“We’ve got to take action … the economy is not supporting home ownership the way we need it to.” Say what?I? The highest rate of homeownership in the history of homeownership is not enough? Surely whatever is done will make everything worse. Von Mises lived and died for some reason, but no one can remember what it is…
Technorati Tags: real estate, real estate marketing
Rocco says:
Ha. I totally agree Greg. Government data suggests that home ownership in 2001 was 67.8%. In 2005 it was 68.9%. We better take care of this problem right away. 😉
March 15, 2007 — 12:19 pm
Greg Swann says:
> We better take care of this problem right away.
Indeed! I think the solution to the subprime lending crisis is to come up with loan programs for people who don’t have the debt-management skills to own homes…
March 15, 2007 — 12:30 pm
Brian Brady says:
Blame the banks; they’re evil! Put restrictions on the loans (no prepayment penalties, counseling, etc). Ask the City of Cleveland how that’s working out for them.
March 15, 2007 — 12:57 pm
Jay Thompson says:
Oh good grief. She needs to just….. go away.
March 15, 2007 — 1:11 pm
Drew Nichols says:
Now I’m just waiting for the supporters to show up…
March 15, 2007 — 4:50 pm
Chris says:
Oh my if the government gets involved we are screwed!
March 15, 2007 — 5:24 pm
Todd Carpenter says:
“Presidential hopeful Hillary Clinton on Thursday called for incentives for U.S. lenders to identify troubled mortgages, offer “a foreclosure timeout” and possibly revise repayment terms amid the widening subprime mortgage crisis.”
OK, how does making it harder for lenders to collect help them from going out of business? Foreclosure rates are their own problem. It would be nice if politicians could correctly identify the problems they wish to address before coming up with ways to “fix” them.
March 15, 2007 — 10:57 pm
J Galt says:
Ah, you are dating yourself now. It is not that we have forgotten WHY Mises lived, it is that no one even knows THAT he lived. There are recent graduates in economics who have never even heard the name. All the documents have been shreaded, the memories purged, the books burned. We rule by fiat, and true or not, the Homeland has no room for such nonsense.
March 16, 2007 — 3:02 pm
NYCJoe says:
There’s an old maxim that over the long term, government programs almost always achieve the exact opposite of the effect they were intended to have.
March 17, 2007 — 4:47 pm
Kaye Thomas says:
You knew this was going to happen with all the hype in the media and elections around the corner..Soon there will be stories about Joe & Jan, their 5 kids and how they are being evicted by the blood sucking bank. Then 8 out of 10 Presidential candidates will come forth with a plan to save the poor homeowners..
March 17, 2007 — 7:00 pm
Rob Rob says:
Great numbers: home ownership in 2001 was 67.8%. In 2005 it was 68.9%. But if you have zero equity in your home do you really `own` it?
I don’t think so.
Let’s get rid of the home mortgage deduction, and reduce taxes for everyone.
May 16, 2007 — 9:13 am
Matt in Portland OR says:
I am a Mortgage Broker as well as a real-estate broker and have been for 15 years now. I have been through this cycle before but I think that this is a lot different than what we have experienced before. This will get a whole lot worse before it gets any better but I am constantly amazed at the number of people in our own industry that are willing to ignore the obvious.
Let alone politicians that don’t even understand the tip of the iceberg let alone the full scope of the problem.
(Having just lived through the Banks in Oregon trying to legislate mortgage brokers out of business)
Yes we do have a lot more people that have “purchased” homes but why is that? Why did our values increase so much since 9/11? Have our incomes increased at the same pace as home appreciation? It all comes down to simple economics, Supply and Demand. The values went up because there were more borrowers. There were more borrowers because the Fannie Mae and Freddy Mac guidelines were loosed up after Sept 11 in an effort to help stimulate the economy, and it worked. The problem was that the banks & Wall Street got greedy and rode that pony too far.
The Supposed “Sup-Prime” loans are only the tip of the iceberg because this dose not even reflect the crappy job of underwriting that was done on the “Prime” of “Conforming” loans. Does anyone remember when your debt to income ration used to be 38% unless you were doing an FHA loan and it was 42%. When you did those loans you had to actually PUT MONEY DOWN, giving you a vested interest in the home and a reason not to just walk away from it when things went bad. You also had to pay closing costs. So generally the people that you were making loans to had to have some level of responsibility having saved up (most of the time) enough money to put down and pay closing costs on a home. People that were not smart enough to budget them selves and save money were not able to get in to a home. This left a barrier to home ownership that kept the industry in check and healthy. Once you removed all of that, every idiot could by a home with out having to think about how they were going to afford it, if they should, what the not so obvious costs of owning a home are. (Having to work on it when things break, and things like you can only use your Sponge Bob Square Paints sheets as window coverings for so long before you actually have to by real ones)
You could go to 100% LTV with no mortgage insurance with the seller paying all of your costs because you wrote the EM for more that what the sellers were asking and then had “them” pay the costs for the buyer. So it was cheaper upfront to buy a house than to rent an apartment (even they would ask for some kind of security deposit) I am not talking about “Sub-Prime” loans I am talking about “Conforming” loans. The loans got more an more aggressive as the lenders ran out of candidates for the last round of aggressive changes that they made to loosen their guidelines, but rather than downsize and wait for the market to catch up, they just go more and more aggressive. In the meantime the home values shot up so high (and the incomes did not) that now even fewer people could qualify so they did more and more “stated” or “No Ratio” loans. I had several loans that I closed were we put in $1 for the borrowers monthly income, but because they were putting down money and had liquid assets the loan was approved “conforming”
With the banks doing all of these loans that used to fall under the “Sub-Prime” lenders territory, what were they left with? They had to do really stupid loans because that was all that was left. Most of those loans should have never been made, but there are a ton of them out there and they are all getting ready to have their rates adjust. It usually takes about 6 months before you start the foreclosure after payments start to get late. So far banks have been trying to hide the delinquency’s by re-writing the loans to incorporate the late’s but this is only stalling the problem. With out that sub-prime lender out there (114 lenders have imploded to date) who is going to bail these people out of foreclosure now?
Why are there so many homes sitting on the market now? Is it because there are not enough banks willing to make loans? Is it because they are finally being forced to rethink their underwriting? Or is it simply because, things are way too overpriced because of the bubble that was created by removing all the stops on common sense for a while?
All of these jobs that have been lost by these banks going under, were very good paying jobs, but that is only a small portion of what this will affect. Think about how many parts of our economy this will impact.
Builders, Realtors, Escrow, Title, Banks/ Brokers are the obvious ones (also some of the biggest spenders of their cash) What about the delivery service, office equipment, Office Suppliers, Land lords (usually funded by pension funds) Furniture, appliance, Home Depot, electronics stores.
Our Economy has been based on something like 58% Consumer spending. Is that from their awesome pay checks? Or from the Equity in their homes? The endless cycle of running up all of your credit cards and then refinance to make it all affordable again is now over for 90% of the population (most lenders will no longer even do a Home Equity Line of Credit) With all of that, what will the Back to school shopping numbers look like this year? How about Christmas?
What do you think next February is going to look like?
Yes it is going go be a rough ride, but this bitter pill has been coming for a while and it has to happen to get things back to being sustainable.
Any “help” from politicians at this point I think will only for long the pain and ultimately hurt us more.
Rip that Band-Aid off and lets get through this thing as soon as possible.
You thought Enron looked bad? What is going to happen when the public gets to hear about the types of loans that the quazi-governmental agencies (Fannie/Freddy) have been doing with government money? Is this who is going to get left holding the bag with this all goes down, because that is ultimately the general public.
Their are a lot of good things that will happen as a result of all of this. Ethics will be brought to light and more emphasis will be placed on them (at least until we forget about this round and make the same mistakes again.
This will shake the tree and hopefully shed some of the Rotten apples out of the industry.
The players that survived will be stronger if they can learn from this.
I realize that much of this rant has sounded like “the sky is falling” Chicken Little speak. Keep your heads up, there will be plenty of opportunities ahead of us but you need to consider everything to find them.
Buckle Up, it is going to be a bumpy ride!!
Matt
August 9, 2007 — 1:36 pm