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Ryan's Questions (2)
Ryan's Answers (8)
Ryan answered:
Realtyexec, I never thought I'd get called out for being off of my own topic! "i can cut and past bailout and depression articles and nausea." I think you mean "ad nauseum," Latin for "to the point of nauseum," unless you actually have the stunning ability to "cut and past[e]...nausea." I don't even know how that would work!
But I can see your point about keeping this forum directly related to real estate, so I'll try to pull back a bit--I admit we/I have broadened this discussion beyond its initial purpose. But I've also tried (see below about 15-20 posts) to discuss how this current economic crisis affects housing trends and decisions.
But I can see your point about keeping this forum directly related to real estate, so I'll try to pull back a bit--I admit we/I have broadened this discussion beyond its initial purpose. But I've also tried (see below about 15-20 posts) to discuss how this current economic crisis affects housing trends and decisions.
Great, reasonable article that puts today's crisis in some historical context:
http://www.nytimes.com/2008/10/01/business/economy/01leonhar…
http://www.nytimes.com/2008/10/01/business/economy/01leonhar…
A stroll down memory lane--and a reminder of how we got where we are today. Enjoy this one folks, it's a nine year-old article I've dusted off from the archives:
http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF…
http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF…
According to the C-S Index, the D.C. market is down 22.1% since its May 2006 peak. It's also down 15.8% year-over-year (July '07 v. July '08 data).
So the average buyer who purchased a $300,000 condo in D.C. in May 2006 now "owns" a property worth just $233,700. If that buyer put 20% down on her loan, she has not only lost 100% of her $60,000 equity stake, but she also owes the bank an additional $6,300 if she walks away (not including foreclosure costs which she is also liable for).
So the average buyer who purchased a $300,000 condo in D.C. in May 2006 now "owns" a property worth just $233,700. If that buyer put 20% down on her loan, she has not only lost 100% of her $60,000 equity stake, but she also owes the bank an additional $6,300 if she walks away (not including foreclosure costs which she is also liable for).
Revolt of the Nihilists
By DAVID BROOKS (NYT editorial article)
Published: September 29, 2008
In 1933, Franklin Roosevelt inherited an economic crisis. He understood that his first job was to restore confidence, to give people a sense that somebody was in charge, that something was going to be done.
This generation of political leaders is confronting a similar situation, and, so far, they have failed utterly and catastrophically to project any sense of authority, to give the world any reason to believe that this country is being governed. Instead, by rejecting the rescue package on Monday, they have made the psychological climate much worse.
George W. Bush is completely out of juice, having squandered his influence with Republicans as well as Democrats. Treasury Secretary Henry Paulson is a smart moneyman, but an inept legislator. He was told time and time again that House Republicans would not support his bill, and his response was to get down on bended knee before House Speaker Nancy Pelosi.
House leaders of both parties got wrapped up in their own negotiations, but did it occur to any of them that it might be hard to pass a bill fairly described as a bailout to Wall Street? Was the media darling Barney Frank too busy to notice the 95 Democrats who opposed his bill? Pelosi’s fiery speech at the crucial moment didn’t actually kill this bill, but did she have to act like a Democratic fund-raiser at the most important moment of her career?
And let us recognize above all the 228 who voted no — the authors of this revolt of the nihilists. They showed the world how much they detest their own leaders and the collected expertise of the Treasury and Fed. They did the momentarily popular thing, and if the country slides into a deep recession, they will have the time and leisure to watch public opinion shift against them.
House Republicans led the way and will get most of the blame. It has been interesting to watch them on their single-minded mission to destroy the Republican Party. Not long ago, they led an anti-immigration crusade that drove away Hispanic support. Then, too, they listened to the loudest and angriest voices in their party, oblivious to the complicated anxieties that lurk in most American minds.
Now they have once again confused talk radio with reality. If this economy slides, they will go down in history as the Smoot-Hawleys of the 21st century. With this vote, they’ve taken responsibility for this economy, and they will be held accountable. The short-term blows will fall on John McCain, the long-term stress on the existence of the G.O.P. as we know it.
I’ve spoken with several House Republicans over the past few days and most admirably believe in free-market principles. What’s sad is that they still think it’s 1984. They still think the biggest threat comes from socialism and Walter Mondale liberalism. They seem not to have noticed how global capital flows have transformed our political economy.
We’re living in an age when a vast excess of capital sloshes around the world fueling cycles of bubble and bust. When the capital floods into a sector or economy, it washes away sober business practices, and habits of discipline and self-denial. Then the money managers panic and it sloshes out, punishing the just and unjust alike.
What we need in this situation is authority. Not heavy-handed government regulation, but the steady and powerful hand of some public institutions that can guard against the corrupting influences of sloppy money and then prevent destructive contagions when the credit dries up.
The Congressional plan was nobody’s darling, but it was an effort to assert some authority. It was an effort to alter the psychology of the markets. People don’t trust the banks; the bankers don’t trust each other. It was an effort to address the crisis of authority in Washington. At least it might have stabilized the situation so fundamental reforms of the world’s financial architecture could be undertaken later.
But the 228 House members who voted no have exacerbated the global psychological free fall, and now we have a crisis of political authority on top of the crisis of financial authority.
The only thing now is to try again — to rescue the rescue. There’s no time to find a brand-new package, so the Congressional plan should go up for another vote on Thursday, this time with additions that would change its political prospects. Leaders need to add provisions that would shore up housing prices and directly help mortgage holders. Martin Feldstein and Lawrence Lindsey both have good proposals of the sort that could lead to a plausible majority coalition. Loosening deposit insurance rules would also be nice.
If that doesn’t happen, the world could be in for some tough economic times (the Europeans, apparently, have not even begun to acknowledge their toxic debt) — but also tou
By DAVID BROOKS (NYT editorial article)
Published: September 29, 2008
In 1933, Franklin Roosevelt inherited an economic crisis. He understood that his first job was to restore confidence, to give people a sense that somebody was in charge, that something was going to be done.
This generation of political leaders is confronting a similar situation, and, so far, they have failed utterly and catastrophically to project any sense of authority, to give the world any reason to believe that this country is being governed. Instead, by rejecting the rescue package on Monday, they have made the psychological climate much worse.
George W. Bush is completely out of juice, having squandered his influence with Republicans as well as Democrats. Treasury Secretary Henry Paulson is a smart moneyman, but an inept legislator. He was told time and time again that House Republicans would not support his bill, and his response was to get down on bended knee before House Speaker Nancy Pelosi.
House leaders of both parties got wrapped up in their own negotiations, but did it occur to any of them that it might be hard to pass a bill fairly described as a bailout to Wall Street? Was the media darling Barney Frank too busy to notice the 95 Democrats who opposed his bill? Pelosi’s fiery speech at the crucial moment didn’t actually kill this bill, but did she have to act like a Democratic fund-raiser at the most important moment of her career?
And let us recognize above all the 228 who voted no — the authors of this revolt of the nihilists. They showed the world how much they detest their own leaders and the collected expertise of the Treasury and Fed. They did the momentarily popular thing, and if the country slides into a deep recession, they will have the time and leisure to watch public opinion shift against them.
House Republicans led the way and will get most of the blame. It has been interesting to watch them on their single-minded mission to destroy the Republican Party. Not long ago, they led an anti-immigration crusade that drove away Hispanic support. Then, too, they listened to the loudest and angriest voices in their party, oblivious to the complicated anxieties that lurk in most American minds.
Now they have once again confused talk radio with reality. If this economy slides, they will go down in history as the Smoot-Hawleys of the 21st century. With this vote, they’ve taken responsibility for this economy, and they will be held accountable. The short-term blows will fall on John McCain, the long-term stress on the existence of the G.O.P. as we know it.
I’ve spoken with several House Republicans over the past few days and most admirably believe in free-market principles. What’s sad is that they still think it’s 1984. They still think the biggest threat comes from socialism and Walter Mondale liberalism. They seem not to have noticed how global capital flows have transformed our political economy.
We’re living in an age when a vast excess of capital sloshes around the world fueling cycles of bubble and bust. When the capital floods into a sector or economy, it washes away sober business practices, and habits of discipline and self-denial. Then the money managers panic and it sloshes out, punishing the just and unjust alike.
What we need in this situation is authority. Not heavy-handed government regulation, but the steady and powerful hand of some public institutions that can guard against the corrupting influences of sloppy money and then prevent destructive contagions when the credit dries up.
The Congressional plan was nobody’s darling, but it was an effort to assert some authority. It was an effort to alter the psychology of the markets. People don’t trust the banks; the bankers don’t trust each other. It was an effort to address the crisis of authority in Washington. At least it might have stabilized the situation so fundamental reforms of the world’s financial architecture could be undertaken later.
But the 228 House members who voted no have exacerbated the global psychological free fall, and now we have a crisis of political authority on top of the crisis of financial authority.
The only thing now is to try again — to rescue the rescue. There’s no time to find a brand-new package, so the Congressional plan should go up for another vote on Thursday, this time with additions that would change its political prospects. Leaders need to add provisions that would shore up housing prices and directly help mortgage holders. Martin Feldstein and Lawrence Lindsey both have good proposals of the sort that could lead to a plausible majority coalition. Loosening deposit insurance rules would also be nice.
If that doesn’t happen, the world could be in for some tough economic times (the Europeans, apparently, have not even begun to acknowledge their toxic debt) — but also tou
Per today's Case-Schiller report (home sales through July 2008), here are some peak-to-present (not trough, because almost all tracked markets are still falling) calculations of notable markets:
New York: down 10.6% since June '06
Chicago: down 11.27% since Sept. '06
Los Angeles: down 29.7% since Sept. '06
Miami: down 33.5% since Dec. '06
Phoenix: down 34.1% since June '06
Las Vegas: down 34.3% since Aug. '06
Again, these are July numbers (as Paul is quick to point out, they are two months old the day they are announced). On one hand, the rate of decline appears to be slowing across all markets; on the other hand, the summer months are usually the strongest price-wise, and I would expect the fall numbers to be way down as buying season slows and home sellers accept previously unacceptably low bids.
Finally, until now the story has been the effect of slumping housing on our economy. It will be interesting to see how the opposite story plays out: the effect of our slumping economy on an already beat-down housing market. As I previously stated, rising unemployment and wealth loss should cause more foreclosures and reduce demand, yielding ever lower housing prices. For instance, it is hard to imagine New York's real estate market (which has thus far been fairly strong) holding up like this after losing tens of thousands of high income I-bankers.
New York: down 10.6% since June '06
Chicago: down 11.27% since Sept. '06
Los Angeles: down 29.7% since Sept. '06
Miami: down 33.5% since Dec. '06
Phoenix: down 34.1% since June '06
Las Vegas: down 34.3% since Aug. '06
Again, these are July numbers (as Paul is quick to point out, they are two months old the day they are announced). On one hand, the rate of decline appears to be slowing across all markets; on the other hand, the summer months are usually the strongest price-wise, and I would expect the fall numbers to be way down as buying season slows and home sellers accept previously unacceptably low bids.
Finally, until now the story has been the effect of slumping housing on our economy. It will be interesting to see how the opposite story plays out: the effect of our slumping economy on an already beat-down housing market. As I previously stated, rising unemployment and wealth loss should cause more foreclosures and reduce demand, yielding ever lower housing prices. For instance, it is hard to imagine New York's real estate market (which has thus far been fairly strong) holding up like this after losing tens of thousands of high income I-bankers.
Rising unemployment and wealth depletion cannot be helping the housing market either. With the markets down 30% YTD, suddenly there isn't as much money for a down payment as was planned--or maybe the down payment money was set aside, but the "extra" savings cushion (mutual funds, whatever) isn't looking as safe, so the home purchase is delayed. I realize many people buy a home before investing in other markets, but I also think that many people invest while renting, or live in a small/relatively cheap home while saving for a move to a nicer home, or a large home in the suburbs, etc.
I suspect that layoffs are also most likely to affect those homeowners who are barely clinging to their mortgages, meaning we should perhaps expect a new and fundamentally different wave of foreclosures.
I suspect that layoffs are also most likely to affect those homeowners who are barely clinging to their mortgages, meaning we should perhaps expect a new and fundamentally different wave of foreclosures.
Aj, that is true, but Buffett also said that he invested in GS because he believed the Government would "do the right thing" by passing a bill to bring stability to banking, and he said this action was required to avoid an
"economic Pearl Harbor." So the premise (that the Government would intervene in credit markets) that led Buffett to act has since been nullified. Also, Goldman Sachs was probably the most healthy/least affected bank in this crisis, so that purchase says little about the viability of the rest of the banking system. Goldman can't lend to everyone.
"economic Pearl Harbor." So the premise (that the Government would intervene in credit markets) that led Buffett to act has since been nullified. Also, Goldman Sachs was probably the most healthy/least affected bank in this crisis, so that purchase says little about the viability of the rest of the banking system. Goldman can't lend to everyone.
Bayou, that's an interesting question, and I don't know the answer, but I suspect the regulations would not prohibit banks, pension funds, etc. from purchasing the securities in the future (though there may be added restrictions, transparency measures, etc.). I don't think we got here simply because the banks took on these assets, but rather because these assets were badly overvalued. Putting them back in the hands of banks, funds, etc. probably shouldn't be a problem once their market price has been properly adjusted downward.
John, you know I always respect your opinion, but we'll have to disagree on this. It's clear that your take on what should(n't) be done is (at least in part) influenced by your safe personal assets, which I understand--when I decided not to buy a house, I wasn't too upset about falling home prices. If the Dow falls another 1,000, it sounds as if that is no sweat off of your back, so it's understandable that days like today don't bother you.
But I think there is a very real risk of total credit and banking collapse in the near future if we fail to stabilize these markets. And to me, that's all this is about--stability. I have no interest in saving executives from their idiocy, or in artificially propping up our markets. But I don't think this is a simple market correction needed to more accurately reflect our nation's economic health; rather, I think our markets have crippled under the weight of fear and uncertainty, and Government intervention is required in the short-term to free our credit market from its own weight by allowing the credit market to trade these assets for much-needed cash that can be used to permit the business and consumer loans which drive production and growth.
John, you know I always respect your opinion, but we'll have to disagree on this. It's clear that your take on what should(n't) be done is (at least in part) influenced by your safe personal assets, which I understand--when I decided not to buy a house, I wasn't too upset about falling home prices. If the Dow falls another 1,000, it sounds as if that is no sweat off of your back, so it's understandable that days like today don't bother you.
But I think there is a very real risk of total credit and banking collapse in the near future if we fail to stabilize these markets. And to me, that's all this is about--stability. I have no interest in saving executives from their idiocy, or in artificially propping up our markets. But I don't think this is a simple market correction needed to more accurately reflect our nation's economic health; rather, I think our markets have crippled under the weight of fear and uncertainty, and Government intervention is required in the short-term to free our credit market from its own weight by allowing the credit market to trade these assets for much-needed cash that can be used to permit the business and consumer loans which drive production and growth.
I have to disagree with you here. First, the firms that made the bad loans have already eaten their losses. Three of the five largest US investment banks have failed in the past month. The survivors are clinging to "assets" that have gone toxic and expect to recoup $.20-.40 on the dollar for their poor investments--in my opinion, making banks realize a 60-80% asset depreciation IS making them "eat their losses."
You say this is OK because "someone" with capital will come along. No they won't, and that is the problem. First, there isn't exactly a lot of capital to go around right now. Second, the capital that is available is avoiding (and will continue to avoid) banks like The Plague. Right now, there is simply no price at which private parties will infuse capital into banks right now, because the likelihood of total default is just too high.
The only party who could bear that kind of risk is the Federal Government. Fear has devastated the value of holding these assets, meaning the Government could purchase them at a premium (as I said before, around $.20 on the dollar). The Government could then hold these assets, expecting some appreciation since the holder is more secure, and sell them in the future--potentially for a modest profit. At the same time, banks could then wipe these mortgages from their balance sheet in exchange for cash that they could (finally!) lend to consumers, small businesses, etc. Above all, a Government backing would have brought much needed stability to a market in a tailspin.
The average citizen will "pay" far more in the form of wealth depletion than she would have paid for the Government's purchasing (and reselling) of these devalued assets, making inaction far costlier than action. Our nation will pay much more, too--in the form of foregone capital improvements, prolonged credit and housing crisises, and depleted tax revenue. Just my opinion.
You say this is OK because "someone" with capital will come along. No they won't, and that is the problem. First, there isn't exactly a lot of capital to go around right now. Second, the capital that is available is avoiding (and will continue to avoid) banks like The Plague. Right now, there is simply no price at which private parties will infuse capital into banks right now, because the likelihood of total default is just too high.
The only party who could bear that kind of risk is the Federal Government. Fear has devastated the value of holding these assets, meaning the Government could purchase them at a premium (as I said before, around $.20 on the dollar). The Government could then hold these assets, expecting some appreciation since the holder is more secure, and sell them in the future--potentially for a modest profit. At the same time, banks could then wipe these mortgages from their balance sheet in exchange for cash that they could (finally!) lend to consumers, small businesses, etc. Above all, a Government backing would have brought much needed stability to a market in a tailspin.
The average citizen will "pay" far more in the form of wealth depletion than she would have paid for the Government's purchasing (and reselling) of these devalued assets, making inaction far costlier than action. Our nation will pay much more, too--in the form of foregone capital improvements, prolonged credit and housing crisises, and depleted tax revenue. Just my opinion.
Fdr (or whatever alias you're posting under these days), it wasn't President Bush who said we'd face an "economic Pearl Harbor" if we failed to pass a bailout package--it was Warren Buffett. A pretty important difference in terms of reputation on economic matters.
The bill just failed and, in my opinion, Congress has failed us. The bill was perhaps doomed from the beginning when the media took to the label "Wall Street bailout" instead of "credit rescue" or "Economic Confidence Act" or something like that. We needed action to restore (at least in part) market confidence and to free up frozen credit markets. I honestly cannot fathom how our economy can function from here on out without some drastic intervention.
The bill just failed and, in my opinion, Congress has failed us. The bill was perhaps doomed from the beginning when the media took to the label "Wall Street bailout" instead of "credit rescue" or "Economic Confidence Act" or something like that. We needed action to restore (at least in part) market confidence and to free up frozen credit markets. I honestly cannot fathom how our economy can function from here on out without some drastic intervention.
Real estate blog commenting on this discussion thread (the writer gives a slightly unbalanced view of what this thread's contributors are saying, apparently by discounting real estate bears as per se "extremists"):
http://blog.realmiamibeach.com/2008/05/trulia-asks-why-shoul…
http://blog.realmiamibeach.com/2008/05/trulia-asks-why-shoul…
Average price of a new home fell by 11.8% in one month (July to August):
http://biz.yahoo.com/ap/080925/economy.html
New home sales plummet in August, prices tumble
Thursday September 25, 10:21 am ET
By Martin Crutsinger, AP Economics Writer
New home sales plunge in August to slowest pace in 17 years as prices fall by record amount
WASHINGTON (AP) -- New home sales tumbled in August to the slowest pace in 17 years, while the average sales price fell by the largest amount on record, demonstrating the depth of the problem that Washington is trying to solve.
The Commerce Department said Thursday that new homes sales fell by 11.5 percent in August to a seasonally adjusted annual sales rate of 460,000 units, the slowest sales pace since January 1991.
It was a much bigger sales decline than the small 1 percent drop that economists had been expecting. The average price of a new home sold in August dropped by a record amount of 11.8 percent to $263,900, compared to the July average of $299,100. The median price was also down, falling 5.5 percent to $221,900.
The big drop in new home sales followed news Wednesday that sales of existing homes were down 2.2 percent in August to a seasonally adjusted annual rate of 4.91 million units. Both segments of the market remain under pressure from the steepest housing downturn in decades.
That housing slump has contributed to a record surge in mortgage defaults, leading to billions of dollars in losses by financial firms and spawning a severe credit crisis that is threatening to send the country into a steep recession.
In a nationally televised speech Wednesday night, President Bush said the credit crisis could trigger a "long and painful recession" unless Congress acts quickly to pass a $700 billion bailout plan for the nation's financial system. Negotiations on that plan were continuing Thursday with expectations that an agreement would be reached soon.
Besides the weak housing report, the government said Thursday that new claims for unemployment benefits shot up last week to the highest level in seven years. Orders to factories for big-ticket manufactured goods fell by a much-bigger-amount than expected amount of 4.5 percent in August. Both indicate the rising pressures facing the economy.
The report on new home sales showed that business was off in every region of the country except the Midwest, which posted a 7.2 percent increase. Sales plunged by 36.1 percent in the West and were down 31.9 percent in the Northeast. Sales fell a more modest 2.1 percent in the South.
http://biz.yahoo.com/ap/080925/economy.html
New home sales plummet in August, prices tumble
Thursday September 25, 10:21 am ET
By Martin Crutsinger, AP Economics Writer
New home sales plunge in August to slowest pace in 17 years as prices fall by record amount
WASHINGTON (AP) -- New home sales tumbled in August to the slowest pace in 17 years, while the average sales price fell by the largest amount on record, demonstrating the depth of the problem that Washington is trying to solve.
The Commerce Department said Thursday that new homes sales fell by 11.5 percent in August to a seasonally adjusted annual sales rate of 460,000 units, the slowest sales pace since January 1991.
It was a much bigger sales decline than the small 1 percent drop that economists had been expecting. The average price of a new home sold in August dropped by a record amount of 11.8 percent to $263,900, compared to the July average of $299,100. The median price was also down, falling 5.5 percent to $221,900.
The big drop in new home sales followed news Wednesday that sales of existing homes were down 2.2 percent in August to a seasonally adjusted annual rate of 4.91 million units. Both segments of the market remain under pressure from the steepest housing downturn in decades.
That housing slump has contributed to a record surge in mortgage defaults, leading to billions of dollars in losses by financial firms and spawning a severe credit crisis that is threatening to send the country into a steep recession.
In a nationally televised speech Wednesday night, President Bush said the credit crisis could trigger a "long and painful recession" unless Congress acts quickly to pass a $700 billion bailout plan for the nation's financial system. Negotiations on that plan were continuing Thursday with expectations that an agreement would be reached soon.
Besides the weak housing report, the government said Thursday that new claims for unemployment benefits shot up last week to the highest level in seven years. Orders to factories for big-ticket manufactured goods fell by a much-bigger-amount than expected amount of 4.5 percent in August. Both indicate the rising pressures facing the economy.
The report on new home sales showed that business was off in every region of the country except the Midwest, which posted a 7.2 percent increase. Sales plunged by 36.1 percent in the West and were down 31.9 percent in the Northeast. Sales fell a more modest 2.1 percent in the South.
Thanks Elvis, great song! My favorite by MIKA is "Grace Kelly"--I've had this song stuck in my head for weeks at a time. OK, I promise to get back to real estate topics if I post again this week.
John P, I guess we just have to disagree here. And I think Elvis is right about beating a dead horse, so this will be my last response on the matter. In response to your question, yes, it is my opinion that if another lawyer writes an article and posts it on a publicly-viewed website (not a paid subscription, e.g.), and then I post that article on another publicly viewed website and give the original author credit for the article and provide a link to the original article, I have not broken any law.
I disagree with your assertion that John the Bruce did not clearly define whose words he was posting. His post specifically states that one should read the "actual article" (meaning his post is not that article), that "Mr. Jelbah makes the argument better than I ever could" (meaning "I," or John the Bruce, am not making the argument, rather it is the author's), and then the title of the article is given, "by Zuvin Jelbah," directly above the link to that very same article by Zuvin Jelbah. Not much deception going on here.
I disagree with your assertion that John the Bruce did not clearly define whose words he was posting. His post specifically states that one should read the "actual article" (meaning his post is not that article), that "Mr. Jelbah makes the argument better than I ever could" (meaning "I," or John the Bruce, am not making the argument, rather it is the author's), and then the title of the article is given, "by Zuvin Jelbah," directly above the link to that very same article by Zuvin Jelbah. Not much deception going on here.
Since Trulia has redesigned its site, what is the best way to find this question thread? I used to simply click on "Trulia Voices," then "Best," and this was at the top. Now you cannot sort through questions based on popularity. I've recently had to find this by doing a google search. Thanks in advance for your help.
No Spin II, I call your bluff. You never sent John the Bruce's post to anyone. You say that you "sent that out for review." Tell us, to whom did you "send" it? Was it by email or letter? Can we expect a report back from your reliable source?
The funny thing is that you actually believe your scare tactics will stop us from reporting news.
The funny thing is that you actually believe your scare tactics will stop us from reporting news.
For a moment it seemed like Jim Cramer was saying it was a good time to buy a home. That time is no more. In an interview yesterday, Cramer predicted that housing prices would continue to fall 7-15% in the next year, with 40% additional declines in some markets, and he described the subsequent deflation as "the worst financial crisis since 1913."
John P, I'm not sure about the legal effect of the website agreement. A poster cannot violate copyright law just because the author says so. For instance, if I tell a stranger "don't look at me or I'll sue," and then they look at me, I have no lawsuit--looking at me simply isn't illegal, despite my warning. Similarly, if John the Bruce's post doesn't violate copyright law, the website's standard form probably doesn't change this. I suppose that if J the B checked some box and "accepted" the agreement, that may have formed some sort of a contract between him and the website, in which case he would be bound to that agreement (but as noted before, there's still the issue of whether the author would ever want to sue and, if even he did, the author would still have to prove damages for breach of contract, which I cannot fathom the author doing here).
John P, I am not a lawyer, but I feel pretty good about the bar exam I took last month, so I should be one within a few weeks. My personal (not legal) opinion is that news posts onto Trulia represent "fair use" of the posted material and as such do not violate copyright laws. U.S. law provides that "fair uses" are exempt from copyright law. In determining whether a "use" is "fair," courts must consider:
1. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
2. the nature of the copyrighted work;
3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4. the effect of the use upon the potential market for or value of the copyrighted work.
Copyright Act of 1976, 17 U.S.C. § 107.
John the Bruce's (and others') posting almost certainly qualifies as fair use under this test. Instead of self-profiting, he clearly only seeks to advance a "nonprofit educational purpose." The "nature of the copyrighted work" is not a novel (as if John had posted a Harry Potter book, for example); rather, it is a mere blog post which, by its own nature and the author's apparent intent, is intended to be distributed to whomever is interested. Finally, John's post has virtually no effect on the "potential market for or value of" the author's article; on the contrary, it would seem that John's post--which clearly attributes the article's authorship to "Zuvin Jelbah" and even provides a link to Mr. Jelbah's article--would advance Mr. Jelbah's web hits and notoriety, not hurt him.
Even supposing for the moment that John the Bruce violated copyright law by posting (with attribution) Mr. Jelbah's article, it is extremely unlikely that any action would be taken. Copyright law is not criminal law, so there is no government officer who would prosecute John for posting it. Instead, the author of the article would have to resort to a civil lawsuit. Since it seems pretty clear that the author WANTS people to read his article, it seems unlikely that he would sue John for bringing in readership.
And one final matter: even if posting the article is copyright infringement, and even if the author is so inflamed that he chooses to sue John the Bruce, the author must still prove "damages" to a jury. That is, the plaintiff/author cannot win a lawsuit unless he can prove to a jury that he has been monetarily harmed by John's posting of his blog. As stated above, I'm fairly sure John's posting--again, with attribution--only boosted Mr. Jelbah monetarily, if it had any effect at all.
Personally, John P, I would counsel you to not make legal assertions and serious accusations unless they are based on either (a) the law, or (b) your own professional experience or study. You have now posted eight times on this legal issue, and you have not yet cited any law or anything else that qualifies you to teach us all about the law. While I'm convinced you are an intelligent man and competent in your own field, I think this exchange has made you look silly.
1. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
2. the nature of the copyrighted work;
3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4. the effect of the use upon the potential market for or value of the copyrighted work.
Copyright Act of 1976, 17 U.S.C. § 107.
John the Bruce's (and others') posting almost certainly qualifies as fair use under this test. Instead of self-profiting, he clearly only seeks to advance a "nonprofit educational purpose." The "nature of the copyrighted work" is not a novel (as if John had posted a Harry Potter book, for example); rather, it is a mere blog post which, by its own nature and the author's apparent intent, is intended to be distributed to whomever is interested. Finally, John's post has virtually no effect on the "potential market for or value of" the author's article; on the contrary, it would seem that John's post--which clearly attributes the article's authorship to "Zuvin Jelbah" and even provides a link to Mr. Jelbah's article--would advance Mr. Jelbah's web hits and notoriety, not hurt him.
Even supposing for the moment that John the Bruce violated copyright law by posting (with attribution) Mr. Jelbah's article, it is extremely unlikely that any action would be taken. Copyright law is not criminal law, so there is no government officer who would prosecute John for posting it. Instead, the author of the article would have to resort to a civil lawsuit. Since it seems pretty clear that the author WANTS people to read his article, it seems unlikely that he would sue John for bringing in readership.
And one final matter: even if posting the article is copyright infringement, and even if the author is so inflamed that he chooses to sue John the Bruce, the author must still prove "damages" to a jury. That is, the plaintiff/author cannot win a lawsuit unless he can prove to a jury that he has been monetarily harmed by John's posting of his blog. As stated above, I'm fairly sure John's posting--again, with attribution--only boosted Mr. Jelbah monetarily, if it had any effect at all.
Personally, John P, I would counsel you to not make legal assertions and serious accusations unless they are based on either (a) the law, or (b) your own professional experience or study. You have now posted eight times on this legal issue, and you have not yet cited any law or anything else that qualifies you to teach us all about the law. While I'm convinced you are an intelligent man and competent in your own field, I think this exchange has made you look silly.
S&P: Home prices tumble by record amount (PDF of Case-Schiller report linked below)
Tuesday August 26, 9:35 am ET
Private housing index shows home prices tumbling by record amount nationwide in June
NEW YORK (AP) -- A widely watched housing index released Tuesday showed home prices dropping by the sharpest rate ever in the second quarter.
The Standard & Poor's/Case-Shiller U.S. National Home Price Index tumbled a record 15.4 percent during the quarter from the same period a year ago.
The monthly indices also clocked in record declines. The 20-city index fell by 15.9 percent in June compared with a year ago, the largest drop since its inception in 2000. The 10-city index plunged 17 percent, its biggest decline in its 21-year history.
No city in the Case-Shiller 20-city index saw year-over-year price gains in June, the third straight month that's happened.
However, the rate of single-family home price declines slowed from May to June, a possible silver lining, the index creators said.
"While there is no national turnaround in residential real estate prices, it is possible that we are seeing some regions struggling to come back, which has resulted in some moderation in price declines at the national level" said David M. Blitzer, chairman of the index committee at S&P.
Tuesday August 26, 9:35 am ET
Private housing index shows home prices tumbling by record amount nationwide in June
NEW YORK (AP) -- A widely watched housing index released Tuesday showed home prices dropping by the sharpest rate ever in the second quarter.
The Standard & Poor's/Case-Shiller U.S. National Home Price Index tumbled a record 15.4 percent during the quarter from the same period a year ago.
The monthly indices also clocked in record declines. The 20-city index fell by 15.9 percent in June compared with a year ago, the largest drop since its inception in 2000. The 10-city index plunged 17 percent, its biggest decline in its 21-year history.
No city in the Case-Shiller 20-city index saw year-over-year price gains in June, the third straight month that's happened.
However, the rate of single-family home price declines slowed from May to June, a possible silver lining, the index creators said.
"While there is no national turnaround in residential real estate prices, it is possible that we are seeing some regions struggling to come back, which has resulted in some moderation in price declines at the national level" said David M. Blitzer, chairman of the index committee at S&P.
Must-read article for anyone still interested in what economists are saying re the housing bottom (this is a Yahoo! finance summary of a much longer NYT article).
Given many indicators, and after soliciting feedback from many economists, the NYT attempts to find the bottom. The research concludes that Chicago is currently the third-most overvalued market and is now 11% overpriced.
Given many indicators, and after soliciting feedback from many economists, the NYT attempts to find the bottom. The research concludes that Chicago is currently the third-most overvalued market and is now 11% overpriced.
Video link to interview with Barry Ritholtz, CEO of Fusion IQ: http://finance.yahoo.com/tech-ticker/article/47438/A-Bottom-…
Ritholtz nicely summarizes all of the major factors which continue to weigh down the market, and he claims housing will fall another 25% (perhaps very quickly, perhaps over a whole decade) before the slump is over. He claims that the data just doesn't support the contrary (optimistic) view.
Ritholtz nicely summarizes all of the major factors which continue to weigh down the market, and he claims housing will fall another 25% (perhaps very quickly, perhaps over a whole decade) before the slump is over. He claims that the data just doesn't support the contrary (optimistic) view.
Freddie Mac chief made $38 million while ignoring repeated warnings of his company's risk exposure.
Tuesday August 5, 2:40 am ET
(Reuters) - U.S. mortgage market giant Freddie Mac's (NYSE:FRE - News) chief executive dismissed internal warnings that could have protected the company from some of the financial problems now engulfing it, the New York Times said, citing more than two dozen current and former high-ranking executives and others.
In 2004, Chief Executive Richard Syron received a memo from Freddie Mac's chief risk officer warning him that the firm was financing questionable loans that threatened its financial health, the paper said.
Though the current housing crisis would have undoubtedly caused problems at both companies, Freddie Mac insiders say Syron heightened those perils by ignoring repeated recommendations, the NY Times said.
In an interview with the paper, Freddie Mac's former chief risk officer, David Andrukonis, recalled telling Syron in mid-2004 that the company was buying bad loans that would likely pose an enormous financial and reputational risk to the company and the country.
Syron received a memo stating that the firm's underwriting standards were becoming shoddier and that the company was becoming exposed to losses, the paper said, citing Andrukonis and two others familiar with the document.
But Syron refused to consider possibilities for reducing Freddie Mac's risks, the paper cited Andrukonis as saying.
"He said we couldn't afford to say no to anyone," the paper quoted Andrukonis as saying. Over the next three years, Freddie Mac continued buying riskier loans, the paper said.
Citing many executives, the paper said Syron was also warned that the firm needed to expand its capital cushion, but instead that safety net shrank. Syron was told to slow the firm's mortgage purchases, but they accelerated, the paper said.
Those and other choices initially paid off for Syron, who has collected more than $38 million in compensation since 2003, the NY Times said.
But when housing prices began declining in 2006, those choices at Freddie Mac proved disastrous.
Freddie Mac could not be immediately reached for a comment on the report.
Tuesday August 5, 2:40 am ET
(Reuters) - U.S. mortgage market giant Freddie Mac's (NYSE:FRE - News) chief executive dismissed internal warnings that could have protected the company from some of the financial problems now engulfing it, the New York Times said, citing more than two dozen current and former high-ranking executives and others.
In 2004, Chief Executive Richard Syron received a memo from Freddie Mac's chief risk officer warning him that the firm was financing questionable loans that threatened its financial health, the paper said.
Though the current housing crisis would have undoubtedly caused problems at both companies, Freddie Mac insiders say Syron heightened those perils by ignoring repeated recommendations, the NY Times said.
In an interview with the paper, Freddie Mac's former chief risk officer, David Andrukonis, recalled telling Syron in mid-2004 that the company was buying bad loans that would likely pose an enormous financial and reputational risk to the company and the country.
Syron received a memo stating that the firm's underwriting standards were becoming shoddier and that the company was becoming exposed to losses, the paper said, citing Andrukonis and two others familiar with the document.
But Syron refused to consider possibilities for reducing Freddie Mac's risks, the paper cited Andrukonis as saying.
"He said we couldn't afford to say no to anyone," the paper quoted Andrukonis as saying. Over the next three years, Freddie Mac continued buying riskier loans, the paper said.
Citing many executives, the paper said Syron was also warned that the firm needed to expand its capital cushion, but instead that safety net shrank. Syron was told to slow the firm's mortgage purchases, but they accelerated, the paper said.
Those and other choices initially paid off for Syron, who has collected more than $38 million in compensation since 2003, the NY Times said.
But when housing prices began declining in 2006, those choices at Freddie Mac proved disastrous.
Freddie Mac could not be immediately reached for a comment on the report.
Standard & Poor's senior economist predicts housing prices will fall an additional 10% nationally (for a 30% peak-to-trough total decline) between now and the time price declines level off, which she predicts will take place in the first half of 2009.
http://finance.yahoo.com/tech-ticker/article/44272/No-Immedi…
http://finance.yahoo.com/tech-ticker/article/44272/No-Immedi…
Fair point, Julia--I think the article mentioned that a significant portion of the "shadow supply" consists of baby boomers. I suspect some of this group will buy a smaller home, but most will opt for retirement communities or similar non-buying alternatives.
Of course, most sellers right now are probably also buyers, but that hasn't changed the fact that oversupply is plaguing housing.
Of course, most sellers right now are probably also buyers, but that hasn't changed the fact that oversupply is plaguing housing.
Invesco's investment strategist says housing inventory backup is actually understated (that is, worse than the numbers indicate) because it doesn't include the "shadow supply" of homes owned by individuals who want to sell but have prolonged the decision due to poor market conditions.
http://finance.yahoo.com/tech-ticker/article/42434/Garnick-M…
http://finance.yahoo.com/tech-ticker/article/42434/Garnick-M…
Foreclosures accelerating:
--Q2 foreclosures up 14% from Q1
--quarterly foreclosures up 121% year-over-year
--RealtyTrac forced to upwardly adjust its foreclosures forecast: "We've been saying foreclosures will total 1.9 million to 2 million this year," [the RealtyTrac spokesman] said. "But midway through the year, we're already at 1.4 million so we're going to be raising our projections."
--Q2 foreclosures up 14% from Q1
--quarterly foreclosures up 121% year-over-year
--RealtyTrac forced to upwardly adjust its foreclosures forecast: "We've been saying foreclosures will total 1.9 million to 2 million this year," [the RealtyTrac spokesman] said. "But midway through the year, we're already at 1.4 million so we're going to be raising our projections."
Agreed--I am thankful to the many contributors who, like you, have made this an informative (if sometimes contentious!) forum.
No, the point I was trying to make is just the opposite--that Buyer A has *not suffered* at all from his town's median price declines. He paid $100k for a house that was worth $100k. He merely got into his home earlier than later buyers, who all eventually bought the same quality house for the same price--$100k.
Sorry if I'm still not clear.
Sorry if I'm still not clear.
Hilarious! Rob Banks/Slash/etc. just created a new account (Roy Davis), posted under that account, and then criticized the post HE JUST MADE under yet another of his alter ego accounts (Mike Rafone..."microphone").
To top it off, he then signs back on under "Roy Davis" immediately thereafter (less than five minutes passed between the posts from "Mike" and "Roy"), apologizes for his repetitiveness, and uses that as a reason to call for this thread to be terminated.
You can't make this stuff up, folks!
AJ, Zach, Richard, and everyone else (including real estate agents!), I'm still looking forward to hearing your thoughts on my post (and Paul's response) from last night.
--Ryan
"Sniffing out Chicago's biggest idiots since Spring 2008"
To top it off, he then signs back on under "Roy Davis" immediately thereafter (less than five minutes passed between the posts from "Mike" and "Roy"), apologizes for his repetitiveness, and uses that as a reason to call for this thread to be terminated.
You can't make this stuff up, folks!
AJ, Zach, Richard, and everyone else (including real estate agents!), I'm still looking forward to hearing your thoughts on my post (and Paul's response) from last night.
--Ryan
"Sniffing out Chicago's biggest idiots since Spring 2008"
Great comment, Paul--thanks. Others, please chime in on my and Paul's posts below.
More news:
--existing home sales down 2.6% in June to their "lowest level in a decade;" sales down 16% year-over-year
--foreclosures now account for at least 1/3 home sales, according to NAR chief economist Lawrence Yun (!)
More news:
--existing home sales down 2.6% in June to their "lowest level in a decade;" sales down 16% year-over-year
--foreclosures now account for at least 1/3 home sales, according to NAR chief economist Lawrence Yun (!)
*Reposted with minor changes*
A thought has been on my mind lately, and I wanted to bounce it off of anyone still keeping up with this thread. It concerns the relationship between whole market data and individual home sales.
By now, everyone in this country (and certainly everyone trying to sell their home) knows that, generally speaking, home prices have fallen and it's a bad time to sell. Suppose I find a seller who realizes this and sells her $700k-listed home to me for $600k, 14% below asking price. The seller is disappointed but realizes that the market has changed in the past few years, and $600k may be a fair assessment of what her home is worth today. Other sellers with similar offers decline them, holding out hope that their home is worth more.
Now suppose that for the next six months, as these "holdout" sellers perceive reality and slowly begin to sell their homes at the disappointingly low numbers, the Case-Schiller index continues to report that median home prices are falling.
Does this *necessarily* mean that the value of my home has also fallen for the past six months? Or could it be that *my home's value* hasn't changed, but the C-S Index is merely reflecting the fact that sellers are slow to realize price losses?
Instead of looking at month-to-month trends to infer the value of a single home, doesn't it make sense to look at homes as single units, some of which have realized their price losses and some of which have not?
I fear I'm not articulating this thought well, so consider this hypothetical:
[ Town A consists of five homes, all for sale and listed at $200k. Due to less demand, sellers are not willing to buy these homes for more than $100k.
Buyer A offers Seller A $100k for his home. Seller A accepts. Buyers B-E offer Sellers B-E $100k for their homes; Sellers B-E decline.
For each of the next four months, one of the Sellers wakes up and realizes home prices have fallen, so they sell their Homes to Buyers at $100k each. ]
If I'm not mistaken, a C-S-type index would indicate that median prices have fallen for Town A during each one of the five months in the hypothetical:
*Month 0 median price for Town A, before "pent-up" price loss has been realized by any homes: $200k
*end of Month 1 median price (after sale of Home A): $180k
*end of Month 2 median price (after sale of Home B): $160
*end of Month 3 median price: $140k (after Home C sold for $100k)
*end of Month 4 median price: $120k (Home D sells)
*end of Month 5 median price: $100k (Home E sells; Town A's price decline realized by all homes).
But for Buyer A--who bought at the beginning of the hypothetical for $100k--surely it would not be accurate to say that the value of *his house* fell just because Town A's median prices continued to fall, would it? On the contrary, it seems to me that House A merely *realized* its pent-up price loss before the other homes did--NOT that the value of House A continued to fall with the Town's price index.
Similarly, I continue to see significant price reductions in Chicago's market. Obviously some sellers (and their agents, no doubt) are beginning to realize that their home isn't worth what it was worth two years ago. If I buy one of these homes at what I perceive to be its true (and decreased) market value, and then Chicago home prices continue to fall, I see no reason why this means that my home's value has correspondingly decreased.
As final food for thought, consider this tidbit from Jim Cramer's "Mad Money" show today:
http://www.cnbc.com/id/25818021
(Relevant excerpt occurs about 2:15 into the clip and contains this quote: “I was the first guy that said torch your house for the insurance money. I am now telling you that between now and the next six months you have to buy a house.”) Whatever you may think about Cramer (I agree he has become the financial sector's "Dr. Phil"--more entertainment than substance--but this is probably the most unequivocal and objective endorsement of housing I've seen in more than a year).
What do you think?
A thought has been on my mind lately, and I wanted to bounce it off of anyone still keeping up with this thread. It concerns the relationship between whole market data and individual home sales.
By now, everyone in this country (and certainly everyone trying to sell their home) knows that, generally speaking, home prices have fallen and it's a bad time to sell. Suppose I find a seller who realizes this and sells her $700k-listed home to me for $600k, 14% below asking price. The seller is disappointed but realizes that the market has changed in the past few years, and $600k may be a fair assessment of what her home is worth today. Other sellers with similar offers decline them, holding out hope that their home is worth more.
Now suppose that for the next six months, as these "holdout" sellers perceive reality and slowly begin to sell their homes at the disappointingly low numbers, the Case-Schiller index continues to report that median home prices are falling.
Does this *necessarily* mean that the value of my home has also fallen for the past six months? Or could it be that *my home's value* hasn't changed, but the C-S Index is merely reflecting the fact that sellers are slow to realize price losses?
Instead of looking at month-to-month trends to infer the value of a single home, doesn't it make sense to look at homes as single units, some of which have realized their price losses and some of which have not?
I fear I'm not articulating this thought well, so consider this hypothetical:
[ Town A consists of five homes, all for sale and listed at $200k. Due to less demand, sellers are not willing to buy these homes for more than $100k.
Buyer A offers Seller A $100k for his home. Seller A accepts. Buyers B-E offer Sellers B-E $100k for their homes; Sellers B-E decline.
For each of the next four months, one of the Sellers wakes up and realizes home prices have fallen, so they sell their Homes to Buyers at $100k each. ]
If I'm not mistaken, a C-S-type index would indicate that median prices have fallen for Town A during each one of the five months in the hypothetical:
*Month 0 median price for Town A, before "pent-up" price loss has been realized by any homes: $200k
*end of Month 1 median price (after sale of Home A): $180k
*end of Month 2 median price (after sale of Home B): $160
*end of Month 3 median price: $140k (after Home C sold for $100k)
*end of Month 4 median price: $120k (Home D sells)
*end of Month 5 median price: $100k (Home E sells; Town A's price decline realized by all homes).
But for Buyer A--who bought at the beginning of the hypothetical for $100k--surely it would not be accurate to say that the value of *his house* fell just because Town A's median prices continued to fall, would it? On the contrary, it seems to me that House A merely *realized* its pent-up price loss before the other homes did--NOT that the value of House A continued to fall with the Town's price index.
Similarly, I continue to see significant price reductions in Chicago's market. Obviously some sellers (and their agents, no doubt) are beginning to realize that their home isn't worth what it was worth two years ago. If I buy one of these homes at what I perceive to be its true (and decreased) market value, and then Chicago home prices continue to fall, I see no reason why this means that my home's value has correspondingly decreased.
As final food for thought, consider this tidbit from Jim Cramer's "Mad Money" show today:
http://www.cnbc.com/id/25818021
(Relevant excerpt occurs about 2:15 into the clip and contains this quote: “I was the first guy that said torch your house for the insurance money. I am now telling you that between now and the next six months you have to buy a house.”) Whatever you may think about Cramer (I agree he has become the financial sector's "Dr. Phil"--more entertainment than substance--but this is probably the most unequivocal and objective endorsement of housing I've seen in more than a year).
What do you think?
It now sounds as if a major housing bill (described by Sen. Chris Dodd as "the most important piece of housing legislation in a generation") will pass by the end of the week.
Please share your thoughts on this and post any topical editorials you come across.
Who wins? Who loses? What impact, if any, should this legislation have on the decision to buy now or wait?
Please share your thoughts on this and post any topical editorials you come across.
Who wins? Who loses? What impact, if any, should this legislation have on the decision to buy now or wait?
More on the politics of foreclosure bailouts--decent analysis of problem, pretty weak on analysis of the solution.
NY Times Editorial
As Foreclosures Escalate
Published: July 1, 2008
By the time the Senate returns next Monday from its July 4 recess, some 55,000 more homes will have entered foreclosure. And that’s hardly the full picture of the growing calamity. More than three million homeowners are currently at risk of default and millions more are expected to join them in the coming year as home prices drop, the economy falters and delinquencies rise. Yet the Senate went ahead with its vacation last Friday without passing a foreclosure prevention measure.
The bill was expected to pass, but the vote was derailed by petty politics. Senator John Ensign, Republican of Nevada, for example, demanded that the Senate add a multibillion dollar package of tax breaks for renewable energy. Democrats balked — not out of opposition to the tax breaks, which rightly enjoy bipartisan support, but because Mr. Ensign wanted to tack them on to the foreclosure bill without paying for them. That would threaten passage of the bill in the House, which is more committed than the Senate to pay-as-you-go governing.
This sort of delay achieves political ends, like denying Democrats the chance to campaign on the accomplishment during the recess, but it’s exceedingly poor policy. Foreclosures are feeding the nation’s severe economic problems. Turmoil in the financial markets is rooted in the collapse of the housing bubble and will not abate until house prices stabilize and sales pick up. Even Americans fortunate enough to have a down payment and a willing lender are hesitating, understandably fearful of further price drops. Rising foreclosures add daily to the glut of unsold homes, pushing prices down and foreclosures up in a vicious cycle.
That same financial turmoil, coupled with huge losses in home equity, has deprived many Americans of the means or the confidence to buy a new house or other big-ticket items, like cars. In a recent Gallup poll, a majority of Americans said they were now worse off financially than they were a year ago. That’s the first time in the 32-year history of the question that more than half the population has reported losing ground.
Unfortunately, the pessimism is justified. The Bush-era expansion was based largely on a boom in bad lending and house-price inflation — not on robust employment, wage increases or sustainable gains in household wealth. As a result, many Americans have spent the last several years taking on debt, rather than building their earning power or adding to savings. They are ill prepared to cope with a weakening economy and rising gas prices, and they know it.
This spring’s tax refunds and stimulus checks have been a boost, but it won’t last. Soon, defaults on credit cards and auto loans are likely to pick up, and lenders will respond by keeping credit tight.
The foreclosure prevention bill is not a cure-all, by any means, but is a way to try to break the cycle. It would allow many troubled borrowers to exchange their unaffordable loans for new mortgages guaranteed by the federal government — as long as the lender agreed to reduce the existing loan balance to 85 percent of the home’s current value. It is questionable whether lenders would be willing to take the loss, and there’s nothing in the law to prod them to do so.
Still, the bill’s passage, which should be the Senate’s priority next week, would be an overdue acknowledgment that the foreclosure mess requires government intervention. Lawmakers could build on the effort as needed, but it is unconscionable not to take the first step.
NY Times Editorial
As Foreclosures Escalate
Published: July 1, 2008
By the time the Senate returns next Monday from its July 4 recess, some 55,000 more homes will have entered foreclosure. And that’s hardly the full picture of the growing calamity. More than three million homeowners are currently at risk of default and millions more are expected to join them in the coming year as home prices drop, the economy falters and delinquencies rise. Yet the Senate went ahead with its vacation last Friday without passing a foreclosure prevention measure.
The bill was expected to pass, but the vote was derailed by petty politics. Senator John Ensign, Republican of Nevada, for example, demanded that the Senate add a multibillion dollar package of tax breaks for renewable energy. Democrats balked — not out of opposition to the tax breaks, which rightly enjoy bipartisan support, but because Mr. Ensign wanted to tack them on to the foreclosure bill without paying for them. That would threaten passage of the bill in the House, which is more committed than the Senate to pay-as-you-go governing.
This sort of delay achieves political ends, like denying Democrats the chance to campaign on the accomplishment during the recess, but it’s exceedingly poor policy. Foreclosures are feeding the nation’s severe economic problems. Turmoil in the financial markets is rooted in the collapse of the housing bubble and will not abate until house prices stabilize and sales pick up. Even Americans fortunate enough to have a down payment and a willing lender are hesitating, understandably fearful of further price drops. Rising foreclosures add daily to the glut of unsold homes, pushing prices down and foreclosures up in a vicious cycle.
That same financial turmoil, coupled with huge losses in home equity, has deprived many Americans of the means or the confidence to buy a new house or other big-ticket items, like cars. In a recent Gallup poll, a majority of Americans said they were now worse off financially than they were a year ago. That’s the first time in the 32-year history of the question that more than half the population has reported losing ground.
Unfortunately, the pessimism is justified. The Bush-era expansion was based largely on a boom in bad lending and house-price inflation — not on robust employment, wage increases or sustainable gains in household wealth. As a result, many Americans have spent the last several years taking on debt, rather than building their earning power or adding to savings. They are ill prepared to cope with a weakening economy and rising gas prices, and they know it.
This spring’s tax refunds and stimulus checks have been a boost, but it won’t last. Soon, defaults on credit cards and auto loans are likely to pick up, and lenders will respond by keeping credit tight.
The foreclosure prevention bill is not a cure-all, by any means, but is a way to try to break the cycle. It would allow many troubled borrowers to exchange their unaffordable loans for new mortgages guaranteed by the federal government — as long as the lender agreed to reduce the existing loan balance to 85 percent of the home’s current value. It is questionable whether lenders would be willing to take the loss, and there’s nothing in the law to prod them to do so.
Still, the bill’s passage, which should be the Senate’s priority next week, would be an overdue acknowledgment that the foreclosure mess requires government intervention. Lawmakers could build on the effort as needed, but it is unconscionable not to take the first step.
Link to interview with Charles Schwab's Chief Investment Strategist predicts another 10-15% drop in housing prices before market stabilizes:
http://finance.yahoo.com/tech-ticker/article/31337/Bottomles…
She also discusses the need to "flush foreclosures out" instead of temporarily staving them off via legislation. Decent interview, though the interviewer either sucks or is on cocaine.
http://finance.yahoo.com/tech-ticker/article/31337/Bottomles…
She also discusses the need to "flush foreclosures out" instead of temporarily staving them off via legislation. Decent interview, though the interviewer either sucks or is on cocaine.
Kallen, your advertised homes are not "BELOW MARKET VALUE" if NO ONE IN THE MARKET IS BUYING THEM.
Here's an article from the Washington Post nicely summing up our current economic problems (warning, this guy is as bearish as I've read in awhile):
http://www.washingtonpost.com/wp-dyn/content/article/2008/06…
Here's an article from the Washington Post nicely summing up our current economic problems (warning, this guy is as bearish as I've read in awhile):
http://www.washingtonpost.com/wp-dyn/content/article/2008/06…
Sales of existing home show slight gain in May
Thursday June 26, 3:04 pm ET
By Martin Crutsinger, AP Economics Writer
Slight rise in sales of existing homes in May; only second gain in past 10 months
WASHINGTON (AP) -- Sales of existing homes rose slightly in May, only the second increase in the past 10 months. Prices, however, kept plunging and analysts said the large number of unsold homes indicated the prolonged slump in housing was far from over.
The National Association of Realtors reported Thursday that sales of existing single-family homes and condominiums edged up by 2 percent to a seasonally adjusted annual rate of 4.99 million units in May. Even with the small gain, it was still 15.9 percent below the depressed levels of a year ago.
The median price of an existing home sold in May dropped to $208,600, 6.3 percent lower than a year ago. That is the point where half sell for more and half sell for less. It was the fifth biggest year-over-year price decline in records that go back to 1999.
Existing homes sales account for the bulk of the housing market. The report followed news Wednesday that sales of new single-family homes fell by 2.5 percent in May. That was the sixth drop in the past seven months and pushed the annual sales pace down to 512,000 units.
The two-year slump in housing has dragged down the economy and rising levels of foreclosures are dumping even more unsold homes on the market.
Given the weak economy, many analysts said they were not looking for a turnaround in housing for many more months. "Plunging prices and massive inventory are huge disincentives to home buying," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Economists said that falling consumer confidence, rising job layoffs and higher mortgage rates were standing in the way of a housing rebound. Freddie Mac, the mortgage company, reported on Thursday that mortgage rates rose across the board in the past week. The 30-year mortgage climbed to 6.45 percent, the highest since last September.
"We do not expect residential real estate markets to turn around soon," said Stuart Hoffman, chief economist at PNC Financial Services. "In a sea of weak data, home sales will remain an anchor, not a life boat."
The existing homes report found a 5.5 percent increase in the Midwest, followed by gains of 4.6 percent in the Northeast and 2 percent in the West. Sales in the South dropped of 0.5 percent.
Economists with the Realtors noted that for the past few months sales have rebounded in areas hit hardest by the housing bust. Examples included Sacramento, the San Fernando Valley and Monterey in California; Sarasota, Fla.; and Battle Creek, Mich.
"Stabilization in home prices can only occur with buyers returning to the market, so we are encouraged by rising home sales, particularly in distressed markets," said Lawrence Yun, the Realtors' chief economist.
Yun said foreclosures and short sales, when a home is sold for less than the value of the mortgage, are a larger portion of the current housing market, particularly in California, and are depressing home prices.
The inventory of unsold homes dropped by 1.4 percent to 4.49 million units in May. That is a 10.8-months supply at the May sales pace, down from 11.2-months in April. That still exceeds the seven-month inventory that is typical.
Thursday June 26, 3:04 pm ET
By Martin Crutsinger, AP Economics Writer
Slight rise in sales of existing homes in May; only second gain in past 10 months
WASHINGTON (AP) -- Sales of existing homes rose slightly in May, only the second increase in the past 10 months. Prices, however, kept plunging and analysts said the large number of unsold homes indicated the prolonged slump in housing was far from over.
The National Association of Realtors reported Thursday that sales of existing single-family homes and condominiums edged up by 2 percent to a seasonally adjusted annual rate of 4.99 million units in May. Even with the small gain, it was still 15.9 percent below the depressed levels of a year ago.
The median price of an existing home sold in May dropped to $208,600, 6.3 percent lower than a year ago. That is the point where half sell for more and half sell for less. It was the fifth biggest year-over-year price decline in records that go back to 1999.
Existing homes sales account for the bulk of the housing market. The report followed news Wednesday that sales of new single-family homes fell by 2.5 percent in May. That was the sixth drop in the past seven months and pushed the annual sales pace down to 512,000 units.
The two-year slump in housing has dragged down the economy and rising levels of foreclosures are dumping even more unsold homes on the market.
Given the weak economy, many analysts said they were not looking for a turnaround in housing for many more months. "Plunging prices and massive inventory are huge disincentives to home buying," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Economists said that falling consumer confidence, rising job layoffs and higher mortgage rates were standing in the way of a housing rebound. Freddie Mac, the mortgage company, reported on Thursday that mortgage rates rose across the board in the past week. The 30-year mortgage climbed to 6.45 percent, the highest since last September.
"We do not expect residential real estate markets to turn around soon," said Stuart Hoffman, chief economist at PNC Financial Services. "In a sea of weak data, home sales will remain an anchor, not a life boat."
The existing homes report found a 5.5 percent increase in the Midwest, followed by gains of 4.6 percent in the Northeast and 2 percent in the West. Sales in the South dropped of 0.5 percent.
Economists with the Realtors noted that for the past few months sales have rebounded in areas hit hardest by the housing bust. Examples included Sacramento, the San Fernando Valley and Monterey in California; Sarasota, Fla.; and Battle Creek, Mich.
"Stabilization in home prices can only occur with buyers returning to the market, so we are encouraged by rising home sales, particularly in distressed markets," said Lawrence Yun, the Realtors' chief economist.
Yun said foreclosures and short sales, when a home is sold for less than the value of the mortgage, are a larger portion of the current housing market, particularly in California, and are depressing home prices.
The inventory of unsold homes dropped by 1.4 percent to 4.49 million units in May. That is a 10.8-months supply at the May sales pace, down from 11.2-months in April. That still exceeds the seven-month inventory that is typical.
Playing Devil's Advocate:
I just looked over the C-S numbers and saw that Chicago's price index rose (oh so modestly--0.11%--but still a rise) in April 2008, the most recent numbers we have. Isn't this what we'd expect a bottom to look like? Before today, C-S showed 19 straight months of Chicago price declines.
We could say "this is just April, which is always a good month for sales," but the C-S numbers don't seem to show much of a seasonal "April bump" in prices. In fact, last year's (2007) March-April price drop (-1.17%) was worse than that year's Feb.-March price drop (-0.45%), suggesting April was a particularly disappointing month (all other things being equal, which I understand they are not).
Again, I'm just playing devil's advocate. At best, the market is still too uncertain for me to jump in, and I have nothing to lose by sitting it out a year (prices aren't going up anytime soon). But for me, these numbers are reason for some optimism.
A final point/question--someone below mentioned the effect of inflation of C-S data. Doesn't C-S control for inflation? I think this factored into the debate between AJ/Bayou re how much prices should fall to align with 2000 numbers.
I just looked over the C-S numbers and saw that Chicago's price index rose (oh so modestly--0.11%--but still a rise) in April 2008, the most recent numbers we have. Isn't this what we'd expect a bottom to look like? Before today, C-S showed 19 straight months of Chicago price declines.
We could say "this is just April, which is always a good month for sales," but the C-S numbers don't seem to show much of a seasonal "April bump" in prices. In fact, last year's (2007) March-April price drop (-1.17%) was worse than that year's Feb.-March price drop (-0.45%), suggesting April was a particularly disappointing month (all other things being equal, which I understand they are not).
Again, I'm just playing devil's advocate. At best, the market is still too uncertain for me to jump in, and I have nothing to lose by sitting it out a year (prices aren't going up anytime soon). But for me, these numbers are reason for some optimism.
A final point/question--someone below mentioned the effect of inflation of C-S data. Doesn't C-S control for inflation? I think this factored into the debate between AJ/Bayou re how much prices should fall to align with 2000 numbers.
Nancy, I think there is some way to do that under the "My Trulia" tab, "My Questions and Answers." If not, just ask someone on Trulia's staff--Trulia Roger was keeping up with this thread for awhile and can probably help you out.
Hyuflg, glad you decided to take down your post. Of course you can never really "take back" anything you have published on the internet--it can all be traced--but it was probably a step in the right direction. Just so you know, I have kept all of your most heinous posts under the various names--from your "KILL LAWYERS" posts to the comments about my family members dying painful deaths to your most recent comments on what should be done to our nation's President. You've really done your profession proud (from your other posts I've read from different question threads, it's clear you actually are a REALTOR). I have collected and kept these posts in case I ever believe they should be reported to authorities outside of this web site.
I repeat, do not ever post on this thread again.
Hyuflg, glad you decided to take down your post. Of course you can never really "take back" anything you have published on the internet--it can all be traced--but it was probably a step in the right direction. Just so you know, I have kept all of your most heinous posts under the various names--from your "KILL LAWYERS" posts to the comments about my family members dying painful deaths to your most recent comments on what should be done to our nation's President. You've really done your profession proud (from your other posts I've read from different question threads, it's clear you actually are a REALTOR). I have collected and kept these posts in case I ever believe they should be reported to authorities outside of this web site.
I repeat, do not ever post on this thread again.
Hyuflg, you are dumber than a tic tac. First, everyone here knows you're the same old Slash/Rob Banks freak. If it isn't clear enough by your poor grammar and general stupidity, it's easy to check your other posts, which I did, and see your same old run-of-the-mill whining about Trulia being anti-Realtor:
(from another thread): "[Trulia] is primarily a place for people to come and tell Realtors how little we know and other bashing, have your broker look through some very active posts on here before jumping blindly in." [P.S.--what ever happened to your "thousands of Realtor friends" who were going to "take this thread down"? I suppose by "thousands" you meant "dozens" and by "friends" you meant you and your cat.
if you're going to continue creating names, posting worthless crap, and giving my thread a thumbs-down, fine. The amount of time you commit to degrading our discussion is a sad commentary on your life, but that's your call. But at least stop pretending to be different people (remember when you invented "Go Cubs!", a woman??)--the whole charade really adds to your creepiness. Every time I see you've created another name I expect your comment to be something like "it puts the lotion in the basket!"
(see http://www.youtube.com/watch?v=HrwDFgEeFCE )
Besides this, you're also a moron. I appreciate the fact that you've backed off of me ever since posting that you wanted to come find me under your "KILL LAWYERS" alias--very civil of you. Now you say "we needed" Lee Harvey Oswald (an assassin) to take care of our President. I hope you get a visit from the Secret Service--partly because it would teach you a lesson, and partly because I'm starting to believe it may actually be necessary.
If you think I'm joking, I'm not. Title 18 of the US Code, section 871 criminalizes threats on our President, and the definition of "threat" is extremely broad--as you might expect, our Secret Service doesn't take comments like yours lightly. In 1996 the Secret Service detained a Reverend under this law who merely said "God will hold you to account, Mr. President" after Bill Clinton vetoed the partial-birth abortion bill. In my opinion, your comment that we "need" Lee Harvey Oswald is much more serious of a threat.
http://usgovinfo.about.com/library/weekly/aa040398.htm
Leave this thread and do not come back.
(from another thread): "[Trulia] is primarily a place for people to come and tell Realtors how little we know and other bashing, have your broker look through some very active posts on here before jumping blindly in." [P.S.--what ever happened to your "thousands of Realtor friends" who were going to "take this thread down"? I suppose by "thousands" you meant "dozens" and by "friends" you meant you and your cat.
if you're going to continue creating names, posting worthless crap, and giving my thread a thumbs-down, fine. The amount of time you commit to degrading our discussion is a sad commentary on your life, but that's your call. But at least stop pretending to be different people (remember when you invented "Go Cubs!", a woman??)--the whole charade really adds to your creepiness. Every time I see you've created another name I expect your comment to be something like "it puts the lotion in the basket!"
(see http://www.youtube.com/watch?v=HrwDFgEeFCE )
Besides this, you're also a moron. I appreciate the fact that you've backed off of me ever since posting that you wanted to come find me under your "KILL LAWYERS" alias--very civil of you. Now you say "we needed" Lee Harvey Oswald (an assassin) to take care of our President. I hope you get a visit from the Secret Service--partly because it would teach you a lesson, and partly because I'm starting to believe it may actually be necessary.
If you think I'm joking, I'm not. Title 18 of the US Code, section 871 criminalizes threats on our President, and the definition of "threat" is extremely broad--as you might expect, our Secret Service doesn't take comments like yours lightly. In 1996 the Secret Service detained a Reverend under this law who merely said "God will hold you to account, Mr. President" after Bill Clinton vetoed the partial-birth abortion bill. In my opinion, your comment that we "need" Lee Harvey Oswald is much more serious of a threat.
http://usgovinfo.about.com/library/weekly/aa040398.htm
Leave this thread and do not come back.
The article Realtyexec just posted is one of the best I've read on this subject in a long time. Here are a few excerpts:
--"There are 129 million housing units in the United States, comprising owner-occupied, rented, and vacant units. Of these, 18.5 million are empty. This vacancy rate is 2.5 percentage points higher than it has been at any point in the half century the data have been tracked, translating into at least 3 million too many empty housing units in the country. This number, moreover, is rising. This is the most intractable part of the real estate bubble, for we cannot find a true bottom to home prices until this inventory of empty units starts to clear, and we cannot find a bottom to the mortgage finance market until home prices bottom out."
--"The worst type of inventory is an empty house, which people in the industry like to say has about the same half-life as a head of cabbage. As the former chairman of the Neighborhood Investment Corporation, I've seen the damage done to neighborhoods by vacant homes. They are never maintained adequately, depress surrounding property values, and can quickly become temporary retail space for drug lords and a playground for juvenile delinquents. They are also the homes whose owner has the least incentive, and usually the least ability, to service the mortgage or pay the property taxes. So whittling down the inventory of empty houses should be the first economic, social, financial, and political objective."
--"Congressmen don't want to appear to be helping speculators, liars, or cheats. The trouble is, a good part of the problem was caused by people who might be considered speculators, liars, and cheats. Speculators by definition bought vacant properties in the hope of "flipping" them for a higher price. A vacant home is therefore a good sign of speculative activity. "
--"Markets correct huge inventory overhangs and declines in demand due to the scarcity of credit by lowering prices. Home prices are correcting, though more slowly than the credit market shrank. Prices are down over 14 percent in aggregate since their peak in 2006--having adjusted in a year and a half as much as liquid markets might in a month. The pace of decline, about a 30 percent annual rate in recent months, is still accelerating. The California Association of Realtors reports that the median price fell that much in just the last year. Futures markets are predicting that home prices will fall over 30 percent in aggregate on a national basis, with 70 percent of the drop happening by year's end. I personally think the decline will be less, but just as 2007 was the year that mortgage credit dried up, 2008 will be the year that home prices plummet....Just a 20 percent decline in home prices would place a quarter of mortgages under water."
--"The housing market crash is far from over, and its ramifications will be with us for some time. The combination of excessively easy credit, a rapid run up in prices, and overbuilding set the stage for the current mess. Prices must fall to correct oversupply, and that, in turn, will further adversely affect both consumer confidence and financial solvency. The unique nature of the problem makes a precise ending hard to predict. But it seems likely that some combination of speculative buying, inflation, and purchases by both foreigners and government entities will correct the situation. Now is not the time for ideology, of either the left-wing variety (soak the rich, punish speculators, and conduct a witch hunt through the financial community) or the right-wing variety (stave off government involvement of any form). Pragmatism is a conservative virtue. It is time for everyone to start practicing it."
--"There are 129 million housing units in the United States, comprising owner-occupied, rented, and vacant units. Of these, 18.5 million are empty. This vacancy rate is 2.5 percentage points higher than it has been at any point in the half century the data have been tracked, translating into at least 3 million too many empty housing units in the country. This number, moreover, is rising. This is the most intractable part of the real estate bubble, for we cannot find a true bottom to home prices until this inventory of empty units starts to clear, and we cannot find a bottom to the mortgage finance market until home prices bottom out."
--"The worst type of inventory is an empty house, which people in the industry like to say has about the same half-life as a head of cabbage. As the former chairman of the Neighborhood Investment Corporation, I've seen the damage done to neighborhoods by vacant homes. They are never maintained adequately, depress surrounding property values, and can quickly become temporary retail space for drug lords and a playground for juvenile delinquents. They are also the homes whose owner has the least incentive, and usually the least ability, to service the mortgage or pay the property taxes. So whittling down the inventory of empty houses should be the first economic, social, financial, and political objective."
--"Congressmen don't want to appear to be helping speculators, liars, or cheats. The trouble is, a good part of the problem was caused by people who might be considered speculators, liars, and cheats. Speculators by definition bought vacant properties in the hope of "flipping" them for a higher price. A vacant home is therefore a good sign of speculative activity. "
--"Markets correct huge inventory overhangs and declines in demand due to the scarcity of credit by lowering prices. Home prices are correcting, though more slowly than the credit market shrank. Prices are down over 14 percent in aggregate since their peak in 2006--having adjusted in a year and a half as much as liquid markets might in a month. The pace of decline, about a 30 percent annual rate in recent months, is still accelerating. The California Association of Realtors reports that the median price fell that much in just the last year. Futures markets are predicting that home prices will fall over 30 percent in aggregate on a national basis, with 70 percent of the drop happening by year's end. I personally think the decline will be less, but just as 2007 was the year that mortgage credit dried up, 2008 will be the year that home prices plummet....Just a 20 percent decline in home prices would place a quarter of mortgages under water."
--"The housing market crash is far from over, and its ramifications will be with us for some time. The combination of excessively easy credit, a rapid run up in prices, and overbuilding set the stage for the current mess. Prices must fall to correct oversupply, and that, in turn, will further adversely affect both consumer confidence and financial solvency. The unique nature of the problem makes a precise ending hard to predict. But it seems likely that some combination of speculative buying, inflation, and purchases by both foreigners and government entities will correct the situation. Now is not the time for ideology, of either the left-wing variety (soak the rich, punish speculators, and conduct a witch hunt through the financial community) or the right-wing variety (stave off government involvement of any form). Pragmatism is a conservative virtue. It is time for everyone to start practicing it."
If by "tossing in some red meat" and "fanning the flames" you mean "posting an article I found on the AP wire," then yes, I am a full-fledged rabble-rousing demagogue. Funny how Joep posts a reply, "Nomorehaterz" appears from thin-air, and the post gets four thumbs-downs in ten minutes.
And yes, I have made up my mind--which I made pretty clear about 600 replies ago. And yes, I hope the market continues to tank, deflating the bubble, and returning prices to historically-sane levels, at which time I will eagerly jump in--not because homes are a great investment (they aren't), but because I am anxious to own a home as soon as I can do so without blowing my savings.
And yes, I have made up my mind--which I made pretty clear about 600 replies ago. And yes, I hope the market continues to tank, deflating the bubble, and returning prices to historically-sane levels, at which time I will eagerly jump in--not because homes are a great investment (they aren't), but because I am anxious to own a home as soon as I can do so without blowing my savings.
The first sentence in Manny's article sums it up nicely: "More than one million homes are now in foreclosure, the highest rate ever recorded, according to a trade group which warned Thursday that number will continue to climb."
The impact of price declines on individuals' net worth:
http://money.cnn.com/2008/06/05/news/economy/fundflows/index.htm
"Americans saw their net worth decline by $1.7 trillion in the first quarter - the biggest drop since 2002 - as declines in home values and the stock market ravaged their holdings.
Meanwhile, the amount of equity people have in their homes fell to 46.2%, the lowest level on record..."
The impact of price declines on individuals' net worth:
http://money.cnn.com/2008/06/05/news/economy/fundflows/index.htm
"Americans saw their net worth decline by $1.7 trillion in the first quarter - the biggest drop since 2002 - as declines in home values and the stock market ravaged their holdings.
Meanwhile, the amount of equity people have in their homes fell to 46.2%, the lowest level on record..."
Home foreclosures set (another new) record in first quarter
WASHINGTON (AP) -- Home foreclosures and late payments set records over the first three months of the year and are expected to keep rising, stark signs of the housing crisis' mounting damage to homeowners and the economy.
The latest snapshot of the mortgage market, released Thursday, showed that the proportion of mortgages that fell into foreclosure soared to 0.99 percent in the January-through-March period. That surpassed the previous high of 0.83 percent over the last three months in 2007.
The report by the Mortgage Bankers Association also found that more homeowners slipped behind on their monthly payments.
The delinquency rate jumped to 6.35 percent in the first quarter, compared with 5.82 percent for the three months earlier. Payments are considered delinquent if they are 30 or more days past due.
Both the rate of new foreclosures and late payments were the highest on record going back to 1979.
Jay Brinkmann, the association's vice president of research and economics, told The Associated Press that the slump in house prices was the biggest factor for rising foreclosures and late payments.
With prices expected to keep dropping, foreclosures and late payments "are going to continue to go up" in the months ahead, he said.
Homeowners with tarnished credit who have subprime adjustable-rate loans took the hardest hits. Foreclosures and late payments for these borrowers also swelled to all-time highs in the first quarter.
The percentage of subprime adjustable-rate mortgages that started the foreclosure process climbed to 6.35 percent. The rate was 5.29 percent in fourth quarter, the previous high. Late payments rose to 22.07 percent from 20.02 percent, the previous high.
The association's survey covers just over 45 million home loans.
More problems also cropped up with loans to more creditworthy borrowers.
The percentage of such loans falling into foreclosure was 0.54 percent, compared with 0.41 percent at the end of last year. Late payment rose to 3.71 percent, compared with 3.24 percent.
The numbers were higher for prime borrowers with adjustable rate mortgages. The proportion of those loans falling into foreclosures jumped to 1.55 percent from 1.06 percent. The delinquency rate rose to 6.78 percent, compared with 5.51 percent.
"The number one problem is the drop in home prices," Brinkmann said. Declining prices, especially in newer built areas, "are hurting people's ability to recover when they run into trouble -- a divorce or loss of job," he said. "In other days, you could sell the home. But because home prices have fallen so much, in many of those cases, the homes are going into foreclosure."
California, Florida, Nevada and Arizona accounted for 89 percent of the total increase in new home foreclosures, he said. Those are places where prices have fallen sharply and there was a lot of home building, creating too much supply, Brinkmann said.
After a five-year boom, the housing market fell into a deep slump two years ago. That dragged down sales, and prices with it. As the value of homes plummeted, many newer homeowners found themselves owing more on their mortgages than their homes were worth.
Homeowners with adjustable-rate mortgages were clobbered when their initially low rates reset to much higher ones. That made it difficult, if not impossible, to keep up with monthly mortgage payments.
As foreclosures and late payments climbed, financial companies took multibillion losses when their investments in mortgage-backed securities soured. A credit crisis erupted and spread, crimping other types of financing. The fallout plunged Wall Street in turmoil, disrupting the normal functioning of markets.
All those troubles have pushed the economy to the brink of a recession, if the country isn't already in one. Consumers and business have tightened their spending. Employers have cut more than a quarter-million jobs in the first four months of this year.
To bolster the economy, the Federal Reserve made aggressive interest rate cuts. That has helped homeowners facing rate resets on their adjustable-rate mortgages. But with inflation on the rise, Fed Chairman Ben Bernanke this week sent his strongest signal yet that the central bank's rate-cutting campaign started that started in September is coming to an end.
The Bush administration has taken steps to help distressed homeowners. It has urged lenders to freeze rates for some homeowners and encouraged lenders to rework mortgage terms so troubled borrowers can stay in their homes.
A congressional plan that includes a foreclosure prevention program has stalled as lawmakers figure out how to pay for it.
The government would back as much as $300 billion in new loans to help certain borrowers refinance into cheaper, fixed-rate loans. Mortgage holders would have to agree
WASHINGTON (AP) -- Home foreclosures and late payments set records over the first three months of the year and are expected to keep rising, stark signs of the housing crisis' mounting damage to homeowners and the economy.
The latest snapshot of the mortgage market, released Thursday, showed that the proportion of mortgages that fell into foreclosure soared to 0.99 percent in the January-through-March period. That surpassed the previous high of 0.83 percent over the last three months in 2007.
The report by the Mortgage Bankers Association also found that more homeowners slipped behind on their monthly payments.
The delinquency rate jumped to 6.35 percent in the first quarter, compared with 5.82 percent for the three months earlier. Payments are considered delinquent if they are 30 or more days past due.
Both the rate of new foreclosures and late payments were the highest on record going back to 1979.
Jay Brinkmann, the association's vice president of research and economics, told The Associated Press that the slump in house prices was the biggest factor for rising foreclosures and late payments.
With prices expected to keep dropping, foreclosures and late payments "are going to continue to go up" in the months ahead, he said.
Homeowners with tarnished credit who have subprime adjustable-rate loans took the hardest hits. Foreclosures and late payments for these borrowers also swelled to all-time highs in the first quarter.
The percentage of subprime adjustable-rate mortgages that started the foreclosure process climbed to 6.35 percent. The rate was 5.29 percent in fourth quarter, the previous high. Late payments rose to 22.07 percent from 20.02 percent, the previous high.
The association's survey covers just over 45 million home loans.
More problems also cropped up with loans to more creditworthy borrowers.
The percentage of such loans falling into foreclosure was 0.54 percent, compared with 0.41 percent at the end of last year. Late payment rose to 3.71 percent, compared with 3.24 percent.
The numbers were higher for prime borrowers with adjustable rate mortgages. The proportion of those loans falling into foreclosures jumped to 1.55 percent from 1.06 percent. The delinquency rate rose to 6.78 percent, compared with 5.51 percent.
"The number one problem is the drop in home prices," Brinkmann said. Declining prices, especially in newer built areas, "are hurting people's ability to recover when they run into trouble -- a divorce or loss of job," he said. "In other days, you could sell the home. But because home prices have fallen so much, in many of those cases, the homes are going into foreclosure."
California, Florida, Nevada and Arizona accounted for 89 percent of the total increase in new home foreclosures, he said. Those are places where prices have fallen sharply and there was a lot of home building, creating too much supply, Brinkmann said.
After a five-year boom, the housing market fell into a deep slump two years ago. That dragged down sales, and prices with it. As the value of homes plummeted, many newer homeowners found themselves owing more on their mortgages than their homes were worth.
Homeowners with adjustable-rate mortgages were clobbered when their initially low rates reset to much higher ones. That made it difficult, if not impossible, to keep up with monthly mortgage payments.
As foreclosures and late payments climbed, financial companies took multibillion losses when their investments in mortgage-backed securities soured. A credit crisis erupted and spread, crimping other types of financing. The fallout plunged Wall Street in turmoil, disrupting the normal functioning of markets.
All those troubles have pushed the economy to the brink of a recession, if the country isn't already in one. Consumers and business have tightened their spending. Employers have cut more than a quarter-million jobs in the first four months of this year.
To bolster the economy, the Federal Reserve made aggressive interest rate cuts. That has helped homeowners facing rate resets on their adjustable-rate mortgages. But with inflation on the rise, Fed Chairman Ben Bernanke this week sent his strongest signal yet that the central bank's rate-cutting campaign started that started in September is coming to an end.
The Bush administration has taken steps to help distressed homeowners. It has urged lenders to freeze rates for some homeowners and encouraged lenders to rework mortgage terms so troubled borrowers can stay in their homes.
A congressional plan that includes a foreclosure prevention program has stalled as lawmakers figure out how to pay for it.
The government would back as much as $300 billion in new loans to help certain borrowers refinance into cheaper, fixed-rate loans. Mortgage holders would have to agree
Dave, I'm not sure I understand. Suppose a small town consists of four homes, average price $100k. Then a neighbor moves in and builds a significantly nicer and larger home, valued at $600,000. Suddenly, the town's average price has risen from $100,000 to $200,000--a doubling of the average price! But surely no one would argue that the town's housing prices have doubled; rather, someone simply built a house nicer than the rest.
This example obviously oversimplifies things, but it captures the basic point. In any city, new construction is generally more valuable than "old" construction, so when new buildings go up, the area's average for-sale prices may be higher--but surely this doesn't mean that the value of those homes is rising.
Despite the town's now-higher price, the owners of the $100,000 homes still own $100,000 homes (not $200,000), whatever the new neighbor may have built.
This example obviously oversimplifies things, but it captures the basic point. In any city, new construction is generally more valuable than "old" construction, so when new buildings go up, the area's average for-sale prices may be higher--but surely this doesn't mean that the value of those homes is rising.
Despite the town's now-higher price, the owners of the $100,000 homes still own $100,000 homes (not $200,000), whatever the new neighbor may have built.
Here is a Washington Post writer's blog re the DOJ/NAR settlement NonRealtor just referenced. I suggested in a different thread that Realtors may be violating state and federal antitrust laws if they refuse to deal with a buyer who chooses not to go with a fellow Realtor, and I was sharply criticized by Realtors and received about 10 thumbs-downs! This is only a slightly different issue, as both deal with the NAR's attempt to limit its own competition, which is anti-competitive and illegal.
Text:
Jason Kincaid
TechCrunch.com
Tuesday, May 27, 2008; 8:09 PM
The National Association of Realtors has settled its antitrust case with the Department of Justice, and has given online realtors full access to the industry-standard Multiple Listing Service (MLS) Databases. The MLS is a comprehensive listing of homes that are are available on the housing market, and until this point the NAR has restricted access to online brokers.
These online brokers have been offering fees that are significantly lower than traditional realtor rates, and rather than adapt as an industry, the NAR choose a more childish route and withheld the essential data. The Department of Justice took issue with this stance, and filed suit in September 2005.
The deal is especially important for disruptive online-only companies like Redfin, which rely on being able to access current home listings. If the case had gone the other way, Redfin CEO Glenn Kelman says that the company would have died a "slow, grisly death" ( SeattlePI). Redfin aims to make the home-buying process more efficient, while saving consumers money in the process (it has been able to save the average home buyer $10,000, which doesn't sit well with most traditional realtors).
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Unfortunately, the settlement isn't a complete victory for online sites, which will be subject to restrictions on the comments users can leave on each home. If a home-seller asks that a comment be taken down, websites are obligated to comply (consequently, you probably won't be seeing many negative reviews). Instant customer feedback is one of the most valuable assets of online retailers - to deny consumers access to such information is both annoying and foolhardy on the NAR's part. The NAR should be supporting traditional brokers by emphasizing personal interaction and service, not by handicapping the competition.
Text:
Jason Kincaid
TechCrunch.com
Tuesday, May 27, 2008; 8:09 PM
The National Association of Realtors has settled its antitrust case with the Department of Justice, and has given online realtors full access to the industry-standard Multiple Listing Service (MLS) Databases. The MLS is a comprehensive listing of homes that are are available on the housing market, and until this point the NAR has restricted access to online brokers.
These online brokers have been offering fees that are significantly lower than traditional realtor rates, and rather than adapt as an industry, the NAR choose a more childish route and withheld the essential data. The Department of Justice took issue with this stance, and filed suit in September 2005.
The deal is especially important for disruptive online-only companies like Redfin, which rely on being able to access current home listings. If the case had gone the other way, Redfin CEO Glenn Kelman says that the company would have died a "slow, grisly death" ( SeattlePI). Redfin aims to make the home-buying process more efficient, while saving consumers money in the process (it has been able to save the average home buyer $10,000, which doesn't sit well with most traditional realtors).
ad_icon
Unfortunately, the settlement isn't a complete victory for online sites, which will be subject to restrictions on the comments users can leave on each home. If a home-seller asks that a comment be taken down, websites are obligated to comply (consequently, you probably won't be seeing many negative reviews). Instant customer feedback is one of the most valuable assets of online retailers - to deny consumers access to such information is both annoying and foolhardy on the NAR's part. The NAR should be supporting traditional brokers by emphasizing personal interaction and service, not by handicapping the competition.
The flyer link Zach posted is just incredible. If I am lucky, I expect to find my shoes or shirts on sale "buy one, get one free." I never thought I'd see California homes selling the same way! I really feel for the California families affected by that situation.
Here is an article summarizing some recent data which shed light on the widespread nature of price losses (as opposed to Case-Schiller, which focuses only on large metro areas). The data show 262/330 American housing markets--including 84% of American homes and 89% of home wealth--are experiencing price declines right now. Or, put a more positive way, 16% of homes have not fallen in value during the current downturn. The comprehensive nature of this data makes it valuable in considering the "real estate is local" mantra, which of course is mostly true but says nothing of the widespread nature of our current housing problems.
[WALTHAM, Mass., June 2 /PRNewswire/ -- Global Insight, the world’s leading company for economic and financial analysis and forecasting, today released the first quarter 2008 update of the U.S. housing valuation analysis, House Prices in America, showing that single-family home prices fell for the third straight period, dropping at a steep 6.7 % annualized rate. Nationwide, 262 housing markets out of 330 in the study -- the overwhelming majority of the nation’s housing markets -- experienced declines, accounting for 84% of all housing units and 89% of real estate value.
California, Florida and Michigan accounted for the steepest losses and contained 45 of the 50 worst performing metropolitan areas for this period. California and Florida had been among the most overvalued states for the past several years and Michigan is reeling from the impact of a slumping economy. Other housing markets in the bottom 50 include Las Vegas and Reno, Nevada and Bend, Oregon, areas cited in earlier House Price studies as being precariously overvalued and likely to be the next "shoe to drop."
House prices are being pushed down across the nation by fewer high-priced home sales and an abundance of foreclosed properties being sold at discount. Contributing to the downward pressure are significantly tighter credit standards which are reducing the amount of borrowing available for home purchases.
In the first quarter 2008, only eight housing markets -- down from a peak of 53 in 2006 -- were determined to be overvalued, representing only 1% of the U.S. single family housing stock and 2% of total real estate value, down from 32% and 16%, respectively, from 2006. Areas of the Pacific Northwest, including Bend, Oregon and Longview, Washington, continued to be among the most overvalued. However, other areas once extremely overvalued -- the Northeast and coastal California and Florida -- are now rated as fairly valued.
Additionally, a number of widely dispersed and mostly smaller markets throughout the country that had seen less price fluctuation during the boom years experienced price resilience. The top nine housing markets registering price increases this period all had populations less than 300,000 and were as varied as Ithaca, New York; Billings, Montana; Houma, Louisiana; and Odessa, Texas.
James Diffley, group managing director of Global Insight’s Regional Services Group, said, "The large price adjustments we have seen are precisely what was required before we could begin to talk of recovery."
Jeannine Cataldi, senior economist and manager of Global Insight’s Regional Real Estate Service, added that, "The housing market will take some time to recover as consumers are constrained not only by tighter credit standards, but rising costs in other areas of the economy. There is also excess supply that needs to be absorbed, plus the rate of foreclosures entering the market needs to slow before housing can begin to pull out of its current downward trend."
The House Prices in America study, a joint effort by Global Insight and National City Corporation, examines the top 330 U.S. real estate markets, representing 78% of all existing housing units and 93% of all related real estate value, to determine what home prices should be, accounting for differences in population density, relative income levels, interest rates, and historically observed market premiums or discounts. Markets with valuation premiums above 35% were deemed at risk for price corrections based on the typical degree of overvaluation that preceded the 79 known local market price declines observed since 1985.
House Prices in America combines a statistical model originally developed at National City Corporation http://(www.nationalcity.com/housevaluation) with data largely developed at Global Insight. More information on Global Insight’s housing valuation analysis is available at http:// http://www.globalinsight.com/housingvaluation.]
Here is an article summarizing some recent data which shed light on the widespread nature of price losses (as opposed to Case-Schiller, which focuses only on large metro areas). The data show 262/330 American housing markets--including 84% of American homes and 89% of home wealth--are experiencing price declines right now. Or, put a more positive way, 16% of homes have not fallen in value during the current downturn. The comprehensive nature of this data makes it valuable in considering the "real estate is local" mantra, which of course is mostly true but says nothing of the widespread nature of our current housing problems.
[WALTHAM, Mass., June 2 /PRNewswire/ -- Global Insight, the world’s leading company for economic and financial analysis and forecasting, today released the first quarter 2008 update of the U.S. housing valuation analysis, House Prices in America, showing that single-family home prices fell for the third straight period, dropping at a steep 6.7 % annualized rate. Nationwide, 262 housing markets out of 330 in the study -- the overwhelming majority of the nation’s housing markets -- experienced declines, accounting for 84% of all housing units and 89% of real estate value.
California, Florida and Michigan accounted for the steepest losses and contained 45 of the 50 worst performing metropolitan areas for this period. California and Florida had been among the most overvalued states for the past several years and Michigan is reeling from the impact of a slumping economy. Other housing markets in the bottom 50 include Las Vegas and Reno, Nevada and Bend, Oregon, areas cited in earlier House Price studies as being precariously overvalued and likely to be the next "shoe to drop."
House prices are being pushed down across the nation by fewer high-priced home sales and an abundance of foreclosed properties being sold at discount. Contributing to the downward pressure are significantly tighter credit standards which are reducing the amount of borrowing available for home purchases.
In the first quarter 2008, only eight housing markets -- down from a peak of 53 in 2006 -- were determined to be overvalued, representing only 1% of the U.S. single family housing stock and 2% of total real estate value, down from 32% and 16%, respectively, from 2006. Areas of the Pacific Northwest, including Bend, Oregon and Longview, Washington, continued to be among the most overvalued. However, other areas once extremely overvalued -- the Northeast and coastal California and Florida -- are now rated as fairly valued.
Additionally, a number of widely dispersed and mostly smaller markets throughout the country that had seen less price fluctuation during the boom years experienced price resilience. The top nine housing markets registering price increases this period all had populations less than 300,000 and were as varied as Ithaca, New York; Billings, Montana; Houma, Louisiana; and Odessa, Texas.
James Diffley, group managing director of Global Insight’s Regional Services Group, said, "The large price adjustments we have seen are precisely what was required before we could begin to talk of recovery."
Jeannine Cataldi, senior economist and manager of Global Insight’s Regional Real Estate Service, added that, "The housing market will take some time to recover as consumers are constrained not only by tighter credit standards, but rising costs in other areas of the economy. There is also excess supply that needs to be absorbed, plus the rate of foreclosures entering the market needs to slow before housing can begin to pull out of its current downward trend."
The House Prices in America study, a joint effort by Global Insight and National City Corporation, examines the top 330 U.S. real estate markets, representing 78% of all existing housing units and 93% of all related real estate value, to determine what home prices should be, accounting for differences in population density, relative income levels, interest rates, and historically observed market premiums or discounts. Markets with valuation premiums above 35% were deemed at risk for price corrections based on the typical degree of overvaluation that preceded the 79 known local market price declines observed since 1985.
House Prices in America combines a statistical model originally developed at National City Corporation http://(www.nationalcity.com/housevaluation) with data largely developed at Global Insight. More information on Global Insight’s housing valuation analysis is available at http:// http://www.globalinsight.com/housingvaluation.]
Greg, FYI: I accidentally picked one of J R's responses as the "Best Answer." I have no idea how it happened and can't figure out if / how I can undo it. Just didn't want you to go searching through 21 pages of responses in order to find it. : )
I wouldn't take the thumbs-down too personally. A handful of people have followed this thread from the beginning, and it can be frustrating when someone chimes in for the first time (after 1000+ responses) to say "interest rates are at an all-time low" and "real estate is always a good long term investment" or something along these lines--statements which are not only false but, as one may imagine, have been pretty well covered by the first 1,045 posts. It's particularly frustrating when such statements are made baldly without any reasoning or factual support.
As an example, Jed, who sells real estate in California, just said:
"While Ryan and his tribe are renting and paying taxes and hopefully enjoying their lives here in 21st century America there are thousands of others that have bought houses, are paying their reduced taxes and hopefully enjoying their lives in 21st century America. In 5, 10, 15, years I hope they are all happy with their decisions. I have a feeling, no I believe strongly, that the people that bought will be better off. "
Jed cites no data in this assessment, instead relying on his "feeling" or the fact that he "believe[s] strongly" in his conclusion. The fact is that the median California home price has fallen more than 30% in the past year *according to the California Association of Realtors*. In Sacramento, the *average* home owner has lost more than $100,000 of equity in ONE YEAR, and prices are still falling. When these home owners compare notes to their renter counterparts in 5, 10, and 15 years, I have a "feeling" you'll find the renters won't be regretting their decisions.
http://www.bizjournals.com/sacramento/stories/2008/05/19/dai…
I wouldn't take the thumbs-down too personally. A handful of people have followed this thread from the beginning, and it can be frustrating when someone chimes in for the first time (after 1000+ responses) to say "interest rates are at an all-time low" and "real estate is always a good long term investment" or something along these lines--statements which are not only false but, as one may imagine, have been pretty well covered by the first 1,045 posts. It's particularly frustrating when such statements are made baldly without any reasoning or factual support.
As an example, Jed, who sells real estate in California, just said:
"While Ryan and his tribe are renting and paying taxes and hopefully enjoying their lives here in 21st century America there are thousands of others that have bought houses, are paying their reduced taxes and hopefully enjoying their lives in 21st century America. In 5, 10, 15, years I hope they are all happy with their decisions. I have a feeling, no I believe strongly, that the people that bought will be better off. "
Jed cites no data in this assessment, instead relying on his "feeling" or the fact that he "believe[s] strongly" in his conclusion. The fact is that the median California home price has fallen more than 30% in the past year *according to the California Association of Realtors*. In Sacramento, the *average* home owner has lost more than $100,000 of equity in ONE YEAR, and prices are still falling. When these home owners compare notes to their renter counterparts in 5, 10, and 15 years, I have a "feeling" you'll find the renters won't be regretting their decisions.
http://www.bizjournals.com/sacramento/stories/2008/05/19/dai…
Consumer Confidence (Way) Down. Question: does this news independently shape the economy in some way, or is it merely reflective of other news? A twist on the "chicken or the egg" question.
May 30 (Bloomberg) -- Confidence among U.S. consumers fell in May to the lowest level in 28 years, pointing to slower spending as gasoline prices reach record levels and job losses mount.
The Reuters/University of Michigan final index of consumer sentiment decreased to 59.8, the weakest reading since June 1980, from 62.6 in April. The measure averaged 85.6 in 2007.
Consumer spending that makes up two-thirds of the economy is cooling as record fuel costs and a weakening job market undermine household buying power. Declining home prices and tighter credit are weighing further on growth, pushing the economy to the brink of a recession.
``The consumer is under siege,'' Russell Price, senior economist at H&R Block Financial Advisors in Detroit, said before the report. ``Home values are dropping, the job market is shaky, food prices are higher and soaring gasoline prices are a constant reminder of their financial burdens.''
The confidence index was forecast to fall to 59.5, according to the median of 57 economists surveyed by Bloomberg News. Estimates ranged from 50 to 63. The preliminary survey, released May 16, came in at 59.5.
Earlier today, the Commerce Department in Washington reported that consumer spending rose 0.2 percent in April after a 0.4 percent increase in March. Incomes grew 0.2 percent, bolstered in part by the government's tax rebates, and the Federal Reserve's preferred measure of inflation moderated, the report showed.
May 30 (Bloomberg) -- Confidence among U.S. consumers fell in May to the lowest level in 28 years, pointing to slower spending as gasoline prices reach record levels and job losses mount.
The Reuters/University of Michigan final index of consumer sentiment decreased to 59.8, the weakest reading since June 1980, from 62.6 in April. The measure averaged 85.6 in 2007.
Consumer spending that makes up two-thirds of the economy is cooling as record fuel costs and a weakening job market undermine household buying power. Declining home prices and tighter credit are weighing further on growth, pushing the economy to the brink of a recession.
``The consumer is under siege,'' Russell Price, senior economist at H&R Block Financial Advisors in Detroit, said before the report. ``Home values are dropping, the job market is shaky, food prices are higher and soaring gasoline prices are a constant reminder of their financial burdens.''
The confidence index was forecast to fall to 59.5, according to the median of 57 economists surveyed by Bloomberg News. Estimates ranged from 50 to 63. The preliminary survey, released May 16, came in at 59.5.
Earlier today, the Commerce Department in Washington reported that consumer spending rose 0.2 percent in April after a 0.4 percent increase in March. Incomes grew 0.2 percent, bolstered in part by the government's tax rebates, and the Federal Reserve's preferred measure of inflation moderated, the report showed.
Latest Case-Schiller data paints bleak picture. Anyone who can look at the graph on page 1 and say "it's a great time to buy" should check themselves into an insane asylum--or is lying to you.
Report highlights (besides the graph, which pretty much tells you all you need to know):
--home prices in the first quarter of 2008 fell at the steepest rate in the index's 20-year history. (Some have stated that "real estate is cyclical" and have compared this decline to the 1990-91 housing recession. In fact, over those years the largest annualized decline in prices was -2.8%, compared to -14.1% for the first quarter of 2008.)
--"The steep downturn in residential real estate continues. There are very few silver linings that one can see in the data."
--"Looking closely at these returns, you can see that 15 of the metro areas are also recording record lows, and eleven are in double-digit decline, with Chicago being the latest metro area to join these ranks."
Report highlights (besides the graph, which pretty much tells you all you need to know):
--home prices in the first quarter of 2008 fell at the steepest rate in the index's 20-year history. (Some have stated that "real estate is cyclical" and have compared this decline to the 1990-91 housing recession. In fact, over those years the largest annualized decline in prices was -2.8%, compared to -14.1% for the first quarter of 2008.)
--"The steep downturn in residential real estate continues. There are very few silver linings that one can see in the data."
--"Looking closely at these returns, you can see that 15 of the metro areas are also recording record lows, and eleven are in double-digit decline, with Chicago being the latest metro area to join these ranks."
Pretty thorough market update, incorporating some new projections and recent data:
http://biz.yahoo.com/ap/080526/housing_prospects.html
http://biz.yahoo.com/ap/080526/housing_prospects.html
It's been a very tame week for this thread, yet we've still had 11 thumbs-down in the past week. I think our old friend(s) Rob Banks/Go Cubs/etc. have shown restraint in their posts, but tried to slowly reappear with the thumbs-down. If any moderator can check to make sure this virus isn't manipulating the system again, it would be much-appreciated.
Great question, Carl. For those who have the time and interest, here is a fascinating article I recently read in March's issue of Atlantic Monthly:
http://www.theatlantic.com/doc/200803/subprime
The article is entitled "The Next Slum?" and argues that with rising energy prices and an overbuilt suburbia, there will soon be a mass "reverse exodus" from the suburbs to the cities--for those who can afford it. "The Next Slum" won't be a blighted urban area, but the suburbia once known for its picket fences.
Favorite excerpts:
"The subprime crisis is just the tip of the iceberg. Fundamental changes in American life may turn today’s McMansions into tomorrow’s tenements."
"At Windy Ridge, a recently built starter-home development seven miles northwest of Charlotte, North Carolina, 81 of the community’s 132 small, vinyl-sided houses were in foreclosure as of late last year. Vandals have kicked in doors and stripped the copper wire from vacant houses; drug users and homeless people have furtively moved in. In December, after a stray bullet blasted through her son’s bedroom and into her own, Laurie Talbot, who’d moved to Windy Ridge from New York in 2005, told The Charlotte Observer, “I thought I’d bought a home in Pleasantville. I never imagined in my wildest dreams that stuff like this would happen.”
"For 60 years, Americans have pushed steadily into the suburbs, transforming the landscape and (until recently) leaving cities behind. But today the pendulum is swinging back toward urban living, and there are many reasons to believe this swing will continue. As it does, many low-density suburbs and McMansion subdivisions, including some that are lovely and affluent today, may become what inner cities became in the 1960s and ’70s—slums characterized by poverty, crime, and decay."
http://www.theatlantic.com/doc/200803/subprime
The article is entitled "The Next Slum?" and argues that with rising energy prices and an overbuilt suburbia, there will soon be a mass "reverse exodus" from the suburbs to the cities--for those who can afford it. "The Next Slum" won't be a blighted urban area, but the suburbia once known for its picket fences.
Favorite excerpts:
"The subprime crisis is just the tip of the iceberg. Fundamental changes in American life may turn today’s McMansions into tomorrow’s tenements."
"At Windy Ridge, a recently built starter-home development seven miles northwest of Charlotte, North Carolina, 81 of the community’s 132 small, vinyl-sided houses were in foreclosure as of late last year. Vandals have kicked in doors and stripped the copper wire from vacant houses; drug users and homeless people have furtively moved in. In December, after a stray bullet blasted through her son’s bedroom and into her own, Laurie Talbot, who’d moved to Windy Ridge from New York in 2005, told The Charlotte Observer, “I thought I’d bought a home in Pleasantville. I never imagined in my wildest dreams that stuff like this would happen.”
"For 60 years, Americans have pushed steadily into the suburbs, transforming the landscape and (until recently) leaving cities behind. But today the pendulum is swinging back toward urban living, and there are many reasons to believe this swing will continue. As it does, many low-density suburbs and McMansion subdivisions, including some that are lovely and affluent today, may become what inner cities became in the 1960s and ’70s—slums characterized by poverty, crime, and decay."
1000!
Steep drop in mortgage applications:
http://money.cnn.com/2008/05/21/real_estate/bc.apfn.mortgage…
Article highlights:
--mortgage applications fell 7.8% from previous week
--"Mortgage application volume falls to one-third of where it was during the height of the housing boom in May, 2003."
Steep drop in mortgage applications:
http://money.cnn.com/2008/05/21/real_estate/bc.apfn.mortgage…
Article highlights:
--mortgage applications fell 7.8% from previous week
--"Mortgage application volume falls to one-third of where it was during the height of the housing boom in May, 2003."
House prices post (another) record decline according to OFHEO data:
http://money.cnn.com/2008/05/22/real_estate/ofheo_report/?po…
Article highlights:
--"Home prices fell 3.1% from the first quarter of 2007, the largest decline in the purchase-only index, which excludes refinancings, since the agency began keeping records 17 years ago."
--"It's not going to be the largest decline on record for long," said Peter Schiff, president and chief global strategist at Euro Pacific Capital."Prices are going to keep falling until we get to the equilibrium, which is much, much lower. This is only the beginning."
--"The nominal price declines aren't as spectacular as they would be if we didn't have so much inflation," Schiff said. "Houses are becoming a less valuable asset relative to the cost of living."
Even worse, these statistics may seriously understate the decline, because "The government index focuses on less expensive properties and includes fewer houses bought with risky home loans that have gone sour over the past year." (source: AP)
http://money.cnn.com/2008/05/22/real_estate/ofheo_report/?po…
Article highlights:
--"Home prices fell 3.1% from the first quarter of 2007, the largest decline in the purchase-only index, which excludes refinancings, since the agency began keeping records 17 years ago."
--"It's not going to be the largest decline on record for long," said Peter Schiff, president and chief global strategist at Euro Pacific Capital."Prices are going to keep falling until we get to the equilibrium, which is much, much lower. This is only the beginning."
--"The nominal price declines aren't as spectacular as they would be if we didn't have so much inflation," Schiff said. "Houses are becoming a less valuable asset relative to the cost of living."
Even worse, these statistics may seriously understate the decline, because "The government index focuses on less expensive properties and includes fewer houses bought with risky home loans that have gone sour over the past year." (source: AP)
NYU's Economics Chair predicts a further 10-15% national home price decrease in the next 6-12 months:
http://finance.yahoo.com/tech-ticker/article/17662/No-Bottom…
[The current downturn is "much more serious" than past housing declines, Smith says, predicting another 10%-15% downside, on average, for national home prices over the next 6-to-12 months before any recovery begins.
In other words, the housing market isn't anywhere close to a bottom yet.]
http://finance.yahoo.com/tech-ticker/article/17662/No-Bottom…
[The current downturn is "much more serious" than past housing declines, Smith says, predicting another 10%-15% downside, on average, for national home prices over the next 6-to-12 months before any recovery begins.
In other words, the housing market isn't anywhere close to a bottom yet.]
Not a lot of talk on this thread yet specifically about the plight of condo owners. Even accepting NAR estimates, sales of existing condo units were down 26% year-over-year in March (compared to 18% sales decline for single-family homes). The real issue is what happens when, say, 1/6 units in your building is in foreclosure, and now the rest of the owners have to take on an additional share of assessment fees that are no longer being shared by the whole building. Interesting New York Times article on this topic:
"Collateral Foreclosure Damage for Condo Owners" 5/15/08
http://www.nytimes.com/2008/05/15/business/15condo.html?page…
"Collateral Foreclosure Damage for Condo Owners" 5/15/08
http://www.nytimes.com/2008/05/15/business/15condo.html?page…
New foreclosure data shows April foreclosures up 65% from same month last year; problem is probably worse, because many foreclosures have not yet been processed because public agencies cannot process the filings quickly enough.
http://biz.yahoo.com/cnbc/080514/24615625.html
CNBC
Home Foreclosures: Crisis Is Only Getting Deeper
Wednesday May 14, 12:15 pm ET
It’s another record in the real estate market, and it’s not a good one. RealtyTrac, the online foreclosure sale site, which has also been tracking foreclosure activity since the beginning of 2005, reports the single largest one-month volume of foreclosure activity it’s ever seen.
Again, they’ve only been doing this for three years, but you get the idea.
Foreclosure activity in April--that’s default notices, auction sale notices and bank repossessions (so yes there can be more than one hit on the property, but we look at the total percentage increases)--was reported on 243,353 properties. That’s a 65% increase from April of 2007.
Alright, so what about all the reports that borrowers are being helped, and all those programs to find and refi borrowers, and what about the word from some other sources that foreclosure numbers are actually dipping?
Well here’s a disconcerting answer: Apparently the system, that is whatever court or clerk or local bureaucratic office is stuck with recording all this stuff, is stressed. In Ohio, for example, I’m being told that it can take two to six months to get your filings in the system.
"In states like Michigan, we’re hearing from some of the trustees who actually do the foreclosures that the lenders have asked them to slow down because they don’t want to process any more into a market that won’t absorb the properties back through sales," says Rick Sharga of RealtyTrac.
In Florida, a St. Lucie County court actually added a night shift to handle the massive backlog of foreclosure filings. The clerk of the courts was quoted as saying the caseload has become, “just horrendous.” The court used to handle about forty filings per month.
In January they were tracking 715 foreclosure filings. Some are reporting lower numbers because the numbers simply can’t get into the system.
The folks at RealtyTrac, and granted these folks list foreclosed properties for a fee, say they don’t believe we’ll see the numbers start to slow until the second quarter of 2009. May and June of this year, according to banking estimates, are supposed to be the peak of adjustable rate mortgage resets from subprime loans initiated in 2006.
Lower interest rates on Libor (one of the most common of benchmark interest rate indexes used to make adjustments to adjustable rate mortgages) and other indices that correlate to ARM loans could help, as could continued efforts from FHA and lenders. But the sheer volume, it appears will remain high for now.
All those foreclosed homes on the market will continue to push inventories up and push prices down in neighborhoods across the country.
http://biz.yahoo.com/cnbc/080514/24615625.html
CNBC
Home Foreclosures: Crisis Is Only Getting Deeper
Wednesday May 14, 12:15 pm ET
It’s another record in the real estate market, and it’s not a good one. RealtyTrac, the online foreclosure sale site, which has also been tracking foreclosure activity since the beginning of 2005, reports the single largest one-month volume of foreclosure activity it’s ever seen.
Again, they’ve only been doing this for three years, but you get the idea.
Foreclosure activity in April--that’s default notices, auction sale notices and bank repossessions (so yes there can be more than one hit on the property, but we look at the total percentage increases)--was reported on 243,353 properties. That’s a 65% increase from April of 2007.
Alright, so what about all the reports that borrowers are being helped, and all those programs to find and refi borrowers, and what about the word from some other sources that foreclosure numbers are actually dipping?
Well here’s a disconcerting answer: Apparently the system, that is whatever court or clerk or local bureaucratic office is stuck with recording all this stuff, is stressed. In Ohio, for example, I’m being told that it can take two to six months to get your filings in the system.
"In states like Michigan, we’re hearing from some of the trustees who actually do the foreclosures that the lenders have asked them to slow down because they don’t want to process any more into a market that won’t absorb the properties back through sales," says Rick Sharga of RealtyTrac.
In Florida, a St. Lucie County court actually added a night shift to handle the massive backlog of foreclosure filings. The clerk of the courts was quoted as saying the caseload has become, “just horrendous.” The court used to handle about forty filings per month.
In January they were tracking 715 foreclosure filings. Some are reporting lower numbers because the numbers simply can’t get into the system.
The folks at RealtyTrac, and granted these folks list foreclosed properties for a fee, say they don’t believe we’ll see the numbers start to slow until the second quarter of 2009. May and June of this year, according to banking estimates, are supposed to be the peak of adjustable rate mortgage resets from subprime loans initiated in 2006.
Lower interest rates on Libor (one of the most common of benchmark interest rate indexes used to make adjustments to adjustable rate mortgages) and other indices that correlate to ARM loans could help, as could continued efforts from FHA and lenders. But the sheer volume, it appears will remain high for now.
All those foreclosed homes on the market will continue to push inventories up and push prices down in neighborhoods across the country.
Very good (and short) article from the American Enterprise Institute for Public Policy Research discussing how several negative economic factors are currently creating an "adverse-feedback loop" and slowing the economy. The article states that 1/3 of all U.S. home owners will have negative equity in their home by the end of the year.
I'm not sure if we have any NPR fans reading this thread, but if so, last week's episode of "This American Life" is excellent and on point. The show discusses what caused the credit crisis by interviewing individuals from various phases of the credit industry and can be downloaded onto your MP3 player.
http://www.thislife.org/ (the show title is "The Giant Pool of Money")
http://www.thislife.org/ (the show title is "The Giant Pool of Money")
I do agree with some of the others below who have complained that this thread has degenerated into a lot of bickering. Some of it is inevitable due to the "Slash"-type who come here for no purpose other than to muddy up an otherwise-impressive ongoing discussion. But to the extent possible, let's keep this discussion issue-focused (instead of personality-focused). Most of the personal issues can be worked out (or fought out) via email, but if this forum is to remain productive and educational, we really need to scale back the personal elements. I imagine I have been guilty of this as well, so I'm not trying to call out any person in particular. Maintaining an issue-focused thread also reduces the burden on moderators, which I'm sure they would appreciate. Since we're all adults, I don't think this should be too difficult.
Moderators: thank you for correcting the thumbs-down issue.
Moderators: thank you for correcting the thumbs-down issue.
Hey wsj, I checked alexa.com, and your claim is bogus. There is maybe a three-day dip, but certainly not a two-week dip--also compare trulia.com to zillow.com and you'll see they mirror each other in the slight decline over this period. More interestingly, try Realtor.com and you'll see the same dip, but even more pronounced.
Maybe all real estate sites are getting fewer hits because fewer people are interested in buying.
I also find your repeated claims (under various member names, of course) that you have the power to "have every realtor in the country" act in a particular way hilarious.
Everyone monitoring this thread knows that you are one person with close to twenty different names, and everyone knows you're manipulating the thumbs-down system by creating names for no other purpose than to add a thumbs-down and throw in your newest useless tidbit (after getting called out under your "Go Cubs" alias this weekend this question received 17 TDs in a one-hour period--after receiving a total of seven in the previous month). So round up all of your friends--Slash, What?, Wsj, Go Cubs, Ryan's Mom, Zach's Mom, and the other fifteen people we've long forgotten, and enjoy watching Fried Green Tomatoes again tonight with your Mom and Dad in their Lakeview condo.
Maybe all real estate sites are getting fewer hits because fewer people are interested in buying.
I also find your repeated claims (under various member names, of course) that you have the power to "have every realtor in the country" act in a particular way hilarious.
Everyone monitoring this thread knows that you are one person with close to twenty different names, and everyone knows you're manipulating the thumbs-down system by creating names for no other purpose than to add a thumbs-down and throw in your newest useless tidbit (after getting called out under your "Go Cubs" alias this weekend this question received 17 TDs in a one-hour period--after receiving a total of seven in the previous month). So round up all of your friends--Slash, What?, Wsj, Go Cubs, Ryan's Mom, Zach's Mom, and the other fifteen people we've long forgotten, and enjoy watching Fried Green Tomatoes again tonight with your Mom and Dad in their Lakeview condo.
A contract is NOT a moral obligation. JR, you continue to embarrass yourself by comparing mortgage default to murder and marital infidelity. A contract is a legal document expressing the duties of the parties, and the penalty to be assessed if a party to the contract fails to heed those duties. In the housing context, the mortgage is nothing other than an agreement--legal, not moral--, on the part of the buyer, to make monthly payments to the lender; and if he does not make those payments, the lender is entitled to recapture the home from the defaulting buyer.
If morality were involved, lenders would probably want to meet with the buyer's friends and family, perhaps even clergymen and former school teachers, to find out as much as possible about the buyer's moral character. But they don't. They look into his finances, (sometimes) legal status and judgments outstanding, and credit history--all financial and legal, but certainly not moral, indicators. Furthermore, when someone defaults on her mortgage, she doesn't face criminal penalty (as when truly moral issues are involved, such as taking another's life) -- she loses whatever she agreed to lose in the contract.
Legal scholars have been trying to emphasize this point to the JR-type for more than a century:
"Nowhere is the confusion between legal and moral ideas more manifest than in the law of contract. Among other things, here again the so-called primary rights and duties are invested with a mystic significance beyond what can be assigned and explained. The duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it — and nothing else... But such a mode of looking at the matter stinks in the nostrils of those who think it advantageous to get as much ethics into the law as they can."
--Oliver Wendell Holmes (the most cited Justice, to date, in United States Supreme Court history), "The Path of the Law," 1897
If morality were involved, lenders would probably want to meet with the buyer's friends and family, perhaps even clergymen and former school teachers, to find out as much as possible about the buyer's moral character. But they don't. They look into his finances, (sometimes) legal status and judgments outstanding, and credit history--all financial and legal, but certainly not moral, indicators. Furthermore, when someone defaults on her mortgage, she doesn't face criminal penalty (as when truly moral issues are involved, such as taking another's life) -- she loses whatever she agreed to lose in the contract.
Legal scholars have been trying to emphasize this point to the JR-type for more than a century:
"Nowhere is the confusion between legal and moral ideas more manifest than in the law of contract. Among other things, here again the so-called primary rights and duties are invested with a mystic significance beyond what can be assigned and explained. The duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it — and nothing else... But such a mode of looking at the matter stinks in the nostrils of those who think it advantageous to get as much ethics into the law as they can."
--Oliver Wendell Holmes (the most cited Justice, to date, in United States Supreme Court history), "The Path of the Law," 1897
Realtyexec, that is a fair point--I hadn't properly considered credit score. But it doesn't change the fact that the loan market of yesterday allowed people to play with house money; financially, they only stood to gain. The credit score hit is a serious consideration to take into account, but when one's home is worth $80,000 less than one's loan (which is very common in your neck of the woods--California), credit score concerns become secondary. In any case, the credit hit is an after-the-fact consideration and factors little into the initial decision whether to purchase a home beyond one's means--in my opinion, most people don't buy a house thinking about what will happen to their credit when they foreclose. It only factors in later, when the speculation-induced damage has been done.
JR, sometimes I feel like you are living in a different universe. I don't know how anyone can disagree with Richard's most recent post, which you described as "disgusting." He simply stated the obvious--that it's natural for individuals to act in their own financial interest. Offer: "no down payment for this gigantic house--if it appreciates (which it has done for years!), you reap ALL OF THE REWARDS (minus a 6% commission); if the housing bubble bursts, you bear none of the risk!" What's "disgusting" about accepting this offer??
Suppose I ask you to call heads or tails. If it's heads, you win $50,000. If it's tails, I shake your hand and you walk away with an "aw, shucks." What's "disgusting" about accepting my offer to play in this game? You'd be a moron not to play. Many people who "played" in the housing boom of the past decade stood to gain (and did gain) much more than $50,000. I doubt they think there was anything "disgusting" about their decision. And many people have faced foreclosure in the past few years as housing busted. Oh, well! Now they're in a new home or are renting, and the move/foreclosure was a pain, but with no money down, it's no skin off of their backs. For these people, the coin came up "tails," but there's nothing "disgusting" about it.
Suppose I ask you to call heads or tails. If it's heads, you win $50,000. If it's tails, I shake your hand and you walk away with an "aw, shucks." What's "disgusting" about accepting my offer to play in this game? You'd be a moron not to play. Many people who "played" in the housing boom of the past decade stood to gain (and did gain) much more than $50,000. I doubt they think there was anything "disgusting" about their decision. And many people have faced foreclosure in the past few years as housing busted. Oh, well! Now they're in a new home or are renting, and the move/foreclosure was a pain, but with no money down, it's no skin off of their backs. For these people, the coin came up "tails," but there's nothing "disgusting" about it.
See my updates below: last night I called out "new contributor" "Go Cubs" as being another Slash alter-ego, and this thread's thumbs-downs quadrupled from 7 to 28 within a one-hour period.
Moderators, thank you for your continued efforts to keep this thread clean, and I'm sorry that it has become more time-consuming than most. I don't mind that there are some thumbs-downs (which can be expected for a relatively controversial question), but I do want to uphold the integrity of the "thumbs-up/thumbs down" procedure by not allowing one individual to give 20+ TDs in the course of an hour (obviously artificial considering the question received only seven authentic TDs--assuming the others were authentic--over the previous four-week span).
Next I expect Slash to give this thread TDs more subtly--say, four here, five there, etc., so as not to be so obvious. It would be great if we could eliminate this (and him) by banishing him completely in some way.
Moderators, thank you for your continued efforts to keep this thread clean, and I'm sorry that it has become more time-consuming than most. I don't mind that there are some thumbs-downs (which can be expected for a relatively controversial question), but I do want to uphold the integrity of the "thumbs-up/thumbs down" procedure by not allowing one individual to give 20+ TDs in the course of an hour (obviously artificial considering the question received only seven authentic TDs--assuming the others were authentic--over the previous four-week span).
Next I expect Slash to give this thread TDs more subtly--say, four here, five there, etc., so as not to be so obvious. It would be great if we could eliminate this (and him) by banishing him completely in some way.
Twenty thumbs-downs on this question in 16 minutes now (after seven in the previous four weeks)--keep 'em coming! This is like watching the ball drop in Times Square. You know it's coming, but it's still so exciting!
Now you're answering like a real person--glad you took my advice. You've sure contributed a lot in the past fifteen minutes for someone who casually observed for the first 740 posts.
See you under your next name, sweety!
Ryan
See you under your next name, sweety!
Ryan
Whatever you say, Slash!
I noted in my post what wikipedia said--that the two-word is often used, but "Lakeview" is "increasingly used," hence its use by the community's Chamber of Commerce.
Also, great job sidestepping Exhibits A, B, and D. You get creepier by the second.
An authentic poster would either ignore my post or put me in my place for even questioning her--they wouldn't try so hard to prove themselves, as you just did. Finally, nice touch on the use of "hone
I noted in my post what wikipedia said--that the two-word is often used, but "Lakeview" is "increasingly used," hence its use by the community's Chamber of Commerce.
Also, great job sidestepping Exhibits A, B, and D. You get creepier by the second.
An authentic poster would either ignore my post or put me in my place for even questioning her--they wouldn't try so hard to prove themselves, as you just did. Finally, nice touch on the use of "hone