Las Vegas Homeowners Lose Their Bets as Home Prices Fall 19 comments
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Wow - this is some serious price contraction. And just think we are still spending hundreds upon hundreds of billions (down the drain) from stopping the market from working. [Mar 5, 2009: WSJ - Mortgage Bailout to Aid 1 in 9 Homeowners] [Dec 8, 2008: More than Half of Homeowners with Modified Loans are Back in Trouble] So in the end, the market will work despite government trying to stop it from doing so; and we'll have saddled generations of children with debt. What is so sad is all these mortgage "saves" (both first and now second mortgage per this week's latest "government initiative" which I did not even bother to post due to "bailout fatigue") done at 105% of value of home will be at 120-130% of value in a year from now. Just a waste of money...
Las Vegas home prices are down to levels not seen since 2000 - so the whole speculative fever and then some has been erased... and 3/4ths of all home sales in the past month were recent foreclosures. It's now been a year since that trend starting appearing and it will only grow from here [Mar 25, 2008: WSJ - Wave of Foreclosures Drives Prices Lower, Lures Buyers] So our framework is playing out perfectly - we will see a surge in transactions (see title insurers) but the prices will be atrocious. This "should" be bad to new home builders as it pressures their prices, but in this market, everything is traded in lockstep, so what's good for home transactions will be seen as good for home builders... no need to apply logic.
Bulls will apply some circular logic about how this will drive down inventories, not realizing to be competitive new home builders are going to destroy their profit margins to keep pace with these rock bottom prices created by a tsunami of foreclosures. Wait... the home builders don't have profit margins to destroy anymore. Carry on - buy home stocks.
Don't even ask what the existing home owners must be thinking right now - almost anyone who bought this decade is now underwater in Vegas. And trapped unless they have cash to bring to the table to "get out of jail". And we're still not going down in price unless you believe March was the bottom. [Dec 8, 2007: Analysis - What Should Housing Prices Be Today?] [Feb 13, 2009: US Home Prices Fall to 2003 Levels]
Via Bloomberg
- The median home price in the Las Vegas area fell to $144,000 last month, the lowest since 2000, as a rise in foreclosures lowered the value of single-family houses and condominiums, MDA DataQuick said today.
- March’s median in the Las Vegas metropolitan region was down 4 percent from the previous month and down 42 percent from a year earlier, the San Diego-based real estate research company said in a statement. The median was last lower in December 2000, when it was $143,000.
- Almost 74 percent of all previously owned homes that sold in the Las Vegas area last month had been foreclosed upon in the prior 12 months, MDA DataQuick said. Almost 2,800 foreclosed properties sold in the area last month, said the company.
- The decline in prices in the Las Vegas area helped boost sales. (economics 101 still works) A total of 4,268 new and existing single-family houses and condominium units sold in the area last month, up 29 percent from February and up 35 percent from a year earlier, MDA DataQuick said. [Mar 28, 2009: Some Real Estate Markets Warming Up]
As I said in 2007, and as I said in 2008... this will be a good thing for Americans in the future... even if its a painful one time adjustment. Having to spend only 25, 30, 35% of income on housing will be much better for everyone than having speculators with easy money run prices up to the point many families who just want a place to live have to pay 40, 45, indeed 50% of their income just for shelter. [
Sep 26, 2008 : 15% of Americans Spend 50%+ of Income for House Payments] The government does not agree with me, and is fighting this reality tool and nail. As a homeowner, trust me - it stinks; but if you take a step back it's fantastic for future homeowners.
Look for a new wave of walk aways in latter 2009 and 2010 as people look around incensed they are living in houses with mortgages 1.5-3.0x time the size of their new neighbors. My prediction for 1 in 4 Americans being underwater by the time this is all said and done might have been conservative.... [
Mar 9, 2009: One in Five Houses Underwater] Not to mention all the foreclosures coming from job losses in the next 18 months. All those losses go to bank balance sheets and Fannie/Freddie (and then the Federal Reserve balance sheet)... green shoots everyone. No mind numbing losses to be seen here - move along.
[
Apr 23, 2009: As More Homes Fall Underwater Trapped Americans Cannot Migrate]
Apr 8, 2009: Recession Causes Relatives to Move in Together & Sharp Drop Off in Divorces. Housing Bubble 2.0? (Not)
]
[
Dec 24, 2008: Median Home Prices Fall Most Since Great Depression]
[
Jul 10, 2008: Foreclosure Activity Map]
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This article has 19 comments:
I can't figure out how these subprime borrowers who went into default were "victims". A guy who had no money, no credit and no prospects was allowed to buy a house and receive 10% of the value in cash. Many made few, if any payments, spent the cash and had a free place to live for awhile. Then comes the government do-gooders to help them out with the taxpayer's money, and half of those get to keep their free roof for awhile longer. When the process is over he still has no money, credit or prospects.
Where can I sign up for "victim" status? And keep in mind that then Senator Obama and ACORN filed a class action suit to help some of these people get loans in the first place. It seems that an Illinois bank didn't like their credit. Imagine that.
I've been saying that we won't hit a bottom until around 2015. All these government interventions are just delaying the inevitable. Lots of people who bought their home at a reasonable price years ago used the newly inflated value of their home as an ATM. These people are still living in their home but are now saddled with a second mortgage for years to come.
So when you speak of only spending a quarter of your income on mortgage, consider that middle-class inflation-adjusted income has stagnated over the last 3 decades, health care costs have ballooned out of control (a bankruptcy in America every 30 seconds due to these costs), and household debt has ballooned to over 13 trillion (123% of national income). Americans have compensated for stagnant incomes by rapidly draining savings and rapidly expanding debt over the last 3 to 4 decades. This time period coincides with the Fed's decades long policy of lower interest rates and increasing of the money supply and the government's easing of lending standards.
But hey, no need to let reality get in the way of Wallstreet profit. We live in the PRA - People's Republic of America. Premier Obama says he's just finishing up with clearing away the financial wreckage from last year and we will soon be on the road to prosperity once again. The fundamentals of the economy are sound.
I'm hoping the upcoming double digit inflation will eat away my mortgage debt and raise the value of my house if only in nominal terms.
On Apr 30 10:58 PM capitalisthero.com wrote:
> Las Vegas is ground zero for the financial crisis. I bought my house
> in November for $540,000. My new next door neighbor just bought his
> house for $385,000. There goes my $120,000 down payment.
>
> I'm hoping the upcoming double digit inflation will eat away my mortgage
> debt and raise the value of my house if only in nominal terms.
On May 01 12:31 AM sr9web wrote:
> I own a split-level ranch 5 bedroom, 3.5 bath, stand alone garage
> West of Boston. Bought in 2000 for 250ish and now owe 150ish. Have
> 15 years left on a 5.65 fixed. The housing crisis is only being experienced
> by people who bought too much house for too much $$.
Just as a quick counterpoint to your suggestion that 1 in 4 Americans will be underwater. I think I would qualify that to 1 in 4 Americans living on one of the coasts will be underwater. I live in Nebraska and throughout the midwest, since we never had the ridiculous price runup in housing prices (who wants to speculate in Omaha?) we don't have to deal with the nasty correction either.
Also, as a quick response to sr9web, the man put down 120k on a 540k house. If that isn't being responsible about his mortgage, I don't know what is. In his case I think it was a simply a case of bad timing.
On May 01 12:53 AM Homer II wrote:
> My house is paid for. I am not rich; I just paid that mortgage relentlessly,
> for 23 1/2 years until it was all mine. Not hard when you buy within
> your means, instead trying to keep up with the Joneses.
seekingalpha.com/insta...
Nice work.
On Apr 30 06:43 PM 2houndz wrote:
>
> I can't figure out how these subprime borrowers who went into default
> were "victims". A guy who had no money, no credit and no prospects
> was allowed to buy a house and receive 10% of the value in cash.
> Many made few, if any payments, spent the cash and had a free place
> to live for awhile. Then comes the government do-gooders to help
> them out with the taxpayer's money, and half of those get to keep
> their free roof for awhile longer. When the process is over he still
> has no money, credit or prospects.
>
> Where can I sign up for "victim" status? And keep in mind that
> then Senator Obama and ACORN filed a class action suit to help some
> of these people get loans in the first place. It seems that an Illinois
> bank didn't like their credit. Imagine that.
Then one day we'll all be at 0% mtg homes and look around to figure out how we finance the next boom.
This policy should get us through to 2020 or so ;) then we can deal with Medicare and minor things like that.
On Apr 30 07:33 PM Sober Realist wrote:
> Mark,
> I've been saying that we won't hit a bottom until around 2015. All
> these government interventions are just delaying the inevitable.
> Lots of people who bought their home at a reasonable price years
> ago used the newly inflated value of their home as an ATM. These
> people are still living in their home but are now saddled with a
> second mortgage for years to come.
> So when you speak of only spending a quarter of your income on mortgage,
> consider that middle-class inflation-adjusted income has stagnated
> over the last 3 decades, health care costs have ballooned out of
> control (a bankruptcy in America every 30 seconds due to these costs),
> and household debt has ballooned to over 13 trillion (123% of national
> income). Americans have compensated for stagnant incomes by rapidly
> draining savings and rapidly expanding debt over the last 3 to 4
> decades. This time period coincides with the Fed's decades long policy
> of lower interest rates and increasing of the money supply and the
> government's easing of lending standards.
> But hey, no need to let reality get in the way of Wallstreet profit.
> We live in the PRA - People's Republic of America. Premier Obama
> says he's just finishing up with clearing away the financial wreckage
> from last year and we will soon be on the road to prosperity once
> again. The fundamentals of the economy are sound.
What's that? We're already loaded with as much debt as possible? Ok step 1 completed. Now we wait for Ben to keep doing his part.
I have been underwater for many a year and I was never in a bubble zone - just the worst economy in the nation. Foolishly I've been paying my mortgage as well, but as I stated above I think we will see a whole new class of walk aways coming in next 18 months. Many ppl still in denial about a V like bounce in their areas in terms of home prices. Just like they were in denail 18 mo that their home prices could go down.
On Apr 30 10:58 PM capitalisthero.com wrote:
> Las Vegas is ground zero for the financial crisis. I bought my house
> in November for $540,000. My new next door neighbor just bought
> his house for $385,000. There goes my $120,000 down payment. <br/>
>
> I'm hoping the upcoming double digit inflation will eat away my mortgage
> debt and raise the value of my house if only in nominal terms.
I hope there are more like you and they don't listen to Robert Wagnor who is not on TeeVee touting reverse mortgages as the way to have a steady stream of income. It just never ends.
On May 01 12:53 AM Homer II wrote:
> My house is paid for. I am not rich; I just paid that mortgage relentlessly,
> for 23 1/2 years until it was all mine. Not hard when you buy within
> your means, instead trying to keep up with the Joneses.
Already 1 in 5 are underwater (20%) - its not going to take much to go to 1 in 4 (+5%)
I think nationally home prices will fall at least 5-15%
What we've experienced thus far is not a traditional housing bust. Its a bad mortgage bust. The traditional housing bust from lost jobs, comes in the next 2 years.
So you will see foreclosures even in the best places in the country without the bubble pricing. Of course a few regions (northern plains) will hold up much better due to local economy.
Again the point I think people need to know about housing is in a traditional recession its one of the last things to go.... after people lose jobs, they go into foreclosure etc.
And if Ben loses his battle to keep mtg rates under lock and key and the "free market" takes rates back to 6%ish+, it's going to be a lot worse than even my forecasts.
Home prices are STILL being propped up by govt - 4.7% is not a natural rate. That inflates home prices. Again. We don't learn.
On May 01 10:02 AM speeddaimon wrote:
> Hey Mark,
>
> Just as a quick counterpoint to your suggestion that 1 in 4 Americans
> will be underwater. I think I would qualify that to 1 in 4 Americans
> living on one of the coasts will be underwater. I live in Nebraska
> and throughout the midwest, since we never had the ridiculous price
> runup in housing prices (who wants to speculate in Omaha?) we don't
> have to deal with the nasty correction either.
>
> Also, as a quick response to sr9web, the man put down 120k on a 540k
> house. If that isn't being responsible about his mortgage, I don't
> know what is. In his case I think it was a simply a case of bad timing.
If you just live in a house for 20-30 years than its sort of irrelevent
Its good for people who do not own a home and want to buy one
But in the LONG run, AFTER the 1 time adjustment downward it actually would be good for everyone (less of income needed for house over head)
Sorry for confusion; writing prose to the jumbled nature of what comes out of my head is difficult at times.
On May 01 12:45 PM evergreen16 wrote:
> You just said that it 'stinks' for homeowners, but then you say it's
> a good opportunity for homeowner - so which is it? As you can see,
> homeowners are suffering. No opportunity here. And because prices
> are falling, no renter will jump in until prices stabilize (read:
> bottom out), because they don't want to loose money. Read up on Deflation,
> please.
We will be suffering magnificent losses via Fannie and Freddie but the numbers will be so big that people will be numb. Just borrow it from the grandkids (or China)
Already the losses so far in those two are brushed aside.... at some points billions just seem to not matter anymore
On May 01 02:52 PM altaman wrote:
> The government has been generating below market rate mortgages by
> holding rates artificially low, via quantitative easing and providing
> cheap capital to banks, and by using Freddie and Fannie to buy mortgages
> at price that are too low to appeal to the private sector (securitization
> is dead). Rates are now rising and whether the government can keep
> up this scam, and its resulting future loses to the taxpayers, depends
> on the Obama crew's continuing ability to bamboozal the sheep. They
> have been good at it so far so who knows.
Before you hurt yourself by patting yourself on the back for your intelligent consumerism in regards to your housing choice, might I remind you that "SOMEONE" is going to pay for the difference between what is owed on these defaulted mortgages and what they are presently worth.
With our government subsidizing these losses, it will come down to the American taxpayer to shoulder this burden. People who wisely consumed less than they produced will have their prudent harvest confiscated, either through runaway inflation, or outright theft(new taxation to "share the burden more fairly").
I'm assuming that you, like me, will be a participant in what has to happen given our leadership's current actions. When that time comes, I hope you don't get bitter about having done all the right things and having gotten screwed just like those that got us into this mess.
On May 01 12:31 AM sr9web wrote:
> I own a split-level ranch 5 bedroom, 3.5 bath, stand alone garage
> West of Boston. Bought in 2000 for 250ish and now owe 150ish. Have
> 15 years left on a 5.65 fixed. The housing crisis is only being experienced
> by people who bought too much house for too much $$.