I just wrote a post about condo overbuilding, overstated sales figures, and shoddy construction as a sort of follow-up to CR's post on single family residence overbuilding.
Rob Dawg writes:
REO disposal transactions are no more a sale than flushing a polished turd down the toilet is grocery store revenue.
Rob Dawg | Homepage | 08.19.08 - 4:45 pm | #
Thank you Rob Dawg......that made my day........LMAO
The latest Case Shiller numbers show a decline of 22.9% between May '07 and May '08 as compared to Dataquick's 29.3% dcline for July to July. However Case-Shiller only includes single family homes in its calculations and, I think, has a more limited definition of "Bay Area".
Seeing similar things in my area. The recent Bergen County Sheriff sales have been going not only for less than the bubble prices but less than the judgments awarded to the lenders.
The last one that sold looks like it was flipped a number of times during the bubble. One of the owners went from facing foreclosure to making over $100k in a sale in a short period of time.
It's interesting that on the opposite side of the US where I am just in the past few weeks or so list prices of houses have started to really come undone.
I think people are panicking or real estate agents are convincing people who want to sell (and don't have big mortgages) to be realistic about their pricing.
The listings I'm looking at seem to be bifurcating into two distinct groups -- bubble priced and non bubble priced.
For example at one condo complex I've been watching for a couple of years there are still a couple of listings at 2006 prices and several other listings now at 20%-25% less.
I assume the higher priced listings still have big bubble mortgages that are preventing the seller from dropping the price.
On the way to work I notice several houses that have been for sale for almost 2 years now. It looks like they're not going to sell this season either.
On guy has probably lost over $200k by sitting on his property.
Hopefully he was being greedy and holding out for the price he "deserved".
I would expect more sales to happen on the court house steps soon as banks lower the starting bids under the amount owed. I am sure they will all find out it is the simplest and most profitable way to sell a home. Think about it, no real estate agents involved saves them 6% right off the bat. Then factor in other costs in taking posesion of the property, inspections, etc.
Banks really need to lower the starting bids below the amount owed at the auctions on the courthouse steps. Think of all the cost they save without a real estate agent and taking possession of the property. If they just advertise the houses going to auction I bet they will recover much more than putting it into REO inventory.
"A better measure of price is a repeat sales index like Case-Shiller."
Yes and no. It depends on how Case Shiller defines an area. By their own admission, close in areas are doing far better than far flung areas crushed by energy costs.
A good example is in DC where case shiller includes rural areas 3 states away. Thus, the mild declines seen close in are swamped by the huge declines in the garbage areas.
Translation - Case Shiller is good for a whole MSA, but if you want to know whats going on on a county by county or smaller basis - Case Shiller is pretty worthless.
I would beg to differ that the median price is being currently "distorted" by the mix of sales -- that's the purpose of using the median price for housing as opposed to the average price to begin with. Just as with income, we use the median because there is the danger of outliers at the high end artificially inflating the average, where there really is no such danger with the low end.
If the only homes that are selling are on the low end, that means that those homes are what people either want, or more likely, can afford. If people can't afford the homes listed for sale on the high end, that means the homes on the high end are unlikely to sell for those prices, and thus their prices as listed for sale on MLS are the real distortion. So even if the bulk of homes listed for sale in a given area have list prices of X hundred thousand, if the only homes selling are the ones for x/2 hundred thousand, than that is the reality of the pricing situation.
So while if there are a lot of houses listed at lower prices, but only the more expensive ones are selling, then we can say the median is being distorted by the mix of houses, which we saw at the peak of the bubble. The lowest prices had become too high for first-time buyers, and they were being priced out, even with nextto no lending standards. But that is a distortion because it is an artificial and unsustainable market environment. In the current environment, the number of foreclosures as a percentage of total sales will almost certainly continue until either the foreclosures stop, or the listing prices come down to match actual market clearing values, and it is likely that the former is not going to happen without the latter. Thus the median price is currently an accurate reflection of the market price as is currently sustainable with incomes and affordability.
I would beg to differ that the median price is being currently "distorted" by the mix of sales -- that's the purpose of using the median price for housing as opposed to the average price to begin with. Just as with income, we use the median because there is the danger of outliers at the high end artificially inflating the average, where there really is no such danger with the low end.
If the only homes that are selling are on the low end, that means that those homes are what people either want, or more likely, can afford. If people can't afford the homes listed for sale on the high end, that means the homes on the high end are unlikely to sell for those prices, and thus their prices as listed for sale on MLS are the real distortion. So even if the bulk of homes listed for sale in a given area have list prices of X hundred thousand, if the only homes selling are the ones for x/2 hundred thousand, than that is the reality of the pricing situation.
So while if there are a lot of houses listed at lower prices, but only the more expensive ones are selling, then we can say the median is being distorted by the mix of houses, which we saw at the peak of the bubble. The lowest prices had become too high for first-time buyers, and they were being priced out, even with next to no lending standards. But that is a distortion because it is an artificial and unsustainable market environment.
In the current environment, the number of foreclosures as a percentage of total sales will almost certainly continue until either the foreclosures stop, or the listing prices come down to match actual market clearing values, and it is likely that the former is not going to happen without the latter. Thus the median price is currently an accurate reflection of the market price as is currently sustainable with incomes and affordability.
I think the only way one could argue that the median price could be distorted on the downside is if the price were equally as artificial and unsustainable, say, only foreclosures listed at $1 were selling. In the current situation, though, I think the median is quite representative of the current market environment, and if anything, probably still too high.
I don't know how things work where you are, but here in Bergen County, NJ the bidding starts at $100.
The banks aren't actually at the auction but they hire lawyers to be there that are also involved in filing and arguing the foreclosure cases. The banks let the representatives know when to stop counterbidding. Looks like they're stopping lower and lower.
That's not even counting the number of modifications and short sales that happen pre auction.
So much of today's market is driven by distress. Unless interpreted in that context, the stats give a rather distorted view of the overall market.
What's distorted about reality? So what if there is a higher percentage of distressed sales. Correct me if I'm wrong but something is worth what someone is willing to pay for it....today.
Real Estate values are fluid and people buy when they perceive value. If they happen to be buying foreclosures at a "reduced" price, then similar homes have a new value until someone agrees to pay more.
My area of interest is the Outer Banks of NC (for those who know the area between-the-highways in KH and KDH)for a rental/vacation property.
In the summer of '06 I got a RE agent to get me the rental/expense numbers (for the proceeding 3 years) on a half a dozen houses that were ~$700K. I was looking to put down 20% and live with a negative cashflow of 12-15k (yeah, I know terrible investment but I surf so what can I say) before tax considerations. After crunching the numbers I found that the houses needed to be 400K. Ended up getting into a discussion of insanity of the prices with the agent. It was actually kinda funny talking fundamentals with a "real estate only goes up" RE agent.
Prices have since dropped (at least for the motivated sellers) into the mid to high 5's but I'm sitting tight until the haircut is 50%.
Fed's Lacker Clashes With Paulson on Fannie, Freddie
Fed's Lacker Clashes With Paulson on Fannie, Freddie (Update1) - Bloomberg.com
"I would prefer to see them credibly and demonstrably privatized," Lacker said today in an interview with Bloomberg Television. He agreed with former Fed Chairman Alan Greenspan's view that the two largest U.S. mortgage finance firms ought to be nationalized, then split up and sold off.
That a lot of economic theory can't handle reality as so assumes non-distressed sales in their theories? Just a wild guess.
Then again, you could think of it this way. If you're trying to evaluate the character of a person, do you take into account their actions during a period when they were really stressed out and doing dumb-shit stuff? It depends on if you want to know their average behavior or are hiring them for a high-stress job. We've possibly hit a period of wide variance in measurements and behaviors with actors doing dumb-shit things. If you're wanting to look at the median prices to gauge how much your house is "really worth" (but have no intention or need of selling for years) vs. how much it will sell for in the next 5 minutes you may need adjust your anchoring to and interpretation of the latest stats.
In the Northwest suburbs of Chicago, asking prices have started to slide, but still not to realistic levels.
The number of homes listed for rent on the MLS has shot up about 20% in just the last few weeks. Most of the asking rents are unrealistic, but as with prices, some have started to slide.
The number of rental listings on the MLS is now around 114. A few years ago it was 7.
I'm noticing the same bifurcation pricing here too. It just started a couple weeks ago.
hmmm...let's see.... do I want the house here for 150K or the exact same model around the corner (literally!) for 280K?
It's so fantastic to see the free market (and with it, sane home pricing) finally begin to work its' magic- despite the wishes of Congress that homes stay permanently overpriced and out of reach.
somewhat OT - In my area they are now allowed to relist properties that have been on the market but that have had their listing expire (usually 6 or 12 months) and have them appear as "new".
I'm sure this isn't unique to my area. So "time on market" numbers are probably worthless. Or more worthless might be more accurate.
It's so fantastic to see the free market (and with it, sane home pricing) finally begin to work its' magic- despite the wishes of Congress that homes stay permanently overpriced and out of reach.
Never underestimate the ability of congress to step in and destroy things just as they're starting to improve.
I suspect if the US government ever does start printing money, for example, it will be just as we're turning the corner to recovery.
They'll try to speed things up and bring everything crashing back down again.
As we're learning the hard way, these markets and the economy are just too complex to manipulate on a whim or in the midst of a panic to respond.
It's so fantastic to see the free market (and with it, sane home pricing) finally begin to work its' magic- despite the wishes of Congress that homes stay permanently overpriced and out of reach.
Never underestimate the ability of congress to step in and destroy things just as they're starting to improve.
I suspect if the US government ever does start printing money, for example, it will be just as we're turning the corner to recovery.
They'll try to speed things up and bring everything crashing back down again.
As we're learning the hard way, these markets and the economy are just too complex to manipulate on a whim or in the midst of a panic to respond.
Relisting as "New on Market!!!" has been Standard Operating Procedure in the Washington State for the whole time I've been obsessively watching the MLS here (2 and 1/2 years).
They supposedly made it illegal a couple years back but none of the realtors have obliged.
As one realtor on a popular RE blog in Seattle said a couple years back: "But we need to make the properties look fresh! They sell better that way!"
Old habits die hard: throwing money at risky endeavors probably paid off handsomely in the Bay Area over the last five years. Too bad these buyers don't understand how much fundamental risk repricing is actually going on.
Some folks seem to love chasing the market down. I've been tracking a place (empty but not a foreclosure) in Oakland since January. Back then it was priced at $350k. Last reduction was to $210k and still no takers.
Fidelity gets access to the Window? Lets see how this plays out.
Mutual Money Market Funds may become illiquid. Or, "I'm sory Ms. Bean no you wont be getting your monthly retirement check". Can the Fed say no?
Does anyone know how much poop Fidelity pumped out to ivestors?
BOSTON, Aug 19 (Reuters) - Massachusetts' top securities regulator asked Fidelity Investments on Tuesday to repurchase auction-rate securities that it sold to customers, urging the mutual fund giant to assist clients now stuck with these frozen securities
"MOSCOW, Aug 19 (Reuters) - Russia is still buying debt issued by U.S. agencies Fannie Mae and Freddie Mac but on a smaller scale than before, Finance Minister Alexei Kudrin told reporters on Tuesday.
Kudrin said the ministry considered other investments in its portfolio were currently riskier than Fannie Mae and Freddie Mac debt.
Declining to be quoted directly, Kudrin added Russia would not have made a loss even if it had sold its entire holdings of bonds issued by the two U.S. agencies straight away."
SAN FRANCISCO (Thomson Financial) - Goodyear Tire & Rubber Co. late Tuesday said it plans to close 92 "underperforming" locations by the end of the year in a move to improve the profitability of its U.S. retail operations.
Goodyear said the impacted locations have roughly 500 full-time and 100 part-time employees
"So much of today's market is driven by distress. Unless interpreted in that context, the stats give a rather distorted view of the overall market. We know one-third of the Bay Area's resales in July were homes fresh off foreclosure. Who knows how many more involved a desperate seller and a lender who accepted a short sale," said John Walsh, MDA DataQuick president.
No mention is made of the distortions to the market (upward price distortions) caused when these homes were originally bought by folks that couldn't really afford them. Perhaps these distressed sales are actually eliminating the distortions caused back then, no?
In addition to undermining sales, the dropoff in jumbo use helps explain why the median price has fallen so sharply. With fewer high-end coastal homes selling, the pool of sales from which a median can be derived skews toward the lower-cost homes that are selling best.
Well, I guess turnabout is fair play, considering that median prices were artificially pumped up at the beginning of the credit crisis, when it was the low-end homes that were not selling, and the mix was more un-naturally weighted towards the high end.
Ministry of Truth--Buying at a foreclosure sale from a lender who bids far less than the judgment amount is a great idea in theory, but very hard in practice.
Vultures would show up if they knew it was gonna happen. But they don't know. Remember you have to produce cash, or cashier's check the same day.
So there is no motivation to show up to bid, because most lenders aren't doing this stuff.
You could publicize that Hey, I'm Joe Lender and I'm not gonna bid the full amount, but the banks would figure that this would be shooting themselves in the foot, which would be more or less true.
All they'd have to do is leave some flyers in the rooms where the vultures check the files and they'd get some action.
Of course, I'm not sure that the banks or the foreclosure attys know that there is a room where interested vultures check the files. (In Miami-Dade)
And I use the term vulture in the kindest and most approving sort of way.
Lawyerliz
In Oklahoma, if you are the successful bidder on a foreclose, you have to put up 10% within 24 hours and the remaining 90% when the sale is confirmed by the court, usually within three or four weeks.
You could publicize that Hey, I'm Joe Lender and I'm not gonna bid the full amount, but the banks would figure that this would be shooting themselves in the foot, which would be more or less true.
There was a building in my city that had been purchased by a guy in Cali, he had bought 20 buildings, all of them with artificially high appraisals. He collected rents on the buildings, never paid taxes and they all were foreclosed on. I'm sure he made off with a few million to go with his black and evil heart. As usually is the case with absentee landlords, the building turned into a crack house. The feds eventually busted them. The guy had paid $120K for the buildings. FMV would've been around $50-$60 (nice two story 100 year old brick buildings in good shape but this was a functioning crack house.)
So, there was going to be an auction at the courthouse. The word was that there was no point in showing up because the bank was going to bid $120K. I went anyways just because I can walk to the courthouse and I'd never been to an auction before.
It was me, a bank rep and the auctioneer person. The bidding started at $60K, much to my surprise. The bank rep bid $60K. She was very surprised to see me there. I asked what increments we needed to bid. I bid $60,100. The auctioneer turned to the bank woman and said, "Are you going to bid?"
Bank woman said, "I wasn't given authorization to bid above $60K".
Sold to a rather pleasantly surprised first time bidder.
Rehabbed along with 4 others in the neighborhood and sold for $175K, which the rents now easily support.
Sad but funny note found on the door when we took ownership "Repeatedly knocking on the door is RUDE!" Figured someone in the crack trade would expect some eager door knockers.
The only thing left behind in the apartment was a full box of 12 guage shells.
Lawyerliz, would it not be better for the bank if a vulture made a few percentage points flipping the property than losing double digits taking it in as an REO?
Lacker Says Fed May Need to Raise Rates Even With Weak Economy
Wow, talk about the boy who cried "wolf"...
Those hicks from the Richmond / St. Louis / Dallas Feds have been jibber-jabbering like this for a year now. Yawn. Wake me up when Janet Yellen mentions raising rates.
If you buy at the courthouse auction, is the purchase price is split between lienholders and you get the property free and clear? Or is there more too it? I never have understood that part.
I live in sonoma county (N. SF bay area).and our median price just hit $399k,which is a 2003 level,down 35% from the peak of $619k.Time to buy? well,no.2003 would have been the peak of a reasonably normal but aggressive real estate upturn that started in 1996-7,with a median skewed up a bit by our counties demographic (lots of older retirees with big $ buying for cash,and silicon valley .The median family income has gone up,to $60k...where will the median go/ probably around $225-$250k,perhaps a little higher because those dang estates skew the heck out of the median price when there aren't many sales.BTW,SOME of this high end stuff you just buy when you can if you have the money,they come on the market once every generation or two,maybe and are ...shit,just buy it,screw the price.
Cash OnlyHousing: You have to do some research and read the foreclosure petition. If the first mortgage holder files for foreclosure, the other lien holders are normally named in the petition so they are notified of the foreclosure action. If they do not bid, their lien is wiped out. They would have to bid in excess of the amount of the first lien. You just have to make sure that anyone who has as lien on the property is named in the foreclosure petition - Including IRS. state and local government who may be owed back taxes. I am not sure if this is the case in states other than Oklahoma, but I would assume that most states are similar, lots of research involved. Hope this helps.
If they are distress sales they may be turned into rental units which could make the homes in an area decline in value. Depends on the landlords. The rental could make a nice area decline very fast very quickly.
Did you mean the buildings were sold at $75K? Because $175K wouldn't make sense given the previous owner bought at $120K and was foreclosed upon.
No. I meant $175K. Four years later.
It does make sense if the two crack houses in the neighborhood have been rehabbed and filled up with law students. We picked a neighbhorhood right next to the rich people on the park. Bought the four worst properties, fixed 'em up real nice, rented 'em out and sold them at very health returns. We cleaned up a lot of shit. Planted a lot of flowers. Sanded floors,etc. You know you can sell for a profit when local business people stop you and thank you for "fixing this neighborhood". We did. And it paid well. Making money and doing something good. Since Wall St doesn't understand this, I'm short those bastards and they will be paying me mucho. So I can fix some more neighborhoods in the future.
We fixed a neighborhood and got paid for it. I remember when that was what people considered capitalism.
I think that is a concept that is lost on the current generation of would-be donald trumps: adding value. You took buildings in disrepair that were of little value -- in fact, negative value -- to the community, and rehabilitated them to add value to the neighborhood. That is what you got paid for: doing work no one else was doing, and creating value where there previously was none.
Flippers simply take something that already had value, and expect to get overpaid for cosmetic enhancements. Granite countertops and travertine floors do not add value to an already workable property, they merely add price. Flippers want to do work that anyone could do and that adds little, and have someone pay them twice as much for it as it cost them.
As opposed to flipping it takes some skill (tiling floors, etc), some sense of decency (fixing a neighborhood) and some sense of "excuse me, but we no longer sell crack here" and telling people to stop treating your property like it is theirs.
Last I checked it was called hard work. And in the USA (and many other places) if you aren't afraid of it, you can make a decent living.
John McCain and his ilk say if we don't lower taxes people won't want to work hard.
I won't even comment on that because all i could say is something that wouldn't make my mama proud (my mama who sold breast milk that was rightfully mine but they needed to pay the rent).
Sure. let us lower the taxes on the rich so they work harder like John McCains heiress drug addict wife. That should help improve things. Ok. I said something.
Anyone afraid of higher taxes has never worked to get ahead. Bet on it.
It's not about being afraid of higher taxes it's about putting a reasonable value on your time. If higher taxes push my hourly earnings below the value which I place on alternate pursuits then I won't work. You would do otherwise?
I just wrote a post about condo overbuilding, overstated sales figures, and shoddy construction as a sort of follow-up to CR's post on single family residence overbuilding.
Have a look here:
Overbuilding of Housing Keeps Downward Pressure on Prices « Greg’s Law & Economics Blog
REO disposal transactions are no more a sale than flushing a polished turd down the toilet is grocery store revenue.
Fully 1/3 foreclosures. Yikes.
Rob Dawg writes:
REO disposal transactions are no more a sale than flushing a polished turd down the toilet is grocery store revenue.
Rob Dawg | Homepage | 08.19.08 - 4:45 pm | #
Thank you Rob Dawg......that made my day........LMAO
The latest Case Shiller numbers show a decline of 22.9% between May '07 and May '08 as compared to Dataquick's 29.3% dcline for July to July. However Case-Shiller only includes single family homes in its calculations and, I think, has a more limited definition of "Bay Area".
Seeing similar things in my area. The recent Bergen County Sheriff sales have been going not only for less than the bubble prices but less than the judgments awarded to the lenders.
The last one that sold looks like it was flipped a number of times during the bubble. One of the owners went from facing foreclosure to making over $100k in a sale in a short period of time.
It's interesting that on the opposite side of the US where I am just in the past few weeks or so list prices of houses have started to really come undone.
I think people are panicking or real estate agents are convincing people who want to sell (and don't have big mortgages) to be realistic about their pricing.
The listings I'm looking at seem to be bifurcating into two distinct groups -- bubble priced and non bubble priced.
For example at one condo complex I've been watching for a couple of years there are still a couple of listings at 2006 prices and several other listings now at 20%-25% less.
I assume the higher priced listings still have big bubble mortgages that are preventing the seller from dropping the price.
On the way to work I notice several houses that have been for sale for almost 2 years now. It looks like they're not going to sell this season either.
On guy has probably lost over $200k by sitting on his property.
Hopefully he was being greedy and holding out for the price he "deserved".
I would expect more sales to happen on the court house steps soon as banks lower the starting bids under the amount owed. I am sure they will all find out it is the simplest and most profitable way to sell a home. Think about it, no real estate agents involved saves them 6% right off the bat. Then factor in other costs in taking posesion of the property, inspections, etc.
Does this mean we will see a disproportionate increase in the median if the higher end gets worked over like the lower end?
It seems we are setting up for a headfake as these wash sales work up the price tiers.
It could mean higher transaction volume with slight median price increases. Can't wait to see the NAR release if that starts to happen.
Banks really need to lower the starting bids below the amount owed at the auctions on the courthouse steps. Think of all the cost they save without a real estate agent and taking possession of the property. If they just advertise the houses going to auction I bet they will recover much more than putting it into REO inventory.
Haloscan I hate you.
Wow, that's a lot of knife catchers.
"A better measure of price is a repeat sales index like Case-Shiller."
Yes and no. It depends on how Case Shiller defines an area. By their own admission, close in areas are doing far better than far flung areas crushed by energy costs.
A good example is in DC where case shiller includes rural areas 3 states away. Thus, the mild declines seen close in are swamped by the huge declines in the garbage areas.
Translation - Case Shiller is good for a whole MSA, but if you want to know whats going on on a county by county or smaller basis - Case Shiller is pretty worthless.
CR,
I would beg to differ that the median price is being currently "distorted" by the mix of sales -- that's the purpose of using the median price for housing as opposed to the average price to begin with. Just as with income, we use the median because there is the danger of outliers at the high end artificially inflating the average, where there really is no such danger with the low end.
If the only homes that are selling are on the low end, that means that those homes are what people either want, or more likely, can afford. If people can't afford the homes listed for sale on the high end, that means the homes on the high end are unlikely to sell for those prices, and thus their prices as listed for sale on MLS are the real distortion. So even if the bulk of homes listed for sale in a given area have list prices of X hundred thousand, if the only homes selling are the ones for x/2 hundred thousand, than that is the reality of the pricing situation.
So while if there are a lot of houses listed at lower prices, but only the more expensive ones are selling, then we can say the median is being distorted by the mix of houses, which we saw at the peak of the bubble. The lowest prices had become too high for first-time buyers, and they were being priced out, even with nextto no lending standards. But that is a distortion because it is an artificial and unsustainable market environment. In the current environment, the number of foreclosures as a percentage of total sales will almost certainly continue until either the foreclosures stop, or the listing prices come down to match actual market clearing values, and it is likely that the former is not going to happen without the latter. Thus the median price is currently an accurate reflection of the market price as is currently sustainable with incomes and affordability.
CR,
I would beg to differ that the median price is being currently "distorted" by the mix of sales -- that's the purpose of using the median price for housing as opposed to the average price to begin with. Just as with income, we use the median because there is the danger of outliers at the high end artificially inflating the average, where there really is no such danger with the low end.
If the only homes that are selling are on the low end, that means that those homes are what people either want, or more likely, can afford. If people can't afford the homes listed for sale on the high end, that means the homes on the high end are unlikely to sell for those prices, and thus their prices as listed for sale on MLS are the real distortion. So even if the bulk of homes listed for sale in a given area have list prices of X hundred thousand, if the only homes selling are the ones for x/2 hundred thousand, than that is the reality of the pricing situation.
So while if there are a lot of houses listed at lower prices, but only the more expensive ones are selling, then we can say the median is being distorted by the mix of houses, which we saw at the peak of the bubble. The lowest prices had become too high for first-time buyers, and they were being priced out, even with next to no lending standards. But that is a distortion because it is an artificial and unsustainable market environment.
In the current environment, the number of foreclosures as a percentage of total sales will almost certainly continue until either the foreclosures stop, or the listing prices come down to match actual market clearing values, and it is likely that the former is not going to happen without the latter. Thus the median price is currently an accurate reflection of the market price as is currently sustainable with incomes and affordability.
I think the only way one could argue that the median price could be distorted on the downside is if the price were equally as artificial and unsustainable, say, only foreclosures listed at $1 were selling. In the current situation, though, I think the median is quite representative of the current market environment, and if anything, probably still too high.
Wow, that's a lot of knife catchers.
That was exactly my reaction.
Why not wait at least until winter? Prices will be down substantially then.
Dammit, please excuse the double-posting everyone, Haloscan is giving me error messages so I thought it hadn't posted.
Ministry,
I don't know how things work where you are, but here in Bergen County, NJ the bidding starts at $100.
The banks aren't actually at the auction but they hire lawyers to be there that are also involved in filing and arguing the foreclosure cases. The banks let the representatives know when to stop counterbidding. Looks like they're stopping lower and lower.
That's not even counting the number of modifications and short sales that happen pre auction.
The putrefaction of California proceeds apace.
mal writes:
The putrefaction of California proceeds apace.
Copyrights, copyrights sir.
"mal writes:
The putrefaction of California proceeds apace."
Makes good fertilizer for the next crop.
So much of today's market is driven by distress. Unless interpreted in that context, the stats give a rather distorted view of the overall market.
What's distorted about reality? So what if there is a higher percentage of distressed sales. Correct me if I'm wrong but something is worth what someone is willing to pay for it....today.
Real Estate values are fluid and people buy when they perceive value. If they happen to be buying foreclosures at a "reduced" price, then similar homes have a new value until someone agrees to pay more.
What am I missing?
My area of interest is the Outer Banks of NC (for those who know the area between-the-highways in KH and KDH)for a rental/vacation property.
In the summer of '06 I got a RE agent to get me the rental/expense numbers (for the proceeding 3 years) on a half a dozen houses that were ~$700K. I was looking to put down 20% and live with a negative cashflow of 12-15k (yeah, I know terrible investment but I surf so what can I say) before tax considerations. After crunching the numbers I found that the houses needed to be 400K. Ended up getting into a discussion of insanity of the prices with the agent. It was actually kinda funny talking fundamentals with a "real estate only goes up" RE agent.
Prices have since dropped (at least for the motivated sellers) into the mid to high 5's but I'm sitting tight until the haircut is 50%.
Fed's Lacker Clashes With Paulson on Fannie, Freddie
Fed's Lacker Clashes With Paulson on Fannie, Freddie (Update1) - Bloomberg.com
"I would prefer to see them credibly and demonstrably privatized," Lacker said today in an interview with Bloomberg Television. He agreed with former Fed Chairman Alan Greenspan's view that the two largest U.S. mortgage finance firms ought to be nationalized, then split up and sold off.
That a lot of economic theory can't handle reality as so assumes non-distressed sales in their theories? Just a wild guess.
Then again, you could think of it this way. If you're trying to evaluate the character of a person, do you take into account their actions during a period when they were really stressed out and doing dumb-shit stuff? It depends on if you want to know their average behavior or are hiring them for a high-stress job. We've possibly hit a period of wide variance in measurements and behaviors with actors doing dumb-shit things. If you're wanting to look at the median prices to gauge how much your house is "really worth" (but have no intention or need of selling for years) vs. how much it will sell for in the next 5 minutes you may need adjust your anchoring to and interpretation of the latest stats.
In the Northwest suburbs of Chicago, asking prices have started to slide, but still not to realistic levels.
The number of homes listed for rent on the MLS has shot up about 20% in just the last few weeks. Most of the asking rents are unrealistic, but as with prices, some have started to slide.
The number of rental listings on the MLS is now around 114. A few years ago it was 7.
ac-
I'm noticing the same bifurcation pricing here too. It just started a couple weeks ago.
hmmm...let's see.... do I want the house here for 150K or the exact same model around the corner (literally!) for 280K?
It's so fantastic to see the free market (and with it, sane home pricing) finally begin to work its' magic- despite the wishes of Congress that homes stay permanently overpriced and out of reach.
somewhat OT - In my area they are now allowed to relist properties that have been on the market but that have had their listing expire (usually 6 or 12 months) and have them appear as "new".
I'm sure this isn't unique to my area. So "time on market" numbers are probably worthless. Or more worthless might be more accurate.
Also noticing the same greedy dumbsh*ts who've had their properties on the market for TWO years (!) at (always just slightly more than) bubble prices.
Their prices now look wildly inflated. One of the hazards of not paying attention to the world around you.
It's so fantastic to see the free market (and with it, sane home pricing) finally begin to work its' magic- despite the wishes of Congress that homes stay permanently overpriced and out of reach.
Never underestimate the ability of congress to step in and destroy things just as they're starting to improve.
I suspect if the US government ever does start printing money, for example, it will be just as we're turning the corner to recovery.
They'll try to speed things up and bring everything crashing back down again.
As we're learning the hard way, these markets and the economy are just too complex to manipulate on a whim or in the midst of a panic to respond.
It's so fantastic to see the free market (and with it, sane home pricing) finally begin to work its' magic- despite the wishes of Congress that homes stay permanently overpriced and out of reach.
Never underestimate the ability of congress to step in and destroy things just as they're starting to improve.
I suspect if the US government ever does start printing money, for example, it will be just as we're turning the corner to recovery.
They'll try to speed things up and bring everything crashing back down again.
As we're learning the hard way, these markets and the economy are just too complex to manipulate on a whim or in the midst of a panic to respond.
12th percentile-
Relisting as "New on Market!!!" has been Standard Operating Procedure in the Washington State for the whole time I've been obsessively watching the MLS here (2 and 1/2 years).
They supposedly made it illegal a couple years back but none of the realtors have obliged.
As one realtor on a popular RE blog in Seattle said a couple years back: "But we need to make the properties look fresh! They sell better that way!"
"Wow, that's a lot of knife catchers." -- Nemo.
Old habits die hard: throwing money at risky endeavors probably paid off handsomely in the Bay Area over the last five years. Too bad these buyers don't understand how much fundamental risk repricing is actually going on.
Some folks seem to love chasing the market down. I've been tracking a place (empty but not a foreclosure) in Oakland since January. Back then it was priced at $350k. Last reduction was to $210k and still no takers.
Said it before and will say it again. A foreclosure sale is not a sale, it is a disaster for everyone else on the block.
Fidelity gets access to the Window? Lets see how this plays out.
Mutual Money Market Funds may become illiquid. Or, "I'm sory Ms. Bean no you wont be getting your monthly retirement check". Can the Fed say no?
Does anyone know how much poop Fidelity pumped out to ivestors?
BOSTON, Aug 19 (Reuters) - Massachusetts' top securities regulator asked Fidelity Investments on Tuesday to repurchase auction-rate securities that it sold to customers, urging the mutual fund giant to assist clients now stuck with these frozen securities
Mass. regulator asks Fidelity to buy back auction-rate debt
| Reuters
"MOSCOW, Aug 19 (Reuters) - Russia is still buying debt issued by U.S. agencies Fannie Mae and Freddie Mac but on a smaller scale than before, Finance Minister Alexei Kudrin told reporters on Tuesday.
Kudrin said the ministry considered other investments in its portfolio were currently riskier than Fannie Mae and Freddie Mac debt.
Declining to be quoted directly, Kudrin added Russia would not have made a loss even if it had sold its entire holdings of bonds issued by the two U.S. agencies straight away."
Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
Lacker Says Fed May Need to Raise Rates Even With Weak Economy
Lacker Says Fed May Need to Raise Rates Even With Weak Economy - Bloomberg.com
Less auto sales less tires:
SAN FRANCISCO (Thomson Financial) - Goodyear Tire & Rubber Co. late Tuesday said it plans to close 92 "underperforming" locations by the end of the year in a move to improve the profitability of its U.S. retail operations.
Goodyear said the impacted locations have roughly 500 full-time and 100 part-time employees
"Barley writes:
Less auto sales less tires:"
Or: the less mileage driven, the more slowly tires wear down. I'd also be interested in knowing whether sales of retreads have picked up.
Love these quotes from the article:
"So much of today's market is driven by distress. Unless interpreted in that context, the stats give a rather distorted view of the overall market. We know one-third of the Bay Area's resales in July were homes fresh off foreclosure. Who knows how many more involved a desperate seller and a lender who accepted a short sale," said John Walsh, MDA DataQuick president.
No mention is made of the distortions to the market (upward price distortions) caused when these homes were originally bought by folks that couldn't really afford them. Perhaps these distressed sales are actually eliminating the distortions caused back then, no?
In addition to undermining sales, the dropoff in jumbo use helps explain why the median price has fallen so sharply. With fewer high-end coastal homes selling, the pool of sales from which a median can be derived skews toward the lower-cost homes that are selling best.
Well, I guess turnabout is fair play, considering that median prices were artificially pumped up at the beginning of the credit crisis, when it was the low-end homes that were not selling, and the mix was more un-naturally weighted towards the high end.
Ministry of Truth--Buying at a foreclosure sale from a lender who bids far less than the judgment amount is a great idea in theory, but very hard in practice.
Vultures would show up if they knew it was gonna happen. But they don't know. Remember you have to produce cash, or cashier's check the same day.
So there is no motivation to show up to bid, because most lenders aren't doing this stuff.
You could publicize that Hey, I'm Joe Lender and I'm not gonna bid the full amount, but the banks would figure that this would be shooting themselves in the foot, which would be more or less true.
All they'd have to do is leave some flyers in the rooms where the vultures check the files and they'd get some action.
Of course, I'm not sure that the banks or the foreclosure attys know that there is a room where interested vultures check the files. (In Miami-Dade)
And I use the term vulture in the kindest and most approving sort of way.
Lawyerliz
In Oklahoma, if you are the successful bidder on a foreclose, you have to put up 10% within 24 hours and the remaining 90% when the sale is confirmed by the court, usually within three or four weeks.
Anxious - but dont count on a HELOC for repairs
Barely: That would probably depend on the LTV, that's been my experience.
Personal story related to this comment
You could publicize that Hey, I'm Joe Lender and I'm not gonna bid the full amount, but the banks would figure that this would be shooting themselves in the foot, which would be more or less true.
There was a building in my city that had been purchased by a guy in Cali, he had bought 20 buildings, all of them with artificially high appraisals. He collected rents on the buildings, never paid taxes and they all were foreclosed on. I'm sure he made off with a few million to go with his black and evil heart. As usually is the case with absentee landlords, the building turned into a crack house. The feds eventually busted them. The guy had paid $120K for the buildings. FMV would've been around $50-$60 (nice two story 100 year old brick buildings in good shape but this was a functioning crack house.)
So, there was going to be an auction at the courthouse. The word was that there was no point in showing up because the bank was going to bid $120K. I went anyways just because I can walk to the courthouse and I'd never been to an auction before.
It was me, a bank rep and the auctioneer person. The bidding started at $60K, much to my surprise. The bank rep bid $60K. She was very surprised to see me there. I asked what increments we needed to bid. I bid $60,100. The auctioneer turned to the bank woman and said, "Are you going to bid?"
Bank woman said, "I wasn't given authorization to bid above $60K".
Sold to a rather pleasantly surprised first time bidder.
Rehabbed along with 4 others in the neighborhood and sold for $175K, which the rents now easily support.
Sad but funny note found on the door when we took ownership "Repeatedly knocking on the door is RUDE!" Figured someone in the crack trade would expect some eager door knockers.
The only thing left behind in the apartment was a full box of 12 guage shells.
Lawyerliz, would it not be better for the bank if a vulture made a few percentage points flipping the property than losing double digits taking it in as an REO?
FFDIC --
Lacker Says Fed May Need to Raise Rates Even With Weak Economy
Wow, talk about the boy who cried "wolf"...
Those hicks from the Richmond / St. Louis / Dallas Feds have been jibber-jabbering like this for a year now. Yawn. Wake me up when Janet Yellen mentions raising rates.
on Fannie and Freddie: "I would prefer to see them credibly and demonstrably privatized", said the Fed's Lacker today....
LOL. I read that as "I would prefer to see them credibly and demonstrably DESTROYED..." the first time around.
just shows where my head's at I guess.
"What's distorted about reality?"
If you know the answer to that you know something important.
Bergen County (NJ?) and other parts of the NE know how to get serious and do RE auctions right.
Friend of mine bought a 5 story building in lower Manhattan for $100.00 US during the last crash.
It needed work, but was perfectly livable if you weren't terribly fussy.
If you buy at the courthouse auction, is the purchase price is split between lienholders and you get the property free and clear? Or is there more too it? I never have understood that part.
HP results top Street despite stronger dollar
HP results top Street despite stronger dollar
| Reuters
Where in the hell do these crack smokers that write these headlines come from. Jesus!
"MOSCOW, Aug 19 (Reuters) - Russia is still buying debt issued by U.S. agencies Fannie Mae and Freddie Mac..."
Da, Russia is still good friend of United States.
FM will soon be backing mortages in Gori.
HP results top Street despite stronger dollar
Two weeks isn't long enough for the stronger dollar to work its magic on exporters.
12th Percentile,
Did you mean the buildings were sold at $75K? Because $175K wouldn't make sense given the previous owner bought at $120K and was foreclosed upon.
Have to say it, home prices are lubricated.
I live in sonoma county (N. SF bay area).and our median price just hit $399k,which is a 2003 level,down 35% from the peak of $619k.Time to buy? well,no.2003 would have been the peak of a reasonably normal but aggressive real estate upturn that started in 1996-7,with a median skewed up a bit by our counties demographic (lots of older retirees with big $ buying for cash,and silicon valley
.The median family income has gone up,to $60k...where will the median go/ probably around $225-$250k,perhaps a little higher because those dang estates skew the heck out of the median price when there aren't many sales.BTW,SOME of this high end stuff you just buy when you can if you have the money,they come on the market once every generation or two,maybe and are ...shit,just buy it,screw the price.
Nemo
J-Yello will raise her skirt before she votes to raise rates...
Privet Pavel,
Reality is a Bulgakov novel.
"Heart of a Dog" comes to mind
We are all Shariks, now!
I bought an oil on canvas from a Moscow artist. Not too famous but his works are well known.
It is a most scene with windmills, pregnant woman riding a dolphin, girafes and the artist an a hill with his dog Max.
The title is "Genuine Reality". I love it so.
Cash OnlyHousing: You have to do some research and read the foreclosure petition. If the first mortgage holder files for foreclosure, the other lien holders are normally named in the petition so they are notified of the foreclosure action. If they do not bid, their lien is wiped out. They would have to bid in excess of the amount of the first lien. You just have to make sure that anyone who has as lien on the property is named in the foreclosure petition - Including IRS. state and local government who may be owed back taxes. I am not sure if this is the case in states other than Oklahoma, but I would assume that most states are similar, lots of research involved. Hope this helps.
FFDIC, they will ALL raise their skirts before they raise rates. Bunch a whinny little girls.
FFDIC, they will ALL raise their skirts before they raise rates. Bunch a whinny little girls.
Maybe they are all Scottish?
FFDIC, they will ALL raise their skirts before they raise rates. Bunch a whinny little girls.
You can say that again.
If they are distress sales they may be turned into rental units which could make the homes in an area decline in value. Depends on the landlords. The rental could make a nice area decline very fast very quickly.
Did you mean the buildings were sold at $75K? Because $175K wouldn't make sense given the previous owner bought at $120K and was foreclosed upon.
No. I meant $175K. Four years later.
It does make sense if the two crack houses in the neighborhood have been rehabbed and filled up with law students. We picked a neighbhorhood right next to the rich people on the park. Bought the four worst properties, fixed 'em up real nice, rented 'em out and sold them at very health returns. We cleaned up a lot of shit. Planted a lot of flowers. Sanded floors,etc. You know you can sell for a profit when local business people stop you and thank you for "fixing this neighborhood". We did. And it paid well. Making money and doing something good. Since Wall St doesn't understand this, I'm short those bastards and they will be paying me mucho. So I can fix some more neighborhoods in the future.
We fixed a neighborhood and got paid for it. I remember when that was what people considered capitalism.
12th Percentile,
I think that is a concept that is lost on the current generation of would-be donald trumps: adding value. You took buildings in disrepair that were of little value -- in fact, negative value -- to the community, and rehabilitated them to add value to the neighborhood. That is what you got paid for: doing work no one else was doing, and creating value where there previously was none.
Flippers simply take something that already had value, and expect to get overpaid for cosmetic enhancements. Granite countertops and travertine floors do not add value to an already workable property, they merely add price. Flippers want to do work that anyone could do and that adds little, and have someone pay them twice as much for it as it cost them.
exactly.
As opposed to flipping it takes some skill (tiling floors, etc), some sense of decency (fixing a neighborhood) and some sense of "excuse me, but we no longer sell crack here" and telling people to stop treating your property like it is theirs.
Last I checked it was called hard work. And in the USA (and many other places) if you aren't afraid of it, you can make a decent living.
John McCain and his ilk say if we don't lower taxes people won't want to work hard.
I won't even comment on that because all i could say is something that wouldn't make my mama proud (my mama who sold breast milk that was rightfully mine but they needed to pay the rent).
Sure. let us lower the taxes on the rich so they work harder like John McCains heiress drug addict wife. That should help improve things. Ok. I said something.
Anyone afraid of higher taxes has never worked to get ahead. Bet on it.
Anyone afraid of higher taxes has never worked to get ahead. Bet on it.
12th Percentile
Or should I flip on it?
It's not about being afraid of higher taxes it's about putting a reasonable value on your time. If higher taxes push my hourly earnings below the value which I place on alternate pursuits then I won't work. You would do otherwise?