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Wow, quite an eviseration of that idiot—and I’ll say her name loudly here for the cheap seats—TAMI LUHBY. She should be shot…no, I don’t mean that. She should have her fingers broken so she can never again write another foolish article…no, that wouldn’t be right. She should have her typewriter/PC taken away from her so she will never pollute the world with her idiotic thoughts. Well, I do believe in freedom of the press, even the stupid kind. So, she should be exposed for the idiot she is, and CNN/Money also. Good job, IHB.
About the condo, I’m glad that the owners aren’t the usual HELOC-abusing deadbeats that we have grown used to here at IHB. But what is the deal with the gingerbread house? Is that where Hansel and Gretel live? Or the wicked stepmother? Or Tami Luhby???
“Housing expert”
The new code word for “realtor” (little ‘r’). The reporter tips their hand on this one.
The real cure isn’t foreclosure, the real cure is modifying the accounting rules so the banks have to recognize the loss on the homes they are in default on and are holding.
People wonder why the market is so sticky in places, but the answer is simple. The banks.
The banks won’t sell a short sale for less than market. They don’t recognize the buyer risk in buying the short. They take months, as in 180 days on longer to go from listings to sold on a short and that is with an offer getting put in on the first weekend it is listed.
They alo make up 80% of the market in many locations. The equity sellers command a premium simply on the fact that they can sell and close quickly.
So again, the real fix is the accounting rules. When the banks have to stop pretending that defaulted loan is still good, then the banks will correct the over extended borrowers.
When the banks are forced to recognize that reo at realistic rates, the banks will sell them.
Until then, we are not seeing liquidations. We are seeing a market dominated by a few sellers that don’t need to sell.
Exactly, combine this with low interest rates which will be headed to all time mortgage lows and you have the housing market for the next 3 years.
The US market has been the gold standard due to transparancy in accounting, business ethics and stable social and political systems. Transparancy with govt. sanctioned mark to fantacy accounting, extend and pretend has made accurate account passe. Business ethics, a foreign concept on WS. The stable social systems has been eroded. The political system is still stable. Other countries are competing with America on all four catagories and surpassingthe USA on COG and COL. Unless the US has a renewal or the other countries implod (economically or by war), the US days are numbered—likely Spanish decline.
The US costal region is a serfdom. One might “own” the house, but the mortgage is so heavy as one living under a feudal lord.
I don’t believe that the people in government or the banks really believe that foreclosure is the problem. They know that foreclosure is the long term solution, but it hurts the banking cartel’s bottom line, and their boards of directors and the politicians they own will not allow that to happen.
Besides, how on earth would the government be able to sell “foreclosure is the long term solution” to the American people? These are the same people who went and bought a house just as the peak was deflating for an $8K tax credit. People who overpaid by hundreds of thousands because someone dangled an $8K carrot in front of them clearly aren’t ever going to comprehend economics. I really hope that IR’s prediction regarding strategic default comes to fruition, because I think that’s the only way any progress will be made. There is probably some strategic default percentage threshold the banking cartel has in mind before they come to the bargaining table.
I forgot to ask my question: What about this solution: Principal reductions that come with a serious credit hit, on par with foreclosure? Do you believe that would create a sufficient moral hazard?
That will keep the government happy because they’re “keeping people in their homes.”
Even with a short sale, one might be able to get a new loan in 2 years.
How is the govt going to justify the bailout of commerical real estate collapse? Keeping the store clerks employeed? Necessary to keep competetion and distribution outlets open, for interstate commerace.
BTW: Last trip to SCP in CM, lots of shoppers and buyer with the water company/district rebates. Didn’t make much sense when the resources to produce a new washing machine are factored in for conservation. Great stimulus package for Sears, Korea and PRC (makers of most of the high efficiency washers).
Well, what if the credit hit makes that prohibitive… like bringing the credit rating down into the sub 500s. Also, I believe that most people in this boat have never had something like foreclosure or “reassessment” happen to them before, and it could totally scare them straight.
Who knows?
If a bank wants to reduce principal sans gov/t subsidy, by all means fellas - knock yourselves out.
The gov/t should in no way be involved with this process.
Hey socialists - i hope healthcare becomes an even bigger success than our socialized mortgage market! This principal writedown argument is the same as healthcare’s “save money in the long run” MY ASS. D_I_S_A_S_T_E_R!
Why doesn’t the government just buy all the houses at this point? It could overpay and bail everyone out and leave the taxpayer holding the bag just as effectively.
Because it is more efficient to try to incentivize individuals to step up to hold the bag….
AZDavidPhx
The REA and the banksters would not be getting their cut.
Better to bleed the cow repeately, slowly and painfully than cure the underlining disease. Bleed it for all it’s worth.
I just waiting to hearing the lenders say that they will lend at an affordable DTI of 60%. Another chance to sign-up for free rent and/or the Ponzi scheme. I missed the last round.
From the politician point of view: who would you rather be mad at you, the 1000 banksters with almost unlimited funds and time to campain for or against you or 1 million unemployed or underemployed voter that can be bought for a few more unemployment checks or slight of hand tricks on mortgage modifications?
2% of the people actually think, 5% of the people like to think that they think, and most people would rather die than think.
“You don’t need to think. We will do your thinking for you and you will be happy.”
Thoughts are more dangerous than guns…. We don’t like our citizens to have guns, why should we allow them to have thoughts. Keep them distracted with entertainment and amusement.
I would MUCH rather have the millions of voters mad at me. They can be easily manipulated. Just jingle the gay marriage or abortion or “fightin’ for firdom from the terrists” keys in front of one of these idiots and you’ve got them eating out of the palm of your hand. The banksters… they can spend infinite money to sway the opinion of the millions of mouth breathing Wal-Mart shoppers. Do not cross them.
es,
Exactly my point. Nothing to fear from Joe and Suzie Six Pack who providing for their family. Fear those that have lots of time on their idle hands.
Banksters are like the mob, they both have long memories and will wait for the opportune time. Maybe their one in the same or have a wide overlap. Gives honest bankers a bad name.
Love the little playhouse. I think it has electricity from the description. That’s a perfect place for my 18 year old son to live. Can a 6’3” person fit in there
One thing I hate about this article:
“These owners resisted the tempation to spend their equity as it accumulated, and now they will get a check at the closing table for more than $300K. Their lives during the housing bubble was boring by the standards of conspicuous consumption of their HELOC abusing neighbors.”
That’s horsesh1t. So, they are still getting over on the american public by SELLING a property that is way over-priced. This is one huge thing I hate about all the blogs on housing. If you didn’t get a HELOC for the max cash of your house value, but instead just sold it and pocketed the cash…all is well. There is no difference. Someone has to pay for that bloated house, as long as it’s the next sucker…everything is ok. As long as the next guy gets ripped off and PAYS FOR IT, man, that’s a good deal.
The whole market is FRAUD, just because some baby boomers ripped off the younger generation through fraud and get the benefit of it, does not make it right.
No, it’s not a good deal, we are *ALL* getting screwed. Personally, I hope the entire financial system collapses and we form a government that actually represents the will of the PEOPLE, no the will of bean counters who do NO WORK, just collect interest. Lazy wealthy good for nothing banksters. Our society is so screwed up, it’s ok to not do a damn lick of work if you gots money to lend us po folks.
You are forgetting the even more responible people who bought in the mid 90s with 9% mortgage rates, refinanced at 4.5% and now have a monthly payment cheaper than a 1 BR apartment.
Heck, in certain parts of the state (Riverside) you can do this today just by buying a house. My monthly payment (not counting taxes and insurance) on my 4 bedroom, 2 bathroom house with a 3 car garage that I bought a year ago is $75 less a month than what I was paying for a 1 bedroom apartment with no patio, balcony, or covered parking 3 miles away.
Swiller,
I agree with your outrage. The point isn’t that everything is OK with current prices, the issue is how the owners managed their debt. The ones who didn’t go the housing ATM did everything right, and they are obtaining the benefit of their right actions. The fact that this benefit is out of proportion to what they did due to the housing bubble is a secondary issue.
So to put it another way:
There was a huge wealth transfer towards the responsible bubble participants.
The irresponsible participants ultimately lose, and the responsible folks who did not participate pay the price via inflation in: rents, housing prices, college tuitions, health care, etc.
I estimate that between 30-40% of Southern California housing is owned by folks who bought in the 90s and 9% mortgage rates, refinanced at 4-5% rates and now live the high life at the expense of the younger generation.
There is no recourse for this, they won.
Yup, those people won by all accounts. They have miniscule mortgage payments, mountains of equity, tiny property tax bills due to Prop 13, boatloads of dispoable income and are in their prime earning years of their careers. The current first time buyers are definitely getting the short end of the stick.
Until the pool of current buyers dries up, there is no ending this insanity. Being at the right place at the right time makes all the difference in the world.
If mortgage interest rates fall to 4% or lower the people who bought at 10% lower prices than current will benefit greatly.
Meaning the people who bought when the sky was falling in early 2009.
The people who bought at the bottom of the interest rate cycle at less than 5% will never get to refinance. There is no refinance gold for them to mine. When the cost of borrowing goes up around them, they may be able to extract some value if their mortgage is assumable, but they won’t get the same advantage as 90s owners who saw their cost of borrowing money decline about 40%.
You are right, I doubt there will be another opportunity in our lifetime for such a widfall as the mid 90s buyer.
Why extract equity from your primary residence? I thought we tried that and got HELOC abuse. Lock in a good solid rate today and paying the property down should be the goal. Predicting rates and economic environments 10+ years out is not something for the masses.
I agree that there will never be an opportunity in our lifetime like buying prime OC RE in the mid 90s. In ten short years, prices tripled. With prices tripling and property taxes tripling, the cost of entry into these markets went through the roof. We’ll see how these places hold up in the years to come. At this point, who knows…anything is possible.
“The current first time buyers are definitely getting the short end of the stick.”
The first time buyer are only getting the short end of the stick if they buy. This cycles around and as IR says, “Timing matters”. I bought in the early and mid 80’s when rates were 15% and 13%. The only losers are the ones who jump before houses are dirt cheap. You have to wait for it or pay, pay, pay.
“You have to wait for it or pay, pay, pay.”
That strategy works in a normal market, we are witnessing anything but normal. Just ask anybody who has been on sidelines the last decade, especially in places like Irvine that are seeing houses once again sell at near peak bubble prices. All while being in the midst of the worst recession in decades and after having the bottom fall out of the national housing market. Most people (especially with families) don’t have an unlimited time horizon.
Yes, that group did win, as they should. They would have won no matter what happened to house prices because they are living like winners. The problem with the housing bubble is it created a class of temporary winners (otherwise known as losers): the Ponzis who lived off the appreciation. The responsible borrowers who are paying off their properties would have been complete winners if they didn’t have to pay for the damage caused by all the Ponzis. The responsible renters are losers both for missing all the fun from the HELOC orgy and for having to pay for the party they couldn’t attend.
Don’t get me wrong, I completely agree that those whom lived within their means and were wise deserve to be compensated by profit, it’s just that those whom followed the EXACT same path, are now getting hosed. That’s the ones who actually got in the game and attempted to own, supposedly the “american dream”.
There are also the ones who just cannot get in to play the game. The money required to “get in” is now out of the realm of possibility to a majority of americans, and those whom were wise enough to save that much money, aren’t interested in throwing it down on a BLACK (house) or RED (house)...interesting how the house always wins, because the house is always owned by the Casino (bankster/gangster).
How about the people who are *working* and can’t get out of the debt cycle?
The most hilarious thing I read from this site is that many are super neo-conservative and hate Unions, but when unions were strong, a single income could buy a home, support the whole family, and put a kid to college. Damn good thing Reagan started the dismantling of regulation and the destruction of unions. Looks like it really worked to put the hob-nailed boot on the necks of the middle class WORKERS. Keep voting people, I still have a few freedoms left and I’m in a hurry to lose them! I’m scared something will happen to me….anything, in fact, here’s my wrists, bind me to save me. Thank you.
“There is no recourse for this, they won.”
Actually, the game is still in progress.
Nope… some of us bought in the 80s paying through the nose at 9%. Rebuilt a new house in place reaping Prop 13 -borrowing against the house to rebuild- and then refi’d.
Actually, we refi’d again last year at 5%.
I think two bedroom apartments in Costa Mesa cost more than our 5b/3ba house. ;-D
Of course, the real winners were my late neighbors. They bought new in ‘69. Remodeled nicely as they went along, paid like 500 bucks RE taxes….. but, they passed away. >:-P
That’s a good example of Keynes’ truism about planning for the “long run”...unfortunately, in the long run, we are all dead.
I am fine with nutty prices and am ok with folks profiting from them. Caveat Emptor.
That’s right. Not every ‘baby-boomer’ cashed in, and one reason was because without moving out of state, you’d be buying back into the bubble pool and possibly at a higher tax rate. No gains there. A lot of so-called gains were therefore just paper-gains, which is what banks are so good at showing on their balance sheets. Now it looks like too much paper on one side of the equation and the corporate ship lists hard to port.
“Personally, I hope the entire financial system collapses and we form a government that actually represents the will of the PEOPLE”
Me too.
However, the first step is to write elected officials. There should be no excuses for not doing this. Reading this blog and others spurs me to do this often.
Extra Bonus….? I will buy a home from any Realtor with enough brass to use the 1984 term “DoublePlusGood” in their listing.
Would be an interesting comparison to see if $300 of non-taxed “free” income during the MEW explosion of 2004-2008 is financially better than getting a $300,000 check at closing in 2010 dollars. You’d have to take into account the lower FICO score impact if you short sale or foreclose on the home, but my guess is that the penalty free withdrawals people made on their equity are in the long run better than waiting around for a check from escrow.
“penalty free” in that I doubt there will be large scale IRS audits or even that steady of pressure from collectors to extract the MEW back out of the hands of former home owners.
My .02c
Soylent Green Is People.
why should fannie and freddie reduce principal balances? Most of their delinquent loans have mortgage insurance coverage. Check the stats of delinquencies on “credit enhanced” vs “non-credit enhanced” - credit enhanced have a delinquency rate 4X that of non-credit enhanced.
It is the mortgage insurers who should be taking a hit. There is no reason fannie and freddie should reduce principal when they are insured for the first 25% of principal.
I’ve wondered about this….who are the insurers?
ultimate build and flip by a realtor…
http://lansner.freedomblogging.com/2010/05/17/57-million-palace-hits-o-c-market/65759/
Love the “wine cave”
Would be perfect for my 10$ bottle of Black Swan
Hmm…. I could stash a lot of Two Buck Chuck in there.
But, seriously, that looks like a dungeon. I could dress up like Torquemada or Machiavelli and have dreams of grandeur.
“Repent!”.
Only the hardcore know the 24 bucks for a case of Chuck at Trader Joe’s.
In Jersey, two buck chuck is $3 a bottle. I haven’t figured out if the difference is caused by some weird NJ tax or if it’s TJ’s recouping the transportation cost.
I like the Merlot though it’s never really consistent; the flavor is different from each lot. I’m not a wine snob either, but I can certainly tell that it’s not always identical. I tried a bottle of cab a few weeks ago and it was vinegar, but TJs happily exchanged it.
If principal reductions were allowed…
If they put restrictions on them e.g. only apply to the purchase mortgage, limited to at most 15% of value, not available for any refi’s or HELOCs I wouldn’t be so against them.
I concur that principal reductions will not acomplish anything in the long run other than causing people to continue to make payments in the false hope they might get one.
We need a graphic for WOW to go with STUNNING
Inland empire luxury housing article
http://www.pe.com/business/local/stories/PE_Biz_D_highendforeclos16.9b65baa.html
I guess I was stupid. I have an 80LTV conventional that is $260K and the house is now worth less than $100K. I bought a small house. All the new houses were too big because cities would not allow single story modest footage in thier zoning I found out. I kept my loan under 20% of gross. I did not artificially stimulate the market so I would have an inflated base for my interest to be applied to, the banks did. Now banks want their assets to be protected even though they created them through fraud. I will be walking soon as I get some things arranged. The banks can then mark my loan to market value. In a few years, if buying makes sense, I will pay cash. Credit hit? A good FICO score is as relevant to a cash buyer as knowing swahili is to learning physics, so take your best shot.
curmudgeonman,
If you only refinanced for $600,000 you could of walked away in CA with $340,000 in your pocket. The smart ones bought in Newport for $1 million and refinanced for $4 million. The best kind of income, tax free. No need for credit to buy a house. FICO score of 500, no problem, just use the HEW cash.
Your tax dollars at work. By the way, your not paying enough taxes. I estimate that the tax rate should be about 50% for workers in CA to pay for all the CA nd Federal programs and govt. salaries/pensions.
I know a lot of people are angry out there, and they have the right to be… but… try NOT to spin too much, instead preserve that anger - you will need it in November. You may be tired, your kids may have a school game, or something else might happen, yet if you care about your family future and your country, get out there and vote! While you at it, talk to your friends make sure they do the same. I do not care whether you are a Dem. or GOP lover - vote for a guy/ gal you could leave your kid with on Friday night (not another slick “community organizer” SOB ) - there are trustworthy people who are willing to serve.
And finally, please do not forget to pay attention to your local assembly elections (http://www.sos.ca.gov/elections/2010-elections/index.htm) - sounds boring, but if are to get California back on track, this is the only way to go…
Sorry about a long post… :-(
Thank you for reiterating what I have been saying for the last 2.5 years.
While we are at it we should also undo the loan forgivenss income tax waiver policy. The public has paid an enourmous price directly related to housing bubble shenanigans. If dumping a loan back to the lenders is a good financial decision, then passing part of the benefit back to Uncle Sam seems like a fair part of the overall arrangement.