now this makes Me Mad!
But in some new developments, homebuilders are including in contracts a 1% fee to be paid to them every time the house is sold -- for 99 years. And the money doesn't go for improvements or upkeep: It's just money in the builders' pockets.
Huh? You mean to tell me that the builders are actually holding you hostage for, basically, ever? By simply "choosing" to include in the deed some sort of restriction that you must pay what amounts to a tax (to them) every time the house is sold?
Yep.
What is being done with the money? You'll be shocked - shocked I tell you....
The company's plan is to monetize that future income -- essentially allowing developers to get paid now rather than later. To do that, Freehold would bundle together the estimated income from the future fees and sell that package to investors. It claims this new "asset" would be worth about 5% of the original home prices.
Oh. So they intend to securitize this income stream and then sell it into the market? You bet.
So it's not enough that the banks get a piece of every transaction in the financial world. Now they want to guarantee that same sort of "piece" of every Real Estate transaction into the perpetual future, and, of course, sell that off to "investors."
In short, this is yet another form of derivative, this time backed by you (the intrepid home-buyer) who will get screwed once again by the vulchers on Wall Street.
Tuesday, August 24, 2010
Tuesday, July 20, 2010
BofA FHA insured delinquent loans increase nearly 200 percent in one year.
Last week HUD came out with laser focused ways of addressing its impending insolvency because of defaulting FHA insured loans. Now some of you were under the impression that something was already done to tighten lending standards given the precarious situation the housing bubble brought to our economy. Yet that is not the case and incredibly, what passes for basic due diligence today seems excessive because only a few years ago loans were given out to people making $14,000 a year and financing their $720,000 home purchase. FHA insured loans have become the staple of moving properties especially in areas like California. The 3.5 percent minimum down payment is all people can muster up and apparently this has caused further deterioration in this market.
HUD is seeking public comments for the next 30 days on the below:
Source: HUD
Now some of you might be thinking why we are asking these basic questions three years deep into the housing implosion. The first question focuses on the credit score of borrowers. Can you believe that a 580 credit score will enter you into the “flagship” 3.5 percent down payment FHA insured loan program? No wonder why defaults are off the charts. No bank in their right mind would lend their own money so banks are basically using the government as their lender and sucker of last resort to continue to make these financially troubling loans. The second point relates to seller concessions. Yes, this stuff is still going on. Serious reform apparently doesn’t involve basic common sense. Finally, the third point focuses on tighter underwriting. If we are asking these questions today from an agency that now insures approximately 4 out of every 10 loans we have some major issues coming down the pipeline.
HUD is seeking public comments for the next 30 days on the below:
Source: HUD
Now some of you might be thinking why we are asking these basic questions three years deep into the housing implosion. The first question focuses on the credit score of borrowers. Can you believe that a 580 credit score will enter you into the “flagship” 3.5 percent down payment FHA insured loan program? No wonder why defaults are off the charts. No bank in their right mind would lend their own money so banks are basically using the government as their lender and sucker of last resort to continue to make these financially troubling loans. The second point relates to seller concessions. Yes, this stuff is still going on. Serious reform apparently doesn’t involve basic common sense. Finally, the third point focuses on tighter underwriting. If we are asking these questions today from an agency that now insures approximately 4 out of every 10 loans we have some major issues coming down the pipeline.
Friday, June 25, 2010
The Housing Collapse Intensifies
New home sales fell by nearly one-third last month versus April with the end to the Federal government's $8,000 home-buyer tax credit. New home sales at 300,000 followed a downwardly revised 446,000 during April.
It was a record low for the series which dates back to 1963. The latest level was well short of Consensus expectations for 420,000 sales.
Can't pay your mortgage? Don't worry the state will pay it for you!:
Michigan’s plan to spend $154.5 million in federal funds to help those hardest hit by the economy has gained federal approval and will be available starting July 12.
The funds – targeted at helping borrowers facing pay cuts or job losses keep their homes – are expected to aid more than 17,000 Michigan households.
Until then, Michigan State Housing Development Authority officials will educate banks and credit unions about the process of evaluating borrowers for the program. Borrowers must apply with their lenders to take advantage of the lifeline, which will be awarded on a first-come, first-serve basis.
Has the world gone mad????? How on earth is this going to be productive? Will these borrowers all of a sudden be able to afford their house 12 months from now? Talk about a total waste of money.
We have already seen a 50-70% re-default rate on modified mortgages. Why on earth do they think this is going to solve the problem?
The government needs to be face the music: Millions of people bought houses they could not afford using lending products that are no longer available.
Pissing away billions trying to keep them in these homes is nothing but a total waste of money that we don't have!
I understand that the housing tax credit may have skewed this number a tad but let's put this into perspective. In 2007 (after the housing bubble had peaked) we still sold 769,000 new units according to Haver. Yesterday's number was more than 50% lower.
The median home price also dropped to $200,900 which is the lowest number since 2003. Think about this one for a second: Prices are collapsing at a time where we are seeing the lowest mortgage rates in history!
What this tells you is that America has lost interest in owning a home. The psychological damage has been done. As prices continue to fall, potential home buyers stay on the sidelines because they are petrified that they might lose money on their home.
Homes are now looked at as a place to live versus an investment. Once this mindset sets in it's very difficult to change it. What we are seeing now is a classic example of how deflation sets in on a specific asset. The more prices drop the more people stay on the sidelines which then triggers more price drops.
It's called a negative feedback loop (otherwise known as a deflationary death spiral). This is how bubbles pop and we are seeing it now in housing.
One more question to ponder: Can you imagine what the home sales numbers will look like when rates start moving higher and/or when the weather starts to get cold? Yikes!
I will leave you with this one piece of advice: Stay on the sidelines if you are looking to buy a house because this housing unwind hasn't even gotten into full gear yet.
It was a record low for the series which dates back to 1963. The latest level was well short of Consensus expectations for 420,000 sales.
Can't pay your mortgage? Don't worry the state will pay it for you!:
Michigan’s plan to spend $154.5 million in federal funds to help those hardest hit by the economy has gained federal approval and will be available starting July 12.
The funds – targeted at helping borrowers facing pay cuts or job losses keep their homes – are expected to aid more than 17,000 Michigan households.
Until then, Michigan State Housing Development Authority officials will educate banks and credit unions about the process of evaluating borrowers for the program. Borrowers must apply with their lenders to take advantage of the lifeline, which will be awarded on a first-come, first-serve basis.
Has the world gone mad????? How on earth is this going to be productive? Will these borrowers all of a sudden be able to afford their house 12 months from now? Talk about a total waste of money.
We have already seen a 50-70% re-default rate on modified mortgages. Why on earth do they think this is going to solve the problem?
The government needs to be face the music: Millions of people bought houses they could not afford using lending products that are no longer available.
Pissing away billions trying to keep them in these homes is nothing but a total waste of money that we don't have!
I understand that the housing tax credit may have skewed this number a tad but let's put this into perspective. In 2007 (after the housing bubble had peaked) we still sold 769,000 new units according to Haver. Yesterday's number was more than 50% lower.
The median home price also dropped to $200,900 which is the lowest number since 2003. Think about this one for a second: Prices are collapsing at a time where we are seeing the lowest mortgage rates in history!
What this tells you is that America has lost interest in owning a home. The psychological damage has been done. As prices continue to fall, potential home buyers stay on the sidelines because they are petrified that they might lose money on their home.
Homes are now looked at as a place to live versus an investment. Once this mindset sets in it's very difficult to change it. What we are seeing now is a classic example of how deflation sets in on a specific asset. The more prices drop the more people stay on the sidelines which then triggers more price drops.
It's called a negative feedback loop (otherwise known as a deflationary death spiral). This is how bubbles pop and we are seeing it now in housing.
One more question to ponder: Can you imagine what the home sales numbers will look like when rates start moving higher and/or when the weather starts to get cold? Yikes!
I will leave you with this one piece of advice: Stay on the sidelines if you are looking to buy a house because this housing unwind hasn't even gotten into full gear yet.
Friday, June 18, 2010
U.S. home building craters after tax break expires
Single-family permits drop 10% to lowest in a year
Housing starts fell 10% to a seasonally adjusted annual rate of 593,000 in May, the lowest level since December. The details were even worse, as starts of single-family homes plunged 17% to a seasonally adjusted rate of 468,000, the lowest in a year.
It was the largest percentage decline in single-family starts since 1991.
Housing starts were up 7.8% compared with May 2009, but are down more than 70% from the peak. Read the full report on the Census Bureau's website.
The tax credit and low mortgage rates have helped revive home sales and construction from the worst downturn since World War II. But with the credit expiring, builders face tough competition from foreclosures of existing homes, and buyers remain cautious about the job market. In some areas, prices are still falling.
Most economists expect the weakness to persist for the next several months. "The tax credit pulled housing transactions and construction activity forward into the spring from the summer, so the next few months will see activity remaining at a very low level," wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics.
Building permits fell sharply in May for the second straight month, with total authorizations falling 5.9% to a 574,000 annual pace after falling 10% in April. Single-family permits fell 10% for the second month in a row to a 438,000 pace.
Permits for single-family homes -- considered by many analysts to be the best gauge of the health of the building market -- stood at the lowest level in a year.
Permits and starts had risen smartly earlier in the year, as builders rushed to meet the deadline for the federal home buyers' subsidy. To qualify for the credit, buyers had to sign a sales contract by April 30 and close the sale by June 30.
It would be rare to start construction in May and complete it by June 30.
Housing starts fell 10% to a seasonally adjusted annual rate of 593,000 in May, the lowest level since December. The details were even worse, as starts of single-family homes plunged 17% to a seasonally adjusted rate of 468,000, the lowest in a year.
It was the largest percentage decline in single-family starts since 1991.
Housing starts were up 7.8% compared with May 2009, but are down more than 70% from the peak. Read the full report on the Census Bureau's website.
The tax credit and low mortgage rates have helped revive home sales and construction from the worst downturn since World War II. But with the credit expiring, builders face tough competition from foreclosures of existing homes, and buyers remain cautious about the job market. In some areas, prices are still falling.
Most economists expect the weakness to persist for the next several months. "The tax credit pulled housing transactions and construction activity forward into the spring from the summer, so the next few months will see activity remaining at a very low level," wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics.
Building permits fell sharply in May for the second straight month, with total authorizations falling 5.9% to a 574,000 annual pace after falling 10% in April. Single-family permits fell 10% for the second month in a row to a 438,000 pace.
Permits for single-family homes -- considered by many analysts to be the best gauge of the health of the building market -- stood at the lowest level in a year.
Permits and starts had risen smartly earlier in the year, as builders rushed to meet the deadline for the federal home buyers' subsidy. To qualify for the credit, buyers had to sign a sales contract by April 30 and close the sale by June 30.
It would be rare to start construction in May and complete it by June 30.
Sunday, May 23, 2010
California will face another lost decade in housing!
5 reasons why California will face another lost decade in housing – 493,000 real estate agents and brokers for 219,000 homes listed on the MLS. 7 percent of 90+ day late loans in California have no foreclosure filed. State budget depended on real estate bubble jobs for revenues.
How many real estate agents and brokers does it take to sell a California home? 2 ¼ if we look at current inventory levels and the amount of Californians with a real estate or broker’s license. One of the early observations of the housing bubble was how much money was being spent in the economy because of high wage California housing bubble jobs. Toxic loan after toxic loan provided wonderful commission checks but also provided the state with a nice chunk of tax revenue. Year after year this went on. Our fate has been intertwined with real estate and since real estate has busted so has our state economy. I remember a few colleagues that were pulling in high six-figure incomes as mortgage brokers and real estate agents and were spending every dime as quickly as it came in. Many have downsized drastically and don’t have a penny to their name. Ironically many of these people drank their own Kool-Aid and bought million dollar homes with the same mortgage sewage they were passing onto their clients. A few are now in bankruptcy and many have lost or will lose their homes.
California is likely to face a lost decade in housing. Do I mean from 2000 to 2010? In some areas we have already reached a lost decade. Yet many areas will face their lost decade from 2010 to 2020. Here are 5 reasons why California real estate will have a decade of slow or no growth ahead:
Reason #1 – High paying finance and real estate jobs are gone
Reason #2 – Too little inventory and sales for the amount of workers
Reason #3 – California budget and revenues shattered
Reason #4 – Shadow inventory
Reason #5 – Consumer psychology and jobs
The mantra that real estate prices never fall is completely shattered for an entire generation of Americans. Those who lived through the Great Depression are largely absent from our current economy and can’t share their wisdom. And given the preference of Americans to watch Dancing with the Stars instead of reading some history, many have forgotten that real estate can crash and crash hard. But if history is any guide, we will have a generation of Americans who are more cautious and thus will put a lid on any mega jumps in appreciation for the next decade.
On Friday the California unemployment rate came out and we are still at a record high of 12.6 percent. Adjusted for the underemployment rate we are closer to 23 percent. Even the running average at the BLS shows us over 21 percent:
How many real estate agents and brokers does it take to sell a California home? 2 ¼ if we look at current inventory levels and the amount of Californians with a real estate or broker’s license. One of the early observations of the housing bubble was how much money was being spent in the economy because of high wage California housing bubble jobs. Toxic loan after toxic loan provided wonderful commission checks but also provided the state with a nice chunk of tax revenue. Year after year this went on. Our fate has been intertwined with real estate and since real estate has busted so has our state economy. I remember a few colleagues that were pulling in high six-figure incomes as mortgage brokers and real estate agents and were spending every dime as quickly as it came in. Many have downsized drastically and don’t have a penny to their name. Ironically many of these people drank their own Kool-Aid and bought million dollar homes with the same mortgage sewage they were passing onto their clients. A few are now in bankruptcy and many have lost or will lose their homes.
California is likely to face a lost decade in housing. Do I mean from 2000 to 2010? In some areas we have already reached a lost decade. Yet many areas will face their lost decade from 2010 to 2020. Here are 5 reasons why California real estate will have a decade of slow or no growth ahead:
Reason #1 – High paying finance and real estate jobs are gone
Reason #2 – Too little inventory and sales for the amount of workers
Reason #3 – California budget and revenues shattered
Reason #4 – Shadow inventory
Reason #5 – Consumer psychology and jobs
The mantra that real estate prices never fall is completely shattered for an entire generation of Americans. Those who lived through the Great Depression are largely absent from our current economy and can’t share their wisdom. And given the preference of Americans to watch Dancing with the Stars instead of reading some history, many have forgotten that real estate can crash and crash hard. But if history is any guide, we will have a generation of Americans who are more cautious and thus will put a lid on any mega jumps in appreciation for the next decade.
On Friday the California unemployment rate came out and we are still at a record high of 12.6 percent. Adjusted for the underemployment rate we are closer to 23 percent. Even the running average at the BLS shows us over 21 percent:
Wednesday, May 19, 2010
Futures market predicting housing bottom for Los Angeles and San Diego in May of 2012
LA to drop 12.8 percent and San Diego to drop 26.8 percent. San Francisco future predict increase in prices?
The futures market is betting on a housing bottom for Los Angeles and San Diego out to May of 2012. This prediction seems to coincide with many of the toxic mortgage reset/recast charts that we have now etched to memory. These futures contracts reflect real money at play. People that invest and understand these more “sophisticated” investment products are betting on still significant price declines for the Los Angeles and San Diego Case Shiller measures. Interestingly enough, for San Francisco the futures market is predicting increase in prices although this is by the far the most over priced market in the state. Two out of three winning bets in Vegas makes you rich.
Are you interested in losing $42,000 or $55,000 in two years because you decide to purchase today? Keep in mind these are actual money bets predicting additional price declines from where we stand today. I would venture to say that in some areas like Culver City and Pasadena price declines will be much steeper. The futures markets do not see any price increase for the next few years. So the rush to purchase a home today doesn’t seem to be grounded on any facts or market trends.
The futures market is betting on a housing bottom for Los Angeles and San Diego out to May of 2012. This prediction seems to coincide with many of the toxic mortgage reset/recast charts that we have now etched to memory. These futures contracts reflect real money at play. People that invest and understand these more “sophisticated” investment products are betting on still significant price declines for the Los Angeles and San Diego Case Shiller measures. Interestingly enough, for San Francisco the futures market is predicting increase in prices although this is by the far the most over priced market in the state. Two out of three winning bets in Vegas makes you rich.
Are you interested in losing $42,000 or $55,000 in two years because you decide to purchase today? Keep in mind these are actual money bets predicting additional price declines from where we stand today. I would venture to say that in some areas like Culver City and Pasadena price declines will be much steeper. The futures markets do not see any price increase for the next few years. So the rush to purchase a home today doesn’t seem to be grounded on any facts or market trends.
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