There's a plague on the real estate market that isn't being talked about, but I suspect it's having as big an impact on this ailing industry as foreclosures. It made the news for a while, but the government assures us it's all A-OK now. I beg to differ. Qualified buyers are finding it impossible to get mortgages.
My wife and I are not rich, but we're a good bet for a home loan. In fact, we're the very people the puritanical types like to hold up as exemplars of model citizen behavior: We don't spend much, we save all we can, and we pursue a modest lifestyle -- we don't even get cable.
In fact, we wouldn't even be in the market for a house, except our landlords keep getting into financial trouble and raising the rent or selling the property. We finally decided we'd better buy something, if we didn't want to have to move every eight months. So -- with the sun setting on the tax credits -- we got preapproved, went out and found a place well within our price range, and made an offer.
Preapproved doesn't mean much.
Suffice it to say that after several banks, two appraisals, reams of paperwork, and an incredible amount of jumping through hoops, we still don't have a mortgage. Escrow ended ten days ago, and the seller is almost insane with worry. We're about to get evicted from our current digs, and are looking at rentals again, even going so far as to fill out lease applications. Five days ago, we were one day from having the loan. Then three days ago, same story. And yesterday, and today, and it looks like we could just keep on responding to contingencies and demands until winter comes around.
I'm rubbish at paperwork, but my beloved wife is a genius with the stuff. She's a documentary producer -- even won an Oscar for it -- and she knows how to deal with bureaucracy. She has been hunting down scraps of documentation so obscure we didn't know they existed, along with signed reassurances from our accountant, past landlords, employers, and distant acquaintances that we're not grifters. The bank wants pay stubs from the time of the Edison Cylinder Phonograph through next year. She literally had to call a CPA off the golf course to deal with this. The only thing the bank hasn't demanded is a stool sample; I may send one anyway. And yet, with time running out and the urgency evident to all, there's always something else. It has become patently clear that banks are getting out of the mortgage business.
I can understand this. They lost their shirts, and our shirts, too. All those bad mortgages, signed off on no more collateral than a couple of expired lottery tickets, have left the banks extremely cautious. I would be, too. But we're the dull, coupon-clipping, cash-hoarding types everybody's demanding Americans become -- if we can't get a loan, who can? This has gone beyond caution. It's turned into a weird game.
We're fed up with it. If the bank wants anything else from us -- thumb prints, wax effigies, or a copy of the Magna Carta -- they're not getting it. We'll walk away from the deal. The seller will hang himself, and probably the mortgage broker will follow suit. Our real estate agent is used to it: according to her, 50% of all home sales are falling out of escrow -- because it's so incredibly difficult to deal with the banks. It must be a nightmare for all of them. It's a nightmare for us.
Not a nightmare like ten thousand barrels of porpoise death spewing out of a ruptured undersea pipeline; not a nightmare like Haitian earthquakes or being unemployed for two years or living next door to the Palins of Alaska. But in the scope of our relatively ordinary lives, a nightmare. The bank refuses to take our money -- and we're not the only ones.
I'm told this situation is epidemic. Vast numbers of highly qualified buyers can't get into houses, because the banks don't want to lend. We were told that crisis had passed, but it hasn't. Whenever I bring it up, there's always somebody with an equally frustrating tale. I know, I know. It's a problem everybody should have. Poor me, unable to buy a house when there are so many people on the streets. But the American economy runs on consumer spending, and the queen of all consumer expenditures is a house in the suburbs. If it's this difficult for qualified buyers to get into a house, I don't see real estate making a comeback any time soon -- and if the banks want another bailout, they can send the request care of current resident.
It probably won't be us.
Jeffrey Sachs: Time to Plan for a Post-Keynesian Era
We need to reset our macroeconomic timetables. There are no short-term miracles, only the threat of more bubbles if we pursue economic illusions. The watchword must be investment rather than stimulus.
Randy Frost: The Joy and Pain of Things
Irene's attachments to things and the emotions tied up in them cost her a husband and, for the most part, a normal life.
May 7, Towne Bank of Arizona, Mesa closed
May 7, 1st Pacific Bank of California, San Diego, California closed
May 14, Midwest Bank and Trust Company, Elmwood Park, Illinois closed
May 14, Southwest Community Bank, Springfield, Missouri closed
May 14, Satilla Community Bank, Saint Marys, Georgia closed
May 14, New Liberty Bank, Plymouth, Michigan closed
May 21, Pinehurst Bank, St. Paul, Minnesota closed
May 28, Bank of Florida – Southeast, Fort Lauderdale, Florida; Bank of Florida – Southwest, Naples, Florida; and Bank of Florida – Tampa Bay, Tampa, Florida all closed
May 28, Granite Community Bank, N.A., Granite Bay, California closed
May 28, Sun West Bank, Las Vegas, Nevada closed
June 4, Arcola Homestead Savings Bank, Arcola, Illinois closed
June 4, TierOne Bank, Lincoln, Nebraska closed
June 4, First National Bank, Rosedale, Mississippi closed
June 11, Washington First International Bank, Seattle, Washington closed
June 18, Nevada Security Bank, Reno, Nevada closed
Yep, all those banks just sitting on hoards of cash. uh huh
I'm a new home salesperson, have been working in the home industry for 30 years, and I've never seen anything like this. It truly is a nightmare.
This is a serious, serious blindspot on the part of this administration, and one of the biggest reasons Obama should have taken serious steps to nationalize the banks to the portion necessary to keep money flowing to small businesses, homebuyers, and the middle class in general.
Why? because there has NEVER been an economic recovery in this country that wasn't centered around the home industry.
Why? because it's so smack dab in the middle of our economy, and creates jobs.... Jobs in every direction, from the surveyors, to the sheetrockers, to the salespeople, to the windowtreatments, to the title companies, to the insurance companies, to the childcare centers- everywhere..
And where is Obama? Nowhere close to the realization and attention this so richly deserves... He's busy with his ridiculous "man-crush" with Geithner, telling him how to deal with the banks from the outside.. His inexperience is showing so big in this situation, it's mortifying, because anyone who knows how important this is would be all over the money people, to get them to open the channels and let the middle class have some momentum with the capital we're being strangled from.
The Banks have enormous portfolio's (millions) of loans now they can't value or possibly know the worth of,,,they should generate more?
Between the time of APPRAISAL? and the closing...what is the property worth TODAY? What about by the time the first payment is due? Have they already lost security in margin?
Have you already lost any down payment or supposed equity?
What % down?
Loan to Income ratio?
Overall Debt payments as a % of income?
Credits score
I'd say 20% down, 5:1 loan to income 35% debt payments on income ad a credits score of 700 or over would be "highly qualified"
I don't know about the mortgage market, but I know that the personal loan market has become very difficult to get into in Canada. Banks advertise lines of credit to students which are supposed to supplement government loans. But the same conditions that prevent you from accessing a government loan, can prevent you accessing a private loan as well.
The government has a chance to "encourage" large scale banks to put their balance sheets out. JPM and others are playing a balance sheet game, writing up the balance sheet and creating earnings. They are in a position to generate earnings without lending. This has to stop. This can be encouraged to changes in financial accounting reporting rules. For some reason, the government is pursuing this.
get the dvd at secretofoz.com
If you are expecting a "recover" in the form of a second housing bubble while the first bubble still deflating, you are living pie-in-sky lala land, sorry. Looking at the macroeconomic picture, we can expect housing prices to fall another 40% before the market becomes liquid again.
All the things that the booms of the last generation were built are gone and not coming back anytime soon.
Ii am seriously considering selling my house of 18 years as I believe it will not be worth what it is today for very long. Sit on the sidelines with cash equity and re-enter the housing market as an owner in 2-3 years? Makes me sick to even be considering it, but it seems very foolish not to be at least thinking about it.
This is a serious, serious blindspot on the part of this administration, and one of the biggest reasons Obama should have taken serious steps to nationalize the banks to the portion necessary to keep money flowing to small businesses, homebuyers, and the middle class in general.
Why? because there has NEVER been an economic recovery in this country that wasn't centered around the home industry.
Why? because it's so smack dab in the middle of our economy, and creates jobs.... Jobs in every direction, from the surveyors, to the sheetrockers, to the salespeople, to the windowtreatments, to the title companies, to the insurance companies, to the childcare centers- everywhere..
On the other hand, if you are self-employed, be prepared to perform like a circus beast, jumping through fiery hoops, etc. and even then may need to pay more for the loan, because of "actuarial risk." You are lumped in with all of the old stated income, non-performing loans of the past.
Another possible explanation someone told me: the banks are getting tons of 0 interest money from the Fed, then buying treasuries yielding 3-4% interest. Why lend to someone at 4-5% who might not pay them back?
The secondary concern though is that mortgages are now a whole lot less liquid than they were during the housing bubble, and banks believe (correctly) that they need a large pile of liquid assets to survive the coming financial apocalypse.
I say get a crash helmet, a life jacket, a flashlight, and a whistle. It is going to be a seriously bumpy ride for the foreseeable future for us average Americans!
First time home buyers who are employed and able to save should sit on the sidelines the next 2-3 years saving and waiting and watching. They will be able to cherry pick a great home at a GREAT price. No need to be in a hurry kids, it is all going to get a whole lot cheaper!
Just depends on how long the Goobermint continues to play games with, Mark to Fantasy accounting, low interest rates, and Cash for Clunkers HGTV Edition. (READ: How long China is willing to keep lending us money to keep the ponzi afloat.). If the lending chain is yanked, banks will be coughing up properties, left and right, for pennies on the $
If Japan, and TGD 1.0 are any indication, we could of course, drag this out for a decade or two.
The technical reason that banks are scared to death is this: Interest rates sit at low low, historically low rates. Fed funds rate 0.25%, Prime at 3.25%. Accordingly the current interest rate for home loans continues low at 5% or so. However, in a year or two those rates will be Fed funds at 5% and Prime at 8%. This means that home loan rates will be in thye 7-8% range and this higher interest rate will have to come from the respective monthly payments people can afford. So the arithmetic of this is a 20%-25% drop in the value of housing, for all houses in the the USA. As rates come up, a trillion will be lost in the market value of homes and a trillion will be lost in the market value of Treasury Notes (the ones held as assets by respective owners). And this is what Ben Bernanke and the bankers have in front of them. (I might add this is the result of Greenspan putting the rates to 1.0% nominalm negative real, because whenever they return to normal, the rates, the asset prices deflate ouch for all of us)