patrick.net

No one has a right to insist that a private business take a loss on an asset like that.

I would agree if the loan were private, with no gov backing at all. Even so, there used to be laws about how much REO a bank could have, specifically to stop banks from carrying depressed assets at full value against the reserve requirement.

An empty house is perishable inventory, so banks are not going to sit on a bunch of empty houses for very long.

Many years ago, when I was actively looking for unwanted houses, I found that banks did exactly that, and sat on empty houses for years. The bank would not sell unless I offered an amount equal to the loan balance and then some. I also heard this is a "comp" issue. If the bank sold a house cheap, it lowers the values of other housing loan assets they may have, performing or not. Like a Real Estate Agent that does not like to see a "bargain" sale lowering the comps for her listings.

If you don’t have cash, don’t even think about buying, the cash buyer’s lower offer will always be accepted over your questionable financing offer.

Not just because it is questionable. Oft times a mortgage type buyer want the seller to pay mortgage related closing costs.

HeadSet says

Many years ago, when I was actively looking for unwanted houses, I found that banks did exactly that, and sat on empty houses for years. The bank would not sell unless I offered an amount equal to the loan balance and then some. I also heard this is a "comp" issue. If the bank sold a house cheap, it lowers the values of other housing loan assets they may have, performing or not. Like a Real Estate Agent that does not like to see a "bargain" sale lowering the comps for her listings.

They 100% sit on empty houses. They will also sit on pre-foreclosure properties for extra months or even years depending on the area before officially foreclosing. This is 100% fact. This industry was my life for about 3-4 years that paid the bills a decade ago.

There's also staggering mismanagement with handling short sales and foreclosures on the banks end, 3rd party vendors as the gatekeepers and real estate brokers doing stuff they were never trained to do. The little hottie 30 year old broker selling houses with her tits and ass, has zero clue how to manage a vacant asset. So they go to shit and the banks lose even more money.

If it gets bad again, banks managing these situations better are going to raise the floor on prices falling too low. Prices dropped way lower than they should have around 2008-10 due to pure mismanagement and never having experiencing what happened. I don't expect that to happen again. Though prices are likely to drop.

HeadSet says

I would agree if the loan were private, with no gov backing at all. Even so, there used to be laws about how much REO a bank could have, specifically to stop banks from carrying depressed assets at full value against the reserve requirement.

Excellent point, and I have often wondered what stops banks from doing that. Why ever declare someone in default? Just sit back and be a silent partner instead of a lender.

Mortgages postponed by 3 month
Stimulus checks arriving for every loser

It’s not gonna crash that much.

HeadSet says

Many years ago, when I was actively looking for unwanted houses, I found that banks did exactly that, and sat on empty houses for years. The bank would not sell unless I offered an amount equal to the loan balance and then some. I also heard this is a "comp" issue. If the bank sold a house cheap, it lowers the values of other housing loan assets they may have, performing or not. Like a Real Estate Agent that does not like to see a "bargain" sale lowering the comps for her listings.

Again, solid. The 2008 crash taught banks some of those lessons. You are forgetting that banks weren't selling to individuals like me or yourself. There were so many foreclosures that they were literally bundled in groups of 100s and sold in what are called tranches. Many were bought up under TARP and then given to select institutions to try to dispose of.

HeadSet says

No one has a right to insist that a private business take a loss on an asset like that.

I would agree if the loan were private, with no gov backing at all. Even so, there used to be laws about how much REO a bank could have, specifically to stop banks from carrying depressed assets at full value against the reserve requirement.

An empty house is perishable inventory, so banks are not going to sit on a bunch of empty houses for very long.

Many years ago, when I was actively looking for unwanted houses, I found that banks did exactly that, and sat on empty houses for years. The bank would not sell unless I offered an amount equal to the loan balance and then some. I also heard this is a "comp" issue. If the bank sold a house cheap, it lowers the values of other housing loan assets they may have, performing or not. Like a Real Estate Agent that does not like to see a "bargain" sale lowering the comps for her listings.

This is illegal in so many ways. Too bad they're TBTF.

WineHorror1 says

My daughter married a trustfunder almost 2 years ago. The family owns about 6,000 rental units and over 1,000,000 square feet of commercial space. I wonder how this is going to affect them.

It might bankrupt them. The people I know like this have extreme amounts of debt. They essentially work for the banks. What they worry about most is their credit rating. They are in the maximum amount of debt they possibly can be. How many landlords do you know who have actually paid off their mortgages? They never do, they borrow against property to buy more property. This works until it doesn't.

We'll see, but I think we'll be walking out of this in a very different world. I wouldn't be surprised to see massive bankruptcies. We'll see.

I think what might possibly be happening is that we're seeing a covert operation against the banking cartel. Maybe that's too much to hope for, but it's a possibility.

Onvacation says

Patrick says

Fed buying up mortgages again with newly printed cash.

Why do we allow a private bank to control our money supply?

Rhetorical question, not expecting cogent answers.

The misconception is that it's "our" money.

It's not even our country at all. It belongs to Wall Street, bankers, the US Chamber of Commerce, all of them globalists. We are only their fodder, as someone else just said.

Our only defense is democracy, but they are damn good at subverting that by dividing us.

Trump was a rare glitch in the Matrix. He was never supposed to be allowed to win, just to run as an easy punching bag for Hillary and her ilk.

They forgot to shut down democracy completely, though they do pretty completely control the press. And the people escaped their total control, for a moment.

Patrick says

They forgot to shut down democracy completely, though they do pretty completely control the press. And the people escaped their total control, for a moment.

I don't think the press is going to regain its credibility any time soon. Hell, they have to practically shove it down people's throat to get them to watch it. Most comments on youtube of a mainstream "news" program are obviously bots, which is why they never respond or show any ability to have a conversation.

I'd say George W. Bush broke the illusion when he lied the nation into Iraq, this gave an opportunity for the Daily Show to painstakingly cover all the lies of the Bush administration, then we ended up with ReBush Obama as prezdident meat puppet, all the "left wing" media fell in line to support him while he was bombing nations all over the world, and Trump finally came up and said the "fake news" is the enemy of the American people, so they lied for 3 years about Russia Collusion.

They're not recovering from this. This is the real reason the Internet was created, to destroy the propaganda systems. It took 20 years long then I thought it would, but it seems to be here, finally.

Can’t have it both ways. Patrick claiming this virus is a scam and nothing burger... then also claiming our economy can’t recover from 2-3 months of hitting the pause button... is just nonsensical. If the virus proves to be nothing... we will be on a v-shaped recovery by end of the summer. If it proves as the experts expect... then yeah, this will be bad.

BoomAndBustCycle says

Can’t have it both ways. Patrick claiming this virus is a scam and nothing burger... then also claiming our economy can’t recover from 2-3 months of hitting the pause button... is just nonsensical. If the virus proves to be nothing... we will be on a v-shaped recovery by end of the summer. If it proves as the experts expect... then yeah, this will be bad.

Here's how it was explained to me.

Business cannot pay their bills because they are shut down
Tenets cannot pay their rent
Mortgage owners can't pay their mortgage
Borrowers cannot pay any of their debt

This means:

Banks don't get their money
Depositors can't access their money

We'll see, but I expect we'll be in quite a different world only 2 months from now.

It doesn't matter if the virus is a scam or not, the economy is largely shut down. People live off from debt, they don't have savings. There are plenty of people that are just one paycheck away from homelessness. I'll be surprised if this isn't a game changer, and I wouldn't be a bit surprised to find out this mandatory shutdown is cover for something else.

It was just last September the Repo market broke down. This is where a bank needs a bunch of cash to make payroll, they'll have the money in 24 hours, but they need a literal over-night loan. Well, banks stopped trusting other banks balance sheets, so the Federal reserve took over the market. That is how tight credit is. These giant corporations have no savings either, they borrow against all their assets, and the banks often look the other way on their assets - to a point.

Shutting down the economy for everybody for a week is bad enough. We'll know for certain soon enough, but this is not really about a pandemic or protecting citizens. It's about a controlled implosion of the economy I suspect. Meanwhile, people are stockpiling toilet paper. You might want to think about stockpiling rice and beans.

richwicks says

This means:

Banks don't get their money
Depositors can't access their money

richwicks,

The roadmap is what happened with failed banks like IndyMac in the US, and other banks in places like Iceland, Cyprus, Greece during the financial crisis. Daily withdrawal limits for insured deposits.

I just got approved for a $100k heloc... so the market still is working for the time being. That amount will last me 3-4 years of mortgage payments if I lose my job. I won’t lose my house. Another reason why buying a home 10 years ago was the smartest decision of my life.

BoomAndBustCycle says

I just got approved for a $100k heloc... so the market still is working for the time being. That amount will last me 3-4 years of mortgage payments if I lose my job. I won’t lose my house. Another reason why buying a home 10 years ago was the smartest decision of my life.

Great time to buy, I think you nailed it.

Malcolm says

$100k heloc... so the market still is working for the time being. That amount will last me 3-4 years of mortgage payments

Borrowing money to make the mortgage sounds like a perpetual motion machine or Fed monetization of debt.

B.A.C.A.H. says

Malcolm says

$100k heloc... so the market still is working for the time being. That amount will last me 3-4 years of mortgage payments

Borrowing money to make the mortgage sounds like a perpetual motion machine or Fed monetization of debt.

If it comes down to it... you do what you can to survive. Makes more sense then trying to sell in a down market. Small businesses and individuals with assets or cash reserves need to think out of the box if they lose a job income in the short term. If you lost your job and sold your house in 2008 for a loss and cashed out your 401k to survive you screwed up royally. If you were able to think ahead and got a large credit line and lived off it until you got a new job and maintained those assets and 401k cash in stocks.... you made out very well. I’ve thankfully kept my job... but I’m preparing as if I lost it... or will lose it.

BoomAndBustCycle says

Patrick claiming this virus is a scam

Please quote.

Or retract your slander.

BoomAndBustCycle says

Can’t have it both ways. Patrick claiming this virus is a scam and nothing burger... then also claiming our economy can’t recover from 2-3 months of hitting the pause button... is just nonsensical. If the virus proves to be nothing... we will be on a v-shaped recovery by end of the summer. If it proves as the experts expect... then yeah, this will be bad.

Economy will recover, but it’ll take time. Patrick is correct here.

BoomAndBustCycle says

Malcolm says

$100k heloc... so the market still is working for the time being. That amount will last me 3-4 years of mortgage payments

That's not my quote BTW.

Patrick says

Please quote.

Or retract your slander.

I retract the “scam” part... but plenty of your posts have insinuated COVID-19 is a “nothingburger”.

You are forgetting that banks weren't selling to individuals like me or yourself.

I was talking about a time before the 2008 crash. No bundling or tranches yet.

BoomAndBustCycle says

COVID-19 is a “nothingburger”.

The actual death toll will be about that of the seasonal flu of 2018, which was barely reported on.

How many landlords do you know who have actually paid off their mortgages? They never do, they borrow against property to buy more property. This works until it doesn't.

I actually did pay off the mortgages on my rental properties, by putting all my extra cash into them, plus the proceeds of a sale from earlier rental property. I also question the bit about landlords "borrow against property." I found that banks refused to lend on rental property, especially any kind of "cash out" you would need to buy another. I got my first 2 properties by a FHA 203k (NEVER AGAIN) program and a VA distressed foreclosed sale. They were cheap, but I had to spend months of my time restoring them. To finance my materials, I had to get a personal loan, which only one bank was willing to do. I had just gotten out of the Air Force, and paid cash for the house I was living in, but did not have much cash left to put into fixing up the properties.

My Financial Wizard says his team thinks this will be more like a U-shaped recovery. Stay the course!

I have about 8% cash in my portfolio, with 11% in alternatives, mostly gold. Should I buy the dip, or am I too late?

rocketjoe79 says

My Financial Wizard says his team thinks this will be more like a U-shaped recovery. Stay the course!

I have about 8% cash in my portfolio, with 11% in alternatives, mostly gold. Should I buy the dip, or am I too late?

Today you still get 25-30 percent discount on anything.

Hotel and airlines bigger discount.

rocketjoe79 says

Should I buy the dip, or am I too late?

Check out the dips and surges in the US stock market indices between October 1929 and 1932.

https://www.dailymail.co.uk/news/article-8197747/Requests-delay-mortgage-payments-jump-nearly-2-000-coronavirus-outbreak.html

Requests to delay mortgage payments jump nearly 2,000% as borrowers seek immediate relief during the coronavirus outbreak

Data from Mortgage Bankers Association (MBA) shows that forbearance requests grew by 1,270 per cent between week of March 2 and week of March 16
That number jumped another 1,896 per cent between March 16 and March 30
Last month, President Donald Trump signed the CARES Act, which allows for a three to six month delay in mortgage payments
But at end of grace period, borrowers will be required to pay entire lump sum

Patrick says

But at end of grace period, borrowers will be required to pay entire lump sum

That is going to be devastating. Patrick, banks aren't going to sit back while prices fall, I picture NODs (Notices of default) being filed as early as they possibly can to preserve their rights.

BoomAndBustCycle says

If you lost your job and sold your house in 2008 for a loss and cashed out your 401k to survive you screwed up royally. If you were able to think ahead and got a large credit line and lived off it until you got a new job and maintained those assets and 401k cash in stocks.... you made out very well.

Hindsight is what? 20/20?

Patrick says

But at end of grace period, borrowers will be required to pay entire lump sum

So, the foreclosures will start en masse when? 6 - 9 months from now?

WineHorror1 says

Hindsight is what? 20/20?

that's punny

I look at the stock market today and gotta say I'm surprised to see we ended the day at a level that puts us down only about 18% from our peak a couple months ago, before we crashed. And, were currently about where we were 1 yr ago.

Granted, if you did a s&p 1 yr trend line and compared our current level with where we likely would have been if we followed the trend instead of crashing, then we are down a good clip.

But, damn, being down only 18% just feels at odds with the atmosphere. I guess big money must feel that the stimulus is sized appropriately in relation to how this event is panning out.

I don't trust words that come out of very many of the talking heads. But I do trust rich billionaire fucks not to lose their fortunes, and right now they seem bullish. But maybe this is just volatility manifesting itself in a spike.

If you be liquid, you may be able to pick up some cheap homes. Asset stripping, Chinese Communist style, comrades.

Hircus says

I look at the stock market today and gotta say I'm surprised to see we ended the day at a level that puts us down only about 18% from our peak a couple months ago, before we crashed. And, were currently about where we were 1 yr ago.

Granted, if you did a s&p 1 yr trend line and compared our current level with where we likely would have been if we followed the trend instead of crashing, then we are down a good clip.

But, damn, being down only 18% just feels at odds with the atmosphere. I guess big money must feel that the stimulus is sized appropriately in relation to how this event is panning out.

I don't trust words that come out of very many of the talking heads. But I do trust rich billionaire fucks not to lose their fortunes, and right now they seem bullish. But maybe this is just volatility manifesting itself in a spike.

There will be continued optimism as most bigger companies can easily take a hit for one quarter. Until earnings I don't see another crash. And if earnings come in at or above estimates we may reach previous levels sooner than later again, but I doubt there will be any meaningful growth beyond that. Next we need to rehire many who lost their jobs without their fault. It's doable if they don't fuck this up with further lockdowns.

Whats going on with the housing market? I thought for sure we would see signs of it cracking by now but still don't see any price declines. I think it needs to correct and thought for sure this virus would be the last straw.

.

https://www.wsj.com/articles/why-home-prices-are-rising-during-the-pandemic-11588671002

Why Home Prices Are Rising During the Pandemic
While buyer demand has softened and sales fell 8.5% in March, the supply of homes on the market is contracting even faster

By Nicole Friedman, Wall Street Journal
Updated May 5, 2020 11:41 am ET

The economy is shrinking, businesses are closing and jobs are disappearing due to the coronavirus pandemic. But in the housing market, prices keep chugging higher.

Home prices plunged during the last recession after a housing crash caused millions of families to lose their homes. Home values could start to erode again, especially when mortgage forbearances end, some economists warn.

But that hasn’t been the case so far. The median home price rose 8% year-over-year to $280,600 in March, according to the National Association of Realtors. While buyer demand has softened and sales fell 8.5% that month from the prior month, the supply of homes on the market is contracting even faster, recent preliminary data shows.

“Demand absolutely just got a kick in the gut, but at the same exact time, so did supply,” said Skylar Olsen, senior principal economist at Zillow Group Inc.

Homes typically go under contract a month or two before the contract closes, so the March NAR data largely reflects purchase decisions made in February or January.

Even by the end of last month, many sellers were reluctant to cut prices. Only about 4% of sellers cut their prices in the week ended April 25, down from 5.7% during the same week last year, according to Realtor.com. ( News Corp, parent of The Wall Street Journal, operates Realtor.com.)

I don’t see it yet.

Hircus says

Granted, if you did a s&p 1 yr trend line and compared our current level with where we likely would have been if we followed the trend instead of crashing, then we are down a good clip.

Good point. You could start a preliminary examination with the P/E ratio. https://www.longtermtrends.net/price-earnings-ratio/

The S&P 500 needs to go down about 20% from current level to return to fair value. However that is calibrated based on the past (i.e., pre-2008) when the Federal Reserve was not as proactive in monetary policies. So perhaps there is a "new average" or "new normal" as far as fair valuation (i.e., P/E ratio range between 15 and 20, instead of 10 to 15).

RC2006 says

Whats going on with the housing market? I thought for sure we would see signs of it cracking by now but still don't see any price declines. I think it needs to correct and thought for sure this virus would be the last straw.

In the Bay Area but here are my observations from people I know:

1) White collar professionals - Working from home continuing to collect paychecks
2) Blue collar trades - Many kept working, some furloughed but will return to work this week
3) Service workers - Furloughed/laid off. Restaurant workers, retail, etc

Who buys homes in the Bay Area? See #1 above. This is one reason why homes have not really budged in price through the shelter in place. Also, I assume the data represents those homes that went under contract just before the shelter in place. It will be interesting to see the data for May and the next couple months though. I know there have been tech layoffs but my company (civil engineering) is continuing to hire during the shelter in place. We are just as busy as before China's covidcrap got dumped on us.