patrick.net

Goran_K says

I'm tired of the extremist on both sides, and I guess I never looked hard enough for the ignore button

Yeah, America has become way too polarized.

Biff Baxter says

Also, when I started this thread I was seriously hoping to avoid the stupid, really stupid, relentless arguing that is so prevelant here. Absolutely mindless crapola.

I agree with Dan, some issues just get too polarized, and people want to call each other names, and things out of their emotions. Bears do it because they feel cheated (rightfully so) from a normal housing market, instead of one that is rigged for banks. Bulls do it because they have a monetary attachment to an asset that has high risk associated with it (because of the rigged housing market).

I've been on both sides. I used to be a homeowner, and I am currently a home seeker. So I know why this issue stirs up people so much, but I like to think as grown adults (I hope we are at least), we can stop calling everyone liars, or idiots, or whatever seems to fit at that moment in time. It just makes the discussion turn into a school yard fight. I had enough of those.

People often throw around the phrases "it's a seller's market" or "it's a buyers market," but what does that really mean?

In general, if the HPI shows a positive slope at any given time, I consider it a seller's market, and if the HPI shows a negative slope at any given time, I consider it a buyer's market.

Although I live in Alameda County, I mostly follow the market in Contra Costa County due to more affordable real estate (although I don't think CCC will exhibit any glaring unusual trends compared to other counties in the Bay Area).

I've made several offers in 2012 (6-7 now), most above asking price, and all multiple offer situations with no success. Ignoring all that, and only looking at # of homes for sale, # of homes sold, and selling price per sq-ft...

Inventory is LOW and sinking according to Redfin. Inventory is 53% lower today than it was just one year ago. Despite a 53% reduction in inventory, the # of homes sold is up 22%! That tells you that homes are not sitting on MLS. The median selling price per sq-ft is not dramatically different compared to a year ago, but it's trending upward.

In the big picture, it's difficult to say that it is a seller's market right now. But if you zoom in and only look at 2012, you can certainly make a case that it is a seller's market right now.

Dear Housing Patrolman,

Please pull up a chair and sit down. We need to have a little talk.

There was a housing bubble. Realtors had a big part in it. Bankers had a big part in it. Irresponsible borrowers had a big part in it. We all know that.

I'm not sure where housing is going in the next few years but my guess is that it will continue to decline slowly and that there is a chance that it may take another significant leg down. I don’t see a recovery for a long time, possibly as much as a decade or even more. I only mention this so you don't think I am bullish on real estate.

Here’s the hard part. You are not the great patrolman for the truth. Your posts are fairly annoying, like gum stuck to your shoe, but you are not the menacing figure you seem to desperately want to be. Your posts are annoying because they lack content of any value. You try to act superior or like some enforcer but you sound dumb and impotent. Your own emails make statements that cannot be known and you state these things as the absolute truth (that’s ironically dumb). Who knows? Maybe you have published something of value here.

On an average day, people find you annoying. On a good day, we are embarrassed for you.

Instead of arguing or attacking, how about some content. Maybe you could find some hidden gem of real estate data from a very credible source. Give it a try. I am thinking you may not be as completely stupid as you sound.

Biff

Dear Housing Patrolman,

I didn't see your Zillow graph until after I had posted my above commentary. Your graph has value. And it's relevant.

Bully for you. I knew you had it in you.

Keep on that track. People will begin to listen and generate some respect for you.

Biff

Housing Patrolman,

The scale on your plot does support your argument. If you look at the plot since before 2008 and calculate a tread-line, sure the market is tanking. But let's look at it a bit deeper.

Using your preferred site and zooming in a bit, I notice the following:

- YoY median selling price is +2.7%
- QoQ median selling price is +11.8%

Median sale price was $278K in Feb and $320K in April. That's a pretty strong 2 month surge and consist with what I have been experiencing trying to pick up a rental over the past few months. Zillow is also delayed, and the trend is upward.

Time will tell whether this 2 month surge is noise or not. I need to pick up a couple rentals, so I certainly hope it's noise!

BayArea

Yep, it just means stepping away from purchasing until winter time (which is what I'm doing) and hope that this is just a blip. With the next recession coming up, I have a feeling it will be.

I'm not going to pay bubble prices for a home here. If worse comes to worse, I'll move into my Santa Cruz home and enjoy my $600 a year property tax and just retire. lol

I'd prefer to buy my own house instead of having one handed to me, but it is what it is.

Dear Housing Patrolman,

I hope this is my last email on the subject of you.

I think home prices will continue to drop. I don't know that they will but that is my guess based on the data I have seen and my experience in the market. I am betting on prices dropping.

I don't know that home prices will continue to drop and neither do you. You might want to peruse a dictionary and look at the words "truth" and "impotent".

Biff

tatupu70 says

It is a sellers market where I was looking in NJ last week. Without a doubt.

Please get in touch with my mother in law and make an offer, she is thrilled to know it's now officially a sellers market since nothing around her in Essex county is selling at all, except at heavy discounts. There are something like 500 properties scheduled for for essex county sherrifs sales in the next month. That's not a good sign.

Housing Patrolman says

That's right. Why buy a house now as prices are falling? Buy later after prices crater for 65% less.

And you will be unemployed along with 60% of the population if home prices cratered that much more.

Call it Crazy says

Take off your rose colored glasses as you cruise around the neighborhoods and be aware of the "shadow inventory" in NJ. (Hint, it's the ones with the uncut grass).

I'm not denying that is the case, but I didn't see any in the areas I was looking at.

I've been hearing about the shadow inventory for years now. Why in the hell would banks continue to hold on to their properties with inventory extremely low, houses selling in less than 1 week at over asking price?? That just doesn't make any sense.

I looked at foreclosure.com and unless I want to live in N. Plainfield or Roselle Park, there didn't seem to be much there...

bob2356 says

Please get in touch with my mother in law and make an offer, she is thrilled to know it's now officially a sellers market since nothing around her in Essex county is selling at all, except at heavy discounts. There are something like 500 properties scheduled for for essex county sherrifs sales in the next month. That's not a good sign.

I didn't look much in Essex county--I was in Union county.

Do you think I'm making this up? I'm looking to buy a house in NJ, not sell one. I'd love it if prices were tanking and I had lots of inventory to choose from. Unfortunately, that wasn't the case. I'm just telling it like I saw it last week.

Call it Crazy says

That's why I told you to rent for now, you'll find a house for a lot less in the future...

Maybe--but I'm not sure foreclosures in Newark or Trenton, or even Plainfield will cause prices to drop in Westfield or Cranford.

Further--the areas I was looking at are pretty much at rental parity, if not cheaper to own already. A crappy 3/2 that needs work rents for $2500.

Call it Crazy says

Simple law of supply and demand. If the banks let loose with all the shadow inventory at once, prices would crash down bigtime!! By releasing houses a little at at time, they are trying to create another bubble and start bidding wars, which they hope, will drive prices up for their shadow inventory. It's a simple marketing trick just like the retailers do for Christmas by offering limited quantities

Except they forgot to release the properties! Where are they?? Inventory is ridiculously low right now. Where are the foreclosures??

It's gonna happen by Christmas. Best time to buy is between 12-20 to 1-15, I mean get an offer accepted.

tatupu70 says

I've been hearing about the shadow inventory for years now. Why in the hell would banks continue to hold on to their properties with inventory extremely low, houses selling in less than 1 week at over asking price?? That just doesn't make any sense.

I too have heard a lot about shadow inventory and have seen some credible, jaw dropping statistics. Like tatupu70, I do not understand why the banks would not release more inventory in hot markets where inventory is low and prices are fairly high. I am not saying they should dump a large volume of properties, but where they can clean up their balance sheets without lowering market prices, they surely would, but I don't see any evidence of that.

If the market could bare 10 houses but only 6 are available, why wouldn't the banks release 2 more? 8 available when 10 are in demand would not bring down prices.

And banks do need to get this stuff off of their books. They are holding shitty liabilities. The idea that they are waiting for prices to get better is ludicrous. They may be evil but they are not stupid.

I am unable to explain it and the standard answers I often hear on this site don't really answer the question.

Biff

Regarding my previous comment, I am in California, not a judicial state for foreclosures so the argument that applies to New Jersey does not apply here.

Biff

Call it Crazy says

tatupu70 says

I've been hearing about the shadow inventory for years now. Why in the hell would banks continue to hold on to their properties with inventory extremely low, houses selling in less than 1 week at over asking price?? That just doesn't make any sense.

Simple law of supply and demand. If the banks let loose with all the shadow inventory at once, prices would crash down bigtime!! By releasing houses a little at at time, they are trying to create another bubble and start bidding wars, which they hope, will drive prices up for their shadow inventory. It's a simple marketing trick just like the retailers do for Christmas by offering limited quantities.

That's only half the story. As long as the loan is on the books the banks can claim the full value of the loan as an asset. If a house sells for less than the loan value the loss must be booked. Bankers that book enough losses to miss performance numbers get to see their bonuses go by by. So things are being carefully trickled out.

Even with banks holding off the backlog of foreclosures in NJ is something like 100k houses or about 50 years at current rates. I have a friend in glen ridge ( the upscale area of bloomfield don't laugh, its true) who hasn't made a mortgage payment in 4 years and says the bank is years from doing his foreclosure.

With so much housing stock in NJ tied up in limbo I can see where some area's don't have a lot of inventory right now. Union must be in that category. Western Essex sure isn't.

Call it Crazy says

If you want a nice "family area" you should look at Monmouth County. It is a train ride to Rahway. It depends on what type of commute you want but neighborhoods and pricing is better than Union County.

I looked at Monmouth county and hated it. It was full of snobby folks in their McMansions. Even the realtor was a snob. Not my cup of tea.

Call it Crazy says

I just took a quick check on Zillow. They are reporting 189 houses for sale in the small town of Scotch Plains, so it appears to me, there is some inventory.
Maybe your "wish list" is too specific or your price range doesn't match the area....

Certainly possible, but I guarantee I could look at that list and probably show you 50 properties that are under contract right now. Zillow is not up to date.

Call it Crazy says

Not sure where you are looking... here is the Zillow map of the Cranford, Westfield, Scotch Plains area. It says there are 943 houses in that area. Surely you can find ONE that you like!!!

Yes--my budget is on the low side for the area. I'll agree with you on that one.

Call it Crazy says

f you want a nice "family area" you should look at Monmouth County. It is a train ride to Rahway. It depends on what type of commute you want but neighborhoods and pricing is better than Union County.

I lived in Keyport 20 years ago (on beers st which my friends still laugh about). I really liked it. If you are talking about commuting on the train stay away from the southern parts of the county. Below the Matawan station the trains stop at every single town and it takes forever. Above Matawan there aren't that many stops.

I don't know what it's like today, but I rented in Cateret in 94 and it was a real sleeper. Used to be a real good family town, totally on it's own that almost no one knows about. Not very upscale, but had some good places.

Call it Crazy says

tatupu70 says

I looked at Monmouth county and hated it. It was full of snobby folks in their McMansions. Even the realtor was a snob. Not my cup of tea.

Ha Ha, you must have been looking in Marlboro...

So true.

Call it Crazy says

They are holding shitty liabilities, but they are holding them on their books at the original "mortgage" value, which is higher NOT at the current "market" value, which is lower. Because of the f*cked up accounting rules, it looks better on their balance sheet to hold the mortgage versus posting the loss when the REO is sold...

I think I understand the assets and liabilities aspect of a bank’s books. I am not completely clear on when they have to declare things and when they have to act.

The bits and pieces of information I have are below. I am not sure of the accuracy. If anybody can definitively and accurately verify any of it, it would be appreciated.

1) By law, before the housing crash, banks used to have to sell or put up for sale a repossessed property within 6 months of taking possession. It is my understanding that this law has either been changed so that banks no longer have to do this or the law is not being enforced.

2) Banks are not required to accurately value properties that they hold mortgages on or have repossessed. They do not have to “mark to market”.

3) The minute a bank repossesses a property, the property moves from their asset sheet to their liability sheet.

4) There seems to be no law requiring repossession by a specific time or calendar duration. It seems like a bank can hold off on repossession as long as they like. Is that true?

5) There is some law about banks having to send and make public a notice of default on a property where payments have been missed for some period of time, 90 days I think.

#2 seems to give bankers all kinds of leverage. As an asset, they can leave the price at a previous high. This artificially makes their books look good. When they move the property to the liability column, they lose that asset but they can offset that problem by marking down the value of that property and reducing their liability, again, artificially improving their balance sheet. Does that make sense?

If #3 is true, I would understand not repossessing but I would not understanding holding a property that has been repossessed unless a bank was somehow otherwise increasing their assets. My limited understanding is that banks are having difficulty managing their balance sheets.

It seems like I am missing pieces of the puzzle.

Biff

Call it Crazy says

I agree... he should look in northern Monmouth, maybe Matawan Aberdeen, etc. It would be a easy shot up on the train to Rahway and I think he'll find better house prices than Westfield area.

FWIW, great schools rates Matawan Regional High School as a 4. NJ Monthly has them a little higher (above average), but the schools worried me a little. Especially coming from out of town....

bob2356 says

Below the Matawan station the trains stop at every single town and it takes forever. Above Matawan there aren't that many stops.

I think Long Branch is still safe; it's the stations south of there where you run the risk of having to wait an hour for a train.

(Now when will NJ Transit bring back the off-peak round trip discount ticket? It now costs $30 (!) for a round trip from Long Branch to New York no matter when you go; no off-peak discount!)

tatupu70 says

Call it Crazy says

I agree... he should look in northern Monmouth, maybe Matawan Aberdeen, etc. It would be a easy shot up on the train to Rahway and I think he'll find better house prices than Westfield area.

FWIW, great schools rates Matawan Regional High School as a 4. NJ Monthly has them a little higher (above average), but the schools worried me a little. Especially coming from out of town....

So go a little further to middletown, very well ranked. Henry Hudson over in Highlands used to be considered very good. I really liked that area, I rented just over the bridge in Rumson. If you kids had any interest in a career in marine science the Marine Academy on sandy hook is supposed to be a fantastic high school.

Obligatory:

http://www.smiteahippie.com/wp-content/uploads/2011/12/NJ_map.jpg

BoomAndBustCycle says

Housing Patrolman says

That's right. Why buy a house now as prices are falling? Buy later after prices crater for 65% less.

And you will be unemployed along with 60% of the population if home prices cratered that much more.

Yup, that is why my gold and swiss francs will buy many houses in the future. :) My new job will be learning how to use a rifle to keep all the homeless off my properties.

zzyzzx says

http://www.smiteahippie.com/wp-content/uploads/2011/12/NJ_map.jpg

Great map, perfect. Someone did a lot of research.

BoomAndBustCycle says

And you will be unemployed along with 60% of the population if home prices cratered that much more.

explain how a drastic decrease in the cost of living in a consumer based economy would lead to high unemployment.

Mick Russom says

explain how a drastic decrease in the cost of living in a consumer based economy would lead to high unemployment.

Were you paying attention in 2009? It already happened.

The problem is it's not just a lower cost of living, it's also a LOT of people losing a LOT of money.

Appraisers Are Corrupt says

How are people "losing money"?

Wow. Are you really asking that? When someone gets foreclosed, the homeowner loses money and the bank owners lose money.

Appraisers Are Corrupt says

How is the borrower losing money?

What are you talking about? Which borrower?

tatupu70 says

Call it Crazy says

I agree... he should look in northern Monmouth, maybe Matawan Aberdeen, etc. It would be a easy shot up on the train to Rahway and I think he'll find better house prices than Westfield area.

FWIW, great schools rates Matawan Regional High School as a 4. NJ Monthly has them a little higher (above average), but the schools worried me a little. Especially coming from out of town....

My high school English teacher is an administrator at Matawan. It's not a bad area. Trying to get into a good school district in this state ends up costing you an extra 200k. The district that I teach in, is probably #2 or 3 in the state. As a result, a home that would go for 400k in any other town, which is already overpriced, ends up going for 1.2 million. Welcome to NJ where you live like a bum with a household income of 120k.

I completely agree with the realtor that prices have hit bottom.
This bottom will hold for at least 15 minutes. LOL

tatupu70 says

Appraisers Are Corrupt says

How is the borrower losing money?

What are you talking about? Which borrower?

Wow. Scintillating conversation. Congrats, guys.

bob2356 says

That's only half the story. As long as the loan is on the books the banks can claim the full value of the loan as an asset. If a house sells for less than the loan value the loss must be booked. Bankers that book enough losses to miss performance numbers get to see their bonuses go by by. So things are being carefully trickled out.

I think that's the best explanation so far. Also when you write off bad loans you are hitting the overall bank profit on the P&L. They have to have enought revenue from the other sources to offset these bad debts expenses and still show the profit. So, they release them slowly and according to their internal performance planned vs. actual numbers. It is just a number game to always look good to the stockholders and outsiders.

Biff Baxter says

#2 seems to give bankers all kinds of leverage. As an asset, they can leave the price at a previous high. This artificially makes their books look good. When they move the property to the liability column, they lose that asset but they can offset that problem by marking down the value of that property and reducing their liability, again, artificially improving their balance sheet. Does that make sense?

Bank accounting is not my cup of tea, so maybe I'm wrong but my understanding is that there are two sides of each transaction including writing off bad loans, one site is you lower your asset and the other site is you increase your expense - Bad Debt. When you increase that expense account you are hitting your P&L for the given year. Let's think about it like you run a regular business and you need to write off A/R aging because you know you won't collect money on your bad clients.
You can do it as long as you are not overduing it. What it means not too much too soon in any given year because on the accrual basis it would put you in red (loss/not profit)

Revenue - Expenses = Profit/Loss.

So you have to have enough revenue to write off some of these loans to still make profit.

There is one more thing which I don't understend, in the regular business each Account Receivable (Asset) has a contra account called Allowance for Doubtfull Accounts,

Balance Sheet

Asset
(Allowance for Dobtfull Accounts)
+Asset
+Asset

(Liability)=

Equity

so that account automatically lowers your Asset account because you ESTIMATE how much write offs you are going to have during the year. This same must be with these loan asset accounts for banks. They should have some contra-asset account which should account for their future losses and lower their asset immidiately. The estimate is only what it is, you can artificially lower it but at the end of the year you should adjust it to the reality.

All of it is a postponment game

OK, I found some more about that topic. Estimated losses should offset that loan asset account. It is a manipulative tool for bankers. Managers have incentive to keep these losses low to inflate their Income Statement and their own bonuses. They also don't need to increase their equity capital to absorb unexpected losses.
Accounting standards require the estimates to be as close to reality as possible, but, there is always but...

There are exeptions when,
1. the loans are securitized and traded in financial markets
and
2.the loans are hedged by a derivatives contracts.

I'm not going to that discussion because it is too complicated but a lot of these loans have one of these two forms and banks can adhear to different set of rules or no rules at all with dealing with these instruments.