The residential real estate market is starting to turn around...

Parent Cafe
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<p>qdoggpa,
Bethesda, Chevy Chase and Potomac (or other close-in suburbs), have suffered far less in the real estate market. To the extent prices have dipped, there is an eager market waiting to buy into the top schools, closer commute, etc. In our neighborhood (average housing prices sit right at the county median, and have been at the median since we bought in 1998), there have been a couple of foreclosures, but the folks who bought between 2003-2008 are getting hammered on resale. </p>

<p>This has never been a cheap place to live, but the families who bought with adjustable rate mortgages and then had cutbacks in hours/wages have been hammered.</p>

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<p>Countingdown, that explains it…they are in potomac , near Bethesda…house they purchased was on market for 5 days,with multiple bids</p>

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<p>I have a long time friend that started a mortgage brokerage business around 2003. I remember him telling me that the Wall St. firms that ultimately bought his mortgages told his bankers: We Don’t Care Who The Buyer Is!! MAKE THE DEAL! WE WILL BUY IT!!! WE KNOW HOW TO MAKE IT WORK!!!</p>

<p>He only took the app. but was amazed at the crazy loans that were approved.</p>

<p>Wall St. people made ALLOT of money for a few years knowing that it will eventually all blow-up. They would have already gotten their ill-gotten money before the inevitable implosion. And then they left the duped homeowners (and their neighbors who didn’t even participate) and the taxpayers on the hook for the multi-trillion dollar plus bill. </p>

<p>That’s what happened. And yet no one has even been charged. </p>

<p>SAD.</p>

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<p>i came across situations where there was obvious fraud in 2001.
By 2003/04 there was an brief note on mortgage fraud increase and investigations by the FBI. (Google: FBI mortgage fraud 2004) I seem to recall that a spokesperson from the FBI said that personnel was pulled to staff counterterrorism. </p>

<p>we can see the results where we have internal terrorism from within which nearly accomplished BL goals.</p>

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<p>WELL, there were mortgage fruads during the gogo years, but I think there still are and always has been, even in today’s market. Now a days, the governement has separated the home mortgage brokers from real estae brokers and require a separate license, aiming just to prevent mortgage fraud. Yet, fraud still exist and you can only reduce it, not totally stop it, just like crime.</p>

<p>AND Yes, it is the Wall Street created the Real Estate crisis, but on the other side of the coin, it is ALSO the greed of the general public that fueled the crash. Feeding frenze is the term we are using, if the feeder has the food, the fish will eat and eventually bloat to death. If there is no fish and thus no demand, there will be no transactions. Lets put it this way, NO ONE IS HOLDING A GUN TO YOUR HEAD TO APPLY FOR A LOAN and accept the terms offered.</p>

<p>It looks like the Real Estate industry is turning around, just like the title noted. Just read some thing about Freddie Mac had announced that 30 year fixed mortgage interest has dropped to sub 4%, so that again created a feeding frenze.</p>

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<p>To wit, here are two cases reported in the news paper.

  1. Mr. X refinanced his home several times and reduced his mortgage by $200 and cashed out some proceeds to repay credit card debt.
  2. Mrs. Y refinanced for the first time and cashed out some proceeds to buy a car.</p>

<p>Now, if anyone of the above lost their job and cannot pay the mortgage who is to blame? the bank, the mortgage broker or the borrower?</p>

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<p>“We Don’t Care Who The Buyer Is!! MAKE THE DEAL! WE WILL BUY IT!!! WE KNOW HOW TO MAKE IT WORK!!!”</p>

<p>Mortgage loans were being given to people who could not make their first payment. There was greed on every level.</p>

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<p>

</p>

<p>That is very true. During the easy credit era, the most damaging loans are made to those “Stated Income” applicants. In that, the bank makes loan to 100% appraised value without even check for the income of the borrower because the income is “STATED” by the borrower. So, anyone is making $100K gross/year without savings to make a down payment can write on a loan application that he is making $300K and get a mortgage that requires payment of $7,000/mo with Negative Amortization. The bank, the investors who buy the paper and the borrower all belive the home price will increase in time that the principal of the loan will be taken out by refinance in the NEAR future.</p>

<p>Who is making a mortgage fraud?</p>

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<p>Who is making a mortgage fraud?"</p>

<p>It is the governments fault…</p>

<p>If the country just got rid of regulations…
Everybody involved in the mortgage process would do the right thing…</p>

<p>Just kidding…</p>

<p>Many buyers did not understand the loans…were pushed into loans with
higher interest rates than necessary…did not understand that some low interest rates loans added interest to principal…</p>

<p>It can be argued that many buyers did the right thing for themselves by taking out loans with nothing down…even if the loans were not affordable. The buyers had no skin in the game. If housing prices
continued going up the buyers win…if prices dropped…and most people did not think that was going to happen…well the buyers got to live in a better place than they could afford for a short time…i know people that lived in dumps…then lived in nice homes…and now they are back to living in dumps. At least they got to live in nice places for awhile.</p>

<p>The people in the mortgage industry though…people on wall street…they risked solvency…
They risked their businesses…they had something to lose. They did have tremendous upside though…so for some…it was worth it to hand out loans to people who couldn’t afford to pay them back. The fees were too good.</p>

<p>But then we get to what happens to society…individuals may have good reasons to go crazy…but this idea that individuals can just do what they want and they will act in their own self interests and this will benefit society doesn’t work. The problem is individual choices affect other individuals…individuals that are not even playing the game…that are doing the prudent thing.</p>

<p>For example…individuals that were selling loans that could not be paid back…and buyers buying homes they could not afford…have affected savers…who are screwed…have affected people that paid cash for their homes…have affected retirees on fixed income…etc…</p>

<p>So we need regulations to make sure that one group of individuals doesn’t harm another group by their actions…</p>

<p>And yes…there is a balance…right now…it should be easier for home buyers to buy homes…not less…</p>

<p>I look at the Sacramento area…during the bubble…it was easy to get loans to buy homes for 250,000 to 300,000. And renting was so much cheaper than buying.</p>

<p>Now…the same homes are 120,000 and owning a house may be cheaper than renting. And it is more difficult to buy a home now…</p>

<p>People were encouraged to buy homes when the homes weren’t affordable…and are prevented from buying homes when they are.</p>

<p>Makes no sense…</p>

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<p>Imo
Regulations come about because aggrieved businesses got the short-end. They encouraged uniformity else someone else would take advantage of customer and competitors, Afterall, a business who only cares about making money Now, is not too concern about tomorrow.</p>

<p>FDIC exists for its members, not for the bank’s depositors.</p>

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<p>I remember the feeling of panic during the boom, especially among first-time buyers. They believed that this was their one and only chance to grab the American Dream before it was forever out of reach. I remember hearing remarkably little, even among the experts, that this was a bubble, and people should calm down and wait. I’m not saying there weren’t those voices, just that what came through loud and clear was that if you didn’t buy now, prices would be up another 10% by next month. This belief was encouraged by both the banking and the real estate industries, and it was all over the media.</p>

<p>On the other side, we had lenders who were all too eager to lend to anyone who asked. A high percentage of the subprime loans were ARMs, with buyers just hoping they could made the payments when the loans re-set. Lenders encouraged this belief; many of the sub-prime borrowers were unsophisticated about mortgages and relied on loan professionals to guide them and tell them the truth, a responsibility which lenders ignored. Lenders also ignored time-honored and common-sense practices, such as income verification. Then there was flat-out fraud, with lenders allowing – in some cases, even suggesting – falsification so that a loan would be approved. </p>

<p>So, yes, both borrower and lender were at fault. But ultimately, IMO the responsibility for the boom and bust lies with the lenders. Anyone can apply for a loan; the whole purpose of the loan officer is to determine whether the borrower is a good risk. They were the professionals. They knew that many borrowers would never be able to sustain the exotic mortgages they were being sold. They had the obligation to do their due diligence and turn down high-risk loans, and they failed utterly (and knowingly). And as toblin points out, not a one of them is behind bars.</p>

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<p>Menlo park real estate…
[Menlo</a> Park’s New Millionaires - Video - Bloomberg](<a href=“Bloomberg - Are you a robot?”>Bloomberg - Are you a robot?)</p>

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<p>I think the Economist had a cover with “Housing Bubble” back in 2002. People didn’t want to listen.</p>

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<p>From Doug Noland’s Credit Bubble Bulletin, Friday, August 2, 2002.</p>

<p>From yesterday’s Wall Street Journal: “The Housing Bubble Loses Some Air - In Atlanta, the number of homes for sale priced at $750,000 and above now stands at more than a 20-month supply…compared with a four or five month supply in a more healthy market. The number of homes on the market in Denver has doubled to about 17,000 from January of last year… In Seattle…home sellers now outnumber buyers by four to one… The price drops and sales slowdown in some markets suggest that the residential real-estate bubble may finally be losing some air.”</p>

<p>[The</a> Housing Bubble Loses Some Air? | Doug Noland | Safehaven.com](<a href=“http://www.safehaven.com/article/503/the-housing-bubble-loses-some-air]The”>http://www.safehaven.com/article/503/the-housing-bubble-loses-some-air)</p>

<p>and,</p>

<p>With the corporate debt market in taters and the risk markets dislocating, there is today no doubt that we are in a pickle like nothing seen in decades. Yet, the economic community is making the same critical mistake that the technology bulls made - extrapolating Credit Bubble-induced demand into the future. We fear the key issue going forward will be the bursting of the consumer and mortgage finance Bubbles. For too long, boom-time consumption has been sustained by reckless consumer and mortgage lending. The economic community is about to learn that what it believes is normal spending is, in reality, absolutely unsustainable. If the economy is as fragile as we suspect, it is time to ponder the ramifications of the other dominos lined up perilously throughout the Credit system. And then there is the issue of the dollar, which is acutely vulnerable to unfolding financial and economic dislocation. We’ll have to wait to see how the dollar reacts to what will likely be imminent Fed rate cuts. If the dollar buckles, we’ve got one heck of a mess. If the dollar holds, perhaps the mortgage finance Bubble will have enough remaining life to keep our impaired system liquid and the distorted economy stumbling along for a little longer. But if this unfolding storm hits the Agency and Mortgage-back Mountain, there’s going to be an avalanche. While Mr. Gross is not today suggesting that the Fed buy corporate bonds, we doubt he will protest when the Fed is forced to rescue the agency market.</p>

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<p>Poster boy for mortgage fraud.</p>

<p>[Casey</a> Serin - Wikipedia, the free encyclopedia](<a href=“http://en.wikipedia.org/wiki/Casey_Serin]Casey”>Casey Serin - Wikipedia)</p>

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<p>^^ In 2002, the bubble was just getting started.</p>

<p>There have always been regional real estate ups and downs, not a whole lot of national real estate downturns.</p>

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<p>I saw the real estate bubble getting started in 1999 when we were looking - we thought that prices were crazy back then. It was rising in part because of the internet bubble.</p>

<p>Doug Noland talked about CDOs in 2001 - that was the first place where I learned about those instruments.</p>

<p>Credit inflation continues to fuel the historic Bubble in real estate finance. It is worth noting that the acceleration in home building continues, with housing starts increasing to the strongest level since January. Annualized starts of 1.658 million units during June were six percent above year ago levels, and were actually the strongest June numbers in years. Starts were almost 11% above average June starts from the past six years. For the first half, starts are running slightly ahead of last year but remain below 1999’s record. There is no mystery as to the source of the booming housing market; it’s all about the availability of credit and asset Bubble dynamics. Greenspan touched upon this most critical issue in his testimony, although he certainly doesn’t address the Bubble: “We have constructed a very sophisticated housing economy, and it’s having a very significant effect on consumer spending and indeed the rest of the economy.” That it is!</p>

<p>It may be helpful to look at a recent CDO deal. Bank of America was lead underwriter for a $410 million deal named Landmark CLO (collateralized Loan Obligation) managed by Aladdin Capital Managers. This vehicle is structured with 5 tranches, the senior “A” through subordinated “D” and “Equity.” The “A” tranch is the largest, comprised of $314 million of debt securities rated triple-A by Moody’s. The “A” tranch is protected by the $20 million “B” tranch, the $26 million “C”, $19 million “D” and the $31 million “Equity” tranch. Underlying pool credit losses are first absorbed by the “Equity” tranch, and then move up the food chain as necessary. This deal was priced with the “A” tranch yielding 46 basis points over LIBOR. The “D” tranch, protected only by the $31 million “Equity” tranch, provided speculative yields 625 basis points over LIBOR. </p>

<p>[url=&lt;a href=“http://www.safehaven.com/article/198/cdo-trouble]CDO”&gt;http://www.safehaven.com/article/198/cdo-trouble]CDO</a> Trouble | Doug Noland | Safehaven.com<a href=“Credit%20Bubble%20Bulletin,%20July%2020,%202001”>/url</a></p>

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<p>in 2002-2006 we and ds borrowed 80% COA for CMU. Our out-of-pocket was 5%. The remainder 15% was an institutional grant.</p>

<p>loved it when student loan interest rates were <4% and the EE bonds ≈4%.</p>

<p>should’ve borrowed 85%. :D</p>

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<p>I have to admit…I did not see a housing bubble in 1999…</p>

<p>Maybe 2003 when I saw one…can’t remember…</p>

<p>Seeds of a recovery…</p>

<p>[US</a> Housing Starts Chart](<a href=“http://www.forecast-chart.com/chart-housing-starts.html]US”>US Housing Starts Chart)</p>

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<p>dstark, sobering clip about menlo park real estate. Hadn’t thought of the Facebook impact in the short term. With my luck, by the time DS is ready to get his own place in that area, condos will be double commaed, and at the peak of the bubble.</p>