Geeze, up to $85,000 off!!
Is there an upper limit here before the prospective buyer gets scared off?
Maybe he should wait until next month if Horton is so desperate? (I don't see any notes about "Only 3 left..." --was this a marketing oversight?) Are the regular prices reality-based so that we are looking at wild deflation? (Of course ordinary wages generally have been in mild deflation for years, but average house prices have still been inching upwards, no? So not much of a surprise that only the lottery winners and already housed wealthy can afford those regular prices.)
What does it mean? The regular prices were such a rip-off or Horton's is only days away from declaring insolvency?
About the marketing: those smiling faces; that tight knit family (it was larger but some got smothered); that over-exposure to conceal any cloudy impressions; the happiness that comes with the home purchase is what is being sold (and oh yeah this is what it looks like; skip the lot and the neighborhood) I give the marketing a C, you?
That Horton's ad lists one property's old price as 292,075 and the new price as 202,075. Check my math, but I think that's more than 85,000. And I'm not even counting the new washer-dryer.
That drastic a cut really speaks to how bad things are starting to look.
The thing that has struck me lately is how this stuff comes in waves. It's not a drip, drip, drip, situation, it seems like stuff goes quiet (particularly in specific markets and regions) and then bang you see a shift.
The reason this "no payments for six months" crap rolled out so fast is that it's been in the developing chemicals for a long time. I was representing the buy side in a forward whole loan deal with a builder-owned mortgage company back in 2004 where this "finance your mortgage payments" crap came up. That was actually the first time I ever called one of my clients "Bozo" out loud and in the client's presence. As I recall, the mortgage company swore they weren't going to advertise this feature as an "affordability" option; they were just going to use it for selected highly sophisticated high net worth borrowers who can understand the tax advantage of taking a premium interest rate in order to get a solution to the cash-flow problems they say they don't have while they're buying a property they pretend they're going to live in. Or words to that effect. So having beta-tested this puppy on speculators, they're now going live with first-time homebuyers as the target market.
It's illegal for a lender to advance principal on a past-due loan to bring it current and then sell it as "performing." It is not, however, illegal for a lender to be "proactive" and use seller funds to make sure the loan gets past the Early Payment Delinquency buyback period, as long as you provide the usual incomprehensible regulatory disclosures that nobody reads. And no, this issue was not addressed in the draft nontraditional mortgage guidance.
Tanta, I hadn't thought about this as a way to package the loans and get through the buyback period. Even if that was disclosed in the fine print to the MBS buyer, I think that is more than just misleading.
Thank you for your informed (non-bozzo)[nuanced] post Tanta. It has me thinking (thank you)[it won't last people] about the ad again. This is the piece by the high net worth individuals (you know I have another description for these people) for those who are not.
Nicholas is right: "Save $99,000" type ads are addressing the same audience that GM addresses (a very scary portion of their sales are to clients already failing to meet their obligations on previous GM products).
Predation is one thing but I object to being so under-assessed by my inferiors, you?
They are insulting the rest of us by seriously underestimating our intelligence.
This mindless and desperate tactic
they're now going live with first-time homebuyers as the target market.
represents a huge projection error as the lion's share of last year's construction went to multiple rather than 1st-time buyers. They are in denial about the financial capacity of their target market --perhaps their self-absorption cultivates this cognitive dissonance. Do the large predators end up eating the smaller predators in this scheme?
The pulte one is the one that CR posted earlier, it was just scary how the radio add was.
Looking further, most of the places SUCK: Brentwood, Oakley, Dixon, Tracy, Mountain Horse...
Big $600k+ MiniMcMansions.
The Bay area core has been so antidevelopment, so you have this big greenbelt around the bay area, and then these places OUTSIDE that greenbelt, where most of these communities are built. As a result, you are looking at 50-60 mile/each way commutes.
I'm doing a 40 mile commute (from Napa just to Berkeley rather than SF, and I'm on a motorcycle, and I get in early) and it still sucks. The only one which would NOT be a wores commute for someone in SF or the east bay are a bunch of $500 TOWNHOUSES in San Pablo! Right next to the railroad tracks on what I think is bay fill!
Larry Nusbaum is going to be here in a couple of minutes to explain that these aren't for first-time homebuyers, they're for upgraders. See, upgraders have to sell the house they've got, and maybe it will take a month or two longer than they thought it would, and that means two mortgage payments for a while, and since it makes perfect sense to do this when existing home sales are stagnating and new home sales are falling, you have to conclude that the builder-owned mortgage companies are just trying to help out. The math works if you avoid base 10 and round everything up to the next whole idiot.
Maybe I've been in DC too long, but those prices in those ads don't look like "upgrade" properties to me.
The "good news" for MBS buyers is that payment subsidies either show up on the HUD-1 Settlement Statement, in which case you know what you're buying, or they don't, in which case you can demand repurchase on the grounds of omission of material fact, undisclosed contributions, misrepresentation and mopery with intent to gawk, among other reps and warranties. My reference to incomprehensible disclosures involved the ones the borrower gets prior to closing, which don't explain in simple clear terms that "concessions" effectively lower the value of the home they are about to buy. "Predation" isn't an exaggeration in this context.
I didn't mean to suggest that the primary motivation of this is to game the EPD warranties. That's just gravy for the builders. Their primary motivation is to move inventory by any means necessary without "officially" lowering the contract sales price. "People like us" understand why these deals have pork chops hanging around their necks, but the dog doesn't. It just starts wagging its tail.
Thanks to Tanta! I knew there had to be more behind this than just trying to offload crappy houses in overbuilt developments. Now I see that it is a way for the mortgage orginators to off-load their extremely suspect mortgages on the market and make them appear to be healthier than they are. It really sends chills down my spine.
is it possible that MBS buyers and the whole process actually account for mis-rep's in the product they are buying?
for example,
credit card companies no longer require signatures for certain purchases! can you believe that?? i was shocked at first but now its starting to happen more often - starbucks fresh fields chipotle etc...(can you tell i'm a yuppie).
so my point is that the credit card companies know that some people are going to have their cards stolen and there will be charges that get made that will have to be reversed. and in not requiring signatures, the probability of that happening increases. but they can do this b/c of the laws of large numbers...
any chance of this level of sophistication and awareness in the MBS market?
Geeze, up to $85,000 off!!
Is there an upper limit here before the prospective buyer gets scared off?
Maybe he should wait until next month if Horton is so desperate? (I don't see any notes about "Only 3 left..." --was this a marketing oversight?) Are the regular prices reality-based so that we are looking at wild deflation? (Of course ordinary wages generally have been in mild deflation for years, but average house prices have still been inching upwards, no? So not much of a surprise that only the lottery winners and already housed wealthy can afford those regular prices.)
What does it mean? The regular prices were such a rip-off or Horton's is only days away from declaring insolvency?
About the marketing: those smiling faces; that tight knit family (it was larger but some got smothered); that over-exposure to conceal any cloudy impressions; the happiness that comes with the home purchase is what is being sold (and oh yeah this is what it looks like; skip the lot and the neighborhood) I give the marketing a C, you?
That Horton's ad lists one property's old price as 292,075 and the new price as 202,075. Check my math, but I think that's more than 85,000. And I'm not even counting the new washer-dryer.
30% off in the first days/months
of the secular decline in RE???
More to come I reckon!!
Paarl
Don't forget the free rent for 6 months plus foreclosure time. So figure at least 12 months free rent.
"no mortgage payments for 6 months"
Pulte Homes was advertising on the radio in the bay area:
Free hawaii vacation and up to $99,000 in incentives (including things like "no payments for 6 months", "upgraded interiors", etc).
It sounded like an add for a sleazy GM dealer.
That drastic a cut really speaks to how bad things are starting to look.
The thing that has struck me lately is how this stuff comes in waves. It's not a drip, drip, drip, situation, it seems like stuff goes quiet (particularly in specific markets and regions) and then bang you see a shift.
Am I crazy or just missing something?
The reason this "no payments for six months" crap rolled out so fast is that it's been in the developing chemicals for a long time. I was representing the buy side in a forward whole loan deal with a builder-owned mortgage company back in 2004 where this "finance your mortgage payments" crap came up. That was actually the first time I ever called one of my clients "Bozo" out loud and in the client's presence. As I recall, the mortgage company swore they weren't going to advertise this feature as an "affordability" option; they were just going to use it for selected highly sophisticated high net worth borrowers who can understand the tax advantage of taking a premium interest rate in order to get a solution to the cash-flow problems they say they don't have while they're buying a property they pretend they're going to live in. Or words to that effect. So having beta-tested this puppy on speculators, they're now going live with first-time homebuyers as the target market.
It's illegal for a lender to advance principal on a past-due loan to bring it current and then sell it as "performing." It is not, however, illegal for a lender to be "proactive" and use seller funds to make sure the loan gets past the Early Payment Delinquency buyback period, as long as you provide the usual incomprehensible regulatory disclosures that nobody reads. And no, this issue was not addressed in the draft nontraditional mortgage guidance.
Tanta, I hadn't thought about this as a way to package the loans and get through the buyback period. Even if that was disclosed in the fine print to the MBS buyer, I think that is more than just misleading.
Best Wishes.
Thank you for your informed (non-bozzo)[nuanced] post Tanta. It has me thinking (thank you)[it won't last people] about the ad again. This is the piece by the high net worth individuals (you know I have another description for these people) for those who are not.
Nicholas is right: "Save $99,000" type ads are addressing the same audience that GM addresses (a very scary portion of their sales are to clients already failing to meet their obligations on previous GM products).
Predation is one thing but I object to being so under-assessed by my inferiors, you?
They are insulting the rest of us by seriously underestimating our intelligence.
This mindless and desperate tactic
represents a huge projection error as the lion's share of last year's construction went to multiple rather than 1st-time buyers. They are in denial about the financial capacity of their target market --perhaps their self-absorption cultivates this cognitive dissonance. Do the large predators end up eating the smaller predators in this scheme?
The pulte one is the one that CR posted earlier, it was just scary how the radio add was.
Looking further, most of the places SUCK: Brentwood, Oakley, Dixon, Tracy, Mountain Horse...
Big $600k+ MiniMcMansions.
The Bay area core has been so antidevelopment, so you have this big greenbelt around the bay area, and then these places OUTSIDE that greenbelt, where most of these communities are built. As a result, you are looking at 50-60 mile/each way commutes.
I'm doing a 40 mile commute (from Napa just to Berkeley rather than SF, and I'm on a motorcycle, and I get in early) and it still sucks. The only one which would NOT be a wores commute for someone in SF or the east bay are a bunch of $500 TOWNHOUSES in San Pablo! Right next to the railroad tracks on what I think is bay fill!
Larry Nusbaum is going to be here in a couple of minutes to explain that these aren't for first-time homebuyers, they're for upgraders. See, upgraders have to sell the house they've got, and maybe it will take a month or two longer than they thought it would, and that means two mortgage payments for a while, and since it makes perfect sense to do this when existing home sales are stagnating and new home sales are falling, you have to conclude that the builder-owned mortgage companies are just trying to help out. The math works if you avoid base 10 and round everything up to the next whole idiot.
Maybe I've been in DC too long, but those prices in those ads don't look like "upgrade" properties to me.
The "good news" for MBS buyers is that payment subsidies either show up on the HUD-1 Settlement Statement, in which case you know what you're buying, or they don't, in which case you can demand repurchase on the grounds of omission of material fact, undisclosed contributions, misrepresentation and mopery with intent to gawk, among other reps and warranties. My reference to incomprehensible disclosures involved the ones the borrower gets prior to closing, which don't explain in simple clear terms that "concessions" effectively lower the value of the home they are about to buy. "Predation" isn't an exaggeration in this context.
I didn't mean to suggest that the primary motivation of this is to game the EPD warranties. That's just gravy for the builders. Their primary motivation is to move inventory by any means necessary without "officially" lowering the contract sales price. "People like us" understand why these deals have pork chops hanging around their necks, but the dog doesn't. It just starts wagging its tail.
Thanks to Tanta! I knew there had to be more behind this than just trying to offload crappy houses in overbuilt developments. Now I see that it is a way for the mortgage orginators to off-load their extremely suspect mortgages on the market and make them appear to be healthier than they are. It really sends chills down my spine.
is it possible that MBS buyers and the whole process actually account for mis-rep's in the product they are buying?
for example,
credit card companies no longer require signatures for certain purchases! can you believe that?? i was shocked at first but now its starting to happen more often - starbucks fresh fields chipotle etc...(can you tell i'm a yuppie).
so my point is that the credit card companies know that some people are going to have their cards stolen and there will be charges that get made that will have to be reversed. and in not requiring signatures, the probability of that happening increases. but they can do this b/c of the laws of large numbers...
any chance of this level of sophistication and awareness in the MBS market?
credit card debt is securitized and sold too....
If you give someone free rent for 6 months, could this freebie be considered 'income' and therefore taxable by the IRS? Just asking.