Real Estate Crash thread

[Benny Profane]

I read somewhere you folks down there owe just about double per capita what we owe up here ?

........Not me.

[Missing Sock]

........Not me.

what a feather in your cap

[XXX-er]

........Not me.

me neither but the figures were 40k-50k for the US and 20K-30K for canadians and there are way more of you than us ... like 10 times more

I am pretty sure canada would be in the middle of the same shit storm if Paul Martin the finance minister at the time had allowed the Canadian banks to de-regulate and play the same games as the American banks

[cramer]

One of the main reasons i bought a house is because im paying the same a month as i was renting. But now i get the write offs. Am i missing how this was a bad idea? ya im in debt, but instead of paying for someone else to have something to own, im paying to own something.

[XXX-er]

One of the main reasons i bought a house is because im paying the same a month as i was renting. But now i get the write offs. Am i missing how this was a bad idea? ya im in debt, but instead of paying for someone else to have something to own, im paying to own something.

I would'nt have minded the write off either if wecould get it ,but did people pay their house off OR did they keep buying bigger houses to get more tax write-off's ... which would mean more debt ?

[Spats]

I would'nt have minded the write off either if wecould get it ,but did people pay their house off OR did they keep buying bigger houses to get more tax write-off's ... which would mean more debt ?

People buy a house based on the highest monthly payment they can afford. All a tax deduction does is let people buy a more expensive house, which means they are in more debt (banks make $$$) and houses sell for more (real-estate agents make $$$). Therefore, it's easy to see that the mortgage interest deduction is simply a subsidy to banks and real estate brokers.

Furthermore, the mortgage interest deduction is a subsidy to the rich, because the rich are taxed at a higher rate than the poor, and a deduction is worth more to them.

We should emulate Canada and remove the deduction immediately -- though existing mortgages should be grandfathered, so current owners don't get screwed by a much higher payment than anticipated.

[Benny Profane]

http://www.doctorhousingbubble.com/

"I believe a big part of the housing bubble fuel was the ability for people to purchase homes with little to no money. In California, this was the accelerant that created the biggest housing bubble we have ever witnessed. For the lower end of the market you had subprime loans and for the mid to upper tier you had the Alt-A and option ARM products. There was a reason for a down payment. In this article we are going to try to trace the genesis of nothing down in California."

[Benny Profane]

I am pretty sure canada would be in the middle of the same shit storm if Paul Martin the finance minister at the time had allowed the Canadian banks to de-regulate and play the same games as the American banks

WSJ



* December 7, 2009, 1:06 PM ET

Why Hasn’t Canada’s Housing Market Blown Up?

Both Canada and the United States had low interest rates during the first part of this decade, so why has Canada been able to avoid the severe housing correction that has hit the United States?

This commentary from the Federal Reserve Bank of Cleveland singles out America’s lax lending standards as a leading culprit:

Monetary policy was very similar in both countries from 2000 to 2008, but housing prices rose much faster in the U.S. than in Canada. This suggests that some other factor both drove the more rapid appreciation in U.S. prices and set the stage for the housing bust. A likely candidate is cross-country differences in the structure and regulation of subprime lending markets. That mortgage delinquencies began to climb before the recession in the U.S. but only began to rise recently in Canada (after the economic slowdown began), points to the significance of those structural and regulatory differences in explaining the U.S. housing crash.

In short, lending standards poured more gas onto the fire than did low central bank interest rates, and those standards were too loose in the States.

In the U.S., for example, the ratio of mortgage debt to disposable income jumped by nearly 50%, rising from two-thirds to 100%. Canada saw roughly half of that increase, with the debt-income ratio increase to 90% from 70%. Canada also had much fewer high loan-to-value borrowers. Around 12% of U.S. households had loan-to-values of 90% or more, compared to around 6% of Canadian households.

Federal Reserve Bank of Cleveland
U.S. home prices, tracked with the S&P/Case-Shiller 20-city index, have fallen much harder than Canadian home prices, tracked with the Teranet six-city index.

The subprime market grew to around 22% of the U.S. mortgage market by 2006, but in Canada, it never accounted for more than 5% of mortgage originations. Securitization, or the practice of bundling loans and selling mortgage-backed debt to investors, was also much more common in the U.S. About six in ten loans were securitized in the U.S. in 2007, compared to one-quarter in Canada.

Why was Canada’s subprime market smaller? The study’s author, James MacGee, suggests that in part, Canada was just plain “lucky” to be a “late adopter” of American housing-finance innovations. The subprime share of Canada’s market, for example, was growing rapidly just as the U.S. home price collapse began, and the Canadian government clamped down on some riskier forms of lending in July 2008.

Mr. MacGee notes that Canada, which has seen home prices begin to fall, could still see a bigger correction in the months ahead, but recent data portend that a slowdown is more likely than an outright bust. “Canada’s smaller subprime market share and fewer households with high LTV ratios…suggest that the country is less likely to see the rapid increase in defaults that helped trigger the bust in U.S. housing prices,” he writes.

[Stu Gotz]

Looks like Morgan Stanley is getting into the strategic default business. Although they make it sound so much nicer.

http://www.bloomberg.com/apps/news?p...hnfoXOSk&pos=5

[Benny Profane]

Looks like Morgan Stanley is getting into the strategic default business. Although they make it sound so much nicer.

http://www.bloomberg.com/apps/news?p...hnfoXOSk&pos=5

"“This isn’t a default or foreclosure situation,” Barnes said. “We are going to give them the properties to get out of the loan obligation.”"


I suggest that everyone save that article and especially that quote if they have any qualms or get shit for walking away from an underwater mortgage.

"It's nothing personal. Just business."

[Woolly the Mammoth]

I just read that home prices are up every month for the past five months. Does this mean that the real estate crash is over?

[ass-to-mouth]

Prices are up due to to massive government stimulation & manipulation. $8,000 tax credit is set to expire on 4/30 (maybe). Fed has said it plans to stop purchasing $1.5 trillion in MBS some time in March (maybe). Let's see what happens after all this government intervention ends (maybe).

[mock vomit]

I just read that home prices are up every month for the past five months. Does this mean that the real estate crash is over?

To me, this is more like reading thrown chicken bones. You can divine whatever you want from the numbers.

Many stories about SAME REPORT say things like "House Prices Stall..." and "Home prices are flat for second month in a row"...

Of course I'd need to see exact methods used for the study to suggest it was anything this simple... but remember that explaining changes in "averages" (and even "medians") in something like a housing market, the SIMPLE explanation can often be wrong.

A quick example to illustrate my point.

Imagine a scenario where;

a) in reality ALL home prices had fallen 10%
b) somewhat fewer lower priced homes were selling
c) somewhat more higher priced homes were selling

Again, even though by definition (see a) prices had FALLEN 10%... simply by having somewhat MORE higher priced homes used to calculate it, the AVERAGE (or MEDIAN) sales price number COULD BE SHOWN TO RISE DRAMATICALLY.

Specifics;

Month A... 10 homes sold;

5 @ 1,000 sq.ft. sold for $100,000 each
4 @ 2,000 sq.ft. sold for $200,000 each
1 @ 5,000 sq.ft. sold for $500,000
0 @ 10,000 sq.ft. sold

Month B... 10 homes sold;

4 @ 1,000 sq.ft. sold for $90,000 each
3 @ 2,000 sq.ft. sold for $180,000 each
2 @ 5,000 sq.ft. sold for $450,000 each
1 @ 10,000 sq.ft. sold for $900,000 each

Average Calculations;

Month A: $100,000 + $100,000 + $100,000 + $100,000 + $100,000 + $200,000 + $200,000 + $200,000 + $200,000 + $500,000 = $1,800,000 / 10 = $180,000 AVERAGE SALES PRICE FOR MONTH A.

Month B: $90,000 + $90,000 + $90,000 +$90,000 + $180,000 + $180,000 + $180,000 + $450,000 + $450,000 + $900,000 = $2,700,000 / 10 = $270,000 AVERAGE SALES PRICE FOR MONTH B.

Remember I'm NOT saying that knowing the average has changed is useless, just that it might be telling you something OTHER than the easiest explanation. In my example above it is telling you MORE expensive homes are selling, NOT that homes are selling for more.

[cramer]

To me, this is more like reading thrown chicken bones. You can divine whatever you want from the numbers.

Many stories about SAME REPORT say things like "House Prices Stall..." and "Home prices are flat for second month in a row"...

Of course I'd need to see exact methods used for the study to suggest it was anything this simple... but remember that explaining changes in "averages" (and even "medians") in something like a housing market, the SIMPLE explanation can often be wrong.

A quick example to illustrate my point.

Imagine a scenario where;

a) in reality ALL home prices had fallen 10%
b) somewhat fewer lower priced homes were selling
c) somewhat more higher priced homes were selling

Again, even though by definition (see a) prices had FALLEN 10%... simply by having somewhat MORE higher priced homes used to calculate it, the AVERAGE (or MEDIAN) sales price number COULD BE SHOWN TO RISE DRAMATICALLY.

Specifics;

Month A... 10 homes sold;

5 @ 1,000 sq.ft. sold for $100,000 each
4 @ 2,000 sq.ft. sold for $200,000 each
1 @ 5,000 sq.ft. sold for $500,000
0 @ 10,000 sq.ft. sold

Month B... 10 homes sold;

4 @ 1,000 sq.ft. sold for $90,000 each
3 @ 2,000 sq.ft. sold for $180,000 each
2 @ 5,000 sq.ft. sold for $450,000 each
1 @ 10,000 sq.ft. sold for $900,000 each

Average Calculations;

Month A: $100,000 + $100,000 + $100,000 + $100,000 + $100,000 + $200,000 + $200,000 + $200,000 + $200,000 + $500,000 = $1,800,000 / 10 = $180,000 AVERAGE SALES PRICE FOR MONTH A.

Month B: $90,000 + $90,000 + $90,000 +$90,000 + $180,000 + $180,000 + $180,000 + $450,000 + $450,000 + $900,000 = $2,700,000 / 10 = $270,000 AVERAGE SALES PRICE FOR MONTH B.

Remember I'm NOT saying that knowing the average has changed is useless, just that it might be telling you something OTHER than the easiest explanation. In my example above it is telling you MORE expensive homes are selling, NOT that homes are selling for more.

You are dead on. Median price is rising because more expensive homes are being sold. Me, being in pretty much ground zero for the meltdown in the bay area can attest to that. There isnt anymore bottom feeder houses left to buy right now. They've all been snatched up. My neighborhood was empty when i bought 1 year ago. Its now full. Now its the more expensive ones selling, thus we are seeing that median price rise and stabalization in the worst hit areas. If there is no inventory of foreclosures / short sales, housing prices arent going to fall. The hard hit areas hit rock bottom a good year ago. At least here in the bay area. Probably the same for all of California. Now its the higher end homes selling....

Just looked at mls.

1 year ago
Antioch 1200
Brentwood 500
Oakley 350

Today
Antioch 194
Brentwood 152
Oakley has 112

Oakley has only 11 listed in the price range i was looking. There was like 80 of them last year.

crazy shit.

[Benny Profane]

SF was up 15% today in the Case Schiller thing, which just makes me refer you back to the article I posted at the top of the page. I'm convinced that California is still as beautifully insane a place as it always has been and has inspired such great artists as Thomas Pynchon and Charlie Manson to do their thing, both of which would have been swallowed up and spit out in the east. It's a crazy fucking place, and makes no sense at all, and it pisses me off, because I'd like to live in the most beautiful city in the country, but it's always been so expensive.

What do people do out there to make so much money?

[gravitylover]

I didn't see what happened today but what cause freddie mac and fannie mae stock to jump so high yesterday?

[Woolly the Mammoth]

I didn't see what happened today but what cause freddie mac and fannie mae stock to jump so high yesterday?

The Government said they were lifting their four hundred billion dollar debt ceiling. They aren't close to it, but it means that the U.S. is willing to loan an unlimited amount of money to the companies.

[cramer]

SF was up 15% today in the Case Schiller thing, which just makes me refer you back to the article I posted at the top of the page. I'm convinced that California is still as beautifully insane a place as it always has been and has inspired such great artists as Thomas Pynchon and Charlie Manson to do their thing, both of which would have been swallowed up and spit out in the east. It's a crazy fucking place, and makes no sense at all, and it pisses me off, because I'd like to live in the most beautiful city in the country, but it's always been so expensive.

What do people do out there to make so much money?

IT, Entertainment (porn/movies/music), medical industry, biotech and Cops. Cops make an obscene amount of money here. California has the 8 hour OT law, cops work 4 12's a week as a majority. That is 64 hours of OT a month. The rest of the collective country, you dont get OT until after 40 hours of work. You do the math. Nurses are in a shortage here big time. Best industry to get into right now if you medical and live in cali. You command the pay. The same goes for nurses, they can work obscene amounts of OT.

[mock vomit]

I didn't see what happened today but what cause freddie mac and fannie mae stock to jump so high yesterday?

I think scientists discovered that owning Fannie and Freddie stock means yer wife/girlfriend is a crazy horny virgin each and every night again in your bed??? Either that or the Federal Government gave a carte blanche to them regards losses/guarantees... But I really think I'm right on the "virginal" thing?

[Benny Profane]

I didn't see what happened today but what cause freddie mac and fannie mae stock to jump so high yesterday?

WSJ

DECEMBER 28, 2009
U.S. Move to Cover Fannie, Freddie Losses Stirs Controversy
By JAMES R. HAGERTY and JESSICA HOLZER

The Obama administration's decision to cover an unlimited amount of losses at the mortgage-finance giants Fannie Mae and Freddie Mac over the next three years stirred controversy over the holiday.

The Treasury announced Thursday it was removing the caps that limited the amount of available capital to the companies to $200 billion each.

Unlimited access to bailout funds through 2012 was "necessary for preserving the continued strength and stability of the mortgage market," the Treasury said. Fannie and Freddie purchase or guarantee most U.S. home mortgages and have run up huge losses stemming from the worst wave of defaults since the 1930s.

"The timing of this executive order giving Fannie and Freddie a blank check is no coincidence," said Rep. Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee. He said the Christmas Eve announcement was designed "to prevent the general public from taking note."

Treasury officials couldn't be reached for comment Friday.

So far, Treasury has provided $60 billion of capital to Fannie and $51 billion to Freddie. Mahesh Swaminathan, a senior mortgage analyst at Credit Suisse in New York, said he didn't believe Fannie and Freddie would need more than $200 billion apiece from the Treasury. But he and other analysts have said the market would find a larger commitment from the Treasury reassuring.

In exchange for the funding, the Treasury has received preferred stock in the companies paying 10% dividends. The Treasury also has warrants to acquire nearly 80% of the common shares in each firm.

The Treasury removed the cap on the size of available bailout funds by amending agreements it reached with the companies in September 2008, when the government seized control of the agencies under a legal process called conservatorship. The agreement allowed the Treasury to make amendments through the end of the year, without the consent of Congress. Changes made after Dec. 31 would likely involve a struggle with lawmakers over the terms.

Some Republicans are angry the administration is expanding the potential size of the bailout without having a plan for eventually ending the federal government's role in the companies.

The Treasury reiterated administration plans for a "preliminary report" on the government's future role in the mortgage market around the time the federal budget proposal is released in February.

The companies on Thursday disclosed new packages that will pay Fannie Chief Executive Officer Michael Williams and Freddie CEO Charles Haldeman Jr. as much as $6 million a year, including bonuses. The packages were approved by the Treasury and the Federal Housing Finance Agency, or FHFA, which regulates the companies.

The FHFA said compensation for executive officers of the companies in 2009, on average, is down 40% from the pay levels before the conservatorship.

Under the conservatorship, top officers of Fannie and Freddie take their cues from the Treasury and regulators on all major decisions, current and former executives say. The government has made foreclosure-prevention efforts its top priority.

The pay packages for top officers are entirely in cash; company shares have been trading on the New York Stock Exchange at less than $2 apiece, and it isn't clear when the companies will to profitability or whether common shares will have any value in the long term.

For the CEOs, annual compensation consists of a base salary of $900,000, deferred base salary of $3.1 million and incentive pay of as much as $2 million.

When Mr. Haldeman was hired by Freddie in July, the company set his base pay at $900,000 and said his additional "incentive" pay would depend on a decision by the regulator.

At Fannie, Mr. Williams was chief operating officer until he was promoted in April to CEO. As COO, his base salary was $676,000. He also had annual deferred pay of $2.3 million and a long-term incentive award of as much as $1.5 million.

Under the new packages, Fannie will pay as much as about $3.6 million annually to David M. Johnson, chief financial officer; $2.4 million to Kenneth Bacon, who heads a unit that finances apartment buildings; $2.8 million to David Benson, capital markets chief; $2.2 million to David Hisey, deputy chief financial officer; $3 million to Timothy Mayopoulos, general counsel; and $2.8 million to Kenneth Phelan, chief risk officer.

At Freddie, annual compensation will total as much as $4.5 million for Bruce Witherell, chief operating officer; $3.5 million for Ross Kari, chief financial officer; $2.8 million for Robert Bostrom, general counsel; and $2.7 million for Paul George, head of human resources.

The pay deals also drew fire. With unemployment near 10%, "to be handing out $6 million bonuses to essentially federal employees is unconscionable," said Rep. Jeb Hensarling, a Texas Republican who is a frequent critic of Fannie and Freddie.

He also criticized the administration for approving the compensation without settling on a plan to remove taxpayer supports: "To be doing that with no plan in place is just unconscionable."

The FHFA said that Fannie and Freddie "must attract and retain the talent needed" for their vital role in the mortgage market.

Write to James R. Hagerty at bob.hagerty@wsj.com and Jessica Holzer at jessica.holzer@dowjones.com

[liv2ski]

WSJ

DECEMBER 28, 2009
U.S. Move to Cover Fannie, Freddie Losses Stirs Controversy
By JAMES R. HAGERTY and JESSICA HOLZER

The Obama administration's decision to cover an unlimited amount of losses at the mortgage-finance giants Fannie Mae and Freddie Mac over the next three years stirred controversy over the holiday.

Unlimited access to bailout funds through 2012 was "necessary for preserving the continued strength and stability of the mortgage market," the Treasury said. Fannie and Freddie purchase or guarantee most U.S. home mortgages and have run up huge losses stemming from the worst wave of defaults since the 1930s.

The companies on Thursday disclosed new packages that will pay Fannie Chief Executive Officer Michael Williams and Freddie CEO Charles Haldeman Jr. as much as $6 million a year, including bonuses. The packages were approved by the Treasury and the Federal Housing Finance Agency, or FHFA, which regulates the companies.

For the CEOs, annual compensation consists of a base salary of $900,000, deferred base salary of $3.1 million and incentive pay of as much as $2 million.

The pay deals also drew fire. With unemployment near 10%, "to be handing out $6 million bonuses to essentially federal employees is unconscionable," said Rep. Jeb Hensarling, a Texas Republican who is a frequent critic of Fannie and Freddie.

He also criticized the administration for approving the compensation without settling on a plan to remove taxpayer supports: "To be doing that with no plan in place is just unconscionable."

The FHFA said that Fannie and Freddie "must attract and retain the talent needed" for their vital role in the mortgage market.

Write to James R. Hagerty at bob.hagerty@wsj.com and Jessica Holzer at jessica.holzer@dowjones.com

Just fucking incredible. Obviously the administration is aware of all the foreclosures "off the books" and is anticipating a shit load more, especially in CA, NV, AZ and FL where the majority of the Option ARMs were originated from 2004-2006. As the 5 year resets start to hit on these loans, it will be interesting to see what the banks do to try and keep people from defaulting. I know FNMA and FHLMC are not holding most of these loans. Wells Fargo and B of A are in their portfolios from acquiring Wachovia who bought World Savings and Countrywide to B of A. I suppose they have off loaded these toxic assets to the Fed in one of the TARP deals by now.
On a brighter note, you can buy a pretty nice SFR in Mammoth now for $575k. http://www.mammothcondoblog.com/mls-...mes/101588.php
Who would of thunk it a few years ago. Resort properties in the US are getting hammered. If this shit keeps up I may get a home in the mountains yet.

[Spats]

The Obama administration's decision to cover an unlimited amount of losses at the mortgage-finance giants Fannie Mae and Freddie Mac over the next three years stirred controversy over the holiday.

In other words, Obama is willing to destroy the entire US middle class before he will allow his banker buddies to lose one cent.

The wealth of our entire nation is being poured into a doomed attempt at keeping house prices so high no one can afford to buy them, in order for banks to pretend they aren't all completely insolvent after leveraging over 20:1 on real estate prices.

Who benefits? The banking oligarchs. (Secondarily, failed flippers, and people who partied for decades off their HELOC.)
Who loses? Everyone who works for a living and tries to save money for their kids and their future.

I said in late 2007 that the US would become Argentina, which destroyed its middle class to pay off its unsustainable debt. We're getting there, step by step.


(Skeptics: do you really think they'd have pushed this through if they didn't know FNM and FHLMC weren't going to lose unimaginable amounts of money this year? Riiiiiight. Remember, almost every foreclosure sale is double-counted, because regular homebuyers don't show up at the courthouse auctions: real estate flippers show up, buy the houses, and put them in the NAR database, from which regular people buy them.)
http://market-ticker.org/archives/17...sury-Know.html

[highangle]

the 'middle class' is the primary mortgage defaulter, due to their materialism and desire for conspicuous consumption

i guess they were all hoodwinked into buying McMansions they couldn't afford by their own greed

i know of a couple in another state, he an assembly line worker at a Nissan plant, she a school bus driver

a couple years ago, they were quite disappointed that they couldn't buy a $538,000 house because they couldn't get mortgage insurance

after all, their combined pretax income was almost $40/hr

[liv2ski]

the 'middle class' is the primary mortgage defaulter, due to their materialism and desire for conspicuous consumption

i guess they were all hoodwinked into buying McMansions they couldn't afford by their own greed

i know of a couple in another state, he an assembly line worker at a Nissan plant, she a school bus driver

a couple years ago, they were quite disappointed that they couldn't buy a $538,000 house because they couldn't get mortgage insurance

after all, their combined pretax income was almost $40/hr

But dood, they were counting on the non taxable income from all the meth they could make in the new 3 car garage and the pot they would grow in the 3 unused bedrooms I mean, how else were they going to make the monthly $4000 PITI payment? With their credit cards until the house appreciated enough in 6 months to get a HELOC to pay off their credit cards and cover their shortfall a few years until they sold at a HUUUUUGE profit. GTFO

[mock vomit]

Spats... I'm not going to blindly support everything and anything done to help the market, but can you not see how a real estate market that further deteriorates ends up wiping out the middle class in and by itself?