Why Does The Housing Market Still Suck?

[8537]

Make them cheap enough and people will buy.

They are cheaper than cars in Detroit.

Are you of the opinion that the problem there is that prices haven't fallen enough?

That, and banks are gaming the real market by holding back on foreclosures.

The banks realize that foreclosing on one home impairs their ability to sell the home next door to it, or sell a mortgage for said home.

They also realize that in most cases they are better off working with the borrower than foreclosing on him/her.

in many cases, the ones who haven't figured out the gaming are the ones who keep paying when they should leave the keys in the mailbox and walk away.

 

[Revere]

They are cheaper than cars in Detroit.

Are you of the opinion that the problem there is that prices haven't fallen enough?

That, and banks are gaming the real market by holding back on foreclosures.

The banks realize that foreclosing on one home impairs their ability to sell the home next door to it, or sell a mortgage for said home.

They also realize that in most cases they are better off working with the borrower than foreclosing on him/her.

Um, no. The banks are just playing for time. No sense in modifying a mortgage the borrower will default on no matter what it costs.

 

[8537]

You are, if you force them to accept less for debt service.

and where did I suggest they should be forced to accept less for debt service?

If homeowners refinance on more favorable terms, who eats the difference?

well the bank "eats" the difference between whatever terms they receive and the next best alternative: foreclosing through a lengthy and expensive process in order to take possession of an asset that is losing value, and that will lose even more value through the process of foreclosure.

 

[8537]

That, and banks are gaming the real market by holding back on foreclosures.

The banks realize that foreclosing on one home impairs their ability to sell the home next door to it, or sell a mortgage for said home.

They also realize that in most cases they are better off working with the borrower than foreclosing on him/her.

Um, no. The banks are just playing for time. No sense in modifying a mortgage the borrower will default on no matter what it costs.

so all of the workouts that banks have agreed to over the past two years are just banks buying time?

 

[Revere]

The banks realize that foreclosing on one home impairs their ability to sell the home next door to it, or sell a mortgage for said home.

They also realize that in most cases they are better off working with the borrower than foreclosing on him/her.

Um, no. The banks are just playing for time. No sense in modifying a mortgage the borrower will default on no matter what it costs.

so all of the workouts that banks have agreed to over the past two years are just banks buying time?

"All the workouts?"

Catch up on the news. Workouts have fallen flat on their face.

Um, not foreclosing on you is not the same as giving you a workout.

 

[Revere]

and where did I suggest they should be forced to accept less for debt service?

If homeowners refinance on more favorable terms, who eats the difference?

well the bank "eats" the difference between whatever terms they receive and the next best alternative: foreclosing through a lengthy and expensive process in order to take possession of an asset that is losing value, and that will lose even more value through the process of foreclosure.

FNMA is paying some banks, Onewest, to wit, to foreclose, and giving them every nickel they lose.

There is a growing investor market for foreclosed homes.

 

[8537]

Um, no. The banks are just playing for time. No sense in modifying a mortgage the borrower will default on no matter what it costs.

so all of the workouts that banks have agreed to over the past two years are just banks buying time?

"All the workouts?"

Catch up on the news. Workouts have fallen flat on their face.

Um, not foreclosing on you is not the same as giving you a workout.

refinancings are the fastest growing borrowing sector at the moment.

 

[judyd]

I blame the realtors for a lot of the problem. During the boom, many people got into real estate without having a clue as to how to sell a home--but at that time they didn't have to.

We had a beautiful condo for sale in a desirable area, and it took a year to sell. I found it extremely frustrating that today's realtors depend a lot on the internet, and resist doing the old standards like open houses, flyers, etc. There were lots of high rent apartments in our neighborhood and our condo should have been an easy sell because it would have been cheaper than paying rent. I couldn't get them to market directly--flyers at the door or something--to the apartment dwellers. Be creative, or something!

When a realtor did show the unit, he usually wasn't prepared and didn't know all of the details of the place. Realtors can no longer just stand like lumps while the prospect wanders around--they need to KNOW what they're showing and point out the positive features. They should drive the prospect around the neighborhood, show the two pools, the fitness center, the parks and playgrounds, the community center--all included in the condo fee! Most of them never even mentioned that it had an oversized one-car garage. It was really frustrating to see them come and go, not try to close the deal and then keep coming back to us, telling us how bad the market was, and that we would have to lower the price again! Which of course, aside from losing money for us, they would consequently bring down the value of everyone's unit in the community. This affects all future sales, and anyone who tries to refinance.

i never saw such a sorry bunch--and we dealt with two companies during this time.

 

[Revere]

so all of the workouts that banks have agreed to over the past two years are just banks buying time?

"All the workouts?"

Catch up on the news. Workouts have fallen flat on their face.

Um, not foreclosing on you is not the same as giving you a workout.

refinancings are the fastest growing borrowing sector at the moment.

Only if you have spotless credit and equity, not if you're underwater or delinquent.

 

[8537]

If homeowners refinance on more favorable terms, who eats the difference?

well the bank "eats" the difference between whatever terms they receive and the next best alternative: foreclosing through a lengthy and expensive process in order to take possession of an asset that is losing value, and that will lose even more value through the process of foreclosure.

FNMA is paying some banks, Onewest, to wit, to foreclose, and giving them every nickel they lose.

There is a growing investor market for foreclosed homes.

Well that's a bit different - that's a direct subsidy on banks that foreclose, making foreclosure a more palatable and less expensive solution.

Barring that subsidy, there would be fewer foreclosures.

 

[Revere]

well the bank "eats" the difference between whatever terms they receive and the next best alternative: foreclosing through a lengthy and expensive process in order to take possession of an asset that is losing value, and that will lose even more value through the process of foreclosure.

FNMA is paying some banks, Onewest, to wit, to foreclose, and giving them every nickel they lose.

There is a growing investor market for foreclosed homes.

Well that's a bit different - that's a direct subsidy on banks that foreclose, making foreclosure a more palatable and less expensive solution.

Barring that subsidy, there would be fewer foreclosures.

Foreclosure is a necessary component of banks pricing risk. If you take away foreclosure, they stop making loans.

 

[Revere]

Ya just can't get it out of your head that some people don't merit owning their home, can you?

Does it occur to you that this is what got us in the shit hole in the first place?

 

[8537]

FNMA is paying some banks, Onewest, to wit, to foreclose, and giving them every nickel they lose.

There is a growing investor market for foreclosed homes.

Well that's a bit different - that's a direct subsidy on banks that foreclose, making foreclosure a more palatable and less expensive solution.

Barring that subsidy, there would be fewer foreclosures.

Foreclosure is a necessary component of banks pricing risk. If you take away foreclosure, they stop making loans.

well sure, but by subsidizing foreclosure you don't make it a "necessary component of pricing risk", you make it a government-incentivized payment for negative behavior.

 

[8537]

Ya just can't get it out of your head that some people don't merit owning their home, can you?

I'm fully aware that the home ownership rates got far too high relative to housing prices and incomes.

That doesn't mean that the solution to the problem is to drive home prices and interest rates low enough to make homes affordable to those people again.

 

[The Rabbi]

As opposed to destroying lenders stake in them?

Who is destroying the lenders stake in a home?

You are, if you force them to accept less for debt service.

That would actually make the present situation worse. This has been a recession brought on by a collapse of asset values. Devaluing them further will make things worse.

 

[Revere]

Ya just can't get it out of your head that some people don't merit owning their home, can you?

I'm fully aware that the home ownership rates got far too high relative to housing prices and incomes.

That doesn't mean that the solution to the problem is to drive home prices and interest rates low enough to make homes affordable to those people again.

Drive? Markets take care of themselves.

You want to stick your finger in the dike to accomplish something you believe has noble social justificaiton.

 

[Revere]

Well that's a bit different - that's a direct subsidy on banks that foreclose, making foreclosure a more palatable and less expensive solution.

Barring that subsidy, there would be fewer foreclosures.

Foreclosure is a necessary component of banks pricing risk. If you take away foreclosure, they stop making loans.

well sure, but by subsidizing foreclosure you don't make it a "necessary component of pricing risk", you make it a government-incentivized payment for negative behavior.

That's a government problem. Another bank bailout. I think government should get out of their way and let the market correct itself.

 

[Modbert]

No, "dude" they aren't. They are historically high. Get your fucking facts straight, "dude" before you sound like more of an idiot than you already do.
The Housing Chart That's Worth 1000 Words

Because February 2009 is late October 2010.

 

[editec]

That's called "clearing the market." What is your alternative? Bail out homeowners who can't pay anyway? That's been a proven failure.
No, get the process over with, let prices fall so people who actually saved money and can afford the houses can buy them.

The prices are preeeeeeeeeeetty fuckin low, dude.

No, "dude" they aren't. They are historically high. Get your fucking facts straight, "dude" before you sound like more of an idiot than you already do.
The Housing Chart That's Worth 1000 Words

Now THAT CHART is certainly a valuable addition to this discussion. Thanks for bring it to our attention.

For real giggles superimpose the purchasing power of the working classes (taking inflation into account) over that chart.

What you'll see will be declining purchasing power even as the cost of homes climbed into the stratosphere.

Naturally, the market was due for a correction on a massive scale.

The cost of a median priced home has to bear some relationship to the purchasing power of a median family income. Right now it doesn't.

The WWII generation's rule of thumb for puchasing a home (and the bankers rule of thumb, also) USED TO BE that the price of a home ought to be about equal to ONE YEARS PRETAX INCOME.

Hell folks! -- Americans were trying to buy homes with purchase prices that were three or four years their incomes.

They really had no choice since the prices of homes were rising so much faster than their incomes.

I'd say that the market pricing is paralyzed right now by two things.

1. People just can't let go. They just cannot bring themselves to admit that what they think their homes are worth is wildly out of line with what people can really afford. People, myself included, are still hoping for the market to "get back to normal"

But normal means that the average median home price ought to be about $57,000.

2. The overhang of foreclosed homes PLUS the potential homes that will eventually go into foreclosure (thanks to the banks screwing thing up in terms of chain of ownership) make the observant potenital homebuyer want to wait it out to see where the price of housing is going.

Expect a dramatic collapse in housing prices when these two market psychology problems work themselves out.

BTW....this isn't a nationwide problem.

Depending on where you live the prices of homes may not be wildly out of line, because a lot of places in the USA did not have that BUBBLE in prices that FLAm NAC and CAL did.

 

[The Rabbi]

So your proposal to keep neighbors' home values high is to artificially prop up the price of homes? Seriously? Are you serious?

In the short term? Yes, of course.

And please, genius, tell us why this housing oversupply is different from 1990s.

Well, let's see: in 1990, housing was overvalued relative to historical trend by about 23% and financing such a home would come at about 10.4%.

In 2009, housing was overvalued by almost 100% and financing such a home would come at about 4.5%.

That's funny. GT claims houses are undervalued. You claim tehy are over valued. Or something. So your solution is to prop up values artificially so that....? I dunno. I don't see how that helps anyone except people who are irresponsible and can't pay. Oh, them and the politicians they vote for.