What's in and what's out with buyers for 2008? Sellers take note... OUT = Unrealistic, pie-in-the-sky pricing, double-digit appreciation, vacant homes and option arm lending. IN = beautifully staged interiors, pet showers, elevators, down payments and double-digit depreciation. read

Lisa Fleck, our local representative over at IndyMac reports: "The OFHEO announced that the Fannie Mae conforming single family loan limit will remain at $417,000 despite a decline in real estate values. The maximum conforming loan limit is based on the October-to-October change in the average house price in the Monthly Interest Rate Survey of the Federal Housing Finance Board (FHFB). The FHFB reported the decline in the average price was $10,685 or 3.49 percent, from $306,258 in October 2006 to $295,573 in October 2007. The combined two-year decline is now 3.65 percent. All other Fannie Mae limits remained unchanged."

Our good buddy Mike, AKA Downtown Makeover Dude, is on fire with news and commentary on what's happening in the world of downtown development. Despite the current downturn in residential real estate, major developers continue to quietly invest in our humble downtown, assembling parcels for redevelopment, proposing high-dollar retail plans to the city, even bringing  baseball to Northern Nevada... (now if only someone could throw in a year-round ice rink. That would really make my day.)

Housing Market Screws Teachers and Government

NHAB Names Nation's Most Affordable Housing Markets

Easy Money, Risky Loans Drive Losses

Mortgages, Drugs: What's the Difference?

Forget Incentives, Just Slash Prices

Lyon County Developers Ask for Mercy

A History of Housing Values

Nearly 16% of Homeowners Have Negative Equity

Lenders Holding Lots of Property: What Next?

"Short Sale" Among Top Searched Terms at Inman Wiki

It's a Long Way Down According to Robert Schiller

What's the Big Deal? Just Another Day of Voodoo Lending...

Foreclosures Suck

Mortgage Issues Looming

DR Horton Predicts 2008 to be Worse than 2007

Real Estate Confidential: Today's Reality

What if Freddie Mac Became Insolvent?

Recession in America?

Fiddling Fools?

Quote of the week from a Las Vegas homeowner: "Putting your home on the MLS and expecting a sale is like watching dinosaurs dodge asteroids," Steve Rohl said.

And now for a moment of self promotion... did you see the KREN 10 o'clock news last night? They did a little warning piece on renters unknowingly renting from landlords in trouble and interviewed moi in the process.  A bit part, but renters, beware.

Also, ever wondered what that $100 million will buy you up at Lake Tahoe? Take an MSNBC video tour of my broker's Tranquility listing to find out...

Heard on the Street: I've been collecting these tidbits for weeks and make no claims whatsoever as to their accuracy. However, they do sound credible...

"Sunset Bluffs is the 41 unit development between Somersett and Mogul. Looks like it is tubing. Work seems to have stopped again, no more marketing, and 11 contractors have filed liens.

"Somersett's back door is moving along. Curbs are now poured all the way to parallel to 80, and work on the final section to old US 40 (now W 3rd Street) is accelerating. At the base, you are going to get a Shell gas station with mini-mart and restaurant, courtesy of the guy who owns LST trucking.

"Ground zero = townhouses around Smithridge. 53 on the market right now. They got up to $225,000 or so at the peak, were all at $180,000 a few months ago, and are now nearing $160,000.  Tons of TD's.  This was truly entry level stuff, so it's really too bad. Still, the vast majority are going TD not due to resets, just stupid purchases.

"The average loan foreclosed on in a TD has been about $290.000 but seems to be trending up. Definitely more pricey Wingfield and South Meadows properties showing up.

"It used to be that at least 40% of the NOD's were on obvious investors. It's closer to 10% now. A lot of the speculators have been flushed from the market, and a lot more of the hurt is falling on local owner occupants. 

"Most of the NOD loans are from 2005-06, but I'm seeing more really old '90's loans going bad.  HELOC as death.

"Tracking NODs to TDs is too hard, but NOS to TD is pretty easy. Six months ago it was about 25%, now it is over 60% and heading up. No more than 20% of the NODs are due to rate resets.

"FYI, I can say by traveling daily around the country that housing is in pretty bad shape... Here is some info for you... I am in Florida this week, and just about everybody I know is in trouble to the point the Broward County Sheriff I was with today was telling me of the huge increase in crime do to people losing homes. DESPERATE MEASURES.

"My wife is in Shangahi this week, and property is 'on fire'. Their economy is burning hot. As for Detroit housing... My associate flew into Detroit this afternoon and had a gun put to his head, had his laptop and wallet stolen... The economy is so bad that the Detroit PD would not even take a police report."

Comments

[BanteringBear]

I just watched that news clip of you, Diane. That was hilarious! Ask the prospective landlord if they are late on the mortgage and watch the body language. LOL! That really gave me a laugh. Good call.

[stjoe]

Given the mortgage fiasco and the fact that the government/mortgage industry is now talking about a rate freeze to qualified borrowers, does anyone care to make any predictions about future mortgage requirements? Here are mine?

1. No doc loans are gone forever. Full documentation will be required and mortgage brokers will be required to verify the documents.

2. No downpayment loans are gone. Except for limited government loans with low downpayment requirements (e.g., VA) look for downpayment requirements of 10-20%. (Borrowers will need to have some "skin in the game.")

3. No teaser rates will be offered. Full initial rates will be required (who wants to be a mortgage holder when the government might try and force you to extend the teaser rate for years).

4. Prepayment penalties will be prohibited.

SJ

[Reno Ignoramus]

Wow Diane that's quite a collection of links and comments about the market.

Let's see:

2008= double digit depreciation.

Less than 20% of defaults in Reno are due to rate resets. In other words, these loans were crap the day they closed.

Flippers being foreclosed down the toilet, taking prices with them.
A lot more of the hurt is falling on local owner occupants.

DR Horton says 2008 will be worse than 2007.

Builders slashing prices, inflicting major pain on resale sellers.

Recession coming?

And on and on we go.

Diane, if you are not careful here, somebody is going to call you a hostile pessimist.

[SkrapGuy]

Following up on SJ's comment, I have a question about the proposal to freeze ARMs at the teaser rate for people about to be foreclosed upon. Even assuming this will do any good, how will this be implemented in light of the fact that the great majority of these crap loans have been sliced and diced and bundled off into CMOs and other "exotic" investments and sold to hedge funds in Singapore and "private equity groups" in Malasia. Isn't the hedge fund in Singapore that actually bought these loans going to have to agree that the rates will not reset pursuant to the contractual terms of the note? Is this a legitimate proposal or just some political smoke and mirrors to make it look like politicians are doing something?
Can anybody offer me some insight here?

[Jason Mook]

"Or grab your crystal ball, which might help just as much." That's a reporter for you.

I thought your idea of asking the landlord if they're behind on their mortgage could be quite effective - that's if you ever get to meet the owner.

[Mike Van H]

Wow from the sound of those articles it sounds like East Bay is falling apart. I'm not sure how accurate Yahoo Real Estate is, but it shows 115 foreclosures for my zip code 89502, and 4 (3 homes and one peice of land) are within a mile of my house. So that's pretty good right? I would like to see a foreclosure map of Las Vegas like the East Bay one. I am brainstorming on how to do it...the East Bay Map folks simply used Google Map's API, and converted a spreadsheet of foreclosure addresses into a kml file for node points for Google Maps.

[BanteringBear]

"As for Detroit housing... My associate flew into Detroit this afternoon and had a gun put to his head, had his laptop and wallet stolen... The economy is so bad that the Detroit PD would not even take a police report."

This says a lot about the current state of the US. As the middle class continues to shrink into the ranks of the lower class, with the wealthy elite controlling a larger piece of the pie, violent crime will escalate. When there is little to no money for high priced shelter, clothing, and food, the desperate will resort to horrible acts.

The housing bubble is quite alarming from an affordability standpoint, something largely ignored by the government. With high inflation in both energy and food, exacerbated by stagnant wage growth, the consumer is on life support, getting by only with the help of credit cards. With credit drying up, the economy slowing, and unemployment rising, it's time for everybody to be concerned. It doesn't matter how much money you have, if the SHTF, nobody's safe.

Our problems are eerily similar to those of late 1700's France prior to the French Revolution. Here's a few of the problems they were facing:

"The social burdens caused by war included the huge war debt, made worse by the monarchy's military failures and ineptitude, and the lack of social services for war veterans.

A poor economic situation and an unmanageable national debt, both caused and exacerbated by the burden of a grossly inequitable system of taxation.

The continued conspicuous consumption of the noble class, especially the court of Louis XVI and Marie-Antoinette at Versailles, despite the financial burden on the populace.

High unemployment and high bread prices, causing more money to be spent on food and less in other areas of the economy."

I've never been into doom and gloom, but it's time this country and it's so-called political "leaders" started making decisions in the best interests of the population as a whole. The path we're on is totally unsustainable. The distribution of wealth is horribly unbalanced. The housing bubble is just the latest example of how a precious few got extraordinarily rich on the backs of the masses.

[smarten]

BB writes "with high inflation in both energy and food, exacerbated by stagnant wage growth...high unemployment and high bread prices...the consumer is on life support."

According to the government and all of Derrick's stock market gurus, we have no inflation [Lindie and I don't know where these people live but obviously not in the real world].

Bread prices have not skyrocketed [unless you're buying sour dough French bread from sources other than Trader Joes and Costco].

And unemployment is relatively low [because all those who are unemployable have just given up on seeking employment].

Although energy costs have skyrocketed, they don't go into the CPI becuase they're reflected in the prices of other goods and services encompassed within that index [thus according to economists, they're really nothing more than an excise tax].

So you see BB, there are very few similarities to 1700 France.

[stjoe]

What bugs me is the lack of financial savvy by most American consumers. I just wish the high schools would have a mandatory class called real life economics. Two stories:

1. Friend of mine was struggling to get by on $35,000 a year. I noticed she was drinking a Starbuck coffee. So I asked her how much it cost her and how often she got it. She replied $5 including tip and she got it every workday. I asked her how much it cost her a year. She had no idea. I told her it was $1500 a year. ($5 a day, 5 days a week for 50 weeks = $750. Since she has to earn roughly $2 in pretax dollars to spend $1 in post tax, each cup actually cost her double in gross earnings). So I asked her if her daily fix was worth 4.5% of her gross salary. A week later I ran into her and she was drinking coffee from the office pot. She said after our conversation, she ran the numbers herself. That was her last cup of Starbucks. Want to run your own figures, go see:
http://www.hughchou.org/calc/coffee.cgi

2. Lower level banker (one or two steps above a teller) was complaining about how far her commute was. Turned out it was 60 miles a day. I asked her what car she drove. The car got about 15 mpg. I told her her commute cost her $4000 a year (60 miles at 15 mpg = 4 gallons. 4 gallons times $2 a gallon = $8 a day or $40 a week or $2000 a year. Multiply it by net/gross earning and it cost her $4000 a year, or 10% of her gross income.) Plus I told her it cost her 2 hours a day for the commute. I asked her how valuable her time was. A month later I wandered into the bank and found she had quit her job and taken an identical position with another bank two miles from her home. Allegedly it was at slightly lower salary. Nobody at the branch could figure out why she did such a “stupid move.”

I could go on and on.

[Derrick]

Thanks for the dig smarten as to your inflation comment. However I don't recall anyone ever trying to convince or even elude to the fact that inflation doesn't exist. Perhaps you could show us a link that would help us understand a pointless Dig aimed at other posters.

Ps.
How are the slot machines treating you ?

[Derrick]

"Although energy costs have skyrocketed, they don't go into the CPI becuase they're reflected in the prices of other goods and services encompassed within that index [thus according to economists, they're really nothing more than an excise tax]"

Interesting, with higher energy cost (oil,gas,etc) comes higher transportation costs! With higher transportations costs comes higher prices for the consumers.

wether its bread, milk, cheese, almost everything you buy at the grocery store has to be shipped or transported by the distributor, Who in turn is paying higher prices for transporting (direct result of higher energy prices). these higher transportation costs are being passed on to the consumer.

This means your milk, cheese, eggs, water, and 90% of everything else in your refrigerator or pantry Is becoming more and more expensive..

obviously anyone knows higher energy prices result in higher everything prices! thus increasing inflation and taking more money out of the consumers pocket. It has a direct result on consumer spending and confidence.

As to bread prices are not skyrocketing.. last I checked wheat prices were up OVER 8% in the last MONTH!

[Derrick]

Speaking of inflation, and how certain commodities are skyrocketing,
I think this only proves the point further.. Gathered from the U.S. commerce department.

Percent change in prices for some COMMON food items,
july 2006 to july 2007

Oranges +19.8%
Eggs +19.5%
frozen juices +17.7%
fresh whole milk +13.3%
apples +11.7%
beans,peas,lentils +11.5%
fresh whole chicken +10.0%
beef roast +9.8%
fresh fish,seafood +7.4%
rice,pasta,cornmeal +7.0%
coffee +6.6%
potatoes +5.6%

looks like skyrocketing to me! IMHO!

[Perry]

Can anyone tell me what 5595 Tappan Drive finally went for? It was owned by Countrywide and went through a series of price reductions until it received an offer while listed at $359,000. This one didn't help 5865 Tappan.

[smarten]

Derrick, you need to read what I say which in your case was that "according to the government and all of Derrick's stock market gurus, we have no inflation."

According to Paul J. Lim, Senior Editor at Money Magazine [reprinted in the N.Y. Times at http://www.nytimes.com/2007/10/28/business/yourmoney/28fund.html?n=Top/News/Business/Small%20Business/Finance on October 28, 2007], "the most recent Labor Department inflation report, based on September data, shows the CPI climbed [only] 2.8% over the past year...Yet even against th[e] grimmer backdrop of...$780/ounce...gold prices [and]...$90/barrel...oil...LESS THAN A THIRD OF FUND MANAGERS now think...inflation is a threat. Of course, these fund managers aren’t alone in believing...inflation is either dead, dying or no longer a serious concern. EVEN THE FEDERAL RESERVE IS TALKING LESS INFLATION as it focuses on trying to stoke an economy...pressured by ailing credit and housing markets...After its Sept. 18 meeting, the Fed...indicated that [although] 'some inflation risks remain...readings on core inflation have improved'...[As a result,] many investors and economists are [now] convinced that INFLATION IS UNDER CONTROL. And a number of government statistics support this...inflation, despite some sharp increases in food and energy prices, HAS REALLY BEEN FAIRLY TAME on a year-over-year basis."

Of course these stock market gurus have an incentive to paint a picture that it's a savvy thing to keep investing in stocks [again my point] notwithstanding the inflation pressues you cite Derrick. Gee, kind of like all those Reno real estate sales "professionals" [and Mark & Lexi in Incline Village ("IV")] telling us it's a savvy thing to be purchasing Reno [and IV] SFRs.

And "how are the slot machines treating" me Derrick [he-he]? Didn't you read my previous posts? I don't throw away money gambling either at the slots or on your favorite STOCKS.

And let me throw it back to you. Didn't the S&P housing index just have its sharpest weekly rise in the last 15 years? How did that affect your "no brainer" short selling of housing stocks? Or are you going to tell us all that notwithstanding the barrage of bad news you were astute enough to buy into weakness and cover your positions?

[Derrick]

Smarten if you paid attention I covered and eventually sold my short position I had in 3 homebuilders almost 2 months ago.. I could of even made more than I did ! but you cant get greedy ;)

40% return in 2.5 months smarten.. pay attention

[smarten]

40% return in 2-1/2 months, but only $97K in the bank Derrick? And that means 2-1/2 months ago you and your wife had less than $60K in the bank?

Let me remind you of one of your quotes: when you're rich, I'll pay attention to you; not before.

Looks to me like even with your Spanish Springs house owned free and clear, you've got another $4.6M to go [by your definition of rich].

[Derrick]

97k In savings smarten. 4.6 million to go ? haha not quite..

Im sorry you cant take people younger than you being more successful than you! However smarten if you really want to pretend you know my finances I would have to point out the fact that you forget to add my portfolio to the above Equation.

Here's a clue.. more than 500k

[Mike Van H]

I think this is the fourth or fifth time in a month I have seen banter ensue over who is worth what or who made the right or wrong decisions in real estate or who heeds the advice of who. It gets so old. Let's cool it. To me, it sounds like Bantering Bear, Lindie, Smarten, Derrick are all doing ok in the real estate world, they probably all own a home, none of them are even close to a TOD or NOD, and judging from their harsh criticism and knowledge of the market, it seems they all purchased their real estate before 2004. It would be SO cool to see you guys work together cohesively when commenting on Diane's Posts, since you all seem to have a high level of intelligence, which is unusual for a blog to have so many intelligent readers commenting. Reno Ignoramous and skrapguy are good examples; they usually bring something intelligent (albeit apocalyptic)to the convo without bashing anyone.

[Reno Ignoramus]

Hey Mike Van H:

I wouldn't say my posts have ever been apocalyptic. I don't think I have ever suggested that I think anything of biblical proportions is going to happen. I have never suggested all of Diane's readers repent for their ways, because I see the Four Horsemen of the Housing Bubble Apocalypse at hand.

I continue to suggest that prices will fall from here. I see nothing to indicate we are even near the bottom. The pendings:listings ratio remains dismal; only 5% of all listings have an offer. There are YEARS of inventory in all price segments of the market. The higher up in price we go, the greater the inventory gets. Foreclosures are increasing. More and more short sales are appearing on the MLS. I see more and more evidence that both locally and nationally we may be in a recession. Note that the Governor, the County Manager, and the City Manager are all now commenting that tax revenues are down across the board.

Bear markets are always a bitch, and this bear market in this housing market may turn out to be the biggest one of all. Ever. Never before has a housing market turned so ugly in the presence of good employment numbers. At least those numbers have been good up to now anyway. We all know that this market downturn is the result of actions never before seen by the Fed, lenders, huge mortgage banking houses, and yes, realtors and mortgage brokers. And, in no little amount, fraud and greed never before seen in a housing market. We have talked about those actions enough on this blog.

But I do not have a tinfoil hat. I don't think anybody needs to buy camoflauge fatigues, load up on ammo, and convert all their holdings to gold bullion in order to barter when the entire world monetary and banking systems collapse.

I agree with you Mike that sometimes what happens here on this blog ends up looking like a testosterone contest. You are right, it does get tiresome.

[BanteringBear]

Whoa there, Mike Van H. I'm trying to think of the last time I bashed someone. I can't. Can you help me out? I've been very restrained, actually. I'm sure the fact that I don't share your rosy views on downtown Reno has something to do with your including me in YOUR BASHING of several of us posters. That's just silliness.

[Mike Van H]

Hi Bantering, I wasn't saying everyone I listed bashes everyone, that came out wrong, I was simply addressing the 'regulars' on here as a whole being more creative. Sorry! I was mostly referring to Smarten and Derrick. I wouldn't ever accuse you of bashing me just because you share a different view of downtown...that WOULD be silliness. You've never insulted or bashed me directly, so I'm all good with that. Actually no one on here has ever attacked me personally. And I don't make it personal when people bash inanimate objects like buildings, or real estate LOL. My point is it's good to keep it on a real estate level, instead of attacking each other's portfolios and such.

[stjoe]

Do you guys think there are a lot of people in this same boat, who bought a home, tried to sell their current one and couldn't, and now are stuck with two mortgages and one vacant home?

-----
We had a realtor in my subdivision who tried to to pull this off 18 (?) months ago. She had a two story house but bought a single story house up the block. She moved into the single story and then put the two story up for sale. After no offers for six months. She changed tack and put the single story up for sale too. It went quickly and she moved back into the two story house.

I am still being told by Realtors given the location of my current house and its layout, a 1700 sq ft. single level with an unblockable view, in a desirable neighborhood that it should go quickly if I ever decide to sell.

But then who knows.

SJ

[Ann O.]

I have a similar story but with a happy ending. My husband and I looked at a house we really liked off Wedekind Road in early 2006. We hoped to find a way to use our paid off house to buy that one, but we wanted to do some work on it before we put it up for sale. I called a bunch of lenders and found out they wouldn't even talk to me when I said I didn't want a pre-payment penalty. (I wanted to get an ARM to buy the "new" house and pay it off when we sold our existing house.) I have been glad many, many times since then that we made the decision not to go forward with buying that house before selling our current one.

We have kept watching that house. According to Zillow, its value peaked right about the time we were looking at it. The seller took it off the market afterward (a son was trying to sell it for the owner, who had to move to assisted living, but someone is living in the house now). There is still a chance we will be able to buy it at what we think is a "good deal" price as values continue to fall. At some point we might even be able to buy it without selling our current house.

[Reno Ignoramus]

I'm sorry, folks, but this notion that there are absolutely NO buyers for houses, that some houses just CANNOT be sold today, is really nonsense.

I'm not a realtor, but there's not a house in Reno I couldn't sell. Put me in charge of the asking price, and I could sell ANY house on the MLS.

Now, could I sell it for what the neighbors across the street sold for in 2004? No.

Could I sell it for what the current owner paid in 2004-2005? No.

Could I sell it for what the owner "needs" to get so he can pay off his HELOC and his first? No.

Could I sell it for what Zillow says it's worth? No.

Could I sell it for the price at which the in denial seller would not feel that "I'm giving the house away." No. The price that emotionally "feels good" to the seller? No.

It's not the case there are NO buyers. There are getting to be fewer and fewer buyers willing to pay these dream on prices that so many delusional sellers insist on clinging to. But there are buyers.

How else do you think the market is declining? A market can only drop as the result of sales.

[BanteringBear]

I'm irritated by the whole "no buyers out there, house can't sell" crap too, RI. When I talk to people who aren't selling, or others talking about people in this situation, I generally ask them if they think the house would sell for $10 million. They laugh and say no. I then ask them if it would sell for $1. Again they laugh and think I'm silly. I use this to illustrate the fact that there is a price at which each and every house in this country will sell. It's up to the seller to PRICE the house correctly. If not, they'll NEVER sell. It's that simple. All this lamenting about not getting fantasy prices is nothing but senseless whining.