01.23.2007 - Tuesday Open Thread
This is your open thread for Tuesday, January 23, 2007. Please post random links and off-topic discussions here.
Off-topic comment? Interesting link?
Head over to the forums, or click here for open threads.
Head over to the forums, or click here for open threads.
25 comments:
the ripple effect on the downturn in the housing market may be starting to happen. Loss of jobs in the constrtuction industry are the easiest trackable figures, however, with every new home, comes a new washer and dryer etc....Foreign Exchange investing company FXStreet posts the following...
"The ripple effects are less well known and less visible than the employment effect. The industrial production report contains information about a few of these ripple effects. Production of appliances, furniture and carpeting has dropped for five straight quarters (see chart 3). Construction supplies dropped at an annual rate of 9.3% in the fourth quarter of 2006 vs. a 14.4% increase a year ago. The message here is that the ripple effects are deep, with the details emerging as employment and consumer spending take hits from the second and third round effects of the setback in the housing market".
Link here...http://www.fxstreet.com/fundamental/analysis-reports/daily-global-commentary/2007-01-22.html
Stephen-
While I am not a fan of the MLS, very difficlut to work with, what Ardell is saying is not wrong or illegal. Realtors are at the mercy of the Seller. If the Seller wants to pull teh house off the market for 31 days and then relist, it is their call. So, when you see inventory fall off 20% from November to January while sales didn't do anything do you consider those homes listed? They will surely come back in Spring time. Just wait. I wouldn't look fotr a house until then. I would imagine inventories will spike big time. It would be beneficial to get a buyer's agent and you don't pay for that, the seller does. And remember buy something you can afford not something you qualify for. Then MLS is only as good as the data that is put into it by REALTORS/AGENTS. Garbage in garbage out. It is not perfect but as good as we ahve for now.
It would be beneficial to get a buyer's agent and you don't pay for that, the seller does.
Please explain how the seller pays for the agent, when the buyer is the only one that brings a check to closing.
I think Ardell's saying that the MLS is only publishing some of the data (like asking price, property listings, etc.), but not everything that is available to agents (entry codes, combinations, seller's name and phone number, etc.).
Much as I'm not a fan of closed systems like the RE cabal, I don't begrudge the MLS the ability to make a buck as a storage of information for realtors. They probably shouldn't list "days on the market" in their stats, or they should have a more comprehensive method of deriving this stat to make the whole home-buying system a bit less deceptive, but I doubt they've come up with a good way to do this.
Lets face it, America's greatest minds are not toiling over deriving RE stats. If there were some sort of change in how the Days on Market were derived (the way they constantly change the CPI, for instance), I would cry foul play, but I don't think the MLS is up to anything shady because they can't make this a useful stat.
Tim-
The market is the market. Sellers will pay, give up some of their profit, to have a qualified buyer. Especially in the market ahead. I understand your point and agree the buyer is holding all the cards. It just never works out that the buyer is compensated fully for not using a broker in my opinion. Sellers always want a cut or all. It is well worth it for first time home buyers.
Great analysis by Russ Winters on vacant house data:
http://wallstreetexaminer.com/blogs/winter/?p=345#more-345
"The number of vacant homes for sale nationally jumped more than 30 percent in the third quarter from a year earlier, to 1.9 million homes, the latest data available from the U.S. Census Bureau show. That’s about half of all single-family homes on the market, said Michael Carliner, vice president of economics for the National Association of Home Builders."
Does anyone have any idea how common it is for real-estate deals to involve some kind of kick-back to the purchaser? A colleague of mine just purchase a condo in Kirkland and the buyers are giving him $25,000 in cash. This basically means that condo is worth $25,000 less than the official sales price.
I've heard of this kind of thing happening with scams, but I am wondering how pervasive it has become, even in ordinary transactions. I was taken aback hearing that a rather conservative colleagues of mine was even doing it.
The view seems to be that if the appraisal says the property is worth considerably more than the agreed sale price, why not jack up the mortgage to extract some of that "equity"?
But maybe this is just a rare exception to how transactions normally occur.
I was checking some of the other real estate blogs out there and it's pretty scary what's happening in FL, MA, AZ, and CA. The foreclosures are starting to cause real trouble for some banks and other lending institutions. The bubble deflation thing is BIG! (Excuse my naivete) It makes you wonder if your savings are really all that safe.
Just another thought on this rebate thing: do lenders just not care about the fact rebates are being given to purchasers, artificially boosting a given property's value? I can't believe that lenders just don't realize this stuff is going on, so it would seem they must be turning a blind eye to it.
Terry said: "I was checking some of the other real estate blogs out there and it's pretty scary what's happening in FL, MA, AZ, and CA."
Yes, there is a lot of disturbing news on the real-estate blogs. However, there seems to be a disconnect between the blogs and what is actually happening on the ground. I was visiting relatives in Florida in December and was amazed at just how unfazed everyone was to the real-estate downturn. Whereas I hear all these horror stories in the press, they were talking about how my sister just got a 20% drop in price on a home she was buying in Port Charlotte. She was positively giddy about getting a sweet 100% interest loan with no early payment penalties.
I have to admit that even I was shocked at how attractive the loan was when reading the papers. The interest rate was low, and there were hard limits as to how high they could jack up the monthly payments. With banks continuing to offer amazing deals like that to someone with poor credit (like my sister), then this bubble hasn't come close to popping yet.
mikhail-
Bad credit is one thing. Ability to pay is another. 100% financing of somehting she can afford is great. I just don't see that in our market, at all. The loose lending standards will hopefully allow buyers to buy all teh way down softening the dowturn, i hope. If lending standards resort to criteria of old, we are toast. I really hope that doesn't happen.
confused.... I would say you are a bit.
Bankers NEED to tighten ledning standards and soon. I don't understand why you hope that doesn't happen. It will happen sometime, after we have another S&L crisis, crashing the whole economy? It has already gotten out of hand. This needs to happen now. for two reasons, to try and prevent the afore mentioned, and also, anybody who pays out more than they can afford, ie 25% of their monthly income is only spelling disaster for themselves.
Yes, it will stymie buyers from being able to get into houses they can't afford, it may also stymie flippers from over extending their risk, but the alternative is FAR worse.
Anyone catch this from the D.R. Horton earnings call?
During the conference call Tuesday, Chief Executive Donald Tomnitz said "we're in the very early stages" of the current housing slowdown. "Most of these downturns are longer and deeper, and right now we don't see anything on the horizon that would change that opinion," the CEO said.
Thats funny, the NAR is claming we hit bottom and 2007 is going to peaches and cream.
I certainly trust a CEO feeling gloomy about the future and preparing everybody for it, rather than NAR trying to paint a rosey picture.
t,v & mr.b-
I never said I didn't think bankers NEEDED to tighten lending standards. They have needed to do exactly that for a very long time. I am sayign that I hope they don't do it all at once or this whole charade will end at once instead of a long slow decline. It is kind of like be careful what you pray for. Personally, I think we have already hit critical mass. I don't think there is much the Fed or the banking industry can do to save the impending crash. My point is that the banking industry extended far too much credit to people who had no business buying homes and my hope is that they don't tighten lending standards to a point where no one can qualify thus excacerbating the demise of our economy.
mikhail,
Ben Jones' blog, "The Housing Bubble Blog" has a posting relating to your colleague's cash back experience. The posting is entitled "A Situation That Could Cause a Collapse of Values"
Terry: "Ben Jones' blog, "The Housing Bubble Blog" has a posting relating to your colleague's cash back experience. The posting is entitled "A Situation That Could Cause a Collapse of Values"
Yes, this article is interesting, but it seems to be making the point that inflated prices is solely the responsibility of a few criminals. I wonder if this isn't actually a much broader issue, with EVERYONE using kick-backs to some degree.
mikhail-
I wonder if this isn't actually a much broader issue, with EVERYONE using kick-backs to some degree.
In a word~YES. Builders are offering incentives like free cars, vacations, loan buy downs, granite counter tops, etc. All are forms of kickbacks to buyers. Appraised value is axactly that. How someone can get 100% financing is beyond me. Cash back at closing should be crime. It all points to the same place~lenders. I have a friend who sells manufactured homes in the greater Denver area. He had a potential client that was having trouble qualifying for a 20k trailer. After a couple weeks the guy came back adn said not to bother that he just bought a 300k home. Nutz I tell ya!
Confused,
thanks for explaining a bit. Agreed that we hit a critcal mass to a point. My fear is that they will keep the loose standards and promoting continued lax lending standards.
confused: "Cash back at closing should be crime."
So whhy do lenders allow rebates and kickbacks to take place? Is it that they don't really care about future defaults because they've just spun all the loans off to 3rd parties? Is it that the lenders tacitly want to keep the real-estate appreciation game going, so turn a blind eye to these machinations to prevent a general collapse in real-estate values?
Or are lenders really, and truly, stupid, not realizing that kickbacks are rampant?
SCrow has a Dirty Little Secret, where he talks about rolling closing costs into the loan.
Also, Ardell says cash back is Fraud, at least that seems to be what she's saying in the comments.
I don't know Real Estate law, so I wouldn't know.
That's a bizarre thread, btw. I haven't read the whole thing, but don't completely understand Ardell's points.
Ardell's reasons for keeping all information in the MLS secret may survive the legal litmus test but it is certainly not ethical. If legality is the only measure of our behavior then we are all doomed.
Ethics and morality in the real estate industry is barely detectable. Unfortunately, like Enron, we won't find out how bad it really is until it's too late.
After reading more comments on the Ardell Rain City thread I linked to above, it makes more sense, and goes more in-depth on the issues around Lender Fraud.
I recommend taking a peak.
Kudos to Ardell.
I get a little over dramatic, I apologize. What I am saying is you used to go down to your banker and he would look at your income and debt AND credit to figure out how much you could afford. Typically, that was 2-3 times your income and not to exceed 25% of yor monthly income.
Once banks were able to resell these MBS on the open market they were able to produce more and sell more as long as the market kept appreciation it hid all of the issues an overheated market creates. Banks in their infinite wisdom to "gain marketshare" or tap "new markets" did some outright illegal stuff if not unethical.
As for the intelligence of the institutions, I think they know at the end of the day it is YOUR name and SSN at the bottom of mortgage and thus your a$$. And I agree with them. Am I goign to feel sorry for someone that is living in a house that is worth less than their mortgage because they agreed to take back cash at closing and then cry foul when they try adn sell, No. The problem we run into is that I feel this is so common place it has inflated prices around the US. In teh end it really is no different than the car industry. I just used to think buying a house was a more noble cause and a more professional transaction. I was wrong. I would run from buying a house right now. I react to buying a house now the way I react to someone trying to sll me whole life insurance. Terrible investment but when you die it will be worth something and makes others rich in the mean time.
So recent blogs have argued about how employment being so good here is the reason the housing prices continue to climb. Washington isn't even in the top 50% in the nation at a rate of 5.0. it is 37th in the nation. housing based on employment rate? Florida is 9th and Arizona is 19th. Both in the midst of massive declines.
Post a Comment