From the Triangle MLS for March:
This is down from last year's lows which were themselves 40% off peak volume.
Friday, April 30, 2010
It's over!
The government's $8K price support for houses is over. If houses did not go under contract by today, then their buyers will not qualify for the $8K tax credit. Didn't attract a buyer before the deadline passed? It's not entirely due to the fact that you overpriced your house. Orange county hasn't had very many buyers -- why? Overpricing, I suppose. I guess it is your fault. Too bad that the price the market was willing to bear for your house just dropped $8K today.
From the Triangle MLS for March:
This is down from last year's lows which were themselves 40% off peak volume.
From the Triangle MLS for March:
This is down from last year's lows which were themselves 40% off peak volume.
Wednesday, April 28, 2010
Consequences
The government has worked to keep house prices high. New entrants to the housing market are paying inflated prices; and they are defaulting at inflated rates.
IrvineRealtor has a great post today, which includes this graph.
Government insured loans for first-time home buyers (FHA loans) from 2008 -- from AFTER the bubble had begun to burst -- are performing as bad as the toxic loans made in the run-up of the bubble.
The government is keeping housing prices inflated so that new home owners can overpay for properties they cannot afford, default, and trash their credit. You want to buy a house? The government is setting you up for failure.
IrvineRealtor has a great post today, which includes this graph.
Government insured loans for first-time home buyers (FHA loans) from 2008 -- from AFTER the bubble had begun to burst -- are performing as bad as the toxic loans made in the run-up of the bubble.
The government is keeping housing prices inflated so that new home owners can overpay for properties they cannot afford, default, and trash their credit. You want to buy a house? The government is setting you up for failure.
Sunday, April 18, 2010
Forclosure Moratoria Muerte
Loan owners have been squatting in the houses they cannot afford for the past year. The HAMP program and various threats from the govt that the banks should "do more" to keep loan owners in their houses has produced a backlog in the foreclosure process.
Instead of being evicted for not paying their mortgages, loan owners have been squatting rent free living in a house they could not otherwise afford. This has kept the number of distressed properties on the market down to a minimum, and in turn, helps artificially support housing prices. Why? Foreclosures drive down housing prices 1st by soaking up buyers that might have otherwise purchased more expensive homes (more expensive, but not higher quality) and 2nd by lowing the "comps" for houses. Comps are important in setting the appraised value of a property; a bank will only loan 80% of the appraised value, not of the listing value. If someone wants to buy a house at 110% of its appraised price, they have to put down a larger sum... eventually, houses sell for what they are worth.
So: we had three programs directed at keeping housing prices high. 1) The home buyer's tax credit (which expires in 12 days). 2) the Fed's $1.25 Trillion MBS purchasing program to lower interest rates (which expired in March) and 3) the HAMP program designed to keep deadbeat loan owners in their homes and those homes off the market.
The third program seems to have done all it can. Now banks are beginning to foreclose.
IrvineRenter has been doing some spectacular reporting. First, a guest post from CalculatedRisk's haiku writer, Soylent Green Is People, about the end of HAMPs efficiacy: The Debt Star has cleared the planet. Then a quote from Bank of America's OREO department: BoA will increase its foreclosures this year by 600% over last year. (NOTE: this is really a 500% increase; 2010's rate will be 6x that of 2009's.) This tidbit was picked up by patrick.net and CalculatedRisk
Then March foreclosure data is released: RealtyTrac: March Foreclosure Activity Highest on Record
It's finally happening.
How does this relate to Chapel Hill?
Let's take a look at two google maps (both at the same zoom level). Homes in default/REO/foreclosure status in Chapel Hill, and Homes in default/REO/foreclosure status in Durham.
Above: distressed properties in Chapel Hill.
Above: distressed properties in Durham
When I first started looking at Google Map's foreclosure listings, I noticed right away that there were many more. From there I made the prediction that Durham prices would erode quickly, and that Chapel Hill prices would erode, too, but more slowly. That prediction was half right. What I wasn't counting on was the moratoria to keep all of Durham's delinquent loan owners in their homes for so long. I'm not following Durham very closely, so I can't say for certain that the distressed properties today are the same distressed properties from last year.
But I have been following the distressed properties in Chapel Hill. If you look at the properties in Chapel Hill that are distressed, you'll notice 19 of them are the the same properties from last year. (There are ~25 total; so there have not been very many more properties that have become distressed either). The loan owners have been squatting. Their homes have not been foreclosed and their properties have not come to market.
Instead of being evicted for not paying their mortgages, loan owners have been squatting rent free living in a house they could not otherwise afford. This has kept the number of distressed properties on the market down to a minimum, and in turn, helps artificially support housing prices. Why? Foreclosures drive down housing prices 1st by soaking up buyers that might have otherwise purchased more expensive homes (more expensive, but not higher quality) and 2nd by lowing the "comps" for houses. Comps are important in setting the appraised value of a property; a bank will only loan 80% of the appraised value, not of the listing value. If someone wants to buy a house at 110% of its appraised price, they have to put down a larger sum... eventually, houses sell for what they are worth.
So: we had three programs directed at keeping housing prices high. 1) The home buyer's tax credit (which expires in 12 days). 2) the Fed's $1.25 Trillion MBS purchasing program to lower interest rates (which expired in March) and 3) the HAMP program designed to keep deadbeat loan owners in their homes and those homes off the market.
The third program seems to have done all it can. Now banks are beginning to foreclose.
IrvineRenter has been doing some spectacular reporting. First, a guest post from CalculatedRisk's haiku writer, Soylent Green Is People, about the end of HAMPs efficiacy: The Debt Star has cleared the planet. Then a quote from Bank of America's OREO department: BoA will increase its foreclosures this year by 600% over last year. (NOTE: this is really a 500% increase; 2010's rate will be 6x that of 2009's.) This tidbit was picked up by patrick.net and CalculatedRisk
Then March foreclosure data is released: RealtyTrac: March Foreclosure Activity Highest on Record
It's finally happening.
How does this relate to Chapel Hill?
Let's take a look at two google maps (both at the same zoom level). Homes in default/REO/foreclosure status in Chapel Hill, and Homes in default/REO/foreclosure status in Durham.
Above: distressed properties in Chapel Hill.
Above: distressed properties in Durham
When I first started looking at Google Map's foreclosure listings, I noticed right away that there were many more. From there I made the prediction that Durham prices would erode quickly, and that Chapel Hill prices would erode, too, but more slowly. That prediction was half right. What I wasn't counting on was the moratoria to keep all of Durham's delinquent loan owners in their homes for so long. I'm not following Durham very closely, so I can't say for certain that the distressed properties today are the same distressed properties from last year.
But I have been following the distressed properties in Chapel Hill. If you look at the properties in Chapel Hill that are distressed, you'll notice 19 of them are the the same properties from last year. (There are ~25 total; so there have not been very many more properties that have become distressed either). The loan owners have been squatting. Their homes have not been foreclosed and their properties have not come to market.
Thursday, April 15, 2010
Creepy!
This listing features the POV of the escaped convict as he approaches the unsuspecting baby sitter inside...
Fortunately, it doesn't show us the interior. Who would want to see that?
Saturday, April 10, 2010
How'd he get that price?
Ever wonder where some house prices come from, like, how did they dream up that number?
XXX Hardwick Pl Asking $449,900, $155/sqft.
Purchased 2003 for $335K. First mortgage, $286K, with 20% down.
Then in 2007, the owner took out a $150K HELOC.
( $286K + $150K ) * 1.06 realtor's fees = $443K.
So they're asking $450K.
The owner to you, the buyer: "Look, I already spent $150K of the money I was going to make on the eventual sale of this property, so, yes, of course I'm going to ask for more than $150K worth of appreciation for having lived there a whopping 7 years."
XXX Hardwick Pl Asking $449,900, $155/sqft.
Purchased 2003 for $335K. First mortgage, $286K, with 20% down.
Then in 2007, the owner took out a $150K HELOC.
( $286K + $150K ) * 1.06 realtor's fees = $443K.
So they're asking $450K.
The owner to you, the buyer: "Look, I already spent $150K of the money I was going to make on the eventual sale of this property, so, yes, of course I'm going to ask for more than $150K worth of appreciation for having lived there a whopping 7 years."
Government Price Support Ending
The Fed's $1.25 Trillion MBS purchase program unceremoniously ended last week, and already, interest rates have risen. So far, their rise has been the modest 0.3% that CalculatedRisk has been predicting for a long time, but that doesn't mean they might not rise further; we'll have to wait and see.
Less than a month from now, at the end of April, the home buyer's tax credit will expire. On May 1st, the houses for sale that are not already under contract will see an immediate $6,500 drop in price, as their buyers will have exactly that much less buying power than they had the day before.
So the pressure is on for home owners wanting to sell to find a buyer ASAP. Your neighbors are your competition and there really aren't that many buyers, so you have to price aggressively if you want to sell.
Today, I'll feature two properties both in the Colony Woods neighborhood. The first has been aggressively dropping its price. The second has been keeping its price steady. Wanna guess which one I think will sell first?
XXX Knob Rd Asking $299,000. $95/sqft.
This house listed on February 12th for $349,900. They dropped the price to $339,000 twelve days later. Yesterday, they dropped the price to its current level. They reduced the price by 1/7th of its original asking.
XXX Spruce St Asking $294,500. $136/sqft.
This house listed February 11th at its current price, and it hasn't budged. Tomorrow, April 11th, from 2pm to 4pm, they are holding their third open house. I went to one of their prior open houses. It's a weird house; there is no door to the basement, just a stairwell leading down from the kitchen. The washer and dryer are on the opposite sides of the basement -- so odd. The bedrooms are pretty small. Nothing about this house stands out; it has not been remodeled or improved.
So why are the owners holding fast to their original asking price? If you've read my blog before, you know exactly where I'm going. The reason they can't drop their asking price is because they have radically increased their debt on the property in the time they owned it. They already spent the proceeds of their house sale. Let me say that again: they are looking to sell their house for 60% more than what they paid for it, and they will make no money on the sale.
Total outstanding debt: $412,200, assuming they've fully tapped their $128K HELOC and have not paid down either of their mortgages. I have a feeling their actual debt is right around $294,500.
Because they cannot lower their asking price to meet the price the market is willing to pay for their house, they will be unable to sell before April 30th, and they will likely end up with a short sale or a foreclosure, trashing their credit record.
Mortgage Equity Withdrawal is what caused these home owners to find themselves in their current bind. MEW caused the bubble to inflate and it will be the source of the pain as the bubble deflates. We need to outlaw MEW.
Less than a month from now, at the end of April, the home buyer's tax credit will expire. On May 1st, the houses for sale that are not already under contract will see an immediate $6,500 drop in price, as their buyers will have exactly that much less buying power than they had the day before.
So the pressure is on for home owners wanting to sell to find a buyer ASAP. Your neighbors are your competition and there really aren't that many buyers, so you have to price aggressively if you want to sell.
Today, I'll feature two properties both in the Colony Woods neighborhood. The first has been aggressively dropping its price. The second has been keeping its price steady. Wanna guess which one I think will sell first?
XXX Knob Rd Asking $299,000. $95/sqft.
This house listed on February 12th for $349,900. They dropped the price to $339,000 twelve days later. Yesterday, they dropped the price to its current level. They reduced the price by 1/7th of its original asking.
XXX Spruce St Asking $294,500. $136/sqft.
This house listed February 11th at its current price, and it hasn't budged. Tomorrow, April 11th, from 2pm to 4pm, they are holding their third open house. I went to one of their prior open houses. It's a weird house; there is no door to the basement, just a stairwell leading down from the kitchen. The washer and dryer are on the opposite sides of the basement -- so odd. The bedrooms are pretty small. Nothing about this house stands out; it has not been remodeled or improved.
So why are the owners holding fast to their original asking price? If you've read my blog before, you know exactly where I'm going. The reason they can't drop their asking price is because they have radically increased their debt on the property in the time they owned it. They already spent the proceeds of their house sale. Let me say that again: they are looking to sell their house for 60% more than what they paid for it, and they will make no money on the sale.
Total outstanding debt: $412,200, assuming they've fully tapped their $128K HELOC and have not paid down either of their mortgages. I have a feeling their actual debt is right around $294,500.
Because they cannot lower their asking price to meet the price the market is willing to pay for their house, they will be unable to sell before April 30th, and they will likely end up with a short sale or a foreclosure, trashing their credit record.
Mortgage Equity Withdrawal is what caused these home owners to find themselves in their current bind. MEW caused the bubble to inflate and it will be the source of the pain as the bubble deflates. We need to outlaw MEW.
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