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Monday, May 18, 2009
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125 comments:
Even our president used the lines of credit available to him in the great credit bubble of the aughts: Heloc abuse, the true everymanI hesistate to post this here, since it also has a bunch of inflammatory conclusions on how we should view his policies through the lens of someone who has personally taken advantage of the credit available to him, but I think the tale of just how much debt average upwardly mobile people took on is striking.
the most relevant portion:
"In April 1999, they purchased a Chicago condo and obtained a mortgage for $159,250. In May 1999, they took out a line of credit for $20,750. Then, in 2002, they refinanced the condo with a $210,000 mortgage, which means they took out about $50,000 in equity. Finally, in 2004, they took out another line of credit for $100,000 on top of the mortgage.
Tax returns for 2004 reveal $14,395 in mortgage deductions. If we assume an effective interest rate of 6%, then they owed about $240,000 on a home they purchased for about $159,250.
"
Sanity reigns!
Boston Globe: $8k not for downpayment"According to contacts with both FHA and HUD, Mortgagee Letter 2009-15, which stated that first-time homebuyers would be allowed to use the tax credit for their downpayment, has been rescinded. "
Another disappointing weekend. Was going to check out a foreclosure in Falls Church, but they had enough bids on the first day on market that they cut it off. Another one in S. Arlington we did go to see even though there were already 6 bids in the first two days. Outside of the high-end stuff, the inventory inside of the Beltway blows and buyers are everywhere.
Fred, I'm not even bothering with this market. The foreclosure moratorium and $8000 buyers bribe have ignited a mini-bubble. Market manipulation. Let the buyers fight it out, I'll sit on the sidelines for now.
Cara, that is good news. As much as I hate the bribe, it's much better that it doesn't turn into their down payment. Part of the reason people should make a down payment is to have actual buy-in.
Looking at the housing market in this area and determining which way things are headed seems a very difficult task. Right now, buyers seem to be out in mass. Everything decent around here in the 200k to 500k range seems to be moving rather quickly. Future supply is difficult to determine. Even more difficult to determine, it seems, is future demand. How many first time buyers are being coaxed off the sidelines here at these prices? How many short sellers who sold in the last few years will be reentering the market as soon as they can??? Many will probably not be in a financial position to do so, but I suspect many will be given that alot of short sellers sold not due to financial crisis as much as seeing how underwater they were in their house and just wanting to get out. Any thoughts on what demand will be going forward in the coming years?
Fred-
I agree and its not just for foreclosures. I tried to get a house a week ago. We bid list price on the first day to later find out 15 people bid on the house and list was somewhere in the middle.
Housebuyer,
Would you care to let us know which house you bid on? I'd be curious to see what type of house is sparking that kind of interest. Don't get discouraged. It's peak buying time right now.
dgg,
There are two issues going on there, timing and money available.
Any first time buyers coaxed off the fence now will be missing from the future market when they normally would have bought. The huge number of buyers you're seeing now is the pent up buyer supply of those people who held off buying during the bubble combined with 1st-timers stolen from the future.
Short-sellers. This gets to the crux of the coming problems in the move-up market. That currently most 1st timers are buying from banks, making those transactions 1 and done. This is severely limiting the supply of move-up buyers now. And whether it's a 2-3 year delay on a short sale or a 5-7 year delay on a foreclosure, those buyers won't even be eligible to buy for another 2-7 years. So, now it's looking pretty ugly for the move-up market. But your question is, will it recover quickly starting 2-3 years from now.
No. Why? Because it's not just about how many buyers there are, but about how much money they are allowed to borrow relative to how much money people of similar incomes were allowed to borrow in the bubble. Self-underwritten loans are not coming back. Interest rates will be going back up. Many mortgage-insurance firms will be cutting back or going under. Credit limits on credit-cards are already being drastically cut. The same logic applies to mortgage loans. I don't know what the number will be for DTI front and back end going forward, but it will be lower, and it will no longer neglect things like day-care when counting on two salaries. So even if the short-sellers do repair their own balance sheets and save up, they will not be allowed to borrow what they did last time around, and they'll be expecting to get a house for it this time.
Combine this with the psychological changes of (a) planning for the contingency of lost income (b) needing a real emergency fund and maintanence fund rather than being able to count on credit cards and helocs to get through rough spots (c) needing more explicit savings for college due to lower expected earnings on 529 plan investments (d) continued increases in health care costs (e) providing for others in your extended family that might have been worse hit in their timing with the RE bubble and stock crash for retirement...
All these things will mean that some people won't be as willing to allocate as large of a percentage of their "disposable" income on the bigger nicer better house. If this cultural shift actually comes to pass? Watch out. We might actually get affordable housing.
Very well said, Cara.
Cara,
Thanks for the thoughtful response. I don't object to anything you shared. It does seem there are so many intangibles to consider when looking at the housing market as a whole. I do agree that with the gov't practically doubling the money supply we are headed for a period of significant inflation and higher interest rates which will impact the economy/housing. I never liked my econ classes in college - especially macro economics. It just seems there are so many extraneous factors to consider that will totally shoot holes in just about every theory out there.
We bought in February, so yes, I have my own bias as to what I'd like to see happen - not another bubble, just a bottom with a steady appreciation to our home over the next 5 years. I don't have a feel for where things are headed. You are right though Kevin - there is manipulation and the gov't is going to do everything it can to stabilize housing.
dgg,
Indeed the macroeconomic effects have that completely out of your control and interconnected complexity enough to make one give up on any predictive capability. (Then again I've never taken an econ course in my life)
The lending standards part, and the delay in re-introduction of moev-up buyers into the marketplace is pretty certain though.
But the TH market is driven by first-timers, not move-uppers. And the TH market had fallen a lot further and a lot closer to its fundamental bottom when you bought than the SFHs have. You're saving money owning rather than renting. Other potential buyers will see that same benefit. The price of your unit is much more closely tied to the median income than the price of SFHs are. And the median income can support your price. Not comfortably maybe, but with two or three years of CPI it will.
So, you might not get any appreciation, but you are unlikely to loose money either. And anywhere you buy up into, is likely to fall more from where it is now and then stay flat, making your personal need for appreciation less.
The move-up market faces the danger of not keeping up with incomes in the near-term. The entry level never faces that issue once it has bottomed. Your TH was cheaper than renting, therefore you bought it within spitting distance of the bottom. And if I recall correctly, in Reston, which will appreciate nicely once the metro extension is completed.
No worries, mate. no worries at all.
Thanks Cara - I do tend to worry way too much. I have to remind myself we are paying less than what we were paying in rent and we're here for many years. Still I can't help myself from following the market and reading this board daily.
dgg,
I'm glad you've stuck around. I'll be looking forward to your advice when we finally get around to buying. A couple personal things have pushed that back semi-indefinitely, regardless of the market. But someday, maybe sooner, maybe later. So, I have a vested interest in prices staying flat for a long time...
All these reasons house prices won't rise in the future. Well, prices are rising. Inventory is falling. Demand is swift. Multiple-offers is the norm.
Statistics don't lie. People do.
Robert,
It's called spring. Do you have reading comprehension problems? because I think I've explained both spring and the concept and logic behind a dead-cat bounce once affordability is reached at least 3 times so far just in response to your comments. As well as giving concrete examples of the ways in which you are correct and wherein the error in your extrapolation of current spring market into perpetual appreciation lies. If it hasn't sunk in yet, no more words on my part are going to facilitate comprehension.
Robert, consider the observations made thus far about the prices rising and the inventory falling, and why it's happening. In case you have forgotten, it's because:
-interest rates at record lows
-$8000 buyers bribe
-the mysterious shadow inventory
-four months of a moratorium on foreclosures
If you cannot process the obvious reality that this market is being temporarily manipulated and that these factors are all temporary, then you're setting yourself up for financial failure.
I have been reading this blog for a while now, and I appreciate the reasoned and thought-through tone of most of the regulars.
If we learnt one thing from the bubble it's that anyone that says "this is the way it is, I know the answer" is certainly wrong.
Statistics do not lie; but statistics can tell you anything - it's just how you present them.
We should wait to see what happens later in the year before we (and by 'we' I mean 'Robert') start declaring that it's all over.
Robert reminds me of all the bubble buyers, saying people would be priced out forever and that prices only go up. Yeah, good luck with that baseless pie in the sky optimism.
Spring has nothing to do with falling inventory and rising prices. Show me any data in the last five years that supports your phenomena.
Each of the last five years, except this year, show inventory RISING in spring. As far as prices go, Spring 2005, and Spring 2009, see prices increasing, while 2006, 2007, and 2008, show prices falling.
There is nothing in the data to support any predictable pattern. Yes, transactions go up, but I never said they didn't.
http://franklymls.com/FX6968775
someone was asking whether I'm seeing organic sales as well as REOs? Here you go. SFH 1400 sq feet above ground, $370k, previous sale $359,900 2002. On the market in January, under contract in 7 days for over list price, delayed closing til now (school-year considerations perhaps?). If you're a 2003 and earlier owner and willing to walk away with what you paid, there are plenty of buyers ready to take that property off your hands. Even way back in January. The fate of the previous owners is hard to say, but they certainly don't have very much bubble appreciation to take with them to a new house, ($11k will only cover one realtor fee if they used one) but they may very well have their own hard-earned savings. No way to know (without searching the tax records by owner).
I've appreciated Roberts comments here. I think it is wise to remember that the D.C. area is quite unique from other urban markets and may defy everyone's expectations in how quickly it can rebound out of this recession.
Robert, you mindless retard, read my post regarding a FOUR MONTH FORECLOSURE MORATORIUM.
Do you think I am lying about this?
Kevin -
You forgot one thing: LOW PRICES!
And I agree with you main point, that this is all temporary. LOW PRICES are temporary.
"show me any year in the past five years"
That's your comparison point? The past five years? Therein may lie your difficulty.
But yes, normally in spring (in non-bubble times) inventory should rise, and for the most part it isn't rising. However we are getting the rising prices that also normally happen in spring. (other than during the great collapse of the bubble). Markets have seasonality. Until we've seen how the seasonality plays out over the year we won't know whether this spring is marking the bottom or just the last hurrah on the way down.
The only reason to care that the bottom can only be told with certainty in hindsight is if you also believe that the bottom prices will be fleeting. If the bottom is an L, there's no reason to care that you're 6 months or even 2 years late to the party.
Give me data or statistics or even just a reasoned argument for why prices are going to rise before I get around to buying. This $10-30k price premium I'm seeing people pay this spring over this winter's lows is not scary enough to make me want to join the fray.
Kevin -
I will acknowledge that there is/has been a four month moratorium on foreclosures. Okay?
What exactly do you think is going to happen? seedragon posted an article that foreclosures were going to spike 25% in 2Q from 1Q. First, is that a figure you believe, and second, how is that going to tank prices?
Kristen-
Sorry for the slow response. I bid on http://franklymls.com/FX7051715
Cara -
Good. Spring is a predictor of nothing except more xactions than Winter.
You can buy now or later. If you're going to be in the DC area for the next few years, you'll make money.
Kristin,
The local economy rebounding (which I agree will happen fairly swiftly) is not the same thing as credit being offered in the manner necessary to maintain high RE prices. With move-up equity being destroyed at a rapid pace, and underwriting requirements tightening significantly, people just won't be allowed to pay as much for RE as they once were.
Yes, houses will continue to sell. The world is not ending. And people with solid jobs and solid credit who find houses to buy that are cheaper than renting should not feel worried that the house is going to break their bank in the coming years.
But calculating in future appreciation into your housing decisions is pure greed and folly at this point. Appreciation in-line with incomes will happen in the best areas in NoVa, but that may very well be all that's seen outside of the most sought-after areas. And if you can buy in those sought-after areas, why are you on this blog?
It's been said here before, but I think it's worth repeating. You make money in RE when you buy, not when you sell. You make money by buying for cheap, whether that's savings over renting, cash-flow as a landlord, or future appreciation potential. This spring market with everyone and their brother seemingly out there tripping over themselves at their first opportunity to buy RE in 5 years or more, is not a good environment to land a bargain.
Robert-
The last 5 years still show the same trend if you look at rate of change. During the spring of the last couple of years prices fell at ~0.5%/month rather than ~2%/month that they fell in the winter. So basically it shows during the spring prices do ~1.5% per month better than they would other months. So if prices are rising 1% a month this spring I would expect them to fall ~0.5% a month in the winter.
I don't know how much prices are rising, so I am not saying which way I think prices will go, just that prices do tend to be stronger in the spring.
Robert: "And I agree with you main point, that this is all temporary. LOW PRICES are temporary."
You really don't know anything about the housing bubble do you? How someone can be so dense, I have no idea.
Temporary? NO."What exactly do you think is going to happen?"
I think in a year from now we'll look at those updated charts and see that this is a short "bump" in prices because four months of foreclosure inventory were withheld from the market. A sustained 25% increase in inventory could devastate the market, as well as any other increases (bleeding out some shadow inventory). All these fence-sitters are jumping off. So who will be left to buy? It's a parade of idiots thinking they are getting a "bargain".
kevin,
Great chart!!!
Wow, we have a long way left to go. This chart also does an amazing job of showing the long slow flat period that will ensue if we don't return to trend the hard way. Look at 1989-1998. Wow. As soon as inflation caught back up with house prices "appreciation" started again, and just as swiftly, the gleam of easy money in their eyes, the bubble started inflating...
Cara, the chart is a few months behind, but it is pretty amazing how clueless people are to call this the market bottom. As I've mentioned constantly, there is all kinds of temporary market manipulation happening. There are desperate attempts to create optimism, confidence, and a false sense of rebound. Sure, the double-digit idiots who haven't spent more than five minutes of research will fall for it (hi, Robert), but the fundamentals in the long run do not support that outcome. The only flaw to this chart is differences of GDP to inflation for the region. Maybe it won't meet the green line, or who knows it could even severely cross is (over-correct).
Calculated Risk, high priced REOs don't sell as quickly. Another wrinkle to the puzzle. Low-priced REOs are selling like hotcakes, as I showed last week with the "actives" to listings for things in FFX with "bank" somewhere in the listing at something like 1:3. These were concentrated under $350k.
While the OC and DC are not in anyway the same situation (their heloc abuse and option-arm dwarfs ours as does the height of their bubble) I think this phenonmenon is worth keeping a wary eye on. Calculated Risk is posting from Matthew Padilla about how long REOs sit on the market in the OC. The cheap stuff that can easily be bought by first timers and cash-flow investors is moving rapidly and can easily be absorbed. But the high end stuff? Is sitting longer and thus having a much greater impact on the inventory.
You may be in luck yet Ace. If high-end REOs are more damaging to the market than low-end REOs.... yikes. We'll have to wait and see (1) how many do we get, and (2) how much cash is there out there to scoop up the desireable high-end buys?
We are not the OC, so things indeed will be different here, but qualitatively different, such that our high-end REOs are rapidly absorbed and have no adverse impact? That's a little far-fetched.
Kevin-
I think your GDP comment is also very important. For the past 3 decades GDP and inflation have both been around 3%. So if you adjusted the inflation line up by GDP than the bubble would not look nearly as bad.
I think the bigger question is what interest rates will do. I think prices are pretty close to the bottom if interest rates can stay at 5%. If inflation becomes an issue and interest rates get up to 8% look at below houses could easily fall another 20-30%.
So if you are not planning to stay in a house a long time it may be risky to buy now. If you will stay a while so you can take advantage of the current interest rates than you are in much better shape.
housebuyer, I agree, but there are no certainties that one will be able to stay for the long term. Certainly divorce, death, loss of job, disability, and relocation could all prompt someone to need to sell. If rates are really high at that point, they could be in a world of hurt. Either way I'd wait until some of this pent up inventory starts flooding the market. No point in buying when there are 15 offers on houses, artificially driving up prices. Any potential sellers out there had better get their house on the market ASAP and take advantage of the new pool of idiot buyers looking for their $8000 bribes, thinking prices will shoot back up. If you're a homeowner, this will be your last chance to walk away with bubble money.
Housebuyer, that's a sweet home. I would have liked more windows but the ones they do have are nice, like the kitchen window.
Cara, I do expect to make a profit when I sell our home, many years from now. I don't get you. We bought low and I expect to sell at a good, fair profit. I don't think that's greed.
Kevin, your being plain rude. You can have this same conversation without using abusive remarks. It will reflect better on you.
Kristin: "Kevin, your being plain rude. You can have this same conversation without using abusive remarks. It will reflect better on you."
That's too bad. Robert deliberately ignores what we tell him, things that are generally conventional wisdom. It's like arguing with someone who cannot move beyond the belief that the world is flat. Robert is obtuse, whether intentionally or not it doesn't matter, and he is an impediment on what are usually very interesting and insightful blog threads about the region.
Cara, that makes sense to me that foreclosures in the mid-to-high end would not sell quickly, since even if there were move-up buyers, who wants to "move up" to a mold infested house just because it's bigger and/or in a better location? (I know not all REOs are dumps but there are more potential concerns of that nature).
And it's definitely harder to make money as a landlord on a high-end house becuase price-to-rent ratios (even in non bubble times, I think) are more out-of-whack at the high-end. Right now a $300k house might rent for close to $2000/month but there's no way a $1 million house would rent for $6,500.
To Kristin: I think the point Cara was trying to make is just that it's dumb to purchase a house with the expectation of profit as a prime motivating factor. Wanting to sell for more than you paid for it is fine, but having an expectation of more than 3% a year is foolish.
Yeah, Kristin: it took only 10 years for this area to rebound the last time around, and part of that so-called 'rebound' included a global housing bubble.
Kristin,
I think Cara was just disagreeing with your expectation of price appreciation over the next few years. The majority on this blog, me included, think it's folly to expect that appreciation.
I agree with what you said about Kevin's remarks though. I absolutely think that Robert is a forum troll but there's no need to personally insult people here. The threads from the last few weeks have taken on a nastier aspect than normal and I don't think it adds much to the conversation.
Ok, thanks JeffB, Kevin, et al. I didn't understand the group dynamics since I'm new here. I enjoy all the insights and am sort of addicted to this blog for some strange reason. I think it's best I go back to lurker status now. Play nice.
Robert, here is the fallout from the foreclosure moratorium:
Post-Moratorium Foreclosure Sales Surge
From the CR thread, I liked this comment:
"Move up buyers are so last year.
The new hot trend: move down buyers.
That means that entry-level homeowners now have the hot properties everyone envies. "
Robert,
How many months of price appreciation at 3% a month you need to get your home price to the purchase level? I hope that at least you are not underwater.
Kristin, I love this blog. Been lurking here for over a year. Always thought this was the best place to bounce ideas/observations/thoughts off of people who really understand the market (no, I would never ask an RE agent). Nothing wrong with someone like Robert not being aware of some pretty obvious and important market aspects. However, when he clings to his lack of knowledge rather than listen to what anyone has to say, he wastes our time and attention. We like this blog to remain troll-free. If my mean comments are offensive, then I don't know how you cope with the rest of the internets.
Kristin..I'm fasinated by the bull slung here, too. Robert, I happen to agree with you on almost every point. I find it amusing that so many homeless people here are housing experts where long time home owners and residents are idiots in their opinions. How easily its assumed the the housing bubble burst due to over pricing instead of market liquidy crash. For the life of me, I haven't seen a shortage of buyers willing and able to purchase homes in excess of 500,000 either in foreclosure, SS or resales espically in FF,Loudon and in Md...and the 400 and under is hot. Even in PW last week we had 5 go under contract 2 shorts, 1 foreclosure 639,900,549,000 and 599,000 with 2 resales of 525 & 575
Oi! We're homeless now!
"homeless people here are housing experts where long time home owners and residents are idiots in their opinions...."
(1) I rent a home.
(2) I owned a house. Sold it at the top.
(3) Being a housing owner is completely orthogonal to ones economic wisdom. It's like saying that a cancer surgeon isn't qualified to operate on a cancer patient, because the surgeon himself doesn't have cancer. It's a fallacious argument, not to mention juvenile poppycock.
Now that you're calling me names, can I call you names, too?
Kevin,
Don't make the mistake of clinging to your ideas too long. I have been watching the markets here for 30 years and would voluteer the following information to support Robert:
1. The median houshold income in FFX County is $100,000 and the median home price in April was $356,000. With 10% down the median household can purchase the median house for ~ 25% gross income at current interest rates. Prices will not fall much farther unless interest rates spike.
2. I purchased my home in 2003 and based on current value (below assessment) it has appreciated 3.2% per year since purchase. So bubble since 2003 is wiped out. Prior to that my previous home had 0% appreciation for 8 years coming out of last bust and then started moving in 1999. I would not bet on going back to 1999.
3. Listings in my zip that I track have gone from 75 sfh in my price range to 23 as of today. That is a huge decrease and all the foreclosures are gone. Last foreclosure sold in 3 days. During the bubble the inventory was less than 10 on average for 2 years. If there is a moratorium bubble or shadow inventory it does not show up in the numbers.
4. The administration change caused a lot of buying. People are still moving into the area for jobs. Econcomy is holding up and people will buy homes as the purchase price is once again close to the rental price.
5. It seems that the market has firmed inside the beltway and is rising with inflation. The market has bottomed in FFX County, and that the market decrease has slowed in PW and Loudoun.
If you buy a good home in FFX you will be glad you did in 10 years. Short term purchases are still speculation but the odds are coming to the buyers side the longer we go.
Arkey: "I find it amusing that so many homeless people here are housing experts where long time home owners and residents are idiots in their opinions."
I'm not homeless and I've lived in this area for 24 years. You and Robert can go skip through the flowery hills where foreclosure moratoriums and other market manipulators don't exist. I'm concerned with the fundamentals, the statistics, and the anecdotal observations that support or refute them. Because I'm not going to shoot from the hip when I buy a house. It's called "making an educated decision". You guys and the millions of underwater homeowners can scoff all you want those of us saying that only dumbasses make the largest financial decisions of their lives based on realtor lingo and emotional dominance over rationality.
David: "Don't make the mistake of clinging to your ideas too long."
I'm ready to buy at any point. But what we're seeing here is typical spring buyer activity, minus an inventory of homes kept off market by the foreclosure moratorium. As soon as they announced the moratorium last fall, I knew this was likely to be the result and knew as well that it would delay my eventual purchase. Always updating my ideas and understanding of the market. I won't buy until I'm all but certain that it isn't a major risk. And if you're suggesting that I'm going to miss out or be priced out by waiting too long, then we can end the conversation right there.
"If you buy a good home in FFX you will be glad you did in 10 years."
That's not good enough for me. I could be forced to move in three years. The whole long-term argument is complete bunk. As the millions of underwater homeowners how they feel about the long term. They are pretty miserable as reality sets in that they aren't going to see prices approach what they paid for a considerable amount of time.
"Kevin said...Robert deliberately ignores what we tell him, things that are generally conventional wisdom."
Kevin - no offense, but a few days ago, you seemed to have come around to the conclusion Cara and I had - that the foreclosure moratorium didnt have much of an impact here locally. Yet you are now back at it, suggesting, now that the moratorium is over, "A sustained 25% increase in inventory could devastate the market".
Again, you have no evidence to suggest that the lifting of the moratorium will do anything locally. If anything, here is a story about how the areawide foreclosure rate dropped YOY, the absolute opposite of the national trend where (thanks to the lifting of the moratorium) it is rising YOY.
http://www.washingtonexaminer.com/local/Area-foreclosures-drop-in-April-bucking-national-trend-44933007.html
Is this a blip, or did we just happen to already see the worst of it locally. I dont know, but its worth watching carefully.
Now I agree, Robert is suggesting prices will rise, but isnt doing much now to advance the "how" and "why" argument forward. However, I think he is free to ignore the "forelosure moratorium" argument until there is some evidence to suggest it has or will have an impact here locally.
http://www.examiner.com/x-2342-Northern-Virginia-Real-Estate-Examiner~y2009m5d16-DC-area-foreclosures-fall-30-percent-in-April-bucking-national-trend
TWB is right. There isn't always a large influx of people coming to DC every administration. It's just a rotation. Obama's spending seems to be directed outward too. That is, all over the country to where it hurts most. Which means our taxes will go up, but aside from the benefits of modestly low unemployment, we won't necessarily see significant GDP increases here. Especially if he cuts contractors significantly.
If you may be forced to move in 3 years then you are not a good candidate to buy a home.
The long term argument is not "bunk". Since you have to pay transaction costs to get in and out and real estate comissions to sell you are almost guaranteed a loss in 2-3 years unless you have appreciation higher than inflation.
I saw many people in Western FFX underwater after the S&L boom failed in the late 80's and those people sold for several 100k profit in the late 90's and early 00's. It was not as bad because there were not as many option arms etc., but if you used a fixed rate mortgage that you can afford the market will come back for most people.
but CRT you never addressed the possible banking changes since the moratorium. Yes the moratorium going in didn't even show as a blip on the radar. But, banks are not in the same shape now as they were then. Calculated Risk said that 38% of the next 200 banks below the big 19 will need to be consolidated, bought, go into recievership, or otherwise liquidated. 38%. That's a lot of banks who no longer have the wherewithal to manipulate the market by dribbling out inventory. BoA has stepped up its REO listings and is pricing them aggressively (with excellent effect of always getting over list so far). At some point that will create the price discovery that yes, prices are still going down.
Sure, it's hard for us laypeople to discern, which is worse for the mortgage/housing market, the Lehman brothers collapse and credit freeze of last fall or the continuing unprofitablitiy of many banks current books and business model. We don't know. But it is an open question, and is something that is most distinctly different between November and now.
Kristin,
My comment was not intended as a personal attack, my apologies.
It's really just a hope for the best, but prepare for the worst attitude that's appropriate for the level of uncertainty we have with the housing market. And the truth is, you may well be proven right when you go to sell 10 years from now. We don't know what you bought or where or for how much. And even if we did we would never reach agreement on exactly where that price stood with respect to the ultimate bottom, or the next peak.
If you've been lurking you'll know that I was supportive of Harriet a year ago, dgg back this winter, Tabitha this spring... I'm hardly the bear here.
But jumping in once Robert's stirred the waters may not be the best time to expect the level of respectful discourse that this blog usually has. Although I for one, think he's stirred up a greater depth of discussion than has happened in a long time. Why? because each of us has continued to watch the economy and market and has been assuming that we're all following the same train of thought, when in fact divurgence and convergence of ideas and trends has occured.
Cara, just curious: How do you find out which bank is the owner of bank-owned properties?
I understand, but you can't avoid that risk.
All you can do is make your best bet. I got in at the bottom in the last cycle in 1992 so I was lucky, but also smart because many people were saying the same thing they are today.
What pushed me over the ledge was that I could buy a house on an after tax basis for less than the rent. It seemed like a good risk to me, even with a 6.0% ARM.
Today you can buy a SFH in my neighborhood with 10% down after tax for less than the cost to rent the same house. They rent for 1,800 - 2,000 and you can get $350k at 5% for $1878 plus 400 for taxes and insurance = $2,278
$2,278 x .75 = $1,709 which is less than rent. People want a SFH and people will buy houses at that price so I do not see much further downside.
Every neighborhood is different of course, but I do not forsee an apocolypse unless a nuke goes off or something. It is a great time to get a good house in a good neighborhood with a good school. People are buying in my area and the school enrollment is up quite a bit (I am also the PTA treasure).
anon412
for ffx cnty it's in the tax records if you click on the frankly link. For BofA, they've been including in the listing a statement that you have to be pre-approved with BofA, so that becomes searchable on frankly FX* america.
CRT,
I'm kinda still not buying the argument that foreclosure moratorium had no effect on inventory. Probably did not read the discussion closely enough, but I believe that most of the inventory that was prevented from coming to the market will arrive, and arrive soon.
As far as the prices go, honestly, I will expect them to drop driven mostly by the higher tier. Since homes are not looked at as the best investment you can make anymore (most of the people probably think that it is cash stuffed under the mattress --- your best investment, well, until inflation arrives) it is not so appealing to direct most of your income to the housing cost. everyone needs a home, but the choice of 5000 sqft, 5-bedroom/5 bathroom homes for couples with no kids yet will no be a standard anymore.
for the lower tier --- all depends on job numbers in the area. they are close to rental parity in the outer areas, in the inner ones --- let's see how many young folks will be hired here next 2 years, who want and can pay $1800 rent or $2500 mortgage for a one-bedroom apartment/condo.
CRT: "Kevin - no offense, but a few days ago, you seemed to have come around to the conclusion Cara and I had - that the foreclosure moratorium didnt have much of an impact here locally."
What I said was that it hadn't created an immediate drop-off in inventory. But if you recall I pointed out that this is the first spring that has seen continually declining inventory. Expect a reversal.
David: "If you may be forced to move in 3 years then you are not a good candidate to buy a home."
Anybody could be forced to move. There are unpredictable life-changing events, such as divorce and job relocation. Of course when I buy I intend it to be for a very long time, but I am being as diligent as possible in making sure that I don't end up 20% underwater. I've gone this long making the right calls, no way I'm going to eff up with my eyes wide open.
david,
not to quibble... but the .75 is for the tax deductiblility? I usually just re-assign that to maintanence and lawn-care costs. Which makes those houses still a lot more expensive than renting.
I've done the math for rent versus own every which way. Starting with that rent just has to cover taxes and interest, because the principle payment is like an enforced savings plan. If people want to justify a purchase they can. They always could, even in the bubble. The question is, can the banks afford to lend them that money? And for how long, at what interest rate? Right now the Fed is buying up all the MBS, what happens to house prices when they slow down with that and banks need to price in risk? 20% downpayments for all, anyone? It dould happen, we don't know.
Also, what's the difference between buying in 1992 and buying in 1998? House prices were flat. If people are uncomfortable with the potential downside risk that would mulitiply the pain of job-loss, divorce, death etc. why not wait another year until it's clear the bottom really has happened?
For Robert:
Foreclosures halted during holidays are now flooding the courts
What moratorium? Record low inventory following a four month pause on foreclosures... who'da thunk it? It doesn't take an active imagination to realize what'll happen when the ball gets rolling again. =)
My largest contention with the uber-bulls here isn't that buying now or recently was the worst thing ever. But I take serious issue with anybody using bubble scare tactics of "buy now or be priced out forever". Those insinuations are insulting and false, as history has proven.
kevin, that last one's Tampa. If you find one that's NoVa specific can you indicate that in the comment? sorry to be a pain.
And Robert did on this thread say that he acknowledges that a moratorium did happen.
I think where we are now is that the jury's out on whether the area buyers will be able and willing to absorb the REO inventory and a which price points. The cheap inventory is getting vaccumed up, as well it should because it's priced at or below rental parity. So there the question is how many more buyers are out there to keep soaking this stuff up compared to how many REOs are yet to come. I don't think we know the answer.
And then there's the open question on how the mid-to-high end REOs will fare. The mid-level represents peak demand, so those may not be a "problem" but the high end could cause some serious damage if there aren't enough deep pockets to swoop in and buy them.
But I'm repeating myself and should stop now.
Arkey: "For the life of me, I haven't seen a shortage of buyers willing and able to purchase homes in excess of 500,000"
My impressions are exactly the opposite for the zips I watch in PWC. Every $50,000 step you take up, DOM goes up, inventory goes up, repeated price drops increase, etc. There's over 15 months of inventory >$500K as of April in PWC.
What IS very typical is outrageous overpricing, perhaps due to the fact that they "can't" sell for less, since they can't qualify for a short sale but can't write a check for $300,000+ at closing, either, like this listing:
http://franklymls.com/PW7045321
2009 assessment: $318,200
Some once-high-priced neighborhoods have admitted they have lost 50% of their value since 2006. I'd say those neighborhoods have settled down. But until the rest of >$500K inventory starts selling at a fast clip, I'd say there is still progress to be made.
"Cara said...That's a lot of banks who no longer have the wherewithal to manipulate the market by dribbling out inventory."
Could be Cara, but that assumes several things. Could be that the banks came to the conclusion it is better to maintain the floor by dribbling out inventory FOREVER, than it is to undercut that floor by dumping. Weve had reasons to suggest the dumping will start soon for 18 months now, yet it still hasnt happened.
A few months from now, if the "moratorium has lifted banks will now flood inventory" theory fizzles locally, it will likely be replaced by a new theory about why a "flood of inventory" is on the way.
Thats all fine and good, but there is a certain point at which you have to say enough is enough - and I for one have hit that point. If and when the inventory starts to rise, I will THEN look for signs as to what is causing it to happen. Until then, I will take the trend of the last 18 months at face value - inventory is declining and shows no sign of ever coming back.
Cara: "kevin, that last one's Tampa. If you find one that's NoVa specific can you indicate that in the comment? sorry to be a pain."
I was just looking for any recent news story about the moratorium and its effects. Thought a little bit of evidence that the world is actually round would widen Robert's eyes.
"And Robert did on this thread say that he acknowledges that a moratorium did happen. "
I don't know if he was being sincere or not, so I thought the article might put things in perspective for him.
CRT: "Thats all fine and good, but there is a certain point at which you have to say enough is enough - and I for one have hit that point."
Quitter;)
Cara,
No quibble, everyones situation is different. For me the deduction is worth 30% if you include state, but I have charitable giving over the standard deduction, so it is all benefit to me personally.
You are correct, I assume that appreciation and equity from paying the mortgage offset the additional maintenance charges. You still have to do the lawn if you rent or the neighbors get pi#$@d :-)
The only difference in buying in 1992 vs. 1998 is that you get to live in the home you want for 6 years. If you don't value the non-financial benefits of home ownership then it is probably better to wait. Most people place a high value on the non-financial benefits and will buy. It is the same trade off as in the bubble. I would have loved to sell my house for top dollar and rent, but that would have meant pulling my kids out of school and becoming a renter again and my wife would not have gone for it. Even for $200K. I know it sounds crazy, but our house is where we live, where our friends are, our church is, our school is, etc.
Everyone makes their choice, which is why I am not living in Gaineville with a much nicer house for the same money. I wanted a shorter commute.
Hopefully, the next time prices peak we will be ready to move to our retirement home and I can get the $200k :-)
Forgot to say that there is plenty of mortgage money available if you have good credit and real documentable income. I use Pentagon Federal and they are at 5% fixed now.
It is much harder if you are self employed, less than 2 years at your employer, have bad credit, or are trying to buy a house you cannot afford.
crt,
You can't dribble out inventory if you don't exist. Whether it's the best plan or not is irrelevant if you're being liquidated. Now, in all likelihood a bank with significant presence in the DC are will be extremely attractive to buyers and hence it won't get liquidated but still. The problem with this game (in the game-theory sense) is that the incentive to cheat is high. One player (or bank) dumping inventory faster gets the highest prices for that inventory because it's earlier in the course of the fall. As well as the advantage of money now versus money later (if you've accounted for the losses already to avoid taxes in previous quarters). And one player can cheat, if they hold a minority of the inventory. We won't necessarily detect it in inventory, but it will continue to show up in lower and lower comps. So, whether or not that inventory appears it is still important to the market prices one way or another, even if sold in bulk as rentals (driving rents down, tying up capital that might have had other uses). That this inventory will go from being non-performing assets on the banks balance sheets to houses in some one else's possession who either owns them outright or is paying a new performing mortgage on them is important.
But, I can see why given all our previous dissapointing hopes of nice big corrections, why given that you're waiting for after the fact to worry about justifying which trigger did what. That's perfectly reasonable.
david
Understood. Just be careful not to then buy your retirement home somewhere that's equally bubbly, and you'll be all set ;)
Passing up that $200k is not really crazy at all. What would be crazy would be if everyone in the US decided to move houses each time there was a housing bubble. Now that would be crazy. And disasterous. And it really only works if you then move to somewhere much much cheaper or are willing to rent. Of course the whole moving to somewhere cheaper is what helped inflate mini-bubbles in places like Chattanooga TN.
Kevin - funny. As an aside, it is going to be interesting to see what happens now that we are actually getting near the "peak" in terms of seasonal inventory listings (ironic since the peak most places this year was 1/1/09). If the inventory comes out more rapidly now, it may appear in the form of "flat inventory" during the time which it normally declines.
Cara - ahh yes the game theory exercise. Interestingly, I was thinking about that the other day. In that "tit for tat" exercise, the normal end result, (after several rounds of cheating) is the combatants realize it is better for them to not cheat. Could it be weve already gone through the cheating phase, and now they are into the cooperation phase?
Personally, I dont think the banks are that smart, plus any concerted concious effort to do this may bring up antitrust questions. So if thats the case, expect more cheating.
The other possibility is perhaps, just perhaps, all this shadow REO inventory may not exist in the quantities we think. If we had omniscience and "knew" he very last snog of shadow REO hit in June-Aug 2010, I can guarantee you there will be several people both here and nationally, (as well as news stories) suggesting "it isnt enough" and that there is indeed "more shadow REO to come".
Could we have already hit that point now? Nationally, I dont think so, but locally, I wouldnt dismiss it alltogether.
David: Pentagon Fed is at 5.7% for 30-yr fixed jumbo (i.e. anything over $417k).
crt
"could we be at that point now"?
The main reason I think otherwise is the time at which underwriting standards improved was mid-2008. The 2007,early 2008 vintage loans still had low FICOs, high DTI's and high LTVs and were bought at near peak prices (outside of perhaps PWC). Until that stuff has aged 3 years I wouldn't say we're out of the woods. But it is indeed an open question whether the self-underwriting of loans had already improved by then. Were the 2007-2008 buyers more conservative in their use of funds and their expectations of future income increases, and their assumptions about the ability to HELOC to pay for maintanence than earlier buyers? Maybe. Some probably were buying because they just wanted that darn house finally and were acting conservatively, but others were the tail end of the naive belief in continued appreciation even after that ball had stopped rolling. What the percentage make-up is impossible to tell now, but will be clear as the vintages age.
Cara going back to your game theory question. I think there are two things that should be added that make it less likely to cheat. First, there tends to be less cheating when there are few players, and the top 5 banks control something like 80% of all assets.
The second is the government can and will make sure a bank does not push inventory too quickly. The feds really want prices to stabilize so they need inventory to fall. Seeing that the government has strong control over the banks now they will make sure the banks do not cheat in the "game"
Kevin -
I do follow your logic on the moratorium -- a flood of new foreclosure listings will tank the market. That makes sense. But, where's the beef?
Certainly you would agree that a 25% increase in YOY foreclosures aren't going to tank this market? It is way too hot. It should have started by now, and....nothing but shrinking inventory, rising prices, and multiple bids on <$500k properties.
Please no more articles about the local markets of CA, FL, NV, or AZ. That's a different world.
housebuyer
yes, which is why the 38% of smaller banks potentially failing is of greater concern. How pro-active can the FDIC be in shutting down banks before they liquidate these assets? I am a strong believer in the efficiency of the FDIC, but at the same time, shouldn't they be most worried about the markets that are faring the worst? Which is definitely not us? And if I were a national bank, where would I chose to sell assets rather than dribble them? Here, where the market is absorbing them and I can still get good money. These become second order effects but they're still real.
"Today you can buy a SFH in my neighborhood with 10% down after tax for less than the cost to rent the same house. They rent for 1,800 - 2,000 and you can get $350k at 5% for $1878 plus 400 for taxes and insurance = $2,278
$2,278 x .75 = $1,709 which is less than rent. "
David,
What general area are you in, out of curiosity? In the areas I watch those rents are roughly accurate but you still can't buy that cheaply.
Two points
1. Yes, I should have clarified that Jumbo rates currently have a higher spread than historically. However you can get a 5:1 Jumbo for 4.5% which is a good product and you do not need a jumbo loan to buy a SFH in many areas of FFX County. I also thought that the limit for conforming was raised in high cost areas, but that was temporary.
2. You place your bets and you take your chances. I personally do not have any issue with borrowing at sub 5% tax deductible with inflation running 3% on a historic average with $1 Trillion in govt. money moving through the pipe. If the velocity of money ever picks back up you will see some real inflation and some home value increase. Will be interesting to see if the Fed can sop it up before the economy starts to hum or if the economy goes down for another count. We could end up back like the late 70's where people had 6% mortgages and CDs were paying 18%. If that happened you would basically have borrowed free money.
david,
the conforming raised limits have been extended, so you're right on that.
What's a 5:1? If by that you mean an ARM with a 5 year start and yearly reset thereafter, I wouldn't take that bet right now just in case that inflation scenario pans out. It's all about the hedging for me.
Robert: "I do follow your logic on the moratorium -- a flood of new foreclosure listings will tank the market. That makes sense. But, where's the beef?"
Foreclosures take a while to enact. The moratorium started in December, the impact of which probably wasn't felt until March when inventory continued to decrease at a time of year when it goes way up. So the question ought be "WHEN is the beef?" Time will tell.
"Please no more articles about the local markets of CA, FL, NV, or AZ. That's a different world."
No they are not. They are different from Raleigh, NC, but not D.C. We've seen unbelievable decreases in prices here. Look back at this blog's main page at the top-right and see for yourself.
I am in 20120 Centreville. My neighborhood is older (built in the late 60s early 70s, but no HOA)but the lots are nice and they are not cookie cutter like the new developments. Prices peaked here about $580k but are now more like $370 to $400 so with ~10% down you can end up with a mortgage ~ $350k. I saw a short sale just went under contract this weekend that was listed at $230k. Don't know what it sold for, but that was a great deal at that price. The neighborhood next door that was built in the 80s and 90s is now about $400-$500 so a newer house is more expensive.
David: the conforming rate was 'raised', but banks for the most part ignored it. Almost all of them consider >$417k to be jumbo, or sometimes they'll treat zone from $417k to $7xxk as an intermediate range, sometimes calling it "Jumbo conforming".
Here Navy Fed considers $415,000 to $729,750 jumbo, but keeps the rate relatively low, with only a tiny premium above conforming. Loans above $729,750 are verboten:
http://www.navyfcu.org/rates/mortgage-frameset.html
About the only place I've seen with low prices for jumbo conforming is Navy Fed, but we have no ties to the Navy and do not qualify.
Oh, and there is no way I would consider a 5/1 ARM, as I can guarantee that rates will be higher 5 years from now, and I'd like to keep my payments fixed for the life of the loan.
Kevin,
I would look at the housing affordibility index or similar measures
http://www.nahb.org/page.aspx/category/sectionID=135
If you pop it open you can see that for Washington the bubble peaked in Q3 2006 when only 20.5% of median earners could afford the median home. That number is currently 78.1%!!!!
The correction has occurred and the decline in median price was 36%. Could it fall some more? Sure, but I think the market is saying something else.
You can also see that Washington never got as bad as some areas. At the peak:
San Diego - 3.6%
San Francisco - 5.7%
NYC - 5.1%
LA - 1.8%
Las Vegas - 13%
Like any other data I am sure there are problems, but I think the trend is clear.
NoVaWatcher
I agree on the fixed rate, but my only point is that some people will find an ARM with 5 years guaranteed at 1.2% lower than fixed for 5 years with adjustment caps of 2/5 to be attractive if that is what they need to buy the house they want. We are not talking about a negative am subprime loan here.
"Kevin said...the impact of which probably wasn't felt until March when inventory continued to decrease at a time of year when it goes way up."
You know, thats possible. If you look at the trajectory of the decline, it got steeper in the March - May period (-13.36%) than it was in the Jan to March period (-11.33%).
Of course, you still have no explanation for why it declined at a rate of -11.33% from Jan to March 09 - a time of year when (in years past) inventory is essentially flat to rising. Any explanation for the rapid decline in this period?
Wow, parts of this thread are a real flashback to 2006.
We already have people guaranteeing profits again!
arkey said: "How easily its assumed the housing bubble burst due to over pricing instead of market liquidy crash."
I thought house price bubble deniers were a fully extinct breed at this point, but I was obviously mistaken.
david,
a large part of that affordability is due to the interest rates not the price, and a change in the selling mix to the low-priced less desireable homes that plummeted faster away from a more typical healthy mix, and some areas (like Burke, where I'm looking and Centerville where you live) have fallen a lot further than others and are seeing the effect of that in healthy sales. If you want something further in you're making a much bigger gamble buying now, since you won't find a "cheaper than renting" monetary cushion and the outlay of money is bigger too.
As for the 1992 versus 1998 comparison, many people do prefer to buy now even if in inflation adjusted terms their house is still falling in price. Hence this healthy spring season out by us.
I, on the other hand, see many advantages to renting over owning, (1) I don't have to rent enough space to fit kids I don't have yet (2) I can rent near the metro even if the schools are not as good (3) I don't need to take vacation or sick days to deal with maintainence (4) if circumstances force me to move there's no sunk cost (5) if better job opportunities arise we could take them without blinking. To give up all these freedoms, I demand more out of my house than I'm getting in my apartment, and I demand it be cheaper to cover the cost of my time and risk. A couple years from now when we're even more settled, and the market direction is clear, we may become less picky. Just not yet. But, we're the exception not the rule, as illustrated by the rapid transaction pace this spring.
P.s (david)
but I whole-heartedly agree that we were never in the same class of bubble as CA, FL, etc. as that data well illustrated.
Kevin -
The inventory numbers are on my side. You have the argument to prove. Every home-buying anecdote on this board is bullish. You dip in your bag for "shadow inventory."
Moving forward, there are a host of experts that are bullish on DC Metro specifically. Or are you ready to admit that DC Metro, at minimum, will outperform every other market over the next 3-5 years?
I have Obama, the Fed, Tim Geithner, etc. on my side pumping up home prices. Buying MBS's, $8k home buyer credit, increasing conventional to $729k, and on and on. (And this is only going to increase if home prices don't respond.)
What's probably going to happen is the Federal government won't stop until California prices start rising. By that time, DC Metro will be on FIRE.
You have an "end of foreclosure moratorium", postal service layoffs, 15 Chrysler dealerships closing.
You will lose.
contrarian,
I just noticed that your boy hal turner reneged on his promise to release the his "advance, leaked copy" of the stress test that he swore he would release. Why am i not surprised.
Now that he has officially reneged, are you willing to admit you were wrong to insist that he was credible and that he did have the advanced copy of the stress tests prepared by the Fed government?
robert said: "By that time, DC Metro will be on FIRE."
robert, how many nights are you performing at the IMPROV this week? your bits are classic.
Maybe I am missing something, but if given the option to own vs. rent at the same price owning sounds like the better option. So if we have hit parity I would not expect it to stay.
If you own you will make the same payments month after month and 30 years later the house is yours and you no longer have a mortgage. The opposite is true with renting your payments will likely go up with inflation year after year and you own nothing.
I personally don't think we are at parity right now. Places may have the same monthly payments, but most places are giving 1-2 free months when you sign a lease. This would make renting 10+% cheaper which is probably fair.
contrarian -
Why 25% unemployment and not 30%?
contrary -
Cool map.
RE: Unemployment
I think you have a customized dart board and you throw a dart just before you post.
Tabitha..today in PW 4 houses went U/C, 3 were shorts, 599,900,619,900 and 550,000 and one regular sale...599,000 which was listed at 90% of 07..on the market 16 days..listed last July for 625,000. I don't know where you are getting 15 months inventory..we don't even have that much left in new housing. It's hard to compete with the SS and foreclosures and they are beating the crap out of re-sales...last week or from 5/10 - 5/16 it was 2 shorts, 1 F and 2 resales...the shorts were the highest at 599,000 and 639,900 the F was 549,900..now, seriously look at those figures...does it look like prices are dropping?..nope..the banks have tarp money and homeowners do not and even the banks are NOT really giving any deals when you look at these properties 09 assessments which some of you hang your hat on.
"...find it amusing that so many homeless people here are housing experts where long time home owners and residents are idiots in their opinions."
Arkey, what's with the attempt at snark? I was born and raised in Manassas and my husband's family has lived in Fairfax and Alexandria for *hundreds* of years. No joke. And we are lowly renters. "Homeless", in your parlance. So does that mean his opinion ranks higher than yours? You are talking nonsense.
housebuyer
transaction costs
property taxes (that keep right on up with inflation)
barrier to entry (downpayment closing costs)
In the bubble these were eliminated by appreciation covering your transaction costs in short order, piggyback loans eliminating the barrier to entry, and the promise of free money and "tax benefits" clouding over the property taxes.
In stagnant markets renting is more expensive than buying. You pay a 10-20% premium for maintaining flexiblity/being too poor to build up a DP.
So, I see no particular reason that the rent versus own equation shouldn't stay favorable for a few years once the bottom is reached. (although true rental parity is unlikely to happen in places like Georgetown, foggy bottom, pick your favorite cool place here)
Arkey,
According to MRIS, there were 24 sales >$500K in PWC in April, with 366 active listings. 366 divided by 24 equals 15.25 MOI.
In the three zips I watch closely, 20110, 20111, and 20136, there were 0/2, 0/22, and 2/19 sales >$500K, with the two sales between $500K-$600K.
Further, almost every "contract" listing I notice >$500K either #1 stays U/C forever or #2 comes back to active.
I see the self-fellating trolls are out in force.
Hey all -- Remember Eva who could not get her house sold in Vienna and could not figure out how to get out of the listing? She finally listed it with another company (and lowered the price) and it is now under contract.
Cara: Back to the NY Times writer. I don't think you called him a "sleaze," that was my label.
"Contrarian said...Despite what CRT says :-), the same thing is still coming to prime/jumbo loans in Fairfax, Arlington, Alexandria, etc."
Could be Contrarian - just substitute "Fairfax, Arlington & Alexandria" for "Fairfax, Arlington, Alexandria, Loudoun, PWC, Maryland, FL, CA, etc." its not just here that has prime loans right???
Fannie and Freddie are insolvent. They have ALREADY failed. They failed in September, and yet, the housing market seems to have found a bottom.
anielarke
Thanks for the update on Eva. Glad to know it worked out so smoothly. That situation was just bizarre. Her house didn't seem out of whack in price with the rest of the neighborhood, and if a small price drop got it an offer that quickly it really must have been her realtor that was the problem. You would think that a nieghbor across the street would have a positive vested interest in selling the house but apparently not with this jerk. Glad to hear it is ending out well.
Contrarian - the point I was trying to make was, you say prime/jumbo loan defaults are coming to Arl Alex & Ffx. I say fair enough, but its not as if other areas like CA & FL dont have prime/jumbos - and if they do implode, I dont see why they would disproportionately hit Arl, Alex & Ffx.
Incidentally, Im curious why you seem to be harping on the solvency of fannie and freddie. The govt has already stepped up once and funded them. If they get into worse shape, isnt the govt going to just step in and fund once again? It makes zero sense that they would fund them once and then (in a potentially deflationary environment when the "answer" is to print money), once they fail again, refuse to bail them out again.
CRT -
You're right about Fannie and Freddie. That's why investors keep buying their bonds. The know they have the explicit (previously implicit) backing of the unlimited money supply of the United States Government.
Contrarian combs the Internet for "sensational" news of the impending collapse of the Western financial system.
I've mentioned previously, there is a niche segment of people that always believe the end is near. This little financial crisis has emboldened them and brought in new constituents. They were preaching the exact same thing after the stock market crash in 1987, the recession of 1990, the Russian default in 1998, and, of course, the Internet bubble collapse.
Always a market for that stuff. It's actually a profitable industry for those who write about it. I think only 50% of the writes actually believe this is the end. Like I said previously, I'm working on my own book.
David: "If you pop it open you can see that for Washington the bubble peaked in Q3 2006 when only 20.5% of median earners could afford the median home. That number is currently 78.1%!!!!"
Call me when it nears 100.
Robert: "I have Obama, the Fed, Tim Geithner, etc. on my side pumping up home prices. Buying MBS's, $8k home buyer credit, increasing conventional to $729k, and on and on. (And this is only going to increase if home prices don't respond.)"
Yeah, and what does all of that do for home prices in the long term? NOTHING. It's fools gold.
"Robert Said...Contrarian combs the Internet for "sensational" news of the impending collapse of the Western financial system."
I saw a piece on the news about that the other day - they called it "Pessimism porn"...
I saw something about Robert the other day: it was called "shilling".
Oh, and NOVA watcher is such the sage.
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