Note that most of the areas that are experiencing housing bubble burts appear to be left of center; Cali, Jersey, etc.
Heres' my problem with all of this. First, housing costs WERE elevated due to artifical inflation of the market by people investing in the housing market. If the only people buying homes were those needing homes, we wouldn't be seeing this problem. However, low interest rates combined with variable rate mortgages allowed people to buy second homes as 'investments' without having enough real wealth to actually own the second home. This is much like buying stock on margin before the stock market burst in the 20's. The price of houses in some markets went through the roof not due to demand, but artifical inflation.
What is happening now is the housing market is settling back to where the actual supply/demand is. Those getting screwed by variable rate mortgages and can't make their payements don't get much sympathy from me because you were warned. Those losing their -ss in second home investments get even less sympathy because all they did was make the price of housing higher for those who coulndn't afford it.
Yes, while the population of the U.S. is growing at around 3%, the actual increas in population of those able to afford homes isn't.
This is dramatically over simplified and tin-foil-hat-ish.
1. The "left of center" areas just so happen to be in large demand centers with thriving job markets, decent weather, high-visibility, and large concentrations of wealth. Big surprise that they skyrocket.
2. Your "2nd home" theory is bunk. It has nothing to do with investments, it has to do with bidding wars, stupid fiscal decisions, and irrational exuberance. People thought that they could make some bucks while floating on an IO or an ARM, toss it before they reset, and cash out. Too bad they did this towards the end of the boom.
More people are more in debt, both in mortgages and credit cards. They have taken their gains and cashed out to pay off debt, only to get into more. This has nothing to do with investment 2nd homes, but more to do with poor financial planning and a euphoria that dominates their lives. It is the "give me now" culture propegated by doting parents who didn't teach responsibility.
I see it all of the time, both on the lending side and personal life as more and more friends dig themselves huge holes, seeking alpha. Despite warnings they go right ahead.
3. The housing market isn't settling into anything, it's going to continue to decrease. A year and a half ago when I was telling people it was going to go down, most people thought I was nuts. 9 months ago they still did. When I interviewed for my current job 8 months ago I was told I was wrong. Now they run and hide while my projections are right on. This is just the beginning.
Slew Foot
Lifer
- Sep 22, 2005
- 12,379
- 96
- 86
The numbers for May through JUly were all revised downward. Builders are experiencing cancellation rates near 30%, so the number sold for August will be adjusted downward as well. Also as expected, new homes sell better than resale homes, as builders can cut prices and hand out incentives until the cows come home, while Joe Sixpack has to sell for enough to cover his no-down, I/O mortgage with a HELOC factored in.
Been a while since I updated this.
http://www.msnbc.msn.com/id/15107993/
This is one of things I have been worried about. As ARMs reset and I/O's go into prin payment, more people are going to be less likely to consume as a greater % of their paychecks go to paying for a depreciating house. I firmly believe that the effect of this spiral has been significantly understated.
I also saw on CNN that Bernanke has stated that we are clearly inside a market correction and that he expects that correction to shave about 1% off of GDP. Furthermore, there is some feeling in the market that inflation may come in higher than previously thought, which could cause the Fed to increase rates, further dampening the economy. The flip side of that is expections from a few leading banks that the fed could lower rates as much as 25bps in the first part of 07 and perhaps lower them as much as 100bps over the next year.
How much that will do to stem the tide of raising credit risk seen in the capital markets is yet to be seen. I have been told that investors in the BBB bond area, which is just investment grade and one level above junk bond, are seeking credit protection, which would pay off if their BBB bond went to "junk" status. This indicates that fears from economic problems are on the raise.
http://www.msnbc.msn.com/id/15107993/
This is one of things I have been worried about. As ARMs reset and I/O's go into prin payment, more people are going to be less likely to consume as a greater % of their paychecks go to paying for a depreciating house. I firmly believe that the effect of this spiral has been significantly understated.
I also saw on CNN that Bernanke has stated that we are clearly inside a market correction and that he expects that correction to shave about 1% off of GDP. Furthermore, there is some feeling in the market that inflation may come in higher than previously thought, which could cause the Fed to increase rates, further dampening the economy. The flip side of that is expections from a few leading banks that the fed could lower rates as much as 25bps in the first part of 07 and perhaps lower them as much as 100bps over the next year.
How much that will do to stem the tide of raising credit risk seen in the capital markets is yet to be seen. I have been told that investors in the BBB bond area, which is just investment grade and one level above junk bond, are seeking credit protection, which would pay off if their BBB bond went to "junk" status. This indicates that fears from economic problems are on the raise.
- May 21, 2001
- 25,913
- 4,504
- 126
LegendKiller, Bernanke may have been understating the effect that a housing downturn would have when he said it would be a 1% hit to GDP. I think I lost the link, but I used to have a link to where 7% of consumer spending in recent years was due to pulling money out of housing (home equity loans) and then spending that money on consumer goods/services. Since the consumer is about 1/3rd of the economy (business and government are the rest), that translates to rought 2% of GDP in recent years was from a one time withdrawl of money out of people's houses. When that practice ends, GDP could lose 2%. Graph which is even more pessimistic than my paragraph.
One good sign is that the interest rates on mortgages have been going down for months. Down 10th time in 11 weeks. Thus, those with ARMs and I/O loans aren't being hit with a massive increase that was predicted. Of course, things could change. If inflation does keep its 3-4 year trend of getting higher and higher, Bernanke will be forced to raise interest rates. This would again increase the pain from the ARMs and I/O loans. However, if inflation moderates, I'll be quite happy (I have an ARM myself and I planned on it going up the maximum amount each year, and even then the ARM was the better deal, so that would just be icing on the cake).
One good sign is that the interest rates on mortgages have been going down for months. Down 10th time in 11 weeks. Thus, those with ARMs and I/O loans aren't being hit with a massive increase that was predicted. Of course, things could change. If inflation does keep its 3-4 year trend of getting higher and higher, Bernanke will be forced to raise interest rates. This would again increase the pain from the ARMs and I/O loans. However, if inflation moderates, I'll be quite happy (I have an ARM myself and I planned on it going up the maximum amount each year, and even then the ARM was the better deal, so that would just be icing on the cake).
This is what I have been fearing for a long while, a feedback loop from housing. If house prices go down, not only does equity cash-out stop, but then foreclosures tick up. You have less employment due to housing, which then can feed right back into higher foreclosures. This in turn further reduces spending, causing more pull-back. Of course, some of it will be mitigated by lower rates, but not much. Essentially, you enter into an unstoppable spiral. GDP takes a bigger whack than 1%, or even 2-3%, but we could very likely see a hard recession or soft depression.
I completely agree that the report tomorrow will tell whether rates will go up or stay the same. Even if they stay the same, many people are already in trouble. I have been saying it for 2 years now, this market is overbought, overfunded, and under fundamentaled (my new word)
- May 21, 2001
- 25,913
- 4,504
- 126
Continuing the signs that are now painfully obvious:
1) Feds say housing weakness is widespread. "Home prices fell, inventories rose, and sales softened in most districts, although some regions reported gains in residential activity".
2) Realtors again lower 2006 forecasts. "U.S. home sales for the year will be weaker, and price appreciation will be smaller than previously forecast, a realtors group said on Wednesday."
And to top it off:
3) Mortgage rates start going back up. A big move up this week.
1) Feds say housing weakness is widespread. "Home prices fell, inventories rose, and sales softened in most districts, although some regions reported gains in residential activity".
2) Realtors again lower 2006 forecasts. "U.S. home sales for the year will be weaker, and price appreciation will be smaller than previously forecast, a realtors group said on Wednesday."
And to top it off:
3) Mortgage rates start going back up. A big move up this week.
Slew Foot
Lifer
- Sep 22, 2005
- 12,379
- 96
- 86
http://www.californianonline.com/apps/p...article?AID=/20061017/NEWS01/610170313
Mortgage fraud, how I love thee.
Also bumping this thread since no ones posted in a while. In Sacramento, I see people starting to take their listings down, Im not sure if theyve actually sold because ive never seen a sold or sale pending sign, but some houses are coming off the market.
Mortgage fraud, how I love thee.
Also bumping this thread since no ones posted in a while. In Sacramento, I see people starting to take their listings down, Im not sure if theyve actually sold because ive never seen a sold or sale pending sign, but some houses are coming off the market.
Yet another reason why the end is far from near. It is inevitable:
More Home Loans
Go Sour
Though New Data Show Rising Delinquencies,
Lenders Continue to Loosen Mortgage Standards
By RUTH SIMON
October 19, 2006; Page D1
Mortgage lenders are making it easier to get loans even as the housing market cools -- and as the number of borrowers struggling to make their payments continues to rise, new studies show.
In the latest sign that a cooling housing market and weaker credit standards are beginning to take their toll on borrowers and lenders, the number of past-due mortgages continued to rise in the three months ended Sept. 30, according to data from Equifax Inc. and Moody's Economy.com Inc.
The increase is particularly notable because bad loans normally climb when the economy weakens and job losses rise, leaving more borrowers unable to make their monthly payments. By contrast, the latest increase appears to be more closely tied to looser lending standards, borrowers tapping their equity and slowing home-price growth.
LOAN PROBLEMS
[Loan Problems]
As the housing market softens, more homeowners are having trouble with their mortgages:
? Mortgage delinquencies rose again in the third quarter, after a period of historical lows.
? The rise in problem loans appears to be most closely tied to looser lending standards, homeowners pulling out their equity and a cooling housing market.
? Weakness in local economies -- typically an important factor -- is playing less of a role in delinquencies in many areas this time.
"We're seeing rises in delinquencies and loan losses that are unrelated to what's going on in the job market," says Mark Zandi, chief economist of Moody's Economy.com. "It's very unusual."
Some 2.33% of mortgages were delinquent at the end of the third quarter, the highest level since 2003, according to Equifax and Moody's Economy.com. Among the areas that saw the biggest jump in the delinquency rate since the end of last year were Stockton and Merced, Calif., and Las Vegas-Paradise, Nev. Delinquency rates were highest in McAllen-Edinburg-Mission, Texas; Brownsville-Harlingen, Texas; and Detroit-Livonia-Dearborn, Mich.
A separate report released yesterday by the federal Office of the Comptroller of the Currency found that lenders continued to ease credit standards over the past year.
To be sure, mortgage delinquencies have been at low levels in recent years, and the recent uptick only brings them closer to historical averages. The seasonally adjusted mortgage-delinquency rate reached its most-recent peak of 2.53% in the first quarter of 2002, according to Equifax and Moody's Economy.com.
The latest news comes amid increasing concerns that lenders have been loosening their standards in an effort to boost loan volume as refinancings and home purchases wane. In a speech to the American Bankers Association this week, Comptroller of the Currency John Dugan noted that bank regulators have seen a "significant easing" of mortgage lending standards this year, even though banks normally tighten standards when the housing market cools. "We don't want to see the lending decisions bankers make today result in excessive foreclosures -- and reduced affordable housing credit -- tomorrow," he said.
The Comptroller's report found that competitive pressures are driving many banks to further loosen their credit standards. More than one-third of the lenders relaxed their standards for home-equity loans in the 12 months ended this March, according to bank examiners, while less than 5% tightened their standards.
Over the same period, 26% eased their mortgage-lending standards, most often by increasing the use of nontraditional mortgage products. These include loans that allow borrowers to pay interest and no principal in the early years or make a minimum payment that can lead to a rising loan balance. Yesterday, regulators released a booklet designed to help consumers understand these exotic mortgage products.
"We have reason to believe that the amount of easing we saw back in March is continuing," says Kathryn Dick, deputy comptroller for credit and market risk at the OCC. Federal bank regulators have been stepping up their scrutiny of residential mortgage lending by large banks, she says, with a particular focus on banks that lend heavily in cooling housing markets.
There are signs that some lenders are beginning to pull back. Last week, New Century Financial Corp. said it would begin tightening lending guidelines for adjustable-rate mortgages sold to "at-risk" borrowers. The company also said it would offer the option of refinancing into a low-fee 30-year or 40-year fixed-rate mortgage to certain borrowers with adjustable-rate or interest-only loans held by the company.
Agencies that counsel homeowners with mortgage problems say that many borrowers are running into problems because of the terms of their loans, not their personal circumstances. "It's mostly people with adjustables" who are having trouble paying their loans, says Pam Canada, executive director of the NeighborWorks HomeOwnership Center in Sacramento, Calif.
David M. Crosby, a Las Vegas bankruptcy attorney, says he has seen a "surge" in borrowers with mortgage problems. "Most of it is [tied to] the end of the housing boom, but I do see a good percentage of clients who got caught by a change in their mortgage rates." In addition, some clients "bought a number of speculative homes," he says. "The market turned on them, and now they are in a real financial mess."
[Homeowner Pain]
Some homeowners are calling it quits. "A surprising number of people are walking away from their homes rather than trying to save them," says Mr. Crosby, either because the rate on their loan has jumped or because they owe more than the home is worth.
While the number of bad loans remains manageable, higher loan losses could force lenders to cut back on credit, making it more difficult for some borrowers to get a loan. A spike in foreclosures could also help push home prices downward in some markets if lenders were forced to sell significant numbers of homes at a loss.
Absent a recession and job losses, the rise in delinquencies is unlikely to have an impact on the national economy, says Doug Duncan, chief economist of the Mortgage Bankers Association. But an increase in bad loans could hurt some local housing markets, "especially if you see home price declines," he says.
An analysis by Moody's Economy.com found that a weak economy -- as measured by payroll growth -- was the driving factor in less than one-quarter of the metro areas with large increases in delinquencies. Instead, the rise in bad loans was more closely correlated with "mortgage equity withdrawal," a measure of how much cash homeowners have pulled out by refinancing, taking out home-equity loans or selling their homes and pocketing some of the profits, the study found.
Other factors included slowing home-price growth and a high proportion of loans given to borrowers with scuffed credit. The study was based on an analysis of credit records and included late payments on mortgages and home-equity loans and lines of credit.
More Home Loans
Go Sour
Though New Data Show Rising Delinquencies,
Lenders Continue to Loosen Mortgage Standards
By RUTH SIMON
October 19, 2006; Page D1
Mortgage lenders are making it easier to get loans even as the housing market cools -- and as the number of borrowers struggling to make their payments continues to rise, new studies show.
In the latest sign that a cooling housing market and weaker credit standards are beginning to take their toll on borrowers and lenders, the number of past-due mortgages continued to rise in the three months ended Sept. 30, according to data from Equifax Inc. and Moody's Economy.com Inc.
The increase is particularly notable because bad loans normally climb when the economy weakens and job losses rise, leaving more borrowers unable to make their monthly payments. By contrast, the latest increase appears to be more closely tied to looser lending standards, borrowers tapping their equity and slowing home-price growth.
LOAN PROBLEMS
[Loan Problems]
As the housing market softens, more homeowners are having trouble with their mortgages:
? Mortgage delinquencies rose again in the third quarter, after a period of historical lows.
? The rise in problem loans appears to be most closely tied to looser lending standards, homeowners pulling out their equity and a cooling housing market.
? Weakness in local economies -- typically an important factor -- is playing less of a role in delinquencies in many areas this time.
"We're seeing rises in delinquencies and loan losses that are unrelated to what's going on in the job market," says Mark Zandi, chief economist of Moody's Economy.com. "It's very unusual."
Some 2.33% of mortgages were delinquent at the end of the third quarter, the highest level since 2003, according to Equifax and Moody's Economy.com. Among the areas that saw the biggest jump in the delinquency rate since the end of last year were Stockton and Merced, Calif., and Las Vegas-Paradise, Nev. Delinquency rates were highest in McAllen-Edinburg-Mission, Texas; Brownsville-Harlingen, Texas; and Detroit-Livonia-Dearborn, Mich.
A separate report released yesterday by the federal Office of the Comptroller of the Currency found that lenders continued to ease credit standards over the past year.
To be sure, mortgage delinquencies have been at low levels in recent years, and the recent uptick only brings them closer to historical averages. The seasonally adjusted mortgage-delinquency rate reached its most-recent peak of 2.53% in the first quarter of 2002, according to Equifax and Moody's Economy.com.
The latest news comes amid increasing concerns that lenders have been loosening their standards in an effort to boost loan volume as refinancings and home purchases wane. In a speech to the American Bankers Association this week, Comptroller of the Currency John Dugan noted that bank regulators have seen a "significant easing" of mortgage lending standards this year, even though banks normally tighten standards when the housing market cools. "We don't want to see the lending decisions bankers make today result in excessive foreclosures -- and reduced affordable housing credit -- tomorrow," he said.
The Comptroller's report found that competitive pressures are driving many banks to further loosen their credit standards. More than one-third of the lenders relaxed their standards for home-equity loans in the 12 months ended this March, according to bank examiners, while less than 5% tightened their standards.
Over the same period, 26% eased their mortgage-lending standards, most often by increasing the use of nontraditional mortgage products. These include loans that allow borrowers to pay interest and no principal in the early years or make a minimum payment that can lead to a rising loan balance. Yesterday, regulators released a booklet designed to help consumers understand these exotic mortgage products.
"We have reason to believe that the amount of easing we saw back in March is continuing," says Kathryn Dick, deputy comptroller for credit and market risk at the OCC. Federal bank regulators have been stepping up their scrutiny of residential mortgage lending by large banks, she says, with a particular focus on banks that lend heavily in cooling housing markets.
There are signs that some lenders are beginning to pull back. Last week, New Century Financial Corp. said it would begin tightening lending guidelines for adjustable-rate mortgages sold to "at-risk" borrowers. The company also said it would offer the option of refinancing into a low-fee 30-year or 40-year fixed-rate mortgage to certain borrowers with adjustable-rate or interest-only loans held by the company.
Agencies that counsel homeowners with mortgage problems say that many borrowers are running into problems because of the terms of their loans, not their personal circumstances. "It's mostly people with adjustables" who are having trouble paying their loans, says Pam Canada, executive director of the NeighborWorks HomeOwnership Center in Sacramento, Calif.
David M. Crosby, a Las Vegas bankruptcy attorney, says he has seen a "surge" in borrowers with mortgage problems. "Most of it is [tied to] the end of the housing boom, but I do see a good percentage of clients who got caught by a change in their mortgage rates." In addition, some clients "bought a number of speculative homes," he says. "The market turned on them, and now they are in a real financial mess."
[Homeowner Pain]
Some homeowners are calling it quits. "A surprising number of people are walking away from their homes rather than trying to save them," says Mr. Crosby, either because the rate on their loan has jumped or because they owe more than the home is worth.
While the number of bad loans remains manageable, higher loan losses could force lenders to cut back on credit, making it more difficult for some borrowers to get a loan. A spike in foreclosures could also help push home prices downward in some markets if lenders were forced to sell significant numbers of homes at a loss.
Absent a recession and job losses, the rise in delinquencies is unlikely to have an impact on the national economy, says Doug Duncan, chief economist of the Mortgage Bankers Association. But an increase in bad loans could hurt some local housing markets, "especially if you see home price declines," he says.
An analysis by Moody's Economy.com found that a weak economy -- as measured by payroll growth -- was the driving factor in less than one-quarter of the metro areas with large increases in delinquencies. Instead, the rise in bad loans was more closely correlated with "mortgage equity withdrawal," a measure of how much cash homeowners have pulled out by refinancing, taking out home-equity loans or selling their homes and pocketing some of the profits, the study found.
Other factors included slowing home-price growth and a high proportion of loans given to borrowers with scuffed credit. The study was based on an analysis of credit records and included late payments on mortgages and home-equity loans and lines of credit.
- May 21, 2001
- 25,913
- 4,504
- 126
Existing home sales fell again in Sept 2006, they are down 2% from Aug 2006 levels. Median existing home sale prices fell again too. Prices are down 2.2% from Aug and 2.2% year-over-year. This 2.2% year-over-year drop is an all-time record drop. The peak of 2005 prices was in Oct 2005. Thus, if prices don't soar up next month, they will be down even further year-over-year next month.
Source.
Source.
I love how the realtors are sandbagging the figures. First it was "there will be a soft landing, a leveling off of prices". Then it was "There will be a very small one month decline". Now it's "We have see nteh worst".
Fools.
Fools.
Vic
Elite Member
- Jun 12, 2001
- 50,422
- 14,337
- 136
So far everything has gone how I expected. Extremely overheated markets, like CA (especially central, like Sacramento to Stockton) and the NE, are taking hits, while most other markets are flat and some undervalued markets are still improving.
As always, one has to fall back on rent comparison. How much are comparable rents in your market? Mortgage payments will ALWAYS be more than that. In areas where mortgage payments significantly outpaced rents, prices will decline to equilibrium. I don't feel sorry for anyone who gets hit by this -- the writing has been on the wall for years. The only question has been when the music would stop.
The "fools" are those people who believe otherwise.
As always, one has to fall back on rent comparison. How much are comparable rents in your market? Mortgage payments will ALWAYS be more than that. In areas where mortgage payments significantly outpaced rents, prices will decline to equilibrium. I don't feel sorry for anyone who gets hit by this -- the writing has been on the wall for years. The only question has been when the music would stop.
The "fools" are those people who believe otherwise.
I think the market is pretty flat in the Minneapolis area. No biggie as I am not planning on moving anytime soon and hopefully the county wont appraise my home up and instead down so my taxes are less hehe.
With an expected 1.5 million people expected to migrate to the Twin Cities in the the next ~20 years. It isnt a matter of if, but when it will come back.
With an expected 1.5 million people expected to migrate to the Twin Cities in the the next ~20 years. It isnt a matter of if, but when it will come back.
Vic
Elite Member
- Jun 12, 2001
- 50,422
- 14,337
- 136
Well, look around. If the interest-only mortgage payment on a "starter" home would be $2500/mo. while the market rent for the same house would be $1200/mo., and "average" household incomes are $4,000/mo., then your market has a serious problem. If OTOH it's $1500 and $1000 respectively, then your market might continue to appreciate.
Why is everyone irrationally blaming Bush for the impending complete crash of the housing market? This bubble has been growing since the late '90s, and got even more out of hand after the dot.com bubble burst.
The housing market bursting into flames has nothing to do with Bush. Anyone that didnt see this coming is a moron.
I do NOT feel sorry for people who were trying to live out side there means.
The housing market bursting into flames has nothing to do with Bush. Anyone that didnt see this coming is a moron.
I do NOT feel sorry for people who were trying to live out side there means.
In your opinion, is a comparative rental at $1000 per month vs. an 5/1 ARM for the same house at $1400 acceptable?
- May 21, 2001
- 25,913
- 4,504
- 126
Anyone who blames Bush on a housing crash is just as moronic as anyone who blames Clinton for the dot.com crash. Presidents do have a serious impact on the economy. But, neither had any impact on the irrational exubberance that caused those run-ups nor those crashes.
Well, that is not completely true. While the Fed is supposed to be independant and Greenspan did an admirable job certain influences could have been applied by the administration to raise rates sooner. Furthermore, the President could have lead the charge for reform of the lending industry to best practices and also could have released more moderate language to cool the markets.
He also could have directed many of the ancillary agencies (OTS, OCC, and others) to come up with a reasonable mortgage industry oversight for option arms, arms, IO, or other exotic mortgage product, as they are doing now (mandating qualification at the full neg am amount + full uncapped costs after 1st year). However, the cows are already out of the barn.
However, as with all Presidents, he likes to take credit for a lot. Loves to point out how great things are, but in actuality they really aren't that great.
Could Bush have done much? no. However, his political appointees and such could have been directed to do more. Housing markets are so different from equity markets (which already have margin regulations and other securities regulations built in) where regulations fail to reign in the current situation. Much more could have been done.
TRENDING THREADS
-
Discussion Zen 5 Speculation (EPYC Turin and Strix Point/Granite Ridge - Ryzen 9000)- Started by DisEnchantment
- Replies: 25K
-
Discussion Intel Meteor, Arrow, Lunar & Panther Lakes Discussion Threads
- Started by Tigerick
- Replies: 21K
-
Discussion Intel current and future Lakes & Rapids thread- Started by TheF34RChannel
- Replies: 23K
-
-
Facebook
Twitter