What is happening in the US House market?

[Drifterwood]

We were aware of unethical lending practices in the home mortgage market some three years ago in the UK. I am just surprised that it has taken this long for payback time.

We are being told that there is a slump in the US home market.

What is the scale and how much uncertainty did it take to create the "slump"?

 

[B_NineInchCock_160IQ]

Considering how much housing prices have skyrocketed in many areas in the last 10 years... the fallout hasn't been all that severe, but it's probably going to get worse before it gets better.

 

[dcwrestlefan]

depends on where you are. some places are tanking. dc is flat. prices in baltimore went up 14 pct in the last year. but the market, overall, is not the "free for all" it was a few years ago. it was nuts here for awhile. bid 15k over the asking price for a condo in northern va in 2004, and still lost it.

that would not happen now.

 

[HotBulge]

We were aware of unethical lending practices in the home mortgage market some three years ago in the UK. I am just surprised that it has taken this long for payback time.

It's interesting to hear that such turmoil hit England three years ago. Perhaps the fallout just took longer here in the United States. Both in the US and the UK, I imagine that the credit bubble began in the late '90s, burst with the tech/stock explosion, and the liquidity was transferred to the housing market.

The sub-prime lending practices, I think, took longer to rise to the surface here in the US because the loans were repackaged with good mortgage loans to create a portfolio. Risky loans were therefore redistributed and mixed in with "good" loans. These newly crafted loan portfolios were then resold to other banks and businesses.

We are being told that there is a slump in the US home market.

What is the scale and how much uncertainty did it take to create the "slump"?

The scale is still being determined and is still somewhat obscured from the public. The effects are most strongly concentrated in about ~5 of the 50 states for two reasons.

(1) States/areas with inflated housing markets from 2002 to 2004 saw a dramatic increase in the value of homes.
example: Miami in Florida
example: Tuscon and Phoenix in Arizona
example: San Diego and greater Los Angeles in California
People were buying real estate and were selling it 9 months to a year later to reap a profit over artificially inflated values. This artificial inflation is bursting.

(2) States with a historical industrial base and no modern economy
example: northern Ohio --> steel plants and manufacturing
example: Detroit Michigan --> America's automobile industry is declining
miserably. Plants are being closed down.

The situation exploded because the honeymoon phase of agreeable lending rates is over. Many of these subprime loans were variable interests rates that started off with a year or two of appealing rates and then a trigger to varying or higher interests rates. So, a person who was initially paying $1200 per month all of a sudden sees a monthly rate of $2000, practically overnight. The interest rate triggers will come due for people over the next 6 months, exposing areas to at least another 6 months of higher default rates on mortgages.

 

[snoozan]

my house is for sale. i can tell you firsthand the market is shit. properties that were selling in days a year ago are now taking months to sell at lower prices.

even though i live in an exurban area that is growing rapidly, mortgage lenders have tightened their belts even for prime borrowers and people are scared to buy with all the media hype. i bought my house 5 years ago and am listing the home at over 130% of what i paid for it. prices went sky high for awhile, and now they are equalising.

i just want to get out with some money to pay bills as soon as i can. i'm not holding my breath.

 

[Mem]

The problem is that people were accepting the inerest only loan, and when that part of the loan was over they could no keep up with the other payments.

The housing prices are too high right now. It happend in the 80's. Even when the prices go down, they will eventually go up. This is the exemption to the rule... what goes up must come down.

Most Amercians live paycheck to paycheck. I would rather save and have some security in knowing that I have something to fall back on. Americans want to live above their means and keep up with the Joneses. Our Government is the same way, they spend all that they can, and just print more money, and raise our taxes.

 

[Quite Irate]

One in five people who got a subprime mortgage in '06-'07 will go into foreclosure. Pretty sweet, huh?

This comic is all the explanation you'll ever need:

 

[snoozan]

FYI-- most people in the sub-prime market are paying their mortgages.

My mother was a sub-prime borrower after my father left her with nothing much but a lot of debt when he walked out. She arranged a fixed rate mortgage with regular terms with a mortgage company. When they sat down at the table for settlement, the representative for the mortgage company told her that, by the way, they had to put her into another loan that was an ARM. She should have walked away from the table at that point, but she didn't because she'd already committed herself otherwise and needed the loan. Eventually her rate started adjusting until she couldn't afford the payments. Fortunately, her credit had improved such that she was able to get a traditional mortgage at a decent interest rate when the payments got too high. She kinda got lucky with that.

That's the kind of bullshit practices these lenders used that got a lot of people into trouble.

 

[Osiris]

The problem is that people were accepting the inerest only loan, and when that part of the loan was over they could no keep up with the other payments.

The housing prices are too high right now. It happend in the 80's. Even when the prices go down, they will eventually go up. This is the exemption to the rule... what goes up must come down.

Most Amercians live paycheck to paycheck. I would rather save and have some security in knowing that I have something to fall back on. Americans want to live above their means and keep up with the Joneses. Our Government is the same way, they spend all that they can, and just print more money, and raise our taxes.

We lived in Los Angeles in the late 70s early 80s. That was ground zero for skyrocketing real estate prices. The year that Proposition 13, my folks bought a house in Brentwood and one in Mandeville Canyon (Don't ask why two. Chalk it up to a difference of opinion in where we should live). Both houses together cost $860,000 at the time. Proposition 13 passed and we enjoyed a rise in costs. Now jump ahead to 1984. We are living in Missouri, but still own the two houses in LA. My parents list the house in Brentwood. It sells for $1.2 million. The house in the canyon? It appraised at $1.6 million. And that my friends is where our current housing market is. The $320,000 we spent bought our cute little house with a big yard in Suburban Seattle. That same amount of money would by a house twice the size with an acre lot in Missouri where we are originally from.

A lot of people think The Governator made the majority of his money in movies. Not so, The Governator was buying up property from his weight lifting and movie earnings.

Funny side note, When Ah-nald was mounting his campaign to become California Governor, he was parading his team of advisors out for a news conference. One of them being Warren Buffet. Right before they went on TV, one of Schwarzenegger's advisors hears Buffett talking about the easiest way to fix California's money woe's is to kill Prop 13 and revalue the market.

Buffett didn't take the stage at all. :biggrin1:

One in five people who got a subprime mortgage in '06-'07 will go into foreclosure. Pretty sweet, huh?

This comic is all the explanation you'll ever need:

Amazing how little common sense the high and mighty finance guys have.

 

[Drifterwood]

It is paradoxical isn't it that those who can least afford it are charged the highest interest because they can least afford it.

 

[Not_Punny]

There's something and nothing to be said for Marxism. :wink:

 

[Drifterwood]

There's something and nothing to be said for Marxism. :wink:

Banking is the biggest scam in the world after pharmaceuticals - that's why the Swiss do both :smile:.

Don't tell anyone, but I trained as a Banker in the City of London :redface:

 

[B_stanmarsh14]

& it get's worse with lending etc in the US with the after effects of the US housing market.

One very large UK bank, Northern Rock is having to ask the Bank Of England for a bail out with a short term loan right now, & today just 24 hrs after this hit the news, seams there is a massive run on the bank: BBC NEWS | Business | Northern Rock shares plunge 32%

 

[Not_Punny]

Banking is the biggest scam in the world after pharmaceuticals - that's why the Swiss do both :smile:.

Don't tell anyone, but I trained as a Banker in the City of London :redface:

But I thought the galleries at LPSG were the biggest scam in the world... (Just kidding, just kidding!) (The devil made me do it)

Did you have to wear a bowler hat?!

- - - - - - -

I don't know if I should feel like a stalker or a smart ass. I sold at the top of the market, and I'm waiting for the market to crash so I can buy. So I'm watching every drop with a tinge of glee...

But seriously, banking -- and especially the mortgage market -- is the absolute pits. The underbelly of humanity!

But every time I get mad at it, I look at countries that don't have a strong real estate market, and I look at the people/economy and I say to myself, maybe real estate isn't so bad after all.

I mean, even North Korea is westernizing real estate in certain specific areas to help bolster their terrible economy.

So -- it's good AND bad.

Sort of like sex, huh?

 

[Principessa]

It is paradoxical isn't it that those who can least afford it are charged the highest interest because they can least afford it.

I know it's the way of the world, but I have never quite understood this.

The housing bubble has officially burst in Atlanta, Georgia, Rio Rancho, New Mexico and many other areas across the US as well.

THE CRISIS OF FORECLOSURE: A SIGN OF THE TIMES

Foreclosures rise to another all-time high​

By Martin Crutsinger ~ Associated Press​

Published on: 09/07/07​

Washington —- The number of homeowners receiving foreclosure notices hit a record high in the spring, driven up by problems with subprime mortgages. ​

The Mortgage Bankers Association reported Thursday that mortgage holders starting the foreclosure process in the April-June quarter reached 0.65 percent, marking the third consecutive quarter the figure has set an all-time high.​

The delinquency rate, which tracks the number of people who are behind in their payments but have not yet entered the foreclosure process, was also up sharply during the spring, rising to 5.12 percent of all loans, up nearly three-fourths of a percentage point from the same period a year ago.​

Doug Duncan, the MBA's chief economist, said the worsening performance was driven by two factors —- heavy job losses in Ohio, Michigan and Indiana and the collapse of previously booming housing markets in California, Florida, Nevada and Arizona.​

"The percent of mortgages in Ohio that are 90 days or more past due or in foreclosure is still more than twice the national average, and 1 percent of all the mortgages in Michigan had foreclosure actions started on them during the last quarter," Duncan said.​

He said there were also significant problems in the neighboring states of Indiana, Illinois, Kentucky, Tennessee and Pennsylvania.​

Analysts said the problems in the formerly red-hot housing markets of California, Florida, Nevada and Arizona reflected in part speculators walking away from mortgages they can no longer afford.​

During a five-year housing boom, the prices in these areas surged, creating what many analysts have described as a speculative bubble as investors bid up the price of homes hoping to quickly resell them for a profit.​

Now, with home sales falling, the inventory of unsold homes rising and prices stagnant, some speculators are choosing to default on their mortgages.​

Another big problem is that an estimated 2 million adjustable-rate mortgages are scheduled to reset this year at sharply higher interest rates, which will cause monthly payments in some cases to double or even triple, a problem that is especially severe in the market for subprime mortgages, loans offered to borrowers with weak credit histories.​

The delinquency rate for subprime loans increased to 14.82 percent —- up from 13.77 percent —- in the first quarter.​

The delinquency rate for prime loans, offered to borrowers with good credit histories, also increased but by a much smaller amount, rising to 2.73 percent, up from 2.58 percent in the first quarter.​

 

[Industrialsize]

My B&B is for sale in Provincetown Ma.......Been on the market for 8 months.....tho selling a business is harder at the time than selling a private home.......Hopefully I'll soon be terrorizing South florida......and any LPSG members who live there

 

[LeeEJ]

I'm just plain lucky. I bought my place in early 2003 while prices were still climbing in my area. I could make $80K if I sold now.

The thing is, two years ago I could've made the same amount.

It's been stale. Thank goodness I got into my place while I could still afford it AND while values were still rising.

My main worry now is some terrorist blowing up a dirty radiological bomb and rendering my neighborhood inhabitable for the next five hundred years. There goes my nest egg...

 

[DC_DEEP]

Ha, my partner and I bought at the worst possible time - two years ago.

The market here in the DC area is horrid. It was horrid for the buyers 2 to 5 years ago, and now it's horrid for sellers. The "creative lending" that went on during that time is now ruining people. There have been 4 foreclosures on houses I can see from my yard, in the last 8 months. I just hope that we don't have to take a loss when we eventually sell.

 

[Osiris]

Ha, my partner and I bought at the worst possible time - two years ago.

The market here in the DC area is horrid. It was horrid for the buyers 2 to 5 years ago, and now it's horrid for sellers. The "creative lending" that went on during that time is now ruining people. There have been 4 foreclosures on houses I can see from my yard, in the last 8 months. I just hope that we don't have to take a loss when we eventually sell.

There is a gadget on iGoogle that let's you see foreclosures in your area, there are over 30 in my area alone. Most foreclosure, but a good amount due to tax liens as well. Sad sign of the times.

Good to see you back DC old friend! :smile:

 

[wldhoney]

I bought my house in 2000 and have had it up for sale since just before the summer. The house market in the Pacific Northwest has always done well because of the influx of those moving here, but now it is horrible. At this point I am looking at about an eighty thousand dollar loss in profit so far and that has been since May.

My realtor is one of the major real estate businesses here in Oregon, has been in the business for thirty years, and is known for doing the most sales in Oregon. According to him, mortgage brokers will usually hint at where the market will be in months to come. However, the elections always affect the real estate market, and historically it does better with Republicans in the house, so mortgage lenders are waiting to see what happens.

Now, with the sub-prime rates tanking on top of the above, there is an influx of foreclosures that are lowering prices even more. And, no, I do not have one of those, so I am safe there, but it is still affecting me!

Of course, this would happen just as I put my house on the market and have plans to move to another state!

Of course, this would happen just as I put my house up on the market! I have a historical 1903 Craftsman Bungalow, one of the most popular styles of houses in our area, have had over 9 people look at it in the last two weeks, while the house across the street, a different style and priced higher, has had no one. The offers I have had either want a portion carried, or the people can't afford it.

To summarize.........it stinks!!