Only took the little guys a year or more... maybe someone at the AP reads HP? It's flattering they called me an "Economist". But hey, they call the corrupt David Lereah an economist too.
This report today on rampant incentives and an unregulated system spinning out of control. Yes, this will end badly. A crash of a lifetime. Horrific, ugly, epic, historic - just pick your adjective.
Deals distort home sale prices - Proliferation of buyer incentives such as cash back suggests market downturn is worse than reported.
Vinnee Tong / Associated Press
NEW YORK -- Buyers latched onto mortgages with all kinds of exotic teaser rates to be able to afford the soaring home prices that sellers were demanding during the boom years.
Now that the situation is reversed, buyers are demanding cash payments and other incentives that may be artificially propping up sales prices -- suggesting the market downturn could be even more pronounced than has been reported.
Gonzalo Sotelo, a licensed real estate agent in Salinas, Calif., said that three times in the last few months, buyers' agents approached him about securing cash back at closing without informing the lender. In the most expensive proposition, an agent from the nearby San Francisco Bay Area proposed having a home with a $539,000 asking price reappraised and sold at $600,000, with Sotelo's client paying back $60,000 in cash to the buyer. Sotelo, of Prudential California Realty, said he turned down the deal and hasn't heard from the agent since.
The type of offer Sotelo received prompted his boss, Jose Palma, to devote a recent staff meeting to a discussion of how to avoid potentially fraudulent deals, since giving cash back without telling the lender creates legal liabilities for the broker and seller.
"I think people are trying to be a little bit more creative," Palma said. "We tell our agents: 'There's a black area and a gray area.' I tell them to stay away from the gray area."
Offers abound from sellers willing to pay closing costs, several months of mortgage payments and, in some cases, cash. Giving cash back allows a seller to sweeten the offer without having to lower the stated value.
Buyers are taking the incentives, and economists say the practice could be inflating reported prices and distorting our view of a market already suffering from higher mortgage rates and a sense that the market is enduring a significant correction.
October 18, 2006
Pigs are flying alert: MSM reports that use of incentives is distorting official home sale price numbers
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One incentive that I haven't heard around anywhere is "buying down" the buyer's interest rate for their new loan. A mortgage broker that I have worked with is now promoting this to attract buyers for the agents he works with. Not only is it a gimmick, but it gives him first dibs to finance the buyers. Basically the seller will buy the rate down by paying anywhere from 3-5pts, which lowers the monthly nut. So add this as an incentive to go along with the cash back, free vacations, cars, etc. Even mortgage brokers are now forced into being creative. I guess their ugly mug on their business cards aren't cuttin' it anymore....
The illegal part of the deal is the lack of the details being on HUD-1 closing statement. The entire transaction needs to be on the settlement statement. Some of the fraud in Fl and Ca is with "under the table" agreements. Cash back to buyer at closing is legal if it's in the contract given to the lender AND on the HUD-1 statement. The two closing document business is often fraud. The mortgage broker gives one HUD-1 to the lender and one HUD-1 for the buyer/seller.
hey keith do a post to identify all the gimmicks, i mean incentives that distort price declines.
lets see we got
1. cash backs
2. high ltv loans
3.cars, flat screen tvs
4. vacations
5. interest rate buy downs
6.closing costs paid by sellers
7.pools, granite counter tops
8. seller pays first years payments
9. down payment contribution
10.X years worth of lawn care,or HOA fees
One of them's gotta be for - lessee, how should I put this - oh yes - "servicing". Waddaya HP'ers think? I mean one of the "hot" places is/was Vegas.
I wish they'd would point out manipulation of real estate stats, such as Days on Market, where houses are removed, prices dropped negligably, then re-listed as fresh.
The incentives are clearly fraudulent. I think that it would be a good thing to see a few people prosecuted for this. After all, if you sell a house for $600K with a $60K cashback incentive then the bank has loaned you money on the assumption that the asset is worth $600K where clearly the market has indicated that it is only worth $540K. No two ways about it---that is fraud.
"...since giving cash back without telling the lender creates legal liabilities for the broker and seller."
Those legal liabilities being it's illegal!
Utah Real Estate
Documented incentives like loan buydowns or seller paid closing costs do get documented on the real estate transaction and when documented show the actual sales price on the MLS. I've had appraisers complain there are too many concessions in the past.
What buyers fail to realize with legal and illegal concessions is they are not "seller paid," they are "buyer borrowed."
Fannie Mae guidelines allow incentives. A buyer with a 20% down payment can ask for up to 6% of the SALE PRICE towards fees/incentives. Blame Clinton.
$500,000 loan with 20% down and the buyer can ask for $30,000 for incentives. All legal if it's on the closing statement.
I'm not gonna worry til i see monkeys flying out of their asses
I made a computer program, and plugged the data about the rise of housing prices, and the historic down turns in the market after a top, such as the 1980-85 and the 1990-1996 period. The huge run up since 1997 was at a much higher multiple. I was shocked at the number! Based on the historic trends the housing crash in California was at -71.22%, in a time period of 6.5 years. I'm trying to chart the down turn now. As proof of the historic trends, I noticed the program came up with the same percentage down turn for both the 1980's and 1990's down turn based on my variables.
At first I didn't believe the number! So I ran it again. It came out the same. National I plugged in the national house info. It was -44.2%! Why the difference? The national market hadn't risen on average as much as California. The wild card in the data is the effect of the ARM and interest only mortgage defaults that will come up!
The drop of Cal. real estate by 71.22%, and 44.2% nationally will be an economic tsunami of devastating proportions. It will be almost Biblical! I have not been a big believer in the "wave theories" in the past, but this data my change my mind.
DOW 12,000
Anyone have a comment about this report from Reaters?
Sept consumer price drop biggest since Nov 2005 - Reuters
"Housing is not collapsing and inflation is not accelerating; the data were reassuring on both fronts for the Fed," said economist Pierre Ellis of Decision Economics in New York.
jj
Anyone have a comment about this report from Reuters?9(typo)
...realtors on the brain...
jj
Keith, Check your link: You missed the better story at the bottom of the page under More Real Estate Headlines: “House Listing Service Charged”. I see this as another beginning of the end story for the REIC.
The REIC has pissed everyone off this time around — politicians, attorneys you name it.
jj
The only on top of this is Dogcrap Green. Read his blog daily to stay on top of the real story from an unbias source.
Anybody want to have fun- Call a builder and see just how much you can get out of them, and then say NAh I am going to wait until the price drops further. Great entertainment I promise laugh for all!!!!!
HAHAHAHAHAHAHAHAhAAHHAHAHAHAHAHAHAHAHA
Anon said: "I wish they'd would point out manipulation of real estate stats, such as Days on Market, where houses are removed, prices dropped negligably, then re-listed as fresh."
Here you go:
http://tinyurl.com/sgx4g
Thanks, Patch, that's great.
I've been tracking some flip houses in Frederick, MD., and 3 by same seller dropped-off MLS after 2 months, then re-emerged 1-2 weeks later, reduced just $5k less apiece. Galling.
There is no bubble bursting. I have yet to find a single market that is even 10% off last year's sales prices.
I think you HP people are full of nonsense ... wait until next year and prices start going up again, you will all be looking so stupid.
There is no bubble bursting. I have yet to find a single market that is even 10% off last year's sales prices.
There is no bubble bursting. I have yet to find a single market that is even 20% off last year's sales prices.
There is no bubble bursting. I have yet to find a single market that is even 30% off last year's sales prices.
There is no bubble bursting. I have yet to find a single market that is even 40% off last year's sales prices.
There is no bubble bursting. I have yet to find a single market that is even 50% off last year's sales prices.
There is no bubble bursting. I have yet to find a single market that is even 60% off last year's sales prices.
There is no bubble bursting. I have yet to find a single market that is even 70% off last year's sales prices.
There is no bubble bursting. I have yet to find a single market that is even 80% off last year's sales prices.
There is no bubble bursting. I have yet to find a single market that is even 90% off last year's sales prices.
Hey no bubble bursting yet--- Call some builders and see how far they are willing to drop their prices. I think then you will shuta you face!!!!!
NEW YORK -- Buyers latched onto mortgages with all kinds of exotic teaser rates to be able to afford the soaring home prices that sellers were demanding during the boom years.
_____________________
boy, the way this guy writes, it would seen the boom is over.....
Hey pissed off-
Don't believe me call realtor-whores in San Diego, Las Vegas, Sacramento,Phoenix,Tampa should I go on if anybody is in denial just make the call it will bring clarity instantly!!!!!
HAHAHHAHAHHAHAHAHHAHH
Told you this was coming!!!!!!!
All this will blow over by next year, just watch.
The Fed will rely on an increase in inflation and money supply, to save all the homeowners.
Don't worry yourselves none. If things get really bad you can always sell your organs in China.
"Hey no bubble bursting yet--- Call some builders and see how far they are willing to drop their prices. I think then you will shuta you face!!!!!"
Nobody in Seattle is willing to drop the price. I talked to somebody who is buying a house in Phoenix and he said that he didn't hear about any Bubble, that houses were really expensive in Phoenix so they might have to wait another year to buy one.
All your the sky is falling, the sky is falling, is so much B.S.
Hey anon the sky is falling---
I said talk to realtors not some SUCKER who is buying. By the way do you remeber last time prices crumbled 25% in 90 days in Seattle. I guess you got to much rain in your brain up there to remember.
Hey not buying the bubble yet- It seemes that your balls have dropped to the floor. What happened to not seeing the 10%. Oh i forgot. Next year things will blow over, oh yes they will when 30 Trillion ARMS re-adjust and this gets really nasty.
It's a little weird that Casey hasn't been indicted yet. Perhaps he really is doing this for publicity and it's all a hoax.
" Hey anon the sky is falling---
I said talk to realtors not some SUCKER who is buying. By the way do you remeber last time prices crumbled 25% in 90 days in Seattle. I guess you got to much rain in your brain up there to remember."
WHEN? When did it drop 25% in 90 days???
It never dropped 25% in 90 days. You're full of it.
If it's not a hoax then he's obviously going for a book deal. Otherwise why so publicly advertise that you're a crook?
Back in the 90's. But I guess you were probably still in diapers then!!!!!!
See you at the foreclosure sales of your home HAHAHHHAHHAHAHAHAHAH!!!!!!!
Hey Mort- If you want to go through the trouble find out who his lender was, and show them the blog. I'm sure they will find it very interesting....
Back in the 90s. Okay, which day? Which day did it crash? Because I was in Seattle during the recession in 1991, and yes things were cheaper than now, a lot cheaper, but home prices were stable.
How did I know this? Because the person I was with's dad lived in KIRKLAND, and his house was FOR SALE, and did he drop the price? NO. He just held on for a year or so.
So when did the prices drop 25%? You're delusional.
Ok 1990 April 15th- July 15th
Oh ... yeah, you're full of B.S.
http://www.dkbell.com/home-selling/
"There were bidding wars on most good properties, and homes that sold for $250,000 in 1986 sold for $500,000 in 1990.
The market adjusts quickly here, up and down. In August of 1990 the market entered a correction period. By 1991 that same house that sold for $500,000 would have sold for about $425,000."
This was the period of time that my relatives in Olympia were complaining about all the Californians (ironically my uncle in Olympia was from California) were buying everything up.
You're full of crap, you know that? Things didn't fall by that much. People just held onto their houses and waited it out.
Incentives????
Drop the price!
Nobody wants to drop the price. It's a psychological thing.
So they hold out or offer incentives like pool, granite countertops to keep the prices high.
Bottom line is, rates probably aren't going to be going any lower due to inflation. Prices aren't going to be falling much.
You people who didn't buy lost out. Maybe you can try again at the beginning of the next major runup.
Losers schmoozers.
Here in Phoenix we had a builder offering a custom (to a point) pool with the purchase of a home!
Nice right?
Well, people bought and moved in, got settled, kids back in school, yada yada, decided to start getting info on the pool. Only to find out that they had a very small limited time frame to make decision on which pool. They waited too long, now they have to pay for Up to 40 to 65% of construction costs! Or 90% of anything different than what was offered at the start!
That builder bent them over!
Hey not buying- You full of BS- Once again. Nobody said there was not a run up from 1986-1990 but there was a correction in 90 and 91. As you said yourself idiot the price dropped from 500K to 425K. The actual drop was more like 375K. But why are you not brave enough to tell us where your house is. We will be glad to buy it when you lose it to the bank schmuck.
Builder bent them over---Phoenix people got so bent over by those damn builders.
No F**King S**T nobody wants to drop the price!
But when you have to sell and nobody's buying, you have to do what you have to do! Psychologically or not!
Painful or not!
Why don't you tell us where your brain is, so we can pull it up out of the sewer and clean it off a little bit.
BTW, I was looking at housing in Olympia from 1990-1992, and there was this house for $110k (same house in CA was around $250k). I almost bought it.
But during that time the price didn't go down a single $. So I think you're full of crap.
Most people will NOT have to sell. The ones who do have to sell of course will cause a small price decline but overall things aren't going to drop that much.
As somebody who waited to buy during the early 1980s recession thinking the prices would drop, and the early 1990s recession thinking prices would drop, I can tell you that prices don't drop much at all during recessions except usually on properties that nobody wants much anyway.
AOL Laying Off 1,300, Closing Calls Centers in New Mexico and Arizona, Selling Utah Facility
Wednesday October 18, 4:05 pm ET
By Tim Korte, AP Writer
ALBUQUERQUE, N.M. (AP) -- AOL announced Wednesday it will lay off 1,300 employees by closing call centers in New Mexico and Arizona as part of a previously announced restructuring plan.
AOL, the Time Warner Inc. online unit formerly known as America Online, also plans to sell its call center in Ogden, Utah.
The cuts include 900 layoffs at the Albuquerque call center and 400 jobs at the center in Tucson, Ariz., AOL spokesman Nicholas Graham said. The Arizona and New Mexico call centers each have operated for 10 years.
The closures are part of a restructuring plan that Dulles, Va.-based AOL announced in August. At the time, the company said as many as 5,000 employees would be laid off within six months -- a quarter of its global work force.
"These decisions were very difficult to make, given our long tenure in Albuquerque and Tucson, but they're necessary in terms of the needs of the company and our users," Graham said.
The money spigot is closed now. Just reading the new rules for mortgages requires dramatically stricter standards for income verification, higher equity to loan ratios and significantly more downpayments. If all the new loans require a ratio of 3 or 4 times income for house price and 20% down with income verification, I'd bet we'll see 15% declines across the board in home prices. With those requirements the ave buyer can probably only swing about a 140 k mortgage at best if they can cobble togather 28 k down. Thats a far cry from going prices presently.
It's not a housing bubble per se, it's a DEBT bubble. The next buyer in line can't afford the payments on your house. The median price in Orange County Ca. has risen to $650k. That's about $5000/mo piti. Not many can afford that now, imagine how many will be able to afford it at 7-9%. Ouch.
When house prices reach a point that the end user can't afford the payments, it's all over. You either need wages to increase (not likely) or prices have to decrease. These things take time.
I'm on a list for pre-foreclosures in our town. The list grows daily. It used to increase monthly. NOD's have been plentiful and opportunities will exist for a profit.
As for Casey, he doesn't have a clue how bad it might get. He's in very deep water without a life raft. Short sale=1099 taxes. You're not avoiding those. If the banks get in trouble, the records will be opened. Those little "letters of explaination" on his liars loans are clear evidence of mortgage fraud.
There has been no tightening of lending standards. Consider this blurb from a flyer I received from a leading lender this morning:
Your customer can have a 580 FICO
score and get 100% LTV and the same
pricing as someone with a
649 FICO score!
Lenders are not tightening their standards for residential loans.
Big news of the day. Foreclosures are up 111% YoY in California statewide. I'm surprised we're not seeing more regarding this:
http://www.dqnews.com/RRFor1006.shtm
whydibuy,
The mortgage guy is correct. The only lending requirements I'm aware of were changed 4th Q 05 and went into effect mid-Dec 05. Those were related to B and C paper.
There is no 20% DP required. I'd guess 90% of new mortgages are less than 20% down, unfortunately.
Most of the foreclosure I'm seeing are high risk borrowers. The guy that's one paycheck away from disaster. Think Casey. A few are upper end homes and some builders are losing their personal homes. Not everyone is a great money manager. It's only just beginning.
The debt bubble will likely be noticed by the masses next June. GET OUT OF DEBT NOW!
Real estate 101- I read that the ceo from countrywide wants to require higher rates from fb's with neg amortization loans to keep them from sliding deeper into the red. I thought most of the neg am loans automatically reset if you got to 115% ltv. Standards will continue to tighten as some of these cmo's blow up and are returned to the issuer as in the case of H&R block. To protect themselves they will change or end up eating alot of defaulted loans. They can sue the originator but that guy simply declares bk and in anycase, does not have millions to give as damages for presenting bs documents in the loan application.
what is up with this -
central phoenix, regency house condos, unit 401. listed awhile ago for 469K. no takers. more units come up for sale in the same building at higher prices (higher floors, better views) so the seller raises his price to 509K. still no takers. then the price goes up to 599K and then goes pending. sounds like fraud to me. you think catherine reagor at the arizona republic would ever follow up on something like this?
real estate 101 said...
The debt bubble will likely be noticed by the masses next June. GET OUT OF DEBT NOW!
This is good advice, but unfortunately many people are so deep in the hole that that won't ever be able to dig out. It would be a good idea to set a few bucks aside if you can.
If I was purchasing a house, I'd rather have the lower price than any sort of crap incentives. I want to be paying tax on as little house value as possible.
ARMs, Intrest Only, and No Doc loans for residential real estate is a new phenomenom. Back in the 90's it wasn't used like it is now, I think in CA its something like 50% of the loan or worse. If you don't think the bottom won't drop out of this market, you're insane. San Diego is already down 9%, even more if you look at condos. This is using a distorted number too that doesn't remove incentives. So really its actually more than 9% but hey, if you think the market isn't going to drop, you should be buying!
No, I'm not going to buy until the market's stagnant for a year or two and the FED lowers rates again.
Watch for the 30 year fixed rates to go below 2%. Then I'll buy from all the poor fools who bought last year on neg-am loans.
Hey Not_Buying Jackass
Watch for the 30 year fixed rates to go below 2%. Then I'll buy from all the poor fools who bought last year on neg-am loans.
Hey fool-Make up your mind is it a bubble or not. Obviously your are a moron because first you say there is no bubble. Then you say I'll buy from all the fools who bought last year.
Not buying the bubble is really a FB who is now trying to take his anger out on those who had the insight not to buy into a speculative market fueled by "exotic" loans that were not available on such a widescale back in the late 80's to early 90's.
Face it "Not buying the bubble" your stats are old; exotic loans were not used like they are now in the 1990's.
Maybe you can use some of those exotic loans you took out to finance some exotic dancers. After the bust you'll be flat broke on your ass and the only chick that will talk to you is one that you pay.
Top story above the fold in Washington Post was similar - showed a particular family who was going to back out and builder came up with a sweetheart deal that included months of payments, closing costs, etc. etc.
The buyer was going to walk out on downpayment because...they could not get what they'd hoped for their house.
I've been arguing with you why the thing won't fall and at the same time arguing with the guys at work as to why it will fall.
Emotional highs and lows are part of life for everyone. But, if you have bipolar disorder, these ups and downs can be so extreme that they can interfere with your daily life. Sometimes they can even be dangerous.
Bipolar disorder is a lifelong medical condition that can be confusing and unpredictable--but you do not have to be embarrassed. It can be hard for people with the condition and for their families and friends. While there is no cure, the good news is that there are many treatments available to help treat the symptoms of bipolar disorder.
See a DOCTOR, Hurry, Run to the DOC.
If you are arguing with your client you are not selling. Find the need, fill the need, no need, create the need, objections to overcome:
no time,
no need,
no money.
Sales 101
DUH
I am ready for anything and afraid of nothing.
Here Take this with a Valuim:
http://oftwominds.com/blog.html
"There is no bubble bursting. I have yet to find a single market that is even 20% off last year's sales prices."
How about 2004? Put that foot in mouth
http://www.forsakencraft.com/proof.htm
housing is done!
housing is done!
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housing is done!
housing is done!
housing is done!
housing is done!
housing is done!
housing is done!
housing is done!
housing is done!
housing is done!
Anon 8:18-
Guess you haven't been paying attention. the Seattle MLS is 30% price reduced, not including the properties that were de-listed and put back on the market with new MLS#'s.
Yikers. Looks like "not buying the bubble" is in over his head in depreciating RE.
Read Seattle Eric's flipping blog. He's admitted his Seattle flipping days are over.
Know why? Cuz he's losing money.
BTW, realtor I know is trying to unload most of her properties there too.
When flippers and realtors are throwing in the towel, that's a sign, NBTB.
"DOW 12,000"
Election November...
Dow 30 stocks have nothing to do with housing prices
why trolls keep trying to make the link, well, I'll let you figure that one out
Like the al quaida and iraq link.
Incentives have always been bogus. The advice I give my sellers is the only incentive a buyer needs right now is the final sales price. Sellers that want to offer vacations and things like do NOT become my clients.
I tell buyers why would they want some discount vacation package to Hawaii that they didn't choose?? Would they buy such a vacation package with their money??
After all it is the buyers money that makes the deal. Buyers simply shouldn't be buying anything other than the property and they should pay a price they negotiate for.
Everyone should also remember that it is always the buyer that sets the market price. It was true during the run up in price and it is equally as true today. It WAS buyers that agreed to pay the higher prices as they were competing with other buyers often for the same property because of the limited supply.
Now there isn't nearly as much competition, so buyers need to be conditioned to ask for the ONE and ONLY incentive they need... a reduced price.
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