Market Conditions: Are Banks Keeping High End Foreclosures Off the Market?
Someone sent me an article from last week on the Real Estate Channel discussing the foreclosure market in Cook County. It has some interesting statistics.
It appears that these stats are for the entire Cook County:
As of July 15, RealtyTrac listed 28,829 properties which had been foreclosed and repossessed by lenders. Some have been owned by the bank as long as 2½ years without having been placed on the market. Roughly half have been repossessed by the lender since late January 2010.
This year, banks in the Chicago area have foreclosed on a huge number of expensive homes. RealtyTrac lists 2,650 repossessed homes for more than $300,000 and 169 for more than $1 million.
Here is where it gets really interesting. Out of 28,829 repossessed properties, there were only 1,292 listed by lenders as “for sale.” The vast majority of these available homes were inexpensive. A mere 29 homes over $300,000 were for sale. In other words, the banks have withheld from the market 2,621 properties listed at $300,000 or higher.
There could be several reasons that the banks are withholding the foreclosures from the market and one of them is to “ride out” the declines (i.e. if you put all of the foreclosures out at once, it will bring down prices even more. If they wait, it may be possible to ride out the worst of the losses.)
Even more crucial is that selling substantial numbers of expensive homes at discounts of 50% or more would compel the lenders to take substantial losses which have been avoided by keeping them off the market.
To give you an example, one repossessed home in the upper income suburb of Glencoe was purchased in January 2004 for $850,000. Though not listed for sale yet, its opening bid price is $2,819,000. This suggests that the foreclosed owner had refinanced the property to the tune of $2.8 million. If the holder of the first lien put a home like this on the market, it could be forced to swallow a loss approaching $2 million or perhaps even more.
One big problem with this strategy is that the banks have also ramped up their placing of seriously delinquent borrowers into default – the first step in the foreclosure process. RealtyTrac listed 39,963 defaulted properties in Cook County as of July 15. All of them have been placed into default since August 2009 and half of them since early February of this year. That is nearly 4,000 per month for the past five months and nearly 10,000 in the last two months alone. Of these defaulted properties, there are 7,550 listed over $300,000. Sooner or later, these homes are coming on to the market either as foreclosures or short sales.
We’ve been chattering about the impact of short sales on the “prime” neighborhoods like Lakeview and Lincoln Park. Prices are already being pressured.
Do these statistics indicate that prices will be under even more pressure in 6 to 12 months or will this alleged bank strategy to keep foreclosures off the market actually work to stabilize prices?
Why are banks withholding high end repossessions over $300,000 from the market? [Real Estate Channel, Keith Jurow, July 20, 2010]
While I do believe that some of these banks are reluctant to take the losses, the article leaves out incompetence as a possible explanation. Banks like B of A are so buried in this stuff and so poorly organized (based upon personal experience) that they can’t deal with it.
Is it propping up prices? Maybe not. It seems that buyers are not biting on anything but the best deals right now so maybe more REO sales just brings more buyers out of the woodwork. I think the buyers are there but they’re waiting for the good deals.
Yeah, if you flooded the market with this stuff all at once prices would crash but I don’t think the banks are set up to handle that volume anyway and I don’t think they are smart enough to try to manipulate prices. And if they were smart enough to worry about current and future pricing they would also be smart enough to realize that maybe they should get out before their competitors hit the market.
One other thing I just remembered. I re-published some RealtyTrac charts about a week ago and it shows that the vast, vast majority of the foreclosures in Chicago are at the low end and almost exclusively studios: http://www.chicagonow.com/blogs/chicago-real-estate-getting-real/2010/07/chicago-foreclosure-activity-up-11-in-june.html#more
I was really surprised.
Gary, why do you think studios have been hit the hardest? Fewer young people moving in with a desire to buy and/or maybe they are the hotel/condos that get grouped into studios?
Banks aren’t incentivized to push their REOs through the pipeline for at least three reasons:
1) many if not most of these non-performing loans are carried on the bank’s books at face value, so a REO would result in a big writedown.
2) the banks would rather spread out their losses from these REOs over many quarters instead of spooking the markets with a big bath and admitting insolvency, which would obviously endanger the future of the institution. They’re likely taking only so many losses as they have offsets for (mortgage prepayments via refinancing).
3) its bad PR to “put people out on the streets”.
Look at how big of a joke our accounting standards have become with regards to banks.
I don’t think hotel condos are comps for studios in Chicago except the very highest end buildings. A hotel condo that costs $375k with monthly taxes and HOA fees of $1,700 I don’t think is a valid comp for most Chicago studios which cost under 225k.
Interesting article – I inquired about purchasing a newly built house in my neighborhood (cost around 3 million) and went into foreclosure almost 2 YEARS ago. Not only did the bank continue to fail to return my calls, but when I DID get in touch with the appropriate people, all they said was “it’s not available at the current time”. When I asked if there was an offer or whether the builder was trying to work out some payment plan, they told me “no – but it’s not available at the current time”. I was completely confused – but the article helps sort out possible reasons!!
It would be pertinent to ask what enables the banks to hold onto their tremendous “shadow inventory” and keep it off the market. Were it not for all the taxpayer-funded assistance, the lenders would have to put this stuff on the market. As other posters have pointed out, the banks can keep these huge loans on their books as assets and mark them to fantasy for valuation purposes, while if they were on the market, their prices would drop steeply to move them.
Putting these properties on the market at realistic prices, that is, what the market will pay, and they’ll move. Everything will sell at the right price.
Everybody wants a great deal on a foreclosure. The appropriately priced properties disappear immediately. Everything else languishes.
Think Small,
There are several possible reasons that studios have been hit the hardest:
1) Renting is just such a better option at the low end
2) Harder for people just starting out to get a mortgage
3) Too many studios that haven’t held their value so the owners want to walk away
the definition of “great deal” has some subjectivity to it…person A may be content with purchasing a place 10% under market value (whatever that may be)/last purchase price whereas person B might want to purchase it at 50%.
Additionally there is the discrepency between someone who actually wants to live in the place vs someone who wants to immediately or short term flip.
The banks are definitely keeping things off the market. Part of it is trying to stem the losses on these larger loans and the other part is just pure incompetence. They are woefully understaffed, the left hand doesn’t know what the right hand is doing, and the folks they do hire are completely clueless.
I have one foreclosure that funded this morning. My client has been trying to buy this place since February. I have another short sale that was suppose to close in June and we still have no closing date.
Many times the borrowers simply say screw it and move on to another property because the banks don’t know their ass from their elbow and the process takes too long.
Two (now 3) things bother me about the article:
1. Why assume that a house that was repossessed for over $300k would be for sale for over $300k? A huger percentage of the time this will *not* be true.
2. Does *anyone* believe that a $850k Glencoe property in ’04 was anything other than a teardown or vacant lot? And the $2.8mm was a construction loan? If the bank offers it for $850k, I wanna get me some of that action.
3. He mixes RealtyTrac and Trulia and doesn’t pick up major discrepancies–“RealtyTrac listed 28,829 properties which had been foreclosed and repossessed by lenders.”, he says–yet Trulia shows 39,768 “foreclosed” homes listed for sale. And “RealtyTrac lists 2,650 repossessed homes for more than $300,000”, yet Trulia shows 5,577 “foreclosed” homes for sale over $300k. He may be right, but then he shouldn’t have cited Trulia, as it contradicts his other cited numbers.
“There are several possible reasons that studios have been hit the hardest:
1) Renting is just such a better option at the low end
2) Harder for people just starting out to get a mortgage
3) Too many studios that haven’t held their value so the owners want to walk away”
Isn’t the most likely reason that the majority of the foreclosures didn’t put anything in the “number of bedrooms” field and that got compiled as “zero (ie, Studio)” rather than as “no response”? Occam’s razor is our friend.
If I wanted to become a landlord, I’m not sure that I would be interested in studios at all. Even if you gave one to me for free, I have to pay taxes, assessments, insurance and a bit of maintenance every year.
I might be able to pocket 6 months rent as profit if things go well. Not sure that is worth it. I’d be looking more at 1 & 2 BRs where my potential profit is 8 or 9 months rent.
Amen, Russ. I was on the phone with B of A yesterday for 2 hours trying to get a document. I was transferred to 6 different departments, one of which is a third party. Each department can only see part of the data. Unbelievable.
# bedrooms is a required field
“Isn’t the most likely reason that the majority of the foreclosures didn’t put anything in the “number of bedrooms” field and that got compiled as “zero (ie, Studio)” rather than as “no response”?”
Hi Gary –
Thank you for the interesting data yet again!
In your opinion, what price would make a studio a deal in the following neighborhoods:
Lincoln Park
Lakeview
Uptown
Edgewater
Rogers Park
I’ve been looking for a studio in the “under 100K” range in full-service high-rise buildings with property taxes under 2K and assessments under $300/mo, sized between 500 – 600sft.
Just from personal experience it seems like there was more inventory in the summer and fall of 2009 and I was seeing a fair amount of apartments advertised in the 50 – 60K range. Now the same type of unit seems priced between 80 – 100K.
Is this article saying that houses go to foreclosure auction, the plaintiff’s bid (the bank) is the highest, they beceome REOs….but then what?
1) Is the homeowner/borrower evicted or not?
2) Are all of these “repossessed” properties vacant or occupied?
thanks…
Speaking of extend and pretend, every so often when I dabble in consumer bankruptcies, I get a reaffirmation agreement in the mail, which is sort of like asking the debtor to sign a new mortgage on the subject property even though they’re in bankruptcy.
The original amount of the 1st mortgage was $304,000. The mortgage company (won’t say which one but one of the hungriest pigs at the trough) wants this debtor to reaffirm a principal balance of $314,000. In exchange for the reaffirmation, the bank lowers the interest rate from 7% to 5% lowering the payment from roughly $2,600 to $2,000.
There is also a second mortgage the bank wants reaffirmed for $55,000.
As of today, the house is worth only $140,000. The debtor hasn’t paid the mortgage in years. Literally years.
This is one of those $300k properties yet to be listed. Or even foreclosed.
And yet they still want it on their books at $314,000 plus $55,000.
$2,000 including PITI
Out of all the forclosures in the building i’m in, at least 50% of them are studios
they are pretty bad too with a view of a brick wall, and have been trying to sell for at least 2+ years even at really reduced prices
Sorry, Milkster, I’m afraid I’m not going to be much help to you there. I really don’t follow the studio market so I don’t have an answer off the top of my head.
On a separate note, in theory the banks need to be appropriately reserving for the lower value of these properties. Yeah, I know….but in this day and age you would think the auditors would be all over these banks to appropriately value their holdings. If they are appropriately reserving then there would be no incentive to avoid taking the loss.
“# bedrooms is a required field”
Sure, and all of the people inputting it actually knew how many bedrooms, right? And they all input it correctly? Bet you a steak dinner that that number is over 2.5x the actual number of fc/pre-fc Studios (+ 0-bedroom houses). I strongly suspect it is over 10x the real number.
Per census data, there are about 85,000 “no bedroom” housing units (including rental, 7.1% of the total) in Chicago. Do you really think that 25% of all studios have been foreclosed this year, especially when you consider that some significant percentage (i’d wager over 1/3 and think over half) are in all rental buildings? Does that comport with the houses/condos you are seeing available as REO *at*all*?
When someone is knowledgeable and active in a field and some piece of data is *radically* different from one’s expectations, it is best to think hard about whether one’s expectations were way off or if there is a problem with the data. There is *certainly* (and yes, I am using that after careful consideration) a problem with that data. The most likely problem is on the data entry end, where the submitters chose “0” rather than doing any research to find better info.
Gary: “I think the buyers are there but they’re waiting for the good deals.”
The buyers are there, but are waiting for the train wreck to approach completion. This massive overhang of foreclosures and hidden pre-foreclosures makes me very reluctant to consider purchasing now, when I can wait a year or two and sees how this all plays out.
The fact that State budgets are running on fumes makes me want to “hold on tight” rather than cough up my savings for a down payment.
“As of today, the house is worth only $140,000. The debtor hasn’t paid the mortgage in years. Literally years.
This is one of those $300k properties yet to be listed. Or even foreclosed. ”
Gee, could that be why there are so few $300k+ props listed? Because they aren’t actually worth anything like $300k, even tho that was the foreclosure “value”?
Extend and pretend, anon(tfo), extend and pretend.
“Extend and pretend, anon(tfo), extend and pretend.”
I prefer to call it kicking the can down the road.
I find it humorus when people bash on banks.
anon,
I can’t explain the data but I have never seen a listing in the MLS with a grossly incorrect bedroom count – certainly not 0 unless it really is a studio.
On the other hand RealtyTrac might be getting the data from the tax records. Interestingly, the assessor’s records do not include the number of bedrooms. They include the # fireplaces and the number of full and half baths – but no bedrooms. Would RealtyTrac stuff every property into the studio category then? Where are they getting the ones with multiple bedrooms then?
Shopping for foreclosures is like shopping at an outlet mall. Sure, you may be lucky and find something that you actually like, but, much much more often than not you are stuck with something that doesn’t quite fit your needs.
People don’t realize this and think that they are going to be able to get whatever house they want at a really low price. Sorry to disappoint – but you got to take what’s out there. However, I DO believe that people eventually do realize this and those who are shopping for houses for themselves WILL be picky and pay the extra premium to get what they want. This is life – you have to live it!!!
Deleveraging pains are awful.
A sustainable real estate market requires there to be an appetite for purchase. I think that the majority of people are nauseous from the ride.
Do I really want to jump into the hot tub when everyone sitting in it looks to be ill?
Mark-to-market is very flexible these days, like most other regulations.
from wikipedia:
“On September 30, 2008, the SEC and the FASB issued a joint clarification regarding the implementation of fair value accounting in cases where a market is disorderly or inactive. This guidance clarifies that forced liquidations are not indicative of fair
value, as this is not an “orderly” transaction. Further, it clarifies that estimates of fair value can be made using the expected cash flows from such instruments, provided that the estimates reflect adjustments that a willing buyer would make, such as adjustments for default and liquidity risks.
…
Financial institutions are still required by the rules to mark transactions to market prices but more so in a steady market and less so when the market is inactive.
…
On April 9, 2009, FASB issued the official update to FAS 157[20] that eases the mark-to-market rules when the market is unsteady or inactive. Early adopters were allowed to apply the ruling as of March 15, 2009, and the rest as of June 15, 2009. It was anticipated that these changes could significantly boost banks’ statements of earnings and allow them to defer reporting losses.[21] The changes, however, affected accounting standards applicable to a broad range of derivatives, not just banks holding mortgage-backed securities.”
“On a separate note, in theory the banks need to be appropriately reserving for the lower value of these properties. Yeah, I know….but in this day and age you would think the auditors would be all over these banks to appropriately value their holdings. If they are appropriately reserving then there would be no incentive to avoid taking the loss.”
“On the other hand RealtyTrac might be getting the data from the tax records. Interestingly, the assessor’s records do not include the number of bedrooms. They include the # fireplaces and the number of full and half baths – but no bedrooms. Would RealtyTrac stuff every property into the studio category then? Where are they getting the ones with multiple bedrooms then?”
I’m not sure about Cook, but they do use assessor records in some counties. And if they pull from teh assessor here, it’s garbage in, garbage out.
But I was thinking that there may be some data submission element, where if the person completing the info knows/has-real-info-on the asset, they put in the real number, else they leave it “blank”, which with a req’d field would end up being a zero.
“I find it humorus when people bash on banks.”
I’ll bite, why is that?
“I find it humorus when people bash on banks.”
This one is pretty funny from Chris Whalen today. “zombie dance party” lolz
http://us1.institutionalriskanalytics.com/pub/IRAMain.asp
What is wrong with “extend and pretend.”? We need “extend and pretend” because there is no fluid market right now and mark to model or foreclosure level is not realistic. If you had a commercial property with a 5 year belloon and it just so happened to refinance in the worst market but you have made all your bank payments and the property cash flows should you have to 1) have to bring more equity to the refinance 2) be declared in default; all because of timing.
Besides, “extend and pretend” is like the “main st vs wall st phrase to me”. Horribly incorrect statements of what is actually going on.
Ponzi is nice as long as you get out before the shtf
“What is wrong with “extend and pretend.”?
If you had a commercial property that cash flowed and you paid all your payments on time, there would be no need to ‘extend and pretend’.
Extend and pretend is when you’re a homedebtor that is underwater, behind on payments or severely in default, and you contact the bank for a ‘loan mod’ so the bank lowers your interest rate to 2.0%, increases the term of the loan to 45 years, and put a balloon payment equal to 40% of the principal balance of the loan. Rather the bank should foreclosure, take the loss and sell to someone who can actually afford the monthly payments.
Most homeowners are extend and pretend because they have no chance in hell of affording any mortgage payment, even a modified one. The reality is that until the job market comes back, all these people are up shit creek. You can’t pay a mortgage on unemployment benefits.
I think we are better off just foreclosing on these folks and getting it over with since the government doesn’t seem to be doing anything else to actually create a robust job market by regulating and taxing everything to death.
One of the most overlooked aspects of why people can’t afford their homes is property taxes which certainly don’t appear to be going down anytime soon.
Russ – because thats the solution, kick the families out on the street..these people are up shits creek because they made poor financial decisions. A much better, but more difficult idea, is for the banks to relocate these families from their current home, to that of one in the banks pool of forclosures, one that they can afford.
Property tax is not really a reason why people cannot afford homes I feel. I think it’s more of people getting too much house and cant afford the mortage monthly payments, not being able to pay property tax is just a function of it.
“Rather the bank should foreclosure, take the loss and sell to someone who can actually afford the monthly payments.”
Russ that may be the practical solution, but I disagree with it. I think that people who take out loans should try to pay them, even if it means extending the loan. There are not enough someones out there to absorb the current foreclosure inventory, let alone the amount that would be on the market if banks didn’t provide extensions. I’d be interested in knowing how many current buyers would even consider a foreclosure or short sale as this may be a niche subset of buyers.
“…(the) substantial losses which have been avoided by keeping them off the market.”
1) Are all of these “repossessed” off-the-market properties vacant or occupied?
2) Is the homeowner/borrower evicted or not?
There are enough people to absorb the foreclosure market (to the detriment of the rental market however). The market would be really hot if all homes were priced as foreclosures.
From what I’ve seen and I’m in the trenches for both foreclosures and bankruptcies is that people just got in over their heads. Way over their heads. They may have been able to juggle all the bills, with the use of credit cards, but then one major event caused the house of cards to crumble. That one event is usually a reduction in hours at work, lack of a bonus, an unforsence medical event, or a large housing expenses. It’s sort of like peak debt.
and A-Fed, people won’t be on the street, not even close. I deal with both foreclosed owners and banks and nobody ends up on the street. They may end up in an apartment, or with relatives or in a less than ideal situation, but I have yet to hear of a family ending up on the street. That’s not enough worth arguing about.
Something like 80% of the loans that are modified eventually wind up foreclosing. It is obvious no amount of help is going to get these people out of trouble.
Under no circumstances other than FREE can they pay their mortgages. No job, no mortgage payment. It really is that simple.
People need decent jobs, not more unemployment benefits. The government needs to figure out how we can get decent paying jobs back to this country that don’t require an MBA from a Top 10 school.
1) both
2) sometimes, sometimes not.
the current stats show that 65% of all modifications fail within 6 months. the mods that succeed are those that reduce principal balance…but the banks never cut principal, they just turn it into a balloon payment at the end of 40 years with a ‘principal balance deferment’ as they call it.
there are 1.3 mil trial modifications through HAMP and probably an equal number as many as that done privately through non-HAMP channels. Then there are the people who just aren’t paying and have no loan mod at all. that’s millions more. It’s daunting but eventually the dam will break.
“1) Are all of these “repossessed” off-the-market properties vacant or occupied?
2) Is the homeowner/borrower evicted or not?”
I thought nearly everyone dropped out of HAMP due to its buerocratic struggles and narrow qualification standards
http://noir.bloomberg.com/apps/news?pid=20601087&sid=aekKM9RCzMlY&pos=3
Home Vacancies Rise as Ownership Reaches 10-Year Low (Update1)
By Kathleen M. Howley
July 27 (Bloomberg) — About 18.9 million homes in the U.S. stood empty during the second quarter as surging foreclosures helped push ownership to the lowest level in a decade.
The number of vacant properties, including foreclosures, residences for sale and vacation homes, rose from 18.6 million in the year-earlier quarter, the U.S. Census Bureau said in a report today. The ownership rate, meaning households that own their own residence, was 66.9 percent, the lowest since 1999.
Lenders are accelerating foreclosures as borrowers fall behind in mortgage payments after the worst housing crash since the Great Depression. A record 269,962 U.S. homes were seized in the second quarter, according to RealtyTrac Inc. Foreclosures probably will top 1 million this year, the Irvine, California- based data company said in a July 15 report.
“There are a lot of people losing their homes and either moving in with family or renting places to live,” said Patrick Newport, an economist with IHS Global Insight in Lexington, Massachusetts. “Foreclosures are still going up.”
“There are enough people to absorb the foreclosure market (to the detriment of the rental market however). The market would be really hot if all homes were priced as foreclosures. ”
Largely with current, totally-able-to-afford-it homeowners buying second homes and then giving the first ones back to their lenders. Talk about a death spiral. You want to price the new house down the block from me at “foreclosure” pricing? I’ll buy it and move and jingle mail my current house.
“Something like 80% of the loans that are modified eventually wind up foreclosing.”
Something like 80% of modifications thru 2 or 3 programs end up in default again. Not the same thing.
Hey, I found something I agree 100% with Russ on:
“One of the most overlooked aspects of why people can’t afford their homes is property taxes which certainly don’t appear to be going down anytime soon.”
For me, tt’s actually not even the taxes, per se, it’s the unpredictability of tax increases as the years go on. I knew what my taxes were when we purchased, sort of (old owner had a freeze and long-time resident break). But in 8 years my taxes have gone from under $3K to $6.5K. That doesn’t sound like a lot when you’re talking about home prices, but in an economy where companies can’t afford to give raises/COLAs, it’s significant when broken down in terms of a monthly increase. And who knows what they heck they’ll be in another 8? Probably more than the note!
Let the house of cards start falling. Obama and the gang in D.C. Only have so much duct tape to try and hold this market together. It appears that they are nearing the end of their roll. It’s going to be ugly but it can be bottomed out over the next three years if we start taking the hit now. If not there will be years and years of delayed hits as more shadow inv and other forces slowly roll out and continue to hit the market.
Russ, that is a shocking statistic (80%), and I believe it. Eek, you have ruined my day with that news, not only because it’s so depresssing but because, even worse, I have to revise a deeply held view. Thanks a lot.
“There are enough people to absorb the foreclosure market (to the detriment of the rental market however). The market would be really hot if all homes were priced as foreclosures.”
To the detriment of the rental market is right. So what happens to the rental market? Landlords can’t get tenants, and so then we have entire buildings that are in foreclosure?
“The government needs to figure out how we can get decent paying jobs back to this country that don’t require an MBA from a Top 10 school.”
Last time I checked, Russ, your current job does not require a Kellogg MBA. Plenty of those jobs sprung up in the last decade out of nowhere too.
JMM:
No, it doesn’t. A lot of jobs don’t need any advance degree (or even college degrees for that matter) although that is what employers require just because they can, not because the degrees are needed to actually do the job.
It used to be Joe Average could get a job that paid a decent middle class salary with a high school degree. Just saying those jobs are harder and harder to find for folks.
It is almost like if you don’t make all the right moves starting with High School, your long term employment to earn a decent income gets tougher and tougher.
We need to those simple well paying jobs back is all I am saying.
By the way, JMM… the vast majority of LOs and Realtors are starving right now. 5 or 10% of us are making a killing or earning a decent living, but the vast majority can barely put food on the table. This isn’t a business for the faint of heart.
The vast majority of realitors suck and that’s why they are starving – don’t blame the economy – blame the dumb agent who knows nothing and doesn’t care. Additionally, I would be surpirsed if the majority of realitors, when asked the question if they would rather have another job, say no, I love my job that’s why I am good at it.
anon(tfo) – decent underwriting will prevent you from doing the jingle mail. oh you want to buy a house down the block and you don’t have any plans to sell your current house? sorry!
“anon (tfo) on July 27th, 2010 at 1:44 pm
“There are enough people to absorb the foreclosure market (to the detriment of the rental market however). The market would be really hot if all homes were priced as foreclosures. ”
Largely with current, totally-able-to-afford-it homeowners buying second homes and then giving the first ones back to their lenders. Talk about a death spiral. You want to price the new house down the block from me at “foreclosure” pricing? I’ll buy it and move and jingle mail my current house.”
Wow. but how do you really feel about realtors?
“#A-Fed on July 27th, 2010 at 2:53 pm
The vast majority of realitors suck and that’s why they are starving – don’t blame the economy – blame the dumb agent who knows nothing and doesn’t care. Additionally, I would be surpirsed if the majority of realitors, when asked the question if they would rather have another job, say no, I love my job that’s why I am good at it.”
“anon(tfo) – decent underwriting will prevent you from doing the jingle mail. oh you want to buy a house down the block and you don’t have any plans to sell your current house? sorry! ”
I’m at ~1x gross on the current mortgage and–at HD-approved foreclosure pricing–would be at ~2x gross for the two mortgages. Think we could probably pass underwriting. There are plenty of others like us.
“It used to be Joe Average could get a job that paid a decent middle class salary with a high school degree. Just saying those jobs are harder and harder to find for folks.
It is almost like if you don’t make all the right moves starting with High School, your long term employment to earn a decent income gets tougher and tougher.
We need to those simple well paying jobs back is all I am saying.”
It’s not rocket science; we are no longer a manufacturing economy where Joe HighSchool could get a reasonable blue-collar job that could support a middle class lifestyle. Now that we’re a firmly entrenched service economy and ship basically all of our labor that isn’t nailed down oversees, we’re never going to get those jobs back.
boo hoo you have to go to some 2 year technical college to get a blue collar job now instead of graduating high school… puhlease the US is still the #1 manufacturer in the world don’t let the stupid doom and gloomers cloud your head with delusions
@A-Fed: Not arguing that point. My point to JMM was that it residential real estate isn’t an easy six figure job or even a $50k job for the vast majority of people. The barriers to entry are low which is why there are so many bad ones… but the sky is the limit which is why you have super star agents and LOs.
@Barry: We agree which is the issue. A large portion of the population needs a way to support themselves. What exactly are a lot of the people going to do to earn a living? Not everyone is going to be an attorney, doctor, i-banker, consultant, or middle manager at a f500 company.
Flipping burgers, cutting grass, picking fruit, etc doesn’t really pay the same as the mfg jobs of the previous generation. There are mfg jobs, but it isn’t like before where you could get a job at a plant and make enough to buy a house, car, and get a decent retirement.
Many realtors are great! I appreciate the effort that they put into running their businesses. Several that I have dealt with over the years are not. I own a sales business and can attest that this is the same in any sales based organization. Superstars are few and far between but the vast majority are just phoning it in and bitching that it is too hard.
You can blame it on the 1099 status, a lack of true leadership at most agencies, or typical hiring practice of just adding more bodies to the team hoping to get a few additional listings. In the end it comes down to hiring, training, and retaining great individuals. Few groups do that well.
Russ- completely agree!
Sonies- though the US continue to lead manuf, other countries have cought up very quickly, with wage adjustments ~accordingly, whereas the US has not. To Russ’ point about flipping burgers.
All – I do not hate realtors. Just dont have much respect for those who dont like being a realtor and “I dunno, just kinda do real estate for a living” quote. And please note, this is not limited to residental applications, a stupid agent is a dumb agent.
“Flipping burgers, cutting grass, picking fruit, etc doesn’t really pay the same as the mfg jobs of the previous generation. There are mfg jobs, but it isn’t like before where you could get a job at a plant and make enough to buy a house, car, and get a decent retirement.”
well they shouldn’t be buying a house… really, someone who works at mcdonalds should be buying a house? You sound like the idiots running fannie/freddie circa 2002
@ Sonies. I didn’t say they should own a house if they are flipping burgers. However, the issue is that much of the housing malaise is that many people have lost well paying jobs with no hope in sight of replacing that income which is why nothing to date has worked in stemming foreclosures.
Many of the people in trouble cannot find jobs with similar incomes that were afforded during the boom because they are blue collar or other relatively low skill workers.
Think about all people who lost relatively high paying jobs in construction, sales, etc.
The public is being split to some degree between a highly compensated professional class and your Joe Average blue collar worker. It is much harder to break into the professional class since you pretty much have to be in the right social circle to get those opportunities and the opportunities for a regular working stiff with no degree are getting slimmer by the month.
“I’m at ~1x gross on the current mortgage and–at HD-approved foreclosure pricing–would be at ~2x gross for the two mortgages. Think we could probably pass underwriting. There are plenty of others like us.”
Yipee on your 2br condo. Got news for you — the retired guy down the street is “at” infinite gross (and net) on his current mortgage (and that is on social security!).
If you cash flow so much, you should pay off your mortage like he did. Don’t see many people making 4.5% after tax (call it 7% pre-tax) cash returns right now.
“The vast majority of realitors suck and that’s why they are starving – don’t blame the economy – blame the dumb agent who knows nothing and doesn’t care. Additionally, I would be surpirsed if the majority of realitors, when asked the question if they would rather have another job, say no, I love my job that’s why I am good at it.”
The vast majority of people suck and that is why companies will only hire people with a top 10 MBA. Sorry but it is not just the real estate industry where 90% of the people are not qualified to do their jobs.
Two data points for Old Town.
I know of a short sale in Old Town. It did take ~2 years for that property to close.
It closed over 550k. As the bank was taking its own sweet time, the property was rented out by the investor, the unit wasn’t kept up and it was maddening for the association.
—
On another note, I also know of a 2 bdrm condo unit that never even hit the MLS was shown and sold for 400k+ in Old Town this year.
“the retired guy down the street is “at” infinite gross (and net) on his current mortgage (and that is on social security!). ”
Not even if he’s got the senior freeze (and therefore making under $55k). Taxes count, too.
Oh, and after tax, it’s more like 3.5; not stuck with a 7.25% mortgage.
Get some bad news, friend? cuz that was unusually nasty.
Boasting about a being a high wage earner relative to a small mortage is not useful, that’s all.
For the first condo I ever bought I made more than the purchase price annually, forget even the mortgage. I bet once HD pops his RE cherry he will be in the same spot.
But it is all relative. You have 4 kids and need or want a 5 br house, you’re going to have to run a little thinner.
Personally, as an employer, I like to see people who have big mortgages. It is a good incentive. There is nothing worse than FU money among your employees.
What’s really weird is what takes place when the lender finally agrees to put a distressed property on the market via “sheriff’s sale.” Check out one of local neighborhood newspapers and look at the foreclosures in the legal-notices section. The notice will typically note the date of the sale (at a designated law firm or title office, no longer the County Building for – uh – typical Chicago “reason$”), the address of the property, the type of building on said property, the Tax ID number, and instructions for the successful bidder to bring a cashiers check for 20 or 25% of the agreed-upon price.
But what’s the PRICE??? Nine times out of ten you have no idea what the mortgage balance, so you have no idea of what a good minimum bid would be, so you can figure a percentage of that number to have handy for your down payment!!!
How is this legal???
“Boasting about a being a high wage earner relative to a small mortage is not useful, that’s all. ”
Dude, I don’t respond to speculation about my job; I’m not telling whole truths about my finances here.
HD sez “no way you could buy a 2d house and jingle mail, you’d never get approved for a 2d mortgage”, I point out a scenario where it works, for a lot of people both you and I know.
Also, “For the first condo I ever bought I made more than the purchase price annually, forget even the mortgage.” is *exactly* what you got on my case for, so … what was your point again?
“But what’s the PRICE??? Nine times out of ten you have no idea what the mortgage balance, so you have no idea of what a good minimum bid would be, so you can figure a percentage of that number to have handy for your down payment!!!”
With the PIN you can go to ccrd.info and find the face value of the mortgage. And you can pretty safely assume the full outstanding balance is the face amount or higher.
My first major job out of school, after a little while I went and bought a car.
My project manager in a DEEP voice…said GOOD GOOD.
I said: huh?
He then said, its the first hook the company has in you all the while making fishing gestures.
Now you have a car payment. *Hook*
Then you get married *Hook*
Then you buy a house *Hook*
Then you have kids *GAME OVER*
You’re never going to stop working for the Man he says as he turns away.
My friend brings multiple checks to the auctions in various amounts. It pisses him off because I think he told me that they cost 1% of the check. It allows some flexibility as the price can vary a bit. Also he has explained that he has his price made up before entering the auction. If he gets it great if not great.
“My project manager in a DEEP voice…said GOOD GOOD…You’re never going to stop working for the Man he says as he turns away.”
probably correct, but I’m going to guess he wasn’t someone you wanted to work for, for long.
Oh…I’d still work for him today. He told it like it was(is).
Straight guy. Italian. Catholic. 5 kids. Probably 5th gen Chicago.
Honest and fair. Did what any good project manager does. Deals with all the c(r)*p and shields the team to get the work done.
Or you can have like the people I see, with very large mortgages, children, cars and in serious financial trouble. They can’t concentrate on the job, they make mistakes, and if they cannot competently manage their own finances why in the hell would you want them making good money working for you?
I saw a guy yesterday who makes $71,000, works for MNC and he has a mortgage of $435k in the western burbs. The guy is a complete wreck.
I’d rather have the guy with FU money. Treat him right, pay him well and he’ll be a strong asset to your organization. He’ll only use that FU money if he gets fed up with your BS.
“Personally, as an employer, I like to see people who have big mortgages. It is a good incentive. There is nothing worse than FU money among your employees.”
“I saw a guy yesterday who makes $71,000, works for MNC and he has a mortgage of $435k in the western burbs. The guy is a complete wreck.”
I did know some really really disciplined people who could put 40% of their take home towards a home. They simply just didn’t go out like they used to and home was where they wanted to put their money. But this method isn’t for everyone.
I would also mention that the 28-33% rule of thumb that we use here in the USA is very different from other countries. For example in Britain, a significantly higher percentage of take home pay goes towards housing than here in the good ole U S of A.
Sabrina:
Chicago voters would be asked to decide if the city should make banks pay transfer taxes when they take a home through foreclosure under a proposal a key City Council Committee approved today.
Aldermen are looking to squeeze more city revenue from home sales during a tough economy. Under state law, banks and other mortgage lenders are exempt from the transfer tax — one of the city’s primary income sources — paid by both the buyers and sellers of property in Chicago. But that law allows the council to start charging lenders if aldermen first get voter approval.
The Finance Committee approved the measure 8-2. But Ald. Bernard Stone, 50th, who voted against putting the referendum on the ballot, said he would block a vote until the next council meeting in September.
If the measure is approved today, it would go on the November ballot. If it were approved in September, it would be on the ballot in next February’s city elections.
“It is the right tax at the right time for the right people,” said Ald. Roberto Maldonado, 26th, who proposed the referendum. Last year, 3,320 properties were taken by banks in Chicago through foreclosure, he said.
Rest of article here:
http://newsblogs.chicagotribune.com/clout_st/2010/07/chicago-voters-could-be-asked-to-tax-banks-in-foreclosures.html
ChiChow:
The Chicago Alderman obviously failed 10th grade economics if they think banks aren’t going to pass that on to consumers in the form of higher interest rates.
Corporations do not pay taxes. They all get passed on to consumers in some form or another through higher prices.
“For example in Britain, a significantly higher percentage of take home pay goes towards housing than here in the good ole U S of A.”
If you mean to say that it’s OK to put more of an American salary onto a mortgage, I’m not sure about that. In Britain, if you qualify to go to university, you go on the collective dime, er, ten pence. And if you need health care, again, you’re covered. We do not have this situation here, and until we do, many Americans might benefit from adjusting their expectations of housing downward.
I’m not saying that. From my previous post: “But this method isn’t for everyone.”
I’m saying that it is entirely possible to put in 40% of your take home into housing, but even at 40% this guy at $71k a year is over his head with a $435k mortgage.
And as HD says he’s a wreck. There are some people that simply shouldn’t own and the no money down interest only loans just lowered the bar.
http://finance.yahoo.com/news/Mortgage-brokers-to-be-rb-1094306971.html?x=0&&sec=topStories&pos=5&asset=&ccode=
what do you think about this Russ?
As a person who already has to deal with this sort of BS, I guess its only fair 8)
Sonies. Yeah, it is relatively old news. They have been implementing it for the past two years. Basically, you have to pass a nationwide competency test, background check, and also general credit standards (can’t be an LO with messed up credit). You also have to pass state test as well.
I support it in that it is raising the bar of LOs. The business was overrun with used car salesmen during the boom looking to make a quick buck.
Here is the rub though. It only applies to loan officers who don’t work at Federally Charted Banks. LOs that work at FDIC insured banks just have to register with the National Mortgage Licensing System (NMLS) but they don’t have to take any of the competency tests, etc.
Consumers should keep that in mind when shopping for mortgages. Basically, all the losers, people with bad credit, folks that can’t pass the competency test, etc all went to go work for the Big Banks… you know the Too Big To Fail banks since they aren’t qualified to be a true Broker anymore. They lobbied to be exempt from portions of the SAFE Act.