158 replies to this topic

[Pseudo_Work]

Jerry2, on Nov 25 2007, 09:52 AM, said:

I am hoping that all the progress doesn't revert back to the housing situation that we had in the 80's.

Yes,  you've mentioned that.

[Liamlunchtray]

Its happening really quickly as well. We live in the Armory and my son goes to school near Potters ave. Driving him in every morning I see the forclosed houses multiplying like crazy. It's terrible.

[TheAnk]

I think to Liam's point the speed on the front end drop will also mean increased (than normal) speed on the rebound... Housing has already dropped what, 20% give or take?? I don't think that the speed down means deeper down per se.. Maybe its the nature of the beast today with ARM rests increasing the velocity..

I think one of the greatest misconceptions portrayed in the media is that anyone with an ARM is "likely" to foreclose upon reset.. The people primed to foreclose are buyers at peak, fraud scam artists, predatory victims and generally greedy unscupulous people.

Now, leaving my personal beliefs aside that almost all people are inherently unscrupulous, most people who bought houses even with ARMS intended to live in them.. And they will take steps to keep them.. The foreclosers, are the rest.. Mix in a few honest people who have no avenues to make ends meet, but for the most part, lets be honest.. The people who get foreclosed sort of deserve it.. It just sucks it affects the rest of us through blight...

The government is clearly taking steps to ensure (whether this is good or bad is TBD) that housing finds a bottom through lowering rates and devaluing the dollar.. So how much longer can the downfall take?

It is my opinion that the public is generally wrong most of the time.. When everyone says one thing, its time to do the opposite.. I'd say we are just about at that point with housing.. If you can find a single person (real estate sales professionals excepted) who is bull on housing.. I'd be shocked.. So, that usually means a tipping point.. (On the flip side, no pun intended, when there are TV Shows called Flip This House that was also the tipping point on the high side..)

Who knows.. The one wild card is banks.. They alone hold the key to it all... how they react to their own poor practices will unfortunately indicate how things play out.. By shutting off financing to buyers, they are wittingly or unwittingly increasing their own exposure.. Obviously if things fall enough and it gets bad enough, the "drop off keys to bank scenario" could happen.. But honestly with such an active Fed I really don't think thats possible.. By active I mean, meddling, inflationed based Fed willing to spread the suffering to all people through inflation rather than just some..

Its kind of an interesting catch 22.. I just wish that it could happen in a vacuum instead of in our neighborhoods..

[Pseudo_Work]

For those of you who are still convinced that Providence is ground zero for the nation's foreclosure crisis, consider this article:

http://www.charlotte...ory/401705.html

Is there any neighborhood in Rhode Island facing a 60% foreclosure rate?  And this is the south - the cheap south, where theoretically it would be much more difficult for people to default.

[jencoleslaw]

why is it more difficult to default in the deep south than anywhere else?

[Pseudo_Work]

jencoleslaw, on Dec 13 2007, 11:26 AM, said:

why is it more difficult to default in the deep south than anywhere else?

Because cheap properties require a lot less borrowing.  Especially cheap properties with low taxes.  Plus, most of the south didn't quite reach the outrageously overinflated status that we did.

[Bil]

Pseudo_Work, on Dec 13 2007, 02:19 PM, said:

For those of you who are still convinced that Providence is ground zero for the nation's foreclosure crisis

Who exactly are you referring to?

[Pseudo_Work]

Bil, on Dec 13 2007, 08:25 PM, said:

Who exactly are you referring to?

I'm not singling anybody out, if that's what you mean.  People around here, in general, are extremely pessimistic.  Just thought I'd give 'em a reason not to be for a little while.

[TheAnk]

The foreclosures there are not based on just cost per se.. Its more about sprawl.. Up here in space restricted NE they can't REALLY overbuild.. There they can.. Its a different animal, less based on price than space, but of course price is a factor for sure..

I think the worst area I have seen, hate to say it is mine and the surrounding.. The second circle of PVD West, 1920s stock of smith hill oville valley etc.. But the saving grace is.. These areas already had rundown houses mixed in ANY WAYS.. So it is difficult to tell a recent foreclosure from an older run down house!!!    

[Bil]

TheAnk, on Nov 27 2007, 05:24 PM, said:

I think to Liam's point the speed on the front end drop will also mean increased (than normal) speed on the rebound... Housing has already dropped what, 20% give or take?? I don't think that the speed down means deeper down per se.. Maybe its the nature of the beast today with ARM rests increasing the velocity..

...

It is my opinion that the public is generally wrong most of the time.. When everyone says one thing, its time to do the opposite.. I'd say we are just about at that point with housing.. If you can find a single person (real estate sales professionals excepted) who is bull on housing.. I'd be shocked.. So, that usually means a tipping point..

Who knows.. The one wild card is banks.. They alone hold the key to it all... how they react to their own poor practices will unfortunately indicate how things play out.. By shutting off financing to buyers, they are wittingly or unwittingly increasing their own exposure.. Obviously if things fall enough and it gets bad enough, the "drop off keys to bank scenario" could happen.. But honestly with such an active Fed I really don't think thats possible.. By active I mean, meddling, inflationed based Fed willing to spread the suffering to all people through inflation rather than just some..

This is good stuff, because I know you pay attention to the area. However, I'm not sure where you're getting the 20% drop from, because that's certainly not reflected in the statistics (Providence is down 5.2% since last year). As for a rebound, doesn't that presuppose that what we've seen in the past few years was normal, and we've hit a temporary bump in the road now? I don't think we'll see 2005-6 levels again for years unless incomes go way up, interest rates go way down, people believe they're going to get double digit appreciation, or lending "standards" go back to where they were. Those, to me, are the major drivers of prices and I can't see a good case for any of those things happening. All we've got is inflation, which you've mentioned.

I agree with your premise about public opinion being a good bellweather for the opposite of what's going to happen, but I think your reading of it doesn't go far enough. I think we'll have reached a turning point not when people are no longer bullish on housing, but rather when the general consensus is that housing will never again be a good investment.

I was reminded of your post when I read this today: Calculated Risk: Attitudes Changing Towards Default. I think this is probably more indicative of the California/Florida/Las Vegas axis of excess than here, but an interesting anecdote that could reverberate through the country.

[TheAnk]

I do not think the posted sales numbers show an accurate picture.. I think they are "sticky", meaning they don't show the true current state.. I also put some weight into current listings and track sales on my own.. I guess my point being.. The sales figures say -5%, but if you tried to sell a home, you can bank on more like ~20% of 2006 "peak values", give or take.. I should have probably explained where I was coming from better.. The latest numbers on PVD multis say -16.15% YTD.

I think inflation is enough alone to "stabilize".. Which is hilarious enough that I just said INFLATION will stabilize ANYTHING... Lending and appreciation were not normal.. But then again neither is a 20% drop.. Banks will settle in to some risk adverse lending that will and already has had an effect.. If inflation is compounding continuously @ 3-5%, how long does it take to erase a 20% decline? 3-4 years?

Contrary to the liberal mantra, not everyone should own a home.. I find it DECIDEDLY convenient that democrats pushed for banks to loosen lending criteria to broaden home ownership, then RAILED against banks for unscrupulous practices for loosening the credit purse strings.. Funny how that works..

Also, supply for sale in RI and Providence (multi family housing) seems to be on the decline from highs this summer/fall:

Date        PVD Multi RI Multi 3Fam PVD 3Fam State
09/21/2007 774 1928 349 711
10/04/2007 768 1884 351 702
10/15/2007 768 1881 347 696
10/22/2007 785 1901 355 698
10/29/2007 792 1892 366 700
11/02/2007 791 1874 365 686
11/26/2007 768 1841 362 696
12/07/2007 740 1791 354 688
12/17/2007 748 1807 356 692
12/27/2007 717 1738 340 662

This is just MLS, and doesnt take into consideration FSBOs.. I don't care about single family housing and condos, as I feel those are not investments..

I think we'll have reached a turning point not when people are no longer bullish on housing, but rather when the general consensus is that housing will never again be a good investment.

The only reason I don't agree with the above quote is... People need a place to live.. People don't need mutual funds.. And with constant inflation, housing regardless of sentiment, will go up because it has to.. Housing has to inflate, there has never been deflation in fiat money times on a year to year basis... Ever..  

For sake of conversation we need to separate homes vs investment property... A condo is not an investment property to me.. It is a home.. Unless a single fam or condo was bought long long ago and subject to the powers of inflation, there is little reason to buy one and and rent it.. As there shouldn't be, it is a primary residence..

Multifamily housing is an investment OR a home.. Meaning its a true avenue to home ownership for low income people; the other apartments help pay the mortgage... Along with an FHA loan, these properties can reduce barriers to entry.. In time, people can then "trade up" to a single family home.. So the old rules will return; less "creative financing", more people resorting to multifamily homes for firs time purchase as rents help them qualify...

So I think over time, some people will think it is better to rent rather than buy.. Those people will rent... So I feel rental property stays relatively steady where rents determine price, and single fams and condos still fall.... Because if a condo can rent for $800.. Thats the value.. If a 3 decker has 3 apts @ $800 (2400), thats the value.. I could be wrong, who knows.. But with my twisted gorrilla math it makes sense to me..

Edited by TheAnk, 27 December 2007 - 09:35 AM.

[eltron]

Good post, Ank, and I think pretty well considered.

But just for clarification, the below quote strikes me as pretty ridiculous - the right has embraced to an INSANE extent the idea of the "american dream" of homeownership, to the point of all current federal housing programs geared to that (even freakin' section 8 with the Section 8 to Homeownership Program) at the expense of rental production. I agree that not EVERYONE can or should be homeowners, but that, my friend, has been a mistake from all over the political spectrum...

TheAnk, on Dec 27 2007, 10:27 AM, said:

Contrary to the liberal mantra, not everyone should own a home.. I find it DECIDEDLY convenient that democrats pushed for banks to loosen lending criteria to broaden home ownership, then RAILED against banks for unscrupulous practices for loosening the credit purse strings.. Funny how that works..

[TheAnk]

eltron, on Dec 28 2007, 09:35 AM, said:

I agree that not EVERYONE can or should be homeowners, but that, my friend, has been a mistake from all over the political spectrum...

Fair enough eltron.. there is enough blame to be levied on both partys, as they both try to seem like they want to "help the little guy out"...

I just specifically recall seeing articles with a certain high profile democrat, namely Hillary Clinton (and others), calling for a drop to barriers to entry to encourage home ownership.. Specifically, 0% down payments, ARMs, etc.. And its KILLING ME, because I CAN'T FIND IT.. Completely made that point moot in my post.. Made it seem anti-democrat, which I am not.. Ok, maybe I am like 73% of the time, but I'm also anti-republican.. Hillary made some pretty outrageous comments and I was baffled by them.. Maybe it is with Vince Foster, who knows..

Case and point:
http://money.cnn.com...dates.moneymag/

I could be wrong, but the Clintons are pretty wealthy.. She has only 33k in retirement funds??? What is she 60 years old?? 33k?? I don't mean to scoff at $33,000.. Thats not my point... This is a high ranking government official and possible president, and we are to trust our country to a candidate who can't even save for HER OWN RETIREMENT?? And openly pined for the destruction of housing as we know it??

[Bil]

TheAnk, on Dec 27 2007, 10:27 AM, said:

And with constant inflation, housing regardless of sentiment, will go up because it has to.. Housing has to inflate, there has never been deflation in fiat money times on a year to year basis... Ever..

I assume you're implying "in the US." There's certainly precedent for a prolonged housing downturn coupled with deflation in Japan.

I don't know if you've seen the book The Black Swan, partly about the fallacy of saying "it's never happened before, thus it cannot happen." Good book, a really interesting read.

EDIT: I just reread this and I think I sound like a dick. That's not my intention! Please read it as "here's something to add/amend the preceding discussion" and "hey theAnk, from your previous postings in general you strike me as someone who is interested in ideas. Here's a book I think you'd enjoy reading"

Edited by Bil, 02 January 2008 - 01:48 PM.

[TheAnk]

Bil, on Jan 2 2008, 02:38 PM, said:

I assume you're implying "in the US." There's certainly precedent for a prolonged housing downturn coupled with deflation in Japan.

I did mean the US and I almost never get offended.. Expect by pachouli and parking permits, and those instances are well documented..

Of course deflation can happen.. But if it does in the US the LEAST of our worries is going to be some irresponsible home owners foreclosing.. I was simply stating that we employ a currency bubble that slowly inflates.. Slow enough that people don't care and most don't see it.. Those that do simply accept it as "the way things are"...

[TheAnk]

City Takes Steps to Protect Providence Neighborhoods From National Foreclosure Crisis
Action steps include proposed ordinance creating penalty for abandoned property and possible litigation against mortgage holders

Standing in front of a boarded up tenement house in Olneyville section of Providence, Mayor David N. Cicilline today announced plans to combat what he called a major threat to the stability and prosperity of Providence neighborhoods: the national foreclosure crisis.  According to a recent report by the United States Conference of Mayors, foreclosures are expected to increase by 1.4 million nationwide in 2008 leaving a trail of blighted, abandoned property in its path.
“While this house becomes a target for vandalism and blight, the owner of this property, Deutche Bank, resides in Frankfurt, Germany,” said Mayor Cicilline.  “City government cannot control the lending practices of mortgage companies and financial institutions, but we can speed up the process of getting these properties out of the hands of anonymous institutions and into the hands of Providence families.”

The City of Providence has already taken a number steps in collaboration with its non-profit housing partners to help families hold onto their homes in the face of the sub-prime lending crisis.  Those initiatives include facilitating the transfer of foreclosed property to community development corporations and other non-profits.  

Abandoned Property Penalty
Now the Mayor is submitting an ordinance to the City Council for consideration that would create a new Abandoned Property Penalty.  The annual levy would impose a financial penalty of $10 for each $100 of assessed value of the abandoned property with the goal of creating a disincentive for absentee investment buyers to hold vacant property for long periods of time.  A portion of those funds would go directly to the city’s Housing Trust that was established to create more affordable housing.

No-Interest Loans
The City will also make one million dollars of Housing Trust Funds available in no-interest loans to working families to help defray the cost of repairing foreclosed homes they have purchased and may have been damaged during vacancy.  The money would help buyers repair damage to property caused by vandalism and neglect, making it easier for them to secure bank loans.

Litigation
Further, Mayor Cicilline has directed the City’s Law Department to review avenues for litigation including a public nuisance suit targeting banks that hold onto foreclosed property for extended lengths of time devaluing surrounding property and creating a neighborhood nuisance.  The City is also reviewing civil litigation that would seek restitution for the lending practice known as “reverse redlining” in which minority groups are specifically targeted for predatory loans.
“It’s my hope that the measures I’ve outlined today help strengthen our neighborhoods by accelerating the process of putting Providence homes in the ownership of Providence families,” said Mayor Cicilline.  “Our neighborhoods are more vibrant than they’ve been in decades as a result of lots of hard work over the past five years and we must work extra hard to ensure that the national foreclosure crisis does not threaten that momentum.”

[Bil]

Providence Metro is the 14th riskiest market in a new report from the PMI Group (mortgage risk assessment). Their numbers show a 46% chance that prices will be lower two years from now. Interestingly, we're the only area in the top 2 risk categories that isn't in the major bubble states of CA, AZ, NV and FL. I'm not sure why this is.

PDF Report

[Cotuit]

N.E. cities grapple with foreclosures' fallout [The Boston Globe]

Discusses how Boston, Providence, and Worcester are dealing with vacant foreclosed homes.

[frymasterspeck]

Can't believe nobody jumped on these gaudy numbers. 279% jump in foreclosures. 'course, that's cuz we're lagging the sagging...

Edited by frymasterspeck, 26 February 2008 - 01:41 PM.

[Dan]

Multi-family housing prices falling fast