stablizes. Making the assessment as to whether or not you walk away comes at a time when you can't make the mortgage any more and at roughly the same time you have to decide if you home is worth what you are continuing to pay for it...This isn't rocket science.
Rests continue for the next three years and the housing values will continue to decline until banks are willing to write loans again for middle income buyers.
I'm not sure it's possible to get good info on the number of walkaways.
How do you determine of they walked or left because they knew they would be evicted?
Is it based strictly off the house being empty at eviction time? If so, maybe people walked and left stuff they didn't want in the house.
Is it based on walkers letting the bank know ahead of time their intention to stop paying even though they have the capability of paying? This would give us a good count of the number of morons who walked, but not the entire number.
"just a matter of the pig going through the snake.
PETA should investigate this! Unconscionable behavior on the snakes part!!!
In other rosy news, Mercardante confirmed that gasoline prices are rapidly dropping, the Templars have re-taken Jerusalem, and Mighty Lord Cthullu ate slightly fewer souls in Q1 than he did in Q4 last year.
Also, in a surprise update to previous mythology, Mercardante revealed that the sun is not only a super-powerful semi-divine being pulled across the heavens in a chariot of fire, but that he will soon shower the earth and its grateful inhabitants with up to $1200 CASH MONEY with no strings attached.
Wait, what was that last part?!
Just because hordes of people purchased houses they cannot afford doesn't mean they can eventually learn of their predicament and act rationally. It won't take many renters in the neighborhood paying half as much every month to make people run the numbers from a new perspective. It won't take being 10-15% underwater for people to realize they can do a lot better by walking and renting. The usurious fees the REIC puts on transactions make the math work even for people with single digit positive equity. For some number more than half but less than 2/3rds staying put makes sense because they are paying less to live in a house they own than equivalent rent. Some others will stay for reasons of family, school, etc.
Every month that goes by we will hear the bottom called because every month that goes by is one more payment rather than deficiency. After all what would have happened if in Oct 2006 someone spoke with authority that over the next two years homes recently purchased would lose 20-40% as sales more than halved. The result would have been a market panic. That's why you won't hear that over the next two years prices could fall another 20-40%. Spoken with authority that would cause the housing market to implode. The game is to keep as many as possible paying in as much as possible for as long as possible with the lest return on that investment as possible
Walkaways are over. The financials have bottomed out. The market is looking forward to sunny days ahead.
And you folks here are just trying to spoil the party. Jeez!
"concensus here on the east coast is that it's Monday"
Since when do you listen to consensus ?
What's the difference between an exercised put option walkaway and an irresponsible homeowner in foreclosure?
About 100 Fico points.
In Denver, some of the hardest hit entry level neighborhoods seem to have bottomed out, and are now stabilizing -- at least until the next cycle of foreclosures.
Right now, I'm working on a report for a purchase in an older north metro suburb; values fell 30-40% between 2006 and now, but there are lots of sales and under contracts -- the REO inventory is being absorbed at a steady rate, thank you very much.
On the other hand, in the million dollar scrape off neighborhoods, things are not looking so good -- lots sitting vacant, active listings of new specs outnumbering sales by 4 to 1, and generally weak demand. I would not want to be a custom home builder with a spec McMansion right now.
The next big test will be the Option ARMs coming due. Since they were the rocket fuel of the California appreciation, it will be interesting to see how the media spins the fallout.
Rob Dawg despite the name I'll have to agree. The powers that be have to manage fear in the market. Otherwise there will be a stampede the exits doors.
Previous Nevin "forecast":
Bakersfield Bubble: Central Valley seen as stable
"Walk aways won't slow down or stop until all of the recently originated loans go through the reset cycle and the housing market stablizes."
Yep. But even after that, if prices continue to drop, the "water line" will continue to rise. So that even those who bought in '04 with stable loans will find themselves underwater. Then '03, then....
Potentially, anyway. These later walkaways might walk away "ruthlessly," but also because of divorce, job loss, etc. Expect the walkaway situation to peak and then trail off slowly for several years.
And I think the mortgage powers that be know that. I agree with Rob Dawg, above. All the propaganda is simple intended to keep people in their mortgages as long as possible, even against their own best interests.
The biggest walkaway of all: Penny Pritzker & family walks away from Superior Bank Chicago in 2001 rather than inject more capital into failing bank:
Obama's subprime pal :: CHICAGO SUN-TIMES :: 44: Barack Obama
Current 2008 Nevin "forecast" - more BS. This guy in just another industry shill!
Central Valley Business Times
Let's hope a few of the snakes explode before the pigs all get digested. I for one would like to see some carnage at the top of the mortgage chain instead of just at the bottom of the housing pileup.
Another quotable idiot.
Comedian is too nice of an occupation for these guys to be lumped in. What said by the comedians are intended as jokes. What said by these scums are implicit lies and deceptions -- anything for a quick buck.
Must read article by Kevin Phillips on the PPT
The Plunge Protection Team « The Washington Independent
I've got a closing this afternoon where the seller is having to borrow $20,000 on a personal line to sell her house.
The sales price is about $150,000. The county has the property assessed for $187,000, which is about what she paid for it a couple of years ago.
Except that this not a non-recourse state, I'd have damn sure walked away, and left the heloc holding the bag. My local paper keeps touting the strength of our non-San Diegoish (no big run-up in prices) real estate market. Hmmph!
CBIA Chief Economist Alan Nevin notes that the San Joaquin Valley produced 12,000-15,000 jobs in the 2002-2004 period with most industries showing modest gains. [Then, in 2005, there was a wave of new homebuilding and buying unrelated to new-job creation.] SPECULATORS
No, I think Nevin's is right...it's the crawlaways that he's missing.
(Central Valley) In 2007, employment growth has gradually returned to a more normal level, adding more than 15,000 jobs. [Most of those job gains are support jobs servicing the rapidly expanded inventory of housing] Oh great.
Bob Dobbs writes:
"Potentially, anyway. These later walkaways might walk away "ruthlessly," but also because of divorce, job loss, etc. Expect the walkaway situation to peak and then trail off slowly for several years."
I posted about this yesterday on the housingbubbleblog. One other point is that this could keep prices down for a long time.
"I think the evidence we have seen is that it takes quite a few foreclosures to drive the price down substantially. What I am saying is I think a steady rain of foreclosures, even at a fairly low rate, will KEEP the prices down and I think the depth of underwaterness will keep that rain coming for a long time."
Funny. I just found out that our friend the real estate agent (who help us buy and sell 2 homes over the last 12 years) is planning on walking away from her home. I think there's a lot more people waiting until someone knocks before they walk.
DonKei writes:
I've got a closing this afternoon where the seller is having to borrow $20,000 on a personal line to sell her house.
...My local paper keeps touting the strength of our non-San Diegoish (no big run-up in prices) real estate market. Hmmph!
I keep warning that "Flyover America" is not immune to the aspects of the bubble that were national in nature. Could very well turn out that moderate appreciation was a bubble compared to what would have happened without loose credit morals.
Anybody remember the picture of the "hat" in the early pages of The Little Prince?
When Nevin looks at this pig (elephant) going through the snake, I think he really does see a hat.
His background and job REQUIRE that he see a hat so he does.
Nobody's walking away any more.
They are just running away.
borrow $20,000 on a personal line to sell her house
One only has to imagine the scores of people in higher cost areas where that number could have an extra zero in it.
I find it interesting that many of the walkaway ppeople on the record are all relitters.
"Must read article by Kevin Phillips on the PPT"
Come to think of it, the Fed could actually raise rates on Wed despite the rally in the markets over the past month. There's nothing to fear. After all, the PPT can always intervene to prevent any unseemly reactions in the free markets.
They are growing bolder.
U.S. Home Vacancies Rise to Record on Foreclosures (Update4) - Bloomberg.com
Canadaman writes:
walkaway's won't start declining in numbers until Wall Street IPO's "youwalkaway.com" IMO
Canadaman | 04.28.08 - 10:55 am |
This comment is simple brilliance.
Next step will be to walk away from California Ass of Realtors and California Builders Ass.
Are rate resets on 2/28 ARM's really still an issue with LIBOR so low? I've heard of instances where payments are actually going DOWN at the reset, not up. With Bernanke set to lower the Fed Funds rate again, when do rate resets stop being an issue for these borrowers? Yes, there are option ARM's, but how many of those are really being recast now? When people say someone is walking away because the reset is unaffordable, what kind of loan are these people in?
I have "friends" in soCal trying to get me to buy.
You start finding out who your friends really are.
Big bank woes just beginning, Morgan Stanley analysts say
April 28, 2008
(Reuters)Morgan Stanley analysts Monday told clients to "sell the rally" in financial stocks, slashing forecasts for big bank earnings and warning that the current credit crunch is only just beginning.
In aggregate, Morgan Stanley reduced its estimates for 2008 large bank earnings by $17 billion, or 26%, and reduced 2009 forecasts by $13 billion, or 15%. The analysts expect higher loan losses and expenses, offset by higher net interest income, though profits could fall further still if the Federal Reserve stops lowering interest rates.
"More capital hikes and dividend cuts (are) coming as our credit deteriorates and forward earnings decline," analysts led by Betsy Graseck wrote in a report. "We think we are only in the third inning of the credit cycle and expect this credit cycle will be worse than (the slump in) 1990-91."
REG - Financial Week
lama writes:
Canadaman writes:
walkaway's won't start declining in numbers until Wall Street IPO's "youwalkaway.com" IMO
Canadaman | 04.28.08 - 10:55 am |
This comment is simple brilliance.
I'm there with lama. Brilliant comment. Until wall street can leave the next FB holding the bag, it isn't over.
Got Popcorn?
Neil
So the article's writer found Alan Nevin at a SoCal social event, right? Where some very young lady was getting a pony? And Nevin was the guy in the blue hair and big shoes giving attendees balloons and telling funny stories about animals, right?
I was talking about this issue with another real estate lawyer a few days ago. Both of us have many more clients who are thinking about/getting ready to walk away than who have actually pulled the trigger.
High-income walk-aways will usually take their time to (1) apply for all the consumer credit they need now before the hit to their credit scores (2) find another place to live.
One client is waiting until the end of the school year since he'll probably move out of the district.
All this takes a while. Another source of delay is trying to negotiate a short sale.
Here is something to ponder: Much of California is down 33%+ from 2006 prices, especially new SFH in the distant suburbs and new condos and conversions.
In order to sell without bringing money to closing, the value of a house that has dropped 33% would have to increase 59% from today's prices if you include the RE agent's fee.
That means a lot of people have little hope of disposing of their home without bring money to closing for a long time, even if the market stops declining and starts to recover.
The greatest thing about the resets is that before the reset, most people were making the albeit-small payment each month. But as cd has pointed out regarding a relative, as the mortgage adjusts higher, people stop making any payment at all.
Wasn't it better for CFC to receive that small payment than none?
This is going to get soooo much worse.
What about...said: "When people say someone is walking away because the reset is unaffordable, what kind of loan are these people in?"
Only the worst kinds or ARMs, not the ordinary kinds. Like loans with extremely low "teaser" rates or loans with a "pick-a-payment" feature where the borrower was paying less than the full equity+interest payment.
You can see here that Libor rates are down over 100 bp since the beginning of this year alone and over 200 bp lower from the same time last year.
Mortgage Indexes: WSJ LIBOR: History: 2008
This whole rate-adjustment "disaster" is going to be seriously underwhelming.
Sebastia
I keep warning that "Flyover America" is not immune to the aspects of the bubble that were national in nature. Could very well turn out that moderate appreciation was a bubble compared to what would have happened without loose credit morals.
Rob Dawg | Homepage | 04.28.08 - 12:22 pm | #
The difference is we don't have the 'rent advantage'. In much of flyover rent options are either more expensive of very inferior (and I mean VERY inferior) or both.
That tends to change the calculus for a lot of walk aways - the 'away' is really FAR away, not to another near by rental. With the job losses in automotive & housing components/mat'ls more than a few will be forced to leave - but they will leave the region too, not just their development.
Seb's been trying to make that point but big city 'coasters' just don't get it (just like the rube's can't imagine having that much affordable rental inventory available & that big of a price differential btwn buy & rent).
Its two different worlds, two different situations - but a lot of empty houses just he same.
Just how long is that snake? BTW, the local rosy boa will constrict multiple prey animals and eat them to look a little more like beads on a chain.
Walkaways are diminishing, we will replace the term with 'runaways'. Or maybe 'hiders' in a game of hide-and-go-seek, the lender is 'IT'.
Seb, it's not the rate adjustment as much as finding out that the guy renting the same house is paying $1500 a month while your paying $3000 a month while equity is growing negative. This will take years to play out. She doesn't want to leave as she has kids in school.
Why would she not walk away when your neighborhood is ground zero..
see here
http://www.realtytrac.com/MapSearch/MapSearch/MapSearch.aspx?zipcode=92530&zipOnly=true&#search
Let's get Nevin on record here; How long IS this snake???
Liar, liar pants ion fire!
CD, another calculation people might want to make is that it's better to walk away from their 800K 5.5% 30-year fixed mortgage and buy a similar house for 500K down the street, even if their foreclosure means they have to pay a 8.5% subprime rate.
Morgan Stanley analysts Monday told clients to "sell the rally" in financial stocks
I guess MS forgot to loadup in March.
Citi, agreed the worst isn't over, but this phase of the credit crunch will be regional banks in CRE, Big banks should have less exposure to CRE.
cd said: "Seb, it's not the rate adjustment as much as finding out that the guy renting the same house is paying $1500 a month while your paying $3000 a month while equity is growing negative. This will take years to play out. She doesn't want to leave as she has kids in school."
That relationship of rent to mortgage payment is uncommon, except in California.
HousingTracker.net: Affordabilty Measures
Sebastia
Greg-I agree..
800k/2004 purchase/5.5%
$4,542.31
Monthly Principal & Interest
$1,635,232.32
Total of 360 Payments
$835,232.32
Total Interest Paid Dec, 2033
Pay-off Date
500K/2008 purchase.8.5k
$3,844.57
Monthly Principal & Interest
$1,384,044.27
Total of 360 Payments
$884,044.27
Total Interest Paid Dec, 2037
Pay-off Date
Save almost 300K starting loan 4 years later at 8.5%...most likely will be able to refi to lower rate in less than 2 years..
even if their foreclosure means they have to pay a 8.5% subprime rate.
What? What sort of half-assed advice is this? First of all, IF you can get another loan. Now with an FC on you, you can forget about getting any sort of subprime that even approaches that rate. You'd also have to wait at least a year or more before anyone would look at you, now that the credit markets are still freaked out.
Also it's not just the cost of that loan, it's the coast of ALL CREDIT, as you're going to start paying north of 20% for ANY credit card you already have, once they run a check on you (as they can) and find a seriously delinquent note on you. You'd want to factor that into your equation too.
And you'd better be either planning on living where someone isn't likely to pull a credit report on you for rent, or renting from someone you know.
You make it sound like it's go easy. It isn't, nor should it be. If you couldn't afford it you shouldn't have bought it. I have zero sympathy, as if you can't tell. Another example of the stunning lack of consequence and acceptance of personal responsibility here.
Awgee stole my thought. Ha! Regarding the article - These type of real estate people continue saying the same things over and over and over again hoping that eventually it will merely change the trend and thought processes. Becoming a self-fulfilling prophecy if you will.
Question of the day:
Is a person with an Option-Arm making neg-am payments every single month in a steadily declining real estate market still considered to be current on their mortgage? How in the world could they?
I guess that would depend on what your definition of "IS" is.
Peace Out!
Save almost 300K starting loan 4 years later at 8.5%...most likely will be able to refi to lower rate in less than 2 years..
What are you one of those mortgage brokers "you can refinance in 2 years" sort of guys? Did your difference in a monthly payment cover the fact that ALL credit will be much higher? Including any debt outstanding now? Did it include costs of moving, rent, etc for that time? How about those people for whom credit is checked at the workplace?
Since when did this blog turn into a place for crazies and those with no sense of personal responsibility or ethics? I thought that's what everyone complained about. If this is the way you think, then you shouldn't mind if I say it's OK for the government to bail this person out, right?
says who, the condo salesman. Well according to those, the best time to buy is always NOW.
That relationship of rent to mortgage payment is uncommon, except in California.
The list you reference has 30 markets where it's cheaper to rent than to buy(which also have 20 of the 30 biggest MSAs); the markets where it's cheaper to buy are in TX, OK, the dying midwest and the sunbelt.
As for government bailout:
Unfortunately the only way most humans learn is rather through painful experience. If the government does bailout, how will we learn to buy only something that we can afford?
"30 markets where it's cheaper to rent than to buy"
Yep, and Cali, NY, DC, Seattle, Portland and Sarasota where the ratio is above 1.28:1, as opposed to the 2:1 ratio posited in CD's post, which the list was used to refute.
Of course, the ratio is also based on (80%, 30-yr fixed) mortgage for a SFR versus rent for a 3-BR apartment, so it's apples and oranges. And really depends on 3-br apts being available in the market.
Friend in Wyoming finally got FCed. His brother was renting to him, and got NOD at the end of '06. Friend stayed trying to find a way to get money to buy it out (as his brother tried to work it out), but thankfully (due to implosion in Aug) he couldn't.
Here we are 18months later and the CA lender has finally asked him to walk. At least he's saved ~$10k in rent, but he's spent some of that on actual maintenance and stuff.
His uncle who had owned for years was HELOCed and under water ~$60k based on current appraisal (from $200->140), and the rent was only covering half of the monthly payments. I personally doubt it was ever worth $200 based on pricing of nicer houses nearby.
Ipodius- No I'm not a mrtge broker, I run sales for a successful software co. You take is correct in some ways but your obviously disconnected from the mortgage market and credit right now. FHA is buying at 5.6% with 2 year old bk and 560 fico score. A friend runs a credit reporting company and gives me updates on what is happening on the mrtge side. As for credit I guarantee I've seen more credit apps over the last 20 years than you've seen breakfast, lunch and dinner during the same time.
You can fix credit extremely fast now days. Obviously your not aware of it because your trying to keep the "Crazies" from breaking out..
Credit can be manipulated just like the stock market.
The govt is bailing out so nothing new there...
As far as ethics, I'm pretty sure the line I stand in is straight. Yours I can't vouch for...
Advising someone to stop paying is a bailout too, isn't it? The idiotic post above basically says "hey there's no consequence if you just walk away". So I guess, then, looting is also OK, so is shoplifting, and eating the produce in the grocery store as you walk around before you pay.
Frankly I think anyone that does this should be barred from being on a loan app for at least 7 years.
I find it interesting that many of the walkaway ppeople on the record are all relitters.
Read: unemployment
Great cd, so it's OK if I use your software and don't pay for it because, you know, it's too expensive and my company can't afford it. So we'll just jigger with the licensing or just lie. It has to be ok, if it's ok to just screw the lender and walk away outside of a BK filing (which, btw, i think is fine), a short sale, or having to pay back the amount of the difference (which is also what I think people should have to do outside of a bk).
Alec said: "The list you reference has 30 markets where it's cheaper to rent than to buy(which also have 20 of the 30 biggest MSAs..."
In cd's example, the mortgage payment was double what rent would be, which is an extreme. Within the U.S. that disparity is most common in California MSAs, it even drops off substantially within some parts of CA.
S.
"I think anyone that does this should be barred from being on a loan app for at least 7 years"
No, the proper way is through appropriate pricing. Prohibitions have too many externalities; make the loans expensive enough, or limited enough, but keep them available.
God I'm peeved about that post. It points to everything that made the entire bubble happen...lotto mentality. Something for nothing. Everything's disposable, even your contractual obligations. There are mechanisms to deal with all of this: you can work it out with bank, and if not you can BK. You did it, now take the right way to dispose of the problem instead of running away in the middle of the night. None of these people should be let near a mortgage again without a hefty, hard-cash deposit.
A walk-away should mean zero credit ability for a long, long time. Just to drive home that there are consequences for your actions. Flippin' entitlement strikes again!
Im with CD. Its make sense to just walk away and comeback when the property is cheaper. As far as morals and ethics I think that both have left the equation years ago and now its everyman for themselves.
I's agree with you zaleriana actually. Make it PUNATIVE pricing that reflects the reality of the loss involved in the "walking away". I bet a lot of people would handle it the right way if they knew they wouldn't see a credit card under 25% for seven years and a mortgage with double-digit interest requiring over 20% down.
That relationship of rent to mortgage payment is uncommon, except in California.
Seb - move on - you can't change people's mind.
BTW - the house next door to me is a rental, I know the owner well, I watch his place (sort of).
It is an older three bedroom 1 bath two floor - needs work but is functionally adequate. The owner used to live there but is a city employee and buys homes & rents them - his IRA. He bought the place & moved out 20 years ago when he found a bigger one he'd rather live in than rented this one ever since. I believe he owns about eight homes now - seven he rents. All are 100% paid for mostly occupied 100% of the time.
He wanted the cash out to pay his kids college tuition & tried to sell the house next door during 'the bubble'... asked $140K and didn't get an offer - not one - over an 18 month period. A similar house around the corner (REO) just went for about $80K. 'Splains everything - locals might not be as smart as Californians but they aren't dumb either.
He rents the place for about $1200/month & renters pay utilities... take away tax, insurance and out of pocket maint (he does labor & there is A LOT of it) the place nets about $10K/year... if you use the $140 number - that means it goes for about a 7% cap... at $80K (the similar REO) it goes for 12.5% cap.
So considering alternative options - he keeps it for now even though he is getting older & the maint sucks - renting seven wrecks is a full time job plus his other full time job.
Now from other local home owner perspectives - assuming you still have a job & can make payments... are you gonna walk away from a home selling for $80K-100K even if its underwater to rent a similar home for $1500/month PLUS utilities? I don't think so.
That's the non-California flyover extreme... there are a bunch of people everywhere in between. Walk away isn't a slam dunk for everyone, everywhere by ANY stretch.
If a home in my part of the world goes empty it isn't due to walk away - they get thrown out the old fashioned way.
Its make sense to just walk away and comeback when the property is cheaper.
Yes, and it makes sense that no one write you a loan for less than 10% with 20% down and give you no credit under 25% for the next seven years. Right? It also makes sense for me, your employer, to get rid of you, as you've just demonstrated to me what sort of ethical risk you are to have around, right?
The Bubble Markets Inventory Tracking site posted a link to Nevin's comments in Sept. '05:
I wonder how that might affect Mr Nevin's qualifications as an expert witness ?
"The walkaways may be ending, but now we have the live-ins to deal with (in all seriousness, why walk away when you can live there for months on end rent-free without being evicted?)"
I think there is something to this. Think hard, you're going to lose the house and you have a butt load of credit card debt. What to do?
a) Keep throwing money down a rat hole trying to get current on the mortgage. Get foreclosed on anyways.
b) Walk away.
c) Disparately try to arrange a short sale and then take a huge tax hit come next march?
d) Stop paying the mortgage, live rent free for a year, pay off your credit cards and put money in the bank for a first and last?
Which leaves you in the best position?
Yes, and it makes sense that no one write you a loan for less than 10% with 20% down and give you no credit under 25% for the next seven years. Right? It also makes sense for me, your employer, to get rid of you, as you've just demonstrated to me what sort of ethical risk you are to have around, right?
WHY DO YOU THINK IT IS HARDER TO GET A HOME MORTGAGE. EVERYONE SUFFERS UNFORTUNATELY.
I can't believe that "walkaways" has become so in-fashion that a term has to be invented for it. I knew people back when I was in California who were so succumbed to the idea of accumulating homes. I asked them "when is enough?", for which they replied "you're missing out!"
Perhaps they all thought that life is just a game of Monopoly, wherein you quickly buy properties to get ahead in life.
Problem is, they missed the most important lesson in Monopoly that I have been teaching my kids: That at the end of the game, all monies and properties will go back in the box. This game has a long ways to go...
Seb,
Your correct regarding market. It's inland empire...But that's playing out in many markets and beginning to start leaking into other higher end markets. Example East Bay, Ca- I pay
$1500 rent on condo, owners near me pay $2850..
Ipodius, I agree on no bail out and my advise to the in-law on purchase 3 yrs ago was Don't. As a underwriter in the 90's I wouldn't buy a bk under 15% unless health problems contributed to it..In 05 I was discussing current programs with underwriter freind for fieldstone a "c" paper lender, they were buying bk at 7.5%. I knew that things were going to get bad. When I had hot little re agents I know telling me to buy a home, yet thought equifax was a new online fax product, again my conviction was to stay away.
Here I sit with 20% down, great income and no debt waiting for prices to get back to reality. I'm not advocating walking away, just throwing in my 2 cents on why many will. Personally if I was underwater 200K and it affected my family while a neighbor was paying 1/2 to rent same house, it would be awfully tough to stay..
I agree with your stand but realize the govt will do everything they can to prop the home and stock market..
My neighborhood (93010) equivalents:
673 Corte Estrella $875,000
4 Bed, 3 Bath 2,863 Sq. Ft. 0.14 Acres
636 Corte Elegante Rental $2,950
4 Bed, 3 Bath 2,910 Sq. Ft. 0.15 Acres
Do the math Sebastian. Don't forget lost opportunity costs. And let's look at the zillow:
673 Corte Estrella:
Zestimate: $813,000 30-day change: -$41,000
These people are looking at those numbers and see serious coin just for walking across the street.
"I'm not advocating walking away,..."
Why not? In certain circumstances, it is entirely appropriate to do. A real estate sale is a secured contract. In the event you cannot make the payments, the bank takes possession of the collateral. They lent the money, received monthly payments, and now, have their collateral back.
There is little point in arguing the ethical issues when there are remedies available to the bank.
WHAT ARE YOU SMOKING SIR??
Umm...Ever heard of "ALT-A"??
This crisis hasnt even hit the fan yet, and is twice the size of Sub Prime.
It will start to kick in if we really start freezing and fixing rates for the Sub prime set.
They truly havent even started yet!!
FWIW here in Bham Alabama, my wife works for an attorney. We were over at a friend that does independent contracting work for lawyers typing documents. She said that foreclosures were covering her up, a massive increase.
And I think the mortgage powers that be know that. I agree with Rob Dawg, above. All the propaganda is simply intended to keep people in their mortgages as long as possible, even against their own best interests.
I agree with RobDawg and with Mr. Dobbs. The powers-that-be are probably hoping that happy talk will postpone a meltdown until...until what exactly?
Their only strategy is postponement, because they have no strategy for the meltdown itself. If the ocean liner is sinking and there aren't enough lifeboats, you tell the band to keep on playing. Might as well.
Dumbest comment ever. He is pretending (hoping) pricing is static. Any drop in prices results in a further wave of defaults. Defaults put more downward pressure on prices. This guys is an IDIOT.
Here in flyover land, "point-one-four" is more likely to be used as a descriptor for drunks than lots.
Point-one-four acres - for $875,000!?!
It continues to amaze me that anyone in southern CA, to say nothing of the Dean of Real Estate Feasibility Studies, could have been a bubble-denier with those kind of prices.
Shnaps,
Do not mistake wishing price for selling price. They can probably only get $750-$780k for that house. Subtract another $100k if the buyers find out about the hotel going up to block their view.
How many of these do you want? We have Riverpark to the west and Village at the Park to the east. Tiny lot McMicroMansions with crushing HOAs and taxes. I would not consider them worth considering until they are in the $300s.
looks like Alan Nevin has a $1.4 million refi on his La Jolla home. unemployment would not be pleasant for him.
lama writes:
Canadaman writes:
walkaway's won't start declining in numbers until Wall Street IPO's "youwalkaway.com" IMO
Canadaman | 04.28.08 - 10:55 am |
This comment is simple brilliance.
lama | 04.28.08 - 12:32 pm | #
Thanks lama and neil
Rob Dawg writes:
"My neighborhood (93010) equivalents:
. . .
Do the math Sebastian."
Sebastian writes:
"That relationship of rent to mortgage payment is uncommon, except in California."
Uh, isn't 93010 in California? Aren't you reinforcing Seb's point?
Zaleriana,
I put very little 'stock' in Sebs comments but if you start eliminating California and then Phoenix and most of Florida and Massachusetts and... well the problem is that if rents are in national equilibrium what happens to KC rents when SoCal rents change? Seb wants things contained. Too late.
2:1 rent ratios or 200x rates are not uncommon nor limited to California.
I was looking for a better rate on my HELOC from my friendly banker here in the Chicago suburbs. I asked him about his lending activities, and he said there wasn't much since all the appraisals were coming back way low. I wonder if anything is starting here.
Just because lower LIBORr may have made the first reset a non-event for many 2/28s does mean the bullet is dodged forever. Most of those loans reset again every year or even every six months. Unless and until the holders can refi into a fixed or a longer term ARM, higher interest rates will continue to be an ongoing threat to those who hold them.
Anonymous@11:18 "Do snakes crap?"
Well, if they do, this one had better get an epidural first...
cd
Rob,
Just to add to your point: After all the comparable rent calculations by market by sq. foot, it really comes down to arithmetic and perspective. A $700,000, 4 bedroom house in an average middle-class town with $100,000 avg household income is not sustainable. The pay cannot make an amortizing payment within an average person's standard purchase to retirement time frame of about 30 years.
The perspective, supported by law of numbers, is that the price will revert to it's long term price to income ratio of 3-4 times.
PLEASE, I WANT WHAT NEVIN IS SMOKING, THIS IS MORE LIKE AN ELEPHANT GOING THRU A SNAKE AND THE SNAKE HAS JUST STARTED LICKING IT...........THIS JUST STARTED GUY..........THIS EXPLAINS WHY CALIFORNIA IS THE BEGINNING.........
When people get stuck underwater by $100K, $200K and see the house next door getting sold at 60% off and the entire rest of the community coming down with similar prices, yup, they're going to walk. Especially if they've only just been able to pay the mortgage and it's about to reset from that lovely "teaser" rate to something much higher.
...""LA JOLLA ---- Waiting for San Diego County's supposed housing bubble to burst? You will wait forever, said Alan Nevin, a longtime local real estate specialist.".....
Apparently longtime local real estate specialist = Giant Douchebag.
It's just a matter of the elephant
passing through the wormhole.
Nevin is Correct, people have STOPPED walking away from their homes. They are now running away from their mortgages. These people are now called runaways (not to be confused with sprintaways, ridaways and flyaways).
Runaways are trademarked by REPUBLICANS ARE TRAITORS, inc. It cannot be reused, recopied or retransmitted without the express permission of RATS, inc.
It's a ByeByer's market.
The person who is saying "walkaways are over" is also probably telling people that "now is a great time to buy."
And does the "pig going through a snake really mean what I think it means?"
VennData "It's a ByeByer's market."
Clever! ~steals quote~