WatchAlthough there are many alternatives, but I like this one the best:
Millions of used house owners with negative equity have been salivating at the chance of dumping their overpriced abodes as soon as the market returns to normal. A lot of them are baby boomers waiting to retire. As the banks are artificially reducing inventory, driving prices higher in this dead-cat bounce, more and more of these "pent-up inventory suppliers" are realizing that they are pretty close to breaking even, or can get out with a small loss. I predict that that there is a whole slew of short-sales coming back, just in time for the end of the high season. These will be a strong competition for the bank REO's, causing banks to dump their shacks for deep discounts.
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tatupu70 says
I'm also skeptical of the "delinquent" numbers. How do we really get a true and accurate number? Do the banks truthfully report these loans that are delinquent or non-performing?
My guess, there are a whole lot more that aren't being reported and people are just waiting for the sheriff to show up.
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Scottsdale, AZ
robertoaribas's website
the robosigning settlement is 4 months old, and banks would have been aware of the general terms even months before that. They would have started moving the process to foreclose according to the general guidelines of the agreement as it was negotiated. Meanwhile,trustee sale notices, which must precede actual trust sales by 90 days here in Arizona, have not gone up that much. From around 4100 to 4600 a month. yawn.
So, no sign yet of this tsunami, and guaranteed no market changing effect in the next 4 to 6 months...
What I am seeing, is lots of short sales going through. 2150 in the past 30 days to be precise, with 11,500 in either active with contract, or pending status. Interestingly enough, there are only 900 active short sales at this moment in the entire mls, so clearly they are going down. several months ago, there were over 20,000 short sales in active with contract, or pending status.
Short sales are what have kept sales prices down, but based on this data, I expect this effect to moderate going forward, and significantly by the end of this year, unless some change in listed short sales occurs.
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Core Logic deals in CRE. Thats a lot of commerical Real Estate. Thats a lot of stuff owned by the big boys to begin with. GE cap is the largest small to mid sized lender in the United States on those. You might as well call them the Nation Association of Appraisers. Re-Max GM home lending, Chase Manhattan. Actually they are based out of Britian when it all comes down to it. You think America has interlocking corporations. You should see how many corporations not all, lock back into British PLC's
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robertoaribas says
Can they really print all they want?
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Goran_K says
Hehe. I thought he got a change of heart and became duckhead. :)
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San Jose, CA
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What will be the catalyst for the next down leg in housing?
Come on dunross. You're the oracle. You said there will be a 2nd leg down, then a 3rd leg down, and now you're asking us this question? You just loss all of your credibility as an oracle.
The catalyst for the next leg down is more lay-off, or no one will buy our bonds and interest rate will shoot through the roof, or whatever. So what would be the catalyst in your opinion Mr. Oracle?
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Corning, NY
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Nationally, the housing bubble is *mostly* deflated. At least according to case-shiller:
http://www.multpl.com/case-shiller-home-price-index-inflation-adjusted/
Another small drop from 128 down to 120 would get us back to the post WW2 average.
Every market is different. Some parts of the Bay Area might be "importing" part of the Chinese RE bubble. A+ or GTFO!
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Emeryville, CA
Here's Ritholtz's take, for reals:
http://www.washingtonpost.com/barry-ritholtz-on-investing-house-prices-are-down-mortgage-rates-are-low-but-is-the-real-estate-market-ready-to-rebound/2012/04/05/gIQAnveZzS_story.html
or
http://tinyurl.com/77l2dpf
"These houses will eventually become part of the total supply for sale. Although there is no official count, estimates of potential shadow inventory run as high as 10 million."
That's considerably higher than the Corelogic numbers, eh?
robertoaribas says
And, we do have the benefit of being in a non-judicial state, but we also have the burden of being in a sand state, so you'd have a much larger number of distressed properties to clear non-judically, n'est-ce pas?
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Capitol Controls perhaps:
"•Restrictions on bank withdrawals
•Restrictions on money market fund redemptions
•Greater restrictions on retirement fund liquidations
•Fixing an official exchange rate and criminalizing market rate transactions
•Banning the conversion of domestic currency to foreign currency
•Banning the movement of assets out of the country to foreign financial institutions
•Barriers, restrictions, additional transaction costs imposed on foreigners seeking to deposit funds or make investments in safe havens
•Forcing sovereign debt owners to accept longer maturities rather than principal repayment
•Banning gold ownership
•Reissuing the currency in a new form (an acute risk in Europe obviously)
•Restrictions on the size of cash transactions"
http://theautomaticearth.com/Finance/capital-flight-capital-controls-capital-panic.html
Then again, the timing might make this the catalyst for the third and most brutal leg down.
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Laguna Beach, CA
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wthrfrk80 says
I agree with this. For the most part the bubble is gone, and what we have now are local mini-bubbles (Bay Area, Orange County, parts of NY). These bubbles are deflating a lot more slowly, but still deflating.
However a lot of the downside to housing isn't entirely contained within the housing market itself, it's other "external" factors that could cause this correction to "over" correct like all bubbles eventually do.
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First, there is a dearth of inventory. Second, the Fed will cease to do anymore easing after June 30 - QE3 or Twist. This will result in rising interest rates and all the procrastinating buyers on the sidelines will jump in to buy.
Result - a booming housing market!
Sure, the banks are "evil", but they are managed by professionals and they do know how to play it better than the common folks.
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Laguna Beach, CA
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jhurio says
Are these buyers going to magically find money to buy unaffordable houses?
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No. There are lots of buyers waiting on the sidelines. Decreasing inventory and rising interest rates will be the stimulus ...
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jhurio says
Right, by hook or by crook, the Realtor/Bankster cabal will make sure that no one goes un-raped.
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Housings Dead Cat Bounce says
History tells a different story.
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Next leg down will be prefaced by urban rioting of tens of millions of unemployed who wake up every morning to hear RNC propagandists accuse them of being shiftless marxists who should be shot and to watch the DNC, Congress and White House give savage, gagging, non-stop blow jobs to Wall Street criminals.
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I wish any of this were actually funny.
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Laguna Beach, CA
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jhurio says
Are there many sideline buyers? If they're waiting on the sidelines because prices are too high, how will "higher" prices push them off the sidelines? Rising interest rates will make the "affordability" factor even more acute.
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Kent, WA
John Bailo's website
I saw an article yesterday that said home builders were ramping up for new construction...of rental houses! These would be brand new dwellings for immediate leasing.
This is the sort of thing that a lot of people would want...short term commitments, but yet a full house, not a small apartment with no yard.
And it is also the sort of market introduction that could kick out the bottom from high priced older home rentals...the kind you pay top dollar for but the appliances don't work and the roof leaks.
More Builders Are Turning to New Market: Rentals
http://www.cnbc.com/id/47875221
I have always thought that what many people want really is neither a boxy 1-bedroom "urban" condo in the city, or a 4-bedroom blunderbus with high maintenance fee in the suburbs, but a kind of more upscale trailer park. A neighborhood of low cost rentals, smaller homes, but with space between them and some common parkland nearby and access to roads and bus or rail line. Close to rural parks and with a town square type mall nearby.
That's all we need.
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San Jose, CA
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Goran_K says
Rising prices will only get the sidelined-sellers to put their houses on the market, and there are a lot more pent-up sellers than pent-up buyers right now.
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Laguna Beach, CA
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Exactly. Overpriced homes are about as popular as getting punched in the stomach right now. 2006 isn't coming back.
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Corning, NY
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Goran_K says
From the movie "Dirty Work":
Kirkpatrick (the landlord): "As long as the rent is on time...you don't wreck the place...we ok. If not...*bam*...I punch you in the stomach!"
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Scottsdale, AZ
robertoaribas's website
the title of this thread exhibits PRECISELY the problem with the patrick.net crowd.
the title ASSUMES prices will fall, then tries to figure out why.
That is not how intelligent people think. That is how dumb people rationalize preconceived notions.
Instead, one should study all facts, with an open mind, and make the most defensible predictions, while being aware of other factors that could change that result.
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jhurio says
Then they shouldn't be crying crocodile tears to get help from Fed. They are manged by crook professionals - pretty much what AF said.
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jhurio says
Yep, there are tons of buyers waiting on the sidelines.....
One kicker, to BUY their new house they first have to SELL their existing underwater house.... just a minor small detail....
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Call it Crazy says
there are sellers out there making up multiple bids without proof to encourage higher prices.. and there are buyers making multiple bids on multiple homes with only intent to buy one .. each party inflating prices...
once you get a less emotional market place, and more prudent buyers .. you will see second leg down..
you know.. where were all these multiple bids and pend up buyers when we had a more rational home market... 1980 to 2000 ?
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thomas.wong1986 says
I've heard these stories about multiple bids and selling over listed price but my question is, how many houses are actually experencing this??? Can anyone actually put numbers on the totals.
For instance or example, if there are 1000 houses available in a certain market and 20 of them go through a bidding war, this would be a small percentage. Conversely, if 800 of that 1000 are experiencing bidding wars, than that would be a different situation.
So which is it??? Anyone have actual numbers??
My belief is that there is a lot of "junk" out there, so when a decent house that's not beaten-up (foreclosure) at a fair price comes up, the vultures jump on it... but this might be a small percentage of the whole market.
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San Jose, CA
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The catalyst for the next down leg is going to be FHA loans. 1 out of 6 FHA loans is already delinquent, and bailing out FHA is going to be extremely unpopular. FHA is the next sub-prime:
http://www.doctorhousingbubble.com/fha-new-subprime-30x-leverage-fha-insured-loans-bailout/
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Call it Crazy says
We bought about 2 and a half months ago so I'm not really paying attention to the market as much, but back then every house we looked at was getting multiple bids. One had 23. Another had 15. We have friends who are still looking and it sounds like its even worse now. This is in the immediate Bay Area.
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Corning, NY
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dunnross says
You're kidding right? Anyone who opposes and FHA bailout will be called a racist.
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Darrell In Phoenix says
These aren't speculators buying around here and it we weren't speculating either. Simply ordinary homebuyers. The problem is the lack of supply. That and the economy around here has gotten better, thus there is more optimism, and the rates are really low. We got a 3.5% rate and with our 20% down payment the payments are about the same as we paid in rent. So in other words the delta between renting and buying- at least in the Bay Area- has been bridged. A lot of people realize that and hence the more recent surge in buying.
Will it collapse? Who cares. We didn't buy this as an investment. We bought it to live in. If it falls in value by 50% ( which I seriously doubt) then I could honestly care less. We have retirement and cash savings and the house is again- what we live in.
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Scottsdale, AZ
robertoaribas's website
delusional darrell spouting his wishful thinking again i see...
40% of the phoenix buyers are cash, so good luck waiting for them to suddenly dump properties at losses...That's like asking ME to give you a good deal, never going to happen, I'll simply charge you rent...
Instead of waiting for that day when the promised land of housing comes to you with a nearly free home... you could try making some money or something!
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Virginia Beach, VA
Call it Crazy says
They have to report the account status every month to Experian/Equifax/TransUnion I think. Is that information public? (not names and account #'s, but do the credit bureaus have to make the stats public I wonder?) That is probably the source.
I'd just like to throw it out there that I work in a Loss Mitigation department, and these loan modifications are a joke. Almost every sale I approve (I do short sales) is being sold by someone who already had a modification previously.
Point being, whatever percentage of loans in delinquency that are "working" on a retention option (mod) versus a liquidation option (SS or Deed in Lieu) is quite large. The bulk of those loans will end up as short sales eventually. Half the people trying to get a mod don't qualify. They either run deficits of income in the thousands of dollars every month (hopeless) or they are strategic defaulters who fax us in the same package every month hoping to get another 90 day bump out on their F/C sale date. They know if we have them active in Loss Mitigation, they can press for us to postpone F/C again and again. (and the banks do it because a SS will always bring in more $ (less loss) and that won't change until prices start to rise and stay that way)
Eventually these hopeless souls, or the scammers, are going to find their way to liquidation one way or another, be it REO, Short Sale, or Deed in Lieu. We've long past the point of people who truly need help, and we're just getting dipshits who are experiencing buyer's remorse, or a-holes with $10k a month net income with expenses of $6k, who are incredulous why we won't approve their short sale when they could easily afford 2 more homes and still be able to have money left over each month.
For instance, we have a guy who bought a home in July of 2012. He signed the papers in July. He applied for "assistance" in August after making 0 payments, claiming he wants a better interest rate because other people called in and got their's lowered to 2% (the initial HAMP rate that's only realy in effect the first 5 years, and most people don't qualify for anyway) This douchebag is already unable to pay and hasn't made one payment. Whoever qualified him for this loan should be throttled.
I have another short sale that just fell through because the buyer lost their job right before closing. Seriously people....rent a fucking house. Unless you're sitting on PILES of excess cash (enough to at least get you and your family through 12 months of job searching with no income....and that's AFTER your down payment is paid) then don't sign the contract.
IMO anyone who bought a home post 2010 should be banned from Loss Mitigation. If you didn't read the paper, or turn on the news, for 3 years from 2007-2010 and don't have a handle on this whole homebuying process, and the pitfalls therein, you are too stupid to deserve assistance. Shouldn't there be a statute of limitations on "I didn't think I'd lose my job" or "I didn't think I wouldn't be able to sell it for a profit in 12 months" bullshit??
Now, if your're in FL, NJ, or NY, that's a different story. I have some accounts that are almost 60 months past due. The person bought the home, paid 10 payments, and skipped the next 60....yes, FIVE YEARS paying nothing, and the courts are letting them play us like a fiddle. Can you imagine paying a total of $25,000 to get a home in Queens for 6 full years? Hell of a rent. (and they are nowhere near being evicted...could have some people hitting 7-8 years of squatting EASILY in Jersey or NY before they eventually lose "their" home)
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Scottsdale, AZ
robertoaribas's website
shizlor, that is the post of the month, maybe of the year on here!!!!
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Virginia Beach, VA
Grazie!
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Los Angeles, CA
I worked in loss mitigation like shizlor in the teeth of the last crash 95-97. It was VERY DIFFERENT the country still had rule of law.
For example:
1. no mark to myth accounting for banks back then- they HAD TO FORECLOSE/write off debt asap.
2. investors in mortgages actually audited the servicing and there were servicing guidlines about 'why arent you forclosing faster' etc. Fannie/Freddie/VA/FHA were combined less that 50% of loans - and they were not insane criminals then just yet. Average forclosure took like 12 months then 14 was a looong time, any longer you could only get that much time with temporary BK repreive, once we got the BK case # it was full throttle forclosure time. Conventional (non fha/subprime) default rate was 1.2% or so for years....now its double digits permanently!!!!
3. short sale mayhem: there was little of that - you had to list the home in the MLS for a minimum of 30 days - and sumbit at least 3 offers on the home (and not from brother in law!) and they still would mostly deny them if you had other assets, or would make you sign a 50k promissory note if they forgive 100k in pricinipal. Totally opposite from now.
Now the listing agents get a short sale, find a buyer for thier pocket listing, put it in MLS as pending right off the bat and they only submit offers they double dip or who agree to pay 15k short sale negotiation fee outside escrow (this is really common in CA now! - its legal too. )
Basically the whole RE market has been 'federalized'. Expect a permanent mess the rest of your life.
one more thing, the large bank i was at actually pulled out of writing loans in the entire state of lousiana due to you could not always foreclose. The local sheriffs hated yankee banks and would refuse to evict/serve papers etc much of the time thus they could not predict thier losses/profits.
Can you imagine fannie/freddie/fha pulling out of a whole state now like NY/NJ because it takes 6 years to foreclose? no, profits dont matter - only bailouts matter now - its full time bailouts/giveaways/broken system/screw the taxpayer now.
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Rising interest rates and low family incomes.
Americans, and I don't know how it is elsewhere, tend to stretch themselves way too thin for a privilege of living in a house. Many buy at the edge of affordability. Because of that, any rise in interest rates would simply shift prices down.
I don't make it a secret, my investments are in wall street and business. But the situation in this country and the mess politicians have created that is hurting everyone around is something that still frustrates me to this day.
As a taxpayer I'm tired of paying for it all, as a citizen I'm frustrated with how badly screwed my country is.
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San Jose, CA
PockyClipsNow says
IT WAS. Now we have effects of lobbying.
Bailouts were an overnight decision, predicted by banks, thanks to have Goldman Sachs insider as a US Treasure.
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Laguna Beach, CA
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Schizlor says
This country is being ruined by the lowest common denominator. The "barely got out of high school" crowd is being given $500,000 loans to buy houses, and they think things are going to turn out a-okay.
More than any other time in my life, I've thought about moving out of the country. 10 years ago, I would've thought it was crazy to even consider.
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Why buy a house? I just don't get it. Because rents are too high? Eh, it's sixes. I'd be stuck in a place i can't sell when i need to that has perpetually increasing property taxes. Even when people "own" their home, they don't intend on spending more than eight years in it. The investment angle is dead. People aren't buying because they think it's a good investment anymore. I'm a prime target. I easily have 25 percent to put down on a decent place, but don't count on it. Good renters with a good rep are still solid gold. Our landlords bend over backwards to keep us happy. The last time we were in the market to find a new rental, I gave an application to the potential landlords, because I didn't want to sign a lease with a quick flipper or desperate multi house owner. They thought I was kidding. I wasn't. I'd pay more for the right area and a stable owner. Unencumbered and free to go.