Affordability is like gravity. When house prices rise far beyond what people can afford, rather than being priced out forever -- which is what people fear -- the force of affordability causes prices to fall. Lenders try to cheat this process with affordability products, but as we have all seen, Affordability Mortgage Products Make Prices Unaffordable. When the instability of these products causes high delinquency rates, they are removed from the market, and the gravity of the situation takes over; prices fall.
The housing market, whose collapse pulled the economy into recession in late 2007, is stalling again.
In major markets across the country, home sales are deteriorating, inventories of unsold homes are piling up and builders are scaling back construction plans. The expiration of a federal home-buyers tax credit at the end of April is weighing on the market.
Any hopes of property appreciation have stalled for the foreseeable future. The rate of sales is 20% off historic norms and inventory continues to pile up. Buyers are finding the power that sellers enjoyed just a few months ago has reversed. It is quickly becoming a buyers market. When these changes in the market occur, expect to see even lower sales volumes as sellers initially refuse to lower prices and properties stay on the market longer. This fall, sellers will either lower their price to sell or take their properties off the market. The flippers, short sellers and banks with too much REO will lower their prices to clear their inventory. Discretionary sellers with WTF asking prices will be left behind.
On Tuesday, the U.S. Census Bureau said single-family housing starts in June fell by 0.7%, to a seasonally adjusted annual rate of 454,000. The U.S. started 1.47 million homes in 2006, before the housing bubble popped.
Future construction looks even weaker. Permits for single-family starts fell 3% in June, following big declines in both May and April. "We're hovering at post-World War II lows," said Ivy Zelman, president of Zelman & Associates, a research firm.
Economists aren't singling out one reason for the stalling housing market. A variety of factors have led to flagging confidence, they say, including sluggish labor markets, global economic turmoil and falling stock prices.
While the housing downturn dragged the economy into a recession nearly three years ago, now it is the economy that is pulling down housing, says economist Patrick Newport at IHS Global Insight. Without sustained job growth, the housing market likely won't improve. That in turn will ricochet across manufacturing, retail and other trades heavily dependent on home building and consumer spending.
This is something the bulls refuse to acknowledge. The unemployed do not buy homes.
The Wall Street Journal's quarterly survey of housing-market conditions in 28 major metropolitan areas shows that inventory levels have grown in many markets. But inventory fell in some of the weakest ones, including several Florida markets, Atlanta, and Charlotte, N.C.
At the end of June, inventory was up 33% from year-ago levels in San Diego, and by 19% and 15% in Los Angeles and Orange County, Calif., respectively, according to data compiled by John Burns Real Estate Consulting. Rising inventory can lead to price declines later.
We have all been watching the IHB chart of inventory go up very steeply, and it is show no signs of leveling off.
Jeff Gans, a 45-year-old engineer from Baltimore who designs software for car manufacturers, has contemplated buying a house or condo for more than a year. But concerns about job stability have kept him on the sidelines.
Even falling interest rates aren't enough to whet consumer appetites for housing. Last week, the average rate on a 30-year fixed-rate mortgage was quoted at 4.57%, according to Freddie Mac, the lowest since its survey began in 1971. But demand for home-purchase mortgages sits near 14-year lows, according to the Mortgage Bankers Association, down 44% over the past two months.
With mortgage rates at historic lows, isn't it surprising to find demand for mortgage at historic lows as well? That emphasizes how weak demand really is. If record low mortgage interest rates doesn't stimulate demand, what will?
The government last fall extended tax credits worth up to $8,000 to home buyers who signed contracts by April 30, causing sales to surge early this year. Those buyers had until June 30 to close their sales until Congress, concerned that the backlog of sales wouldn't close in time, extended the deadline through September.
Analysts long expected the withdrawal of a federal tax credit, which had juiced sales, to lead to a slower-than-usual summer.
"It's the magnitude that's been the issue,'' says Douglas Duncan, chief economist at Fannie Mae. "The drop-off in activity has surpassed expectations.''
"surpassed expectations?" LOL! That is a nice way to spin it. Will the price decline "deliver superior performance" as well?
Reports should show that completed transactions of home sales held up through June. But newly signed contracts in May and June have plunged.
To be sure, some housing markets show signs of healing. Home-sales activity in New York, Washington, D.C., and parts of California continue to improve. But other markets, including Tampa, Fla., and Chicago, face rising foreclosures and weak job growth.
Low mortgage rates and falling prices have made homes more affordable in many markets than at any time in the past decade. But those affordability gains have been offset for many buyers by tighter lending standards, particularly for "jumbo" loans that are too large for government backing. Banks are requiring down payments of 20% and more and strong credit scores because they must hold jumbo loans in their portfolios.
So when banks are risking their own money, they are concerned about getting repaid.... What an interesting idea. They charge higher interest rates too.
More broadly, the housing market faces two big problems: too many homes and falling demand. More than seven million borrowers are 30 days or more past due on their mortgage payments or in some stage of foreclosure. Rising foreclosures will keep pressure on prices as banks put more homes on the market.
Last month, nearly 39,000 borrowers received government-backed loan modifications, but more than 90,000 borrowers fell out of the program, the Obama administration said on Tuesday.
Moreover, the pool of potential buyers remains constrained by the unprecedented number of homeowners who are underwater, or who owe more than their homes are worth.
That's making it particularly hard for traditional "trade up" homeowners like Maria Billis to pull the trigger on a home purchase. Ms. Billis can't sell her townhouse in Boynton Beach, Fla., because its value has fallen by a quarter. That puts it below the $160,000 that she owes the bank.
The 31-year-old human resources consultant, who married last month and wants to start a family, found a half-dozen homes in her price range but doesn't want to sell her current home for less than the amount owed. She has considered buying the new home and renting the townhouse, but concedes, "It's a big risk."
It's not a big risk. If she had purchased a property with a cost of ownership at or below rental parity, it would be no big deal; however, that isn't what she did. And neither did anyone else during the bubble. The most obvious sign of the housing bubble, at least to me, was the fact that you couldn't rent out a property for enough to cover the cost. I remember thinking, "why would anyone do this?" I was so naive, that it never occurred to me that people might do that in order to speculate on appreciation.
The real risk is buying a property that can't be rented for enough to cover the costs. Whenever you buy a property, you have to ask yourself what happens if you can't or don't live in it. If the answer is, you lose lots of money each month, then it probably isn't a good idea to buy it. Its really just common sense.
Mortgage-finance giants Fannie Mae and Freddie Mac also are starting to push more repossessed homes onto the market. The companies owned 164,000 homes at the end of March, up 80% from a year ago.
Another reason inventory is rising: "Unrealistic sellers have flooded the market" after reports of bidding wars and home-price increases earlier in the year, says Steven Thomas, president of Altera Real Estate, a brokerage in Orange County. The amount of time that homes there have sat on the market there has swelled to 3.78 months, up from 2.35 months in April.
Steve Thomas managed to get his made-up numbers into national media. I suppose congratulations are in order. At least he got the trend right.
"The sellers think the market's coming back. They've tacked on an extra 5 to 10 to 15%. The buyers aren't going for it," says Jim Klinge, a real-estate agent in Carlsbad, Calif. Over the next six months, "it's going to feel like a double-dip because sellers are going to have to lower their prices."
Jim the Realtor gets it. And notice I capitalized the R with him.
Not all sellers will take that step. Jerry Anderson has listed his four-bedroom home in Dana Point, Calif., on and off the market for the last two years. He's cut the price to $1.25 million, down from $1.75 million, but hasn't had any offers on the home, which has three fireplaces and ocean views.
Mr. Anderson, who bought the home in 1987, says he'll take it off the market in December if it doesn't sell rather than cut the price.
We will undoubtedly be taking it off the market....
Matt Carney listed his Moreno Valley, Calif., home for $337,000 in February, and lowered the price on Tuesday for the third time, to $297,000. He says he can't go any lower because he owes $274,000 on the home and doesn't want to dip into savings to pay for transaction costs.
In other words, this guy is underwater and in denial.
The High end is going to be crushed
I have consistently maintained my belief that the market for properties needing loans over the $729,750 jumbo-conforming limit are going to suffer tremendous pricing pressure. The common delusion in the mainstream media is that this market has already recovered and it is a safe haven. This market is going to collapse, and the price declines will be breathtaking.
Lenders are facing delinquency rates on big mortgages at much higher rates than for smaller mortgages. Think about that -- if the rich pretenders were doing well and recovering from the recession, wouldn't they be paying their mortgage? Shouldn't the delinquency rates on jumbo mortgages be much lower than on conforming?
But Orange County is diffferent, right? So we know that the high end is delinquent on their loans at a greater rate than the low end. Wouldn't it stand to reason that the high end would also have more distressed properties? Nope. The distressed inventory is being withheld from the market. So far this year, only 202 properties with estimated values of over $1,000,000 have been sold at auction. It really is a squatters paradise.
Lenders will not give away these homes even though the result of their inaction is essentially that. The jumbo market is denial on a massive scale. Lenders are somehow hoping that all these people are going to find work at a pay rate capable of making payments on these million dollar mortgages. It's not going to happen. At some point, lenders are going to realize this, and they are going to want their money back. The Ponzis, the system gamers, and other delusional loan owners are going to get wiped out, and this market will be cleared. When it happens, the carnage will be epic.
I don't know when this will happen. It should have happened already. I never thought lenders would allow so much squatting to go on for so long. They can't allow multi-year squatting in these properties without more and more borrowers opting to do the same. The lenders who wise up first and liquidate these properties will obtain the best pricing. Those that hold out with hopes the cartel will sustain unsustainable pricing will lose the most money. Let the liquidation begin.
Countrywide was really stupid
This property was originally purchased on 11/22/2004 for $1,002,500. The owner used a $750,000 first mortgage and a $257,500 down payment.
On 10/27/2005 they obtained a $172,500 HELOC.
On 7/26/2006 Countrywide gave this family a $1,240,000 first mortgage.
Total mortgage equity withdrawal is 490,000 including their down payment.
Total squatting time was about 1 year.
Foreclosure Record Recording Date: 10/27/2009 Document Type: Notice of Sale
Foreclosure Record Recording Date: 07/14/2009 Document Type: Notice of Default
I don't know how Wells Fargo ended up with this loan, but they bought the property as foreclosure auction for $1,049,700. Apparently, dropping the bid $200,000 wasn't enough. They have the property listed at the price their realtor thought they could get. I bet they don't.
Home Purchase Price … $1,049,700 Home Purchase Date .... 3/25/2010
Net Gain (Loss) .......... $31,206 Percent Change .......... 3.0% Annual Appreciation … 27.7%
Cost of Ownership ------------------------------------------------- $1,149,900 .......... Asking Price $229,980 .......... 20% Down Conventional 4.62% ............... Mortgage Interest Rate $919,920 .......... 30-Year Mortgage $227,905 .......... Income Requirement
$4,727 .......... Monthly Mortgage Payment
$997 .......... Property Tax $250 .......... Special Taxes and Levies (Mello Roos) $96 .......... Homeowners Insurance $252 .......... Homeowners Association Fees ============================================ $6,321 .......... Monthly Cash Outlays
-$1271 .......... Tax Savings (% of Interest and Property Tax) -$1185 .......... Equity Hidden in Payment $399 .......... Lost Income to Down Payment (net of taxes) $144 .......... Maintenance and Replacement Reserves ============================================ $4,408 .......... Monthly Cost of Ownership
Cash Acquisition Demands ------------------------------------------------------------------------------ $11,499 .......... Furnishing and Move In @1% $11,499 .......... Closing Costs @1% $9,199 ............ Interest Points @1% of Loan $229,980 .......... Down Payment ============================================ $262,177 .......... Total Cash Costs $67,500 ............ Emergency Cash Reserves ============================================ $329,677 .......... Total Savings Needed
Property Details for 148 TAPESTRY Irvine, CA 92603 ------------------------------------------------------------------------------ Beds: 4 Baths: 3 full 1 part baths Home size: 3,050 sq ft ($377 / sq ft) Lot Size: 4,995 sq ft Year Built: 2004 Days on Market: 9 Listing Updated: 40380 MLS Number: U10003116 Property Type: Single Family, Residential Community: Quail Hill Tract: Tape ------------------------------------------------------------------------------ According to the listing agent, this listing is a bank owned (foreclosed) property.
HIGHEST and BEST FINAL OFFER - Please include the MULTIPLE OFFER FORM that I have uploaded in the media section. We have submitted offers and are in a multiple offer situation. To be fair to your client, please have them bring in their H&B Offer. Call with any questions. From the moment you arrive you will notice the value in this home. Gorgeous curb appeal with flagstone accents and inlay in driveway. Enter into the large living room with a formal dining area to the left. Light-Bright and open kitchen area with granite countertops, pantry, upgraded appliances and cabinetry. There is a large family room with fireplace and access to rear yard. There is plenty of room upstairs with generous bedrooms. The hard scape and landscape in the rear yard is wonderful; covered patio, flagstone, double swing and a koi pond.
For those in the real estate industry it has been a rough time. Teresa Giudice’s husbands construction company is in Chapter 7 bankruptcy and the family is having to liquidate their household to meet the creditors demands of 10.85 million dollars in debt.
For many of us in the real estate world, this is not an uncommon occurance as companies that held out in hopes of surviving the downturn are now going under on a regular basis.
This one is just going to be in the spotight of the Bravo network’s cameras.
“Real Housewives of New Jersey” star Teresa Giudice and her husband, Joe, are set to sell the contents of their 16-room, 10,000-square-foot Towaco mansion in a bankruptcy auction to take place at their home Aug. 22, reported Gawker.
Among the items up for bid will be a grand piano, two LCD TVs, a decorative urn, an antique pool table, a suit of armor, four chandeliers, a jet boat, a snowplow, framed paintings and numerous pieces of furniture, according to A.J. Willner Auctions, the company facilitating the auction. via The NY Daily News
Thanks for reading this post. If you would like to see more articles like this, please come visit The Real Estate Bloggers. where it was originally published.
Your heart has to go out to people in this situation. We know qualifying for a mortgage is hard, even harder for a mortgage at age 84. But when you get approved and then your spouse dies, it should not be this difficult to get the payout.
The day after George Baumann’s wife died, the loan officer at a branch of the Hanover Community Bank refuse payout of a loan that closed 5 days earlier. First of all, the lack of empathy is amazing but the bank has dealt with that and that loan officer is “no longer with the bank”. But the timing of it is even worse.
Here is a man who knows money is tight, has lost the love of his life of over 50 years, and now has to worry about a bank paying out an already approved loan?
As they say on Long Island, “You got to be kidding me?”
Hanover Community Bank had inexplicably refused to refinance the Baldwin, L.I., home where George Baumann and his wife, Florence, lived for almost 50 years.
The couple closed on the $271,000 mortgage five days before Florence, 82, died of a heart attack on May 12. The bank told him a day later he could no longer have the cash.
Baumann needs the money to consolidate heavy debts that leave him virtually penniless at the end of every month.
“The bank is going to honor its previous commitment,” said state Sen. Carl Kruger (D-Brooklyn), who contacted Hanover after reading Baumann’s story.
“We will be contacting Mr. Baumann as soon as possible,” vowed Sangeeta Kishore, Hanover’s acting president and CEO, who blamed the snafu on a loan officer who no longer works there.
But Baumann, 84, isn’t celebrating yet.
“I am gonna believe it when I get the check and it clears,” he said. via The NY Daily News
Thanks for reading this post. If you would like to see more articles like this, please come visit The Real Estate Bloggers. where it was originally published.
Sometimes people who don't read blogs very much ask me what they should read, and one blog I always send them to is "You Are what You Eat or Reheat." Here are the reasons why I love Katie... 1. She...
The 30-year fixed rate mortgage provides a reasonable balance between affordability and buying power. Historically, it has been associated with stable housing markets. Despite these facts, some foolishly want to see it replaced with adjustable-rate mortgages.
I was born with the wrong sign In the wrong house With the wrong ascendancy I took the wrong road That led to the wrong tendencies I was in the wrong place At the wrong time For the wrong reason And the wrong rhyme On the wrong day Of the wrong week I used the wrong method With the wrong technique
I recently wrote the post Government Bureaucrat Recommends Against 30-Year Fixed-Rate Mortgages. The author of that article wrote a scathing and dismissive rant against the 30-year fixed rate mortgage, and he provided no rational arguments for his opposition to its widespread use. I thought it was a one-off written by a crank who had too much coffee that day. Apparently he has company.
I am prone to write stinging rebukes to poorly written garbage on the web, but when I call someone out, I will devote the post to building a factual argument as to why they are wrong. I never ask anyone to just take my word for it because I am some kind of expert. Authority comes from the presentation of data in a compelling argument. Mindless rants don't make authors an authority, it makes them lunatics.
The source article for today's post is horrible. I don't know if the writer is a lunatic, but she certainly is very wrong about her reasons for opposing the 30-year fixed rate mortgage.
I never would have guessed that years in, we'd still be debating the role of the government in the housing bubble. Conservatives are still pinning most of the blame on the Community Reinvestment Act, while liberals are saying that there's no evidence that government played any significant role--unless, perhaps, it was all the fault of Alan Greenspan.
As it happens, I think that the government did play a role. A big role. But I think it's rather subtler, and thus, rather more problematic, than most people on either side are discussing.
To me, the unsung villain of the mortgage crisis is the 30-year fixed rate self-amortizing mortgage with no prepayment penalty. This hothouse creature is beloved of liberals, who like any product that gives the consumer the power to shaft banks whenever it is to their advantage. And it is beloved of conservatives because it smacks of sober citizens taking on modest, stable obligations they can meet.
The 30-year fixed-rate mortgage has been popular among progressives and conservatives alike because it is a good loan product. (Note she used the old term liberals demagogueed by the Right rather than the more fashionable progressives.) She makes a ridiculous straw-man argument that the Left is out to screw the banks. Perhaps some die-hard conservatives who are willing to believe anything bad about progressives will believe that, but the reason the Left likes the 30-year loan is because it provides a means for average wage earners to acquire wealth. Paying down a mortgage through the forced savings of an amortizing mortgage used to be the primary wealth generating mechanism of the middle class -- that is until we allowed everyone to rob the piggy bank with HELOCs.
Did you notice the writer setting the emotional groundwork with the phrases "unsung villain" and "hothouse creature" and "the power to shaft banks?" This dismissive language is not presenting a sound argument based on facts, it is setting the stage for an emotional argument based on hyperbole.
But this product is about as stable as a nitroglycerine shot with a TNT chaser.
That statement is complete and utter bullshit. Actually, bullshit is a statement with a casual disregard for the truth -- realtorspeak is a good example. The statement above is an intentional lie. A lie cloaked with emotional baggage to disguise its intent.
The 30 year fixed rate mortgage was ultimately at the heart of the Savings and Loan crisis.
That statement is a half-truth used to support a weak argument. The heart of the S&L fiasco was an asset-liability mismatch. Banks often borrow with short-term funds and lend on a long-term basis. The 30-year fixed rate mortgage contributes to this problem, but ultimately this is a financial management problem at banks. Nobody forces banks to underwrite these loans, and nobody forces them to match those loans with short-term deposits. This is a choice banks make that sometimes blows up in their face. Banks could float long-term bonds to match their loans, and they can also offload them to the secondary market; in fact, that is one of the primary arguments for keeping a secondary market in place.
Yes, yes, deregulation set the stage for the ultimate denouement--but the Savings and Loans were deregulated in such a haphazard fashion in part because they were being slowly driven into bankruptcy by their huge collection of low-interest, long-term real estate loans, in an environment where Paul Volcker had briefly driven short-term interest rates up to 20%. While fraud and abuse were certainly rampant, the enormous scope of the problem was not due to S&L officers suddenly becoming more thievish, or regulators more tolerant of thievery, but because everyone in the industry was flopping as wildly a a beached sturgeon in an attempt to keep their banks solvent atop large portfolios of low-interest loans. Meanwhile, whenever interest rates dropped, people would refinance, meaning that even the high-interest loans they did make didn't help much.
The answer to this, as you may recall, was . . . the creation of the massive private market in mortgage bonds. In an environment with a floating currency and considerable worries about inflation, the only thing that can neutralize the risks of the 30-year mortgage is laying them off to as large a pool as possible.
Selling low-interest loans in the secondary market is still the answer. There is no problem here. Banks are currently under no obligation to keep any loans they originate on their balance sheets. During the debates on financial reform, there was a proposal for banks to keep 5% of the loans they originated on their balance sheets, and it was defeated by intense opposition from the banking lobby. Their primary argument was that it created asset-liability mismatch. They were right.
MIchael Lewis chronicles what happened next in the still-terrifyingly-relevant Liar's Poker.
Give me a break. She has now associated all the evils of Wall Street with a 30-year fixed rate loan? Did she really think nobody on the web would call her on that nonsense?
Moreover, this product exists, as far as I can tell, only because of massive government intervention into the markets, a point that Reihan Salam and Chris Papagianis made in their recent, excellent piece.
"As far as I can tell?" I respect that she has the courage to flaunt her ignorance so publicly. The product exists because people demand it. People demand it because it is a good and stable loan product that builds wealth for ordinary Americans. The government supports it because it provides stability in housing markets.
Until the Great Depression, the mortgage was a very, very different product. There was no amortization, and down-payments were often massive--half or more of a home's value. They lasted perhaps 3 or 5 years, and were rolled over if borrowers could not meet the balloon payment. The default crisis of the 1930s resulted from the inability to roll those loans, and so the government stepped in, causing the fifteen year self-amortizing loan to proliferate. This process was especially accelerated by the VA loans that were offered to returning veterans. Eventually, the payment terms stretched out to allow more and more people to buy homes.
This had some curious effects. As aforementioned, it was ultimately not good for banks that were restricted to the kind of boring business many commentators would like to see banks return to: loaning money to consumers and small businesses, and taking deposits.
Yes, that is exactly what banks are supposed to do. Is that boring? Are we supposed to have an exciting banking system? Did everyone enjoy the volatility in our economy over the last several years? It was certainly exciting. Financial innovation is a fallacy. Banks are supposed to be boring, stable institutions. What does she want?
The mismatch between their short-term obligations and their long-term assets too easily becomes catastrophic.
Nonsense. If banks do not properly utilize the tools available to them to prevent asset-liability mismatch, they can certainly go broke, but that is only a catastrophe for the poorly managed bank. It isn't a catastrophe for the economy. She is pointing to some bogeyman that doesn't exist.
It also--at least according to economists I've interviewed--contributed to the long, broad run-up in housing prices that took place in the latter half of the twentieth century.
She must have interviewed some real idiots. The transition from a 50% down interest-only loan market of the Great Depression to the 20% down conventionally amortizing loan market beginning after WWII did see a runup in prices. However, once prices stabilized in the early 1950s, the 30-year fixed rate mortgage provided a stable price-to-income structure with excellent affordability for the next 25 years (see graph below). Even then the system broke down in the late 1970s because allowable DTIs got out of control, not because of the mortgage product.
People price their homes by their monthly payment, and what the bank will lend them. As banks lent more, and longer terms lowered the monthly payment for a given loan amount, people bid up the price of housing. This created the expectation of steadily appreciating home values--something that had not been historically true.
This statement is inaccurate. Robert Shiller did detailed studies on this subject for the book Irrational Exuberance. His studies showed that expectation of appreciation was not present prior to the late 1970s. The 25 year period of stability from 1950-1975 -- the heyday of the 30-year fixed rate mortgage -- did not have expectation of appreciation. If you look carefully at the chart of inflation-adjusted home prices, you see that prices did not rise faster than the general rate of inflation during this period.
Over time, people began pricing expected appreciation into their purchase price as well, a phenomenon that again, tended to accelerate over time.
No, this was a phenomenon of the first bubble of the late 70s, and with each successive bubble and continued "innovations" which allowed people to access appreciation for spending money, the expectation of appreciation and the desire for free money has created an entire population of kool aid addicts.
Most subtly, and most perniciously of all, it created generations of buyers who thought of all mortgages as thirty-year fixed rate loans.
Perniciously? I wish everyone thought of mortgages as 30-year fixed-rate loans. If they did, we wouldn't have a demand for interest-only and Option ARMs -- the real culprits of the housing bubble.
People in other countries understand that their mortgage rate resets when interest rates go up.
I think the author is revealing her hidden agenda here: she is pandering to banking interests that would rather issue adjustable rate mortgages at the bottom of the interest rate cycle. Banks would certainly rather have everyone on ARMs because it offloads the interest rate risk. When interest rates go up, the value of fixed-rate annuities goes down. The value of fixed-rate loans held on bank balance sheets will plummet. I wonder if she it receiving compensation from banking interests?
Even the people who theoretically understood that they were taking on an adjustable rate mortgage didn't have any cultural context for them--no unhappy childhood memories, no newspaper stories, no parents or friends to warn them about what would happen when the loan rate reset. And of course, many very naive people simply assumed that their floating-rate mortgage was fixed--and were rooked by unscrupulous mortgage brokers.
I am not sure what she is arguing for here, but the fact that we have had 25 years of steadily falling interest rates is exactly why some boneheads continue taking out adjustable-rate mortgages when it makes no sense to do so. The next bailout of the mortgage and housing industry will come from those idiots taking out ARMs today. The ARM reset issue hasn't gone away, it has only been temporarily deferred by even lower interest rates.
As I see it, this decades long intervention in the housing market took a terrible toll. And whenever this product went bad, rather than reconsidering its support, the government staged another intervention to keep this type of loan alive.
It gave an implicit guarantee to Fannie and Freddie, deregulated the savings and loans (and then bailed them out), had its regulators and lawmakers help create the market in mortgage securities, and so forth. All the while, it gave a giant tax subsidy to mortgage interest that convinced people they were fools not to buy.
No, the National Association of realtors is what worked to convince people there were fools not to buy. They are bullshit artists who will use any tool available. (Graphic below is from 2006.)
As of this writing, are we rethinking any of it? Will the new head of the CFPA crack down on mortgages that offer prepayment options?
I certainly hope not.
Will lawmakers finally break up Fannie and Freddie and cut off the flow of cheap capital they glean from the implicit government guarantee? Will it get the FHA out of the business of propping up the conventional loan market?
I certainly hope so.
Of course not. There is no constituency for such a thing except for a few crazy libertarians.
It is rare that I find an article that annoys me as much as that one. I don't mind that people promote their agendas. I do it. I just prefer it when people do so with rational arguments based on facts and data. The piece of crap this woman wrote reads like something from a tawdry political blog. Many of the best articles I have read on the web have come from the Atlantic. This isn't one of them.
Palladio Properties is at it again
These guys are very active in the Irvine market. Today we have yet another flip.
The previous owners did not buy at the peak, and they did not abuse their HELOC, but they still over borrowed and lost their home.
This property was purchased for $952,000 on 6/16/2004. The owners used a $714,000 Option ARM first mortgage with a 1.25% teaser rate and a $238,000 down payment.
They quit making payments in early 2008 and squatted for over two years before being kicked to the curb.
Foreclosure Record Recording Date: 05/18/2010 Document Type: Notice of Sale
Foreclosure Record Recording Date: 07/25/2008 Document Type: Notice of Default
If you would like to learn how you can get involved with trustee sales, please contact me at sales@idealhomebrokers.com.
Home Purchase Price … $708,000 Home Purchase Date .... 6/10/2010
Net Gain (Loss) .......... $80,660 Percent Change .......... 11.4% Annual Appreciation … 106.3%
Cost of Ownership ------------------------------------------------- $839,000 .......... Asking Price $167,800 .......... 20% Down Conventional 4.62% ............... Mortgage Interest Rate $671,200 .......... 30-Year Mortgage $166,286 .......... Income Requirement
$3,449 .......... Monthly Mortgage Payment
$727 .......... Property Tax $225 .......... Special Taxes and Levies (Mello Roos) $70 .......... Homeowners Insurance $100 .......... Homeowners Association Fees ============================================ $4,571 .......... Monthly Cash Outlays
-$828 .......... Tax Savings (% of Interest and Property Tax) -$865 .......... Equity Hidden in Payment $291 .......... Lost Income to Down Payment (net of taxes) $105 .......... Maintenance and Replacement Reserves ============================================ $3,274 .......... Monthly Cost of Ownership
Cash Acquisition Demands ------------------------------------------------------------------------------ $8,390 .......... Furnishing and Move In @1% $8,390 .......... Closing Costs @1% $6,712 ............ Interest Points @1% of Loan $167,800 .......... Down Payment ============================================ $191,292 .......... Total Cash Costs $50,100 ............ Emergency Cash Reserves ============================================ $241,392 .......... Total Savings Needed
Property Details for 14 IRON Spgs Irvine, CA 92602 ------------------------------------------------------------------------------ Beds: 4 Baths: 2 full 2 part baths Home size: 2,600 sq ft ($323 / sq ft) Lot Size: 3,755 sq ft Year Built: 2002 Days on Market: 12 Listing Updated: 40370 MLS Number: S624557 Property Type: Single Family, Residential Community: Northpark Tract: Aldc ------------------------------------------------------------------------------
Beautiful home located in Northpark Square. 4 Bedrooms and 1 Den. Granite countertop. Hardwood flooring. New carpet & New paint. Built-in BBQ in backyard. Move-in ready.
For those in the real estate industry it has been a rough time. Teresa Giudice’s husbands construction company is in Chapter 7 bankruptcy and the family is having to liquidate their household to meet the creditors demands of 10.85 million dollars in debt. 
Your heart has to go out to people in this situation. We know qualifying for a mortgage is hard, even harder for a mortgage at age 84. But when you get approved and then your spouse dies, it should not be this difficult to get the payout. 
