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Same thing happening in San Francisco. We've got tons of newly constructed condos, much of it sitting empty the last year. Payments to buy after adding property taxes, condo association fees, etc. are still well above rent. I'm not in the market, but have a friend who is.
"She tells me that I have been approved for the loan."
Contratulation! You've won our prize, Mr./Ms. __CBOTRADER__!!
BTW, who was writing the loan? Why do I suspect it is the same bank that extended the loan to the builder?
CBOEtrader
2009 Oct 13, 10:44pm
"BTW, who was writing the loan? Why do I suspect it is the same bank that extended the loan to the builder?"
This is exactly the case. I was aslo told that the builder pays some fees to the bank to help the bank afford the 5% down/5% fixed mortgage. (Compare this to another place I looked at, listed at $599K, in which the realtor told me I would need to put a minimum of 20% down for a 6% mortgage--which is much more in line with reality.) It seems the bank would rather hold onto a residential mortgage than a loan to building company. Or perhaps they can package and sell the mortgages and thus hold onto nothing. I wish I knew the answer.
Either way it's fishy.
elliemae
2009 Oct 13, 11:22pm
Wow. Congrats on being preapproved for a loan based on a conversation! You're awesome!
CBOEtrader
2009 Oct 14, 4:00am
Hopefully I don't get sued for libel, but the company is Lincoln Mortgage.
http://www.lincolnmtg.com/service.htm
I have no idea what they are up to, but I have to assume they don't hold onto any loans themselves.
Charlie Eck, Lincoln’s President....has helped to shape both the industry and the legislation that impacts it.
So he's one of the *%&$&#@* that corrupted the political system into giving the financiers a license make whatever ridiculous "financial products" they dreamed up.
High Ethical Standards
Lincoln Mortgage is very serious about its responsibility to the public.
Uh, huh.
My guess: they probably have to hold the loan themselves since the buyers have dried up. It's a choice of a holding a non-performing construction loan, or a performing (though risky) residential loan on their books. Or, they can sell your loan for a big haircut, but they need the cash to pay off their creditors. All these mortgage companies are leveraged to the hilt.
CBOEtrader
2009 Oct 14, 8:50am
"High Ethical Standards
Lincoln Mortgage is very serious about its responsibility to the public.
Uh, huh."
Yeah, I got a good chuckle out of his website as well. I didn't want to post those goodies myself as I am slightly concerned about a vilification suit.
Senior Eck is supposedly awaiting my call. Should I ask him to give me a 3% rate, just to hear his response?
bubblesitter
2009 Oct 15, 4:26am
Bottom line is never go with a builder or a Realtor for financing.
I was walking around my west loop Chicago neighborhood this past Sunday and decided to enter an open house.
http://www.redfin.com/IL/Chicago/120-N-Halsted-St-60661/unit-4/home/21619917
I was telling the realtor that I thought this 3bd/3bth 2000 sqft place, listed at $629K, was indeed nice, but that I am in no position to buy at the moment. After all, I am a trader, and this year I will not be getting a bonus. Additionally, I have spent my past bonuses and savings on a small technology business which is just now coming out of its research and development phase. My salary is only $100K and so clearly I can not afford a place that is 6 times my salary.
The realtor was not deterred, of course. She proceeds to tell me that the builder has a special arrangement in which their bank only requires 5% down, and then will finance out a 30 year fixed at 5%. At this point I am interested, though mostly to know more about this easy money pitch, moreso than any desire to stretch myself thin overpaying for a condo.
I then did some research and found the place for rent on craigslist for $3200 per month (http://chicago.craigslist.org/chc/apa/1420512455.html) compared to $4000 to $4500 total monthly cost for the mortgage at 5%, after a $30K downpayment, plus tax plus homeowner fees. Add this to the fact that only 2 of 9 units have been sold, and buying this place is clearly not a good idea.
Then this morning I get a phone call from the realtor (she had an "easy" air to her so I gave her my card). She tells me that I have been approved for the loan. Keep in mind that I told her 1) I have no money for a downpayment, and 2) my salary is 1/6th of the condo price.
My conclusion: since they are continuing to hand out loans like pez, and there is still a boatload of condos on the Chicago market, then it is only a matter of time until real estate prices here crash.
Am I missing something?
#housing