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Friday, February 26, 2010
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68 comments:
Here's a link to a Thursday news story that the Obama administration is considering banning all foreclosures unless they are screened by HAMP.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ahuuwBS8KYq8
I'm not sure of what it means, as I gather the performance of HAMP so far has been less than stellar. However I gather that it is meant as a delaying tactic against another big leg down in the housing market.
c,
It's insanity is what it is. I really don't understand what the point of more delaying is. We've been in a delaying mode for over a year now, this is just a national method. But does the nation as a whole need this?
I guess it's about giving the economy time to get on its feet and start providing jobs for the unemployed. If the delays can tide people over until they have jobs again, then you're actually avoiding a lot of unnecessary dislocation and pain. But I don't see it working.
A different take on home equity:
neilsen wire
Instead of what percentage of homeowners are underwater, what percentage of home equity in a zip is owned by the owners. If one could read the itty bitty blobs we appear to be in the light green to green of 5-30% equity or 30% equity and above.
I have no idea if this includes the no-mortgage folks, but I'm guessing it must.
Neither yesterday's measure nor today's are the relevant one for determining the number of distressed sales to come, but they definitely give different spins...
c,
This means administration, fed and treasury are freaking out on major double-dip in housing on the horizon.
Home prices will find intrinsic valuations eventually - let them try delaying tactics all they want.
spider,c,
It's just window dressing anyway. What do they call that now? Optics?
If you actual stood a chance of qualifying for HAMP the bank wouldn't be foreclosing on you anyway, a good modification to an eligible borrower keeps money flowing and money in their pockets. So, this will add maybe 2 weeks or 1 month to the process, big deal. It's just about optics, the administration wants to look like it's getting tough on banks, and not letting them throw people on the street without at least trying to see if they could modify the loan first.
The delay will be miniscule compared to the existing delays, it's just optics.
Anyone know of any "HARP" success stories?
Cara-
I am not so sure all banks would rather modify than foreclose on a loan even if the mod would work. Seeing that most of the loans have been securitized the bank doesn't actually care about whether the loan continues to pay. Many of the loan servicers get additional payments for foreclosing so it is often better for the bank to do this than to get small servicing fees for the future.
Also for the people who went heloc crazy it is much better for the original loan to foreclose. If they go through HAMP everyones payout shrinks. If they foreclose they get paid in full and the helocs take all of the losses because they are junior debt.
Cara, c
There is always side-effects with interventions such as this and others:
- 8k tax credit pulls forward demand, pressures rents immensely - not great for future housing prices
- HAMP keeps shadow inventory off the market, speculative home building goes on as I posted earlier - not great for future total housing supply.
As Cara said - this could very well be window-dressing given the elections are getting closer & democrats can use all the help they can get.
housebuyer,
One thing I've never been really clear on, does the servicer really make these decisions on behalf of the actual owners of the loan?
That's always seemed problematic to me in terms of conflict of interest. (I miss Tanta).
Isn't one of the HAMP provisions that the modification must be more profitable than foreclosure? I'm pretty sure it is.
GDP up highest amount in 7 yrs.
Sorry to hijack today's thread...Regarding the debate everyone had yesterday about increasing health care costs, I'd encourage you all to read this enlightening article from The Atlantic Monthly that was published back in September.
It's very long, but worth it. It really shows you that this entire debate is completely missing the point - we need a health care overhaul, not a health insurance overhaul. The latter just exacerbatest the problems.
One particularly useful analogy - you don't pay for oil changes & gasoline with your car insurance, or light bulbs with your homeowners' insurance, so why the hell are we using health insurance to pay for regular checkups & prescription medicine? (Poorly constructed tax incentives & the status quo)
Cara-
I didn't read CR back then, but I hear she was a very good writer. In theory the servicer is supposed to act in the best interest of the investors, but usually MBS had billions of dollars of loans that are split up into pieces sold to dozens of investors so the investors tend to be somewhat removed and trust that the servicer is doing the right thing rather than running the math on each individual loan. There have been a few law suits against servicers for acting in their best interest rather than the investors.
I'm with Cara and Reecon I am done talking about our medical system. At least when we fight over banks it is somewhat related to housing. This is about as unrelated as we can get and just makes everyone mad.
VA_Investor,
Excluding inventory changes, GDP would have been revised down to around 1.9% from 2.2%.
Not going to continue the HC discussion, i skipped right over it yesterday. But, i have to share a funny thing that happened while i was working on my personal taxes (using H&R block @home software). Since i'm self-employed, i can deduct my premiums. I entered the amount i paid in 2009 and a message appeared: "The amount seems high, are you sure it's correct?" Even H&R block thinks i'm paying too much :)
While i think the HC discussion is boring as hell, the cost does affect how much house i can afford.
novahog-
That is a humorous and yes unfortunate at the same time.
Well Harriet,
Isn't the fact that businesses are restocking good news? Why would they unless they anticipate sales?
"housebuyer said...
Pat-
That lifestyle is available in most of the country. Although it is hard around expensive cities, I think the bigger issue is that people want more stuff than they used too."
Housebuyer, I agree with you. I think the issue why people might not be able to see themselves as middle class now is because what they want is more more more. I grew up at the bottom of the rungs and I don't really recall thking of us as poor as we apparently were. The idea of what constitutes a middle class lifestyle might be changing?
The house two doors down from Arlington's most dangerous hoarder finally went UC, with only a token price drop of $10K.
I'm happy someone bought it so I don't have to keep tinkering with the pros & cons of living there...
OTOH, the new home which borders the hoarder's backyard was taken off the market after 1000+ DOM...
Or maybe we need to recognize that middle class in this are is absolutely NOT middle class in many other parts of this country...
Hoarder? Was that a person that appeared on the show or am I totally clueless??
"It's insanity is what it is. I really don't understand what the point of more delaying is. "
It is about two things...
First, people who don't understand economics...
...and second, people who don't care what the economy/housing market does so long as it doesn't do anything bad before November.
Wunderbar-
I don't think they were on the show. But they had tons of "trash" all over their lawn house... It is very ugly to look at.
Wunderbar, housebuyer,
it's not just ugly. a blogger (annie larke?) posted here before that one of their teenage children died of asthma and the rest were taken away by the county but got them back later after beating the county in a court. that's why i call it dangerous. i worried about the health threats living so close.
Wow, that is crazy! I suppose there would be lots of potential for having "critters" move from their home to yours. Also, depending on the situation inside they might also be an explosion waiting to happen.
MM,
It's interesting that in the description of the Frederick St property, it says, "nicely updated." I feel like I'm in a 40 or 50 year time warp looking at the interior of that house.....
But it does look squeaky clean.
How is our weather affecting the local market? What will happen when the forsythia (let alone Cherry Blossoms) breaks out?
Will supply increase enough to over-run demand or will bidding wars ensue?
Just wondering. No horse in this race at present. I do have a lower-end property that I am prepping for sale. It's a week or two out and my agent keeps contacting me for a date or chance to show people in the office.
Any thoughts on actual inventory increase (vs. seasonal)?
Pat -- re: your charge of Housebuyer drinking the "Republican Kool Aid", I find that ironic in that you regularly canonize Democrats and their policies, and demonize Republicans and their policies.
The most strident supporters of any position, those who can see no merit in the other side, (be it political, economic, etc.) are the biggest Kool Aid imbibers out there. Contrarian, and his inability to conceive of any world in which we get inflation comes to mind...
I would like to think I speak for many here in that we see merit to both sides of many political policies and personas -- we sample a bit from both, see where they are right, and where they are wrong.
Thus, before you accuse someone like HB who seems well reasoned on so many levels, of drinking "Republican Kool Aid", recognize that you seem to step right up to the Democratic fountain and...glug, glug, glug, glug, glug, glug, glug
Oh and before you turn on me and call me an operative for Newt Gingrich or the like, for the record, last time around I voted Democrat thank you very much.
Anon-
Thanks for the back up. I don't know why I keep on finding myself in the middle of these debates that are totally off topic particularly since I don't care that much about the topic. I really need to keep my comments more based on housing.
Has anyone else noticed a pretty significant uptick in Redfin properties since the snow subsided? I am getting 2-3x as many properties as I was in January even before the snow.
HB says:
"In reality the main reason that I don't want the government involved is they mess up nearly everything they get involved in "
Really? The post office moves mail
for 43 cents, FeDex charges $14 for 3 day air.
Ever hear of the Manhattan Project?
Ever hear of the Hoover Dam?
How about the Interstate Highways?
Project Apollo?
How's about the cause for Malaria?
The Panama Canal?
Ever hear of AIDS Treatments?
How's about the Internet?
Sorry, HB, when I say you Drink Republican Koolaid, that's exactly it. The Conservatives lie so easily and so often, that it's hard to fall for it.
And as for Drug Advertising, do you think Drugs are Needs or Wants.
Do people Need pharmaceuticals or do they Want Pharmaceuticals?
I'm glad you also recognize that about half the cost of drugs is the Marketing costs.
Pat-
I agree the post office is actually one of the best quasi government agencies. Although they can't move mail for 43 cents. Yes this what you pay, but they pay more thus huge loses. post office loses
Which one of your marvels was efficient. Maybe some where, but probably not most of them. A lot of those projects were made to give people jobs and they didn't really care about the cost. I don't find it impressive creating roads or dams if you are willing to spend enough money.
Do you want me to create a list of all the disasters the government created such as the Vietnam war (how did that work out for us), the cold war, Katrina Response, Freddie and Fannie, setting up social security only to work if population is growing rather than the Brazilian method where each generation pays for themselves plan, running up an enormous debt over the past several decades while we were the most prosperous nation... If you want I can come up with a bigger list.
In general I am not that anti government I just fear when they are trying to get their hands deeper into the economy.
Pat,
"How's about the cause for Malaria?"
Yes, how about the cause for Malaria? The USA and UN send so much money for this cause yet so many people still go untreated. All it costs is a cheap mosquito net, but people are not getting the nets because it's a beauracracy in charge of it.
There are programs that work and programs that fail, if you cannot understand this then I wonder which "kool-aid" you are drinking?
Va_Investor,
I went to an open house in my townhouse neighborhood this weekend, and the agent seemed fairly optimistic about the price we might command if we put up our townhouse as a regular sale. The agent suggested that the weather was hampering buyers, but I don't agree.
The reasons I don't agree?
Every townhouse in this (actually, quite nice) Leesburg neighborhood, except for one---apparently pulled off the market or rented out--has been sitting on the market for weeks now. I think the pricing seems a bit erratic, too. People are pricing their homes based on when they bought them. Height of the bubble? Then they expect a WTF price, even if, especially if, it's a short sale. The short sale that I saw this weekend, overpriced, I think. Some upgrades, but not many. 35-60k higher than several other comparable neighborhood short sales and foreclosures over the past year. A potential buyer at the open house, who has been living with friend or family for one year, had mistakenly thought she was looking at another short sale TH priced at 219k (currently under contract), which, I think, is really underpriced, considering that these THs sold for the mid-200s when they were built in the early 2000s. She wasn't about to make an offer in the high 370s.
The 399k end unit regular sale price? Knocked down 20k.
The other reason I think there's a problem with townhouse pricing in my neighborhood? I've seen Leesburg and Ashburn area houses fly off the market in certain areas and mid-level price ranges. If the entire market were healthy, everything would be flying. I think that people on this blog were right, the first time buyer 8k bribe did cause demand to be pulled forward. In the fall, THs here priced in the high 300s sold like hotcakes. Those who have followed suit in 2010, aren't having the same 'sell-it-while-it's-hot' experience. I hope these homes sell, but I see a glut forming: more houses, no new contracts.
I've already posted this story before, but I think the weather is just an excuse, not a real reason, for a slow market. If people really want a property, they'll do anything they can to get it. I saw that the weekend of the December snow storm, when there were people crawling all over the 469k foreclosed townhouse on Greg Roy Lane in Herndon 20171 (sold for 501k).
housebuyer,
i counted 31 SFHs in the last 7 days vs 67 in the last 30 days. don't know how that compares to last Feb.
but only two in the 31 i could afford! so i'm still 'snowed in'...
REdealSEEKER,
Perhaps it's because the deals have come and gone in your area. Are you talking reo's and shorts? Both have increased in price - some over 40%.
Any demand pulled forward would most heavily affect areas when 8K meant something (ie. lower-end). I don't think upper 300's for a TH in PWC is lower end, but I don't think you can make the demand pulled forward argument just quite yet. There were plenty of people sitting on the sidelines post 2003.
Off Topic. (Forgive me it's not HC or Politics)
Isn't the best time of year for planting azaleas fast approaching? I thought someone on here mentioned late March.
I need to have a new roof, gutters, and trim put on. Plus, I need to have a few trees trimmed. And a privacy fence for the backyard needs to go in. But I'm thinking a little landscaping as soon as spring hits will be in order.
My $0.02
mytwocents,
I think the garden stores are going to have a boom year. A lot of homeowners are noticing some of their plants killed or badly damaged by the heavy and persistent snow (and now the wind, which is really tough on azaleas). So they will have to replace some of the plants, and for psychological reasons probably a lot of people are really looking forward to seeing some spring color.
The end of March is good for planting bare root roses, though I notice people don't do that much around here. It can be a good time to plant azaleas but some of these are fragile, and if it stays colder than normal here, I think I'm going to wait a bit longer to buy any this year. If the ground stays frozen we may not have much choice!
I think you're right about the market overcorrecting itself. The 219k townhouse is evidence of that. But with the taste of the recent deals in people's mind - a 295k foreclosure, and a 300k SS that recently closed come to mind - will people willingly pay 70k more for a short?
Short sales in a neighboring SFH community have increased in price, but the high level of demand remains. Most only stay on the market a few days before going under contract.
While the high 300s isn't necessary extreme "low end" for Loudoun, I think my TH neighborhood can be considered a first-time buyer's market (lots of young families), as well as a market for those who are likely downsizing (e.g., we have some people who moved here after divorces). But why pay high 300s for a TH, when you can get a SFH across the street for as a 425k short?
Maybe we wait until spring, but I'm seeing lots of spring-like momentum across the street (SFHs). Very little momentum here (THs).
Ace -
And since there has been significantly more RE activity in the past year, more people may be excited about making their new homes look nice with plants.
Sorry for all the errors in my text - I guess I've got too much going on at home....
Good point, REDS.
Anyone going to the home and garden show out at Dulles?
Do you have a link for the home and garden show?
Sorry, SW, I saw it advertised on TV rather than on the web. They did mention that they have a website where you can get tickets for $3 off but I didn't jot down the URL. Hope you can find it quickly.
maybe this is it?
http://www.capitalhomeshow.com/ME2/Sites/Default.asp?SiteID=D7442DD908D345AA81661307872BE5FA
Va_Investor,
I think March would be a great time to list your property. I would put the odds that you get above list very high in March. If the first weekend in March has nice weather I could see you having 2x-3x the attendance you would have had most Marches because February was filled with so much bad weather. And we all know people start worrying when they see a crowded open house and overbid.
Cool, Ace. Thanks for posting. I love garden shows. And it's this weekend everybody (you 2cents).
http://www.capitalhomeshow.com
Thanks for the link!
tbw,
Hope you are right. I'll let you know. It's only about 140K. It will be interesting to see the breakdown b/t first-timer's and investors.
A neighbor called me and wants to rent it for 3 yrs. I guess that's my fall-back. He saw my contractor and did a walk-thru. He is paying $1,400 for a smaller unit that is original to the 70's. He claims his LL won't fix anything and that he went all summer with no AC. Puts some red flags up for me.
I think the low-end bounce is about done.
I have said we are in a deflationary depression - a complete collapse of credit.
Here is the WSJ this week:
Lending Falls at Epic Pace:
U.S. banks posted last year their sharpest decline in lending since 1942, suggesting that the industry's continued slide is making it harder for the economy to recover.
While top-tier banks are recovering at a faster clip, the rest of the industry is still suffering, according to a quarterly report from the Federal Deposit Insurance Corp. Banks fighting for survival, especially those plagued by losses on commercial real estate, are less willing to extend loans, siphoning credit from businesses and consumers.
A collapse in credit is deflationary. Contrary to what CRT thinks, Bernanke can throw all the money he wants onto the bonfire but the entire economy is going to collapse.
This most recent implosion started in Dubai, then spread to Greece, and is currently infesting Ireland, France, Germany & the U.K., before it heads to the U.S. and then China.
Without credit, very few will be able to purchase a home. Less credit, fewer buyers. Fewer buyers, fewer sellers. Prices drop, more and more.
Deflation Rules! :-)
Contrarian,
I do believe deflation is a possibility. I would definitely not discount that scenario like others. I put the odds at about 30%. Throwing money at debt unwinding of this magnitude hasn't succeeded prior to this.
Having said that, economy is so much dependent on human psychology and animal spirits that it is highly impossible to predict specific outcomes one way or the other.
If major deflationary scenario were to materialize - we should see economy double-dip in next few months. I do believe we are getting close to that inflection point & which way we go is going to be very interesting indeed.
VA-
Are you considering taking the three year contract or not. That is a pretty solid cash flow getting ~17K on a 140K house unless there are really high condo fees or something like that. If not you may want to advertise to investors you have someone lined up.
HB
From your Article:
"The service's total mail volume plunged by more than 25 billion pieces, or 12.7%, to 177.1 billion pieces. That drop was twice as much as any mail volume decline in the Postal Service's history.
There is a strong correlation between unemployment and mail volume, according to Corbett, which means that mail volumes will continue to decline as the unemployment rate climbs.
"
As for most of the things you are complaining about, those were Conservatives screwing up.
Citing evidence that right wing republicans can't govern isn't proof that Government can't function.
Citing the fact that George Bush got drunk and looted the Treasury only Indicates that Republicans shouldn't be given the keys to the Government.
HB
If you think the Post Office loses money on First Class mail, please tell me what they do make money on, as they are not supported by the treasury.
The post office has been losing money since 2006. The Post Office strives to survive
HB,
Do you believe in these numbers, i mean in 1400/month for a 140k property? I know some places in herndon that people tend to rent for about that amount of money (2-bedroom units at least), but they did not drop below 180-190k in 2009. Rental market is not too bad there, a lot of it contractors.
Yes, Kon,
I made the whole damn thing up. I paid about 100K 8 mos ago. Reo all renovated. I've been getting 1,350. Just a big f'ing liar.
I'll sell if the $$$ is there. I can find more deals. If not, yes there is good cashflow for smart people.
Oh, no! A bank failure in Carson City, NV!
The Ponderosa has imploded.
p.s. Kon.
You missed the market at Four Seasons and Reflection Lake. Stuff was ging in the 80'sK. Do the math.
"I have said we are in a deflationary depression - a complete collapse of credit."
Oh really?
"Comment deleted
This post has been removed by the author." - Contrarian
Leroy,
Pretty creative, huh? ;-)
Pat-
As I said I am not partisan I think both sides of the government have made big mistakes. If you really want me to I will create a list of Democrats major mistakes, but I really don't feel like trying to think about whose fault many of these catastrophes are.
Saying that the post office can't handle a 12% drop in mail is like saying AIG was run very well and profitable. They only started losing money because people started defaulting on their houses as a historic rate... These companies should be able to handle downturns and as downturns get worse these companies need to adjust.
Va_Investor,
I'm not debating the sales value and your ability to find deals.
My point was more about the price to rent ratio. If one could get around $1400/month cashflow from a property that was bought for 100k, it seems to me that prices in that specific neighborhood overcorrected really a lot. Just wonder why other investors did not bid this place up. Probably you are very good at timing the market. Congrats for that.
Sorry Kon,
Thought you were questioning my truthfulness (a sensitive area for me). Anyway, many areas overcorrected imo. They have bounced up pretty dramatically. At the time I bought the place in question, there were 3 or 4 offers. It had been completely updated and was spotless. Investors have been out and about for quite some time.
I can add only two things about the post office. The cost of a first class stamp is 44 cents rather than 43 cents. According to the postmaster at the Rosslyn Station it is very underpriced and is subsidized by all the other postal services. He also said that the flat rate box has been a very effective competitor with FedEx and UPS and makes money. The flat rate box allows you to ship up to about a 70 pound package anywhere in the U.S. for a flat rate which is much less than what FedEx or UPS charges.
The Post Office is nearly insolvent.
The culprit is, per usual, unfunded pensions.
"We will need [some assistance from Congress] or we will have difficulty paying all of our obligations this year," said Joe Corbett, the Postal Service’s chief financial officer. "And going into next year, we might not have enough cash to operate. … We are dangerously close to running out of cash."
Joe Corbett, huh. If he is involved, I can bet the USPS is in bad shape. Was a Bearing Point CFO for four months (check their stock price) , than worked for Fannie Mae as a consultant with no direct reports (check Fannie Mae stock price) and CFO style comnpensation, now USPS.
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