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Independent Real Estate Agents
Black Friday 2007-08-03

 2:27 pm on Aug 11, 2007 (gmt 0)

Greenspan... Endorsement of Subprime?

The losses are going to be phenomenal…my guesstimate in the subprime world is that the majority of loans are going to go into default. Not just 5 or 10 percent, but the majority.

Company is seeing home price depreciation at levels not seen since the Great Depression.

While some may say the stability in prices is an indication that the bottom may be near, I say it is the major problem facing the market. With inventories so high and sales so weak, unless people start pulling homes off the market, the overhang will remain.

I do follow the market on occassion. I have a client who invests heavily in the Real Estate market and he keeps me up to date on the "latest scoops" in the industry. Based on what he tells me, allows me to make decisions with my real estate investments.

On 2007-08-03 the market apparently took a 18% hit. What some are calling Black Friday in the Real Estate industry.

I know we have quite a few Webmasters here who focus on this industry and I'm wondering what your plans are based on the current state of the market?

2007-07-24 - California Foreclosure Activity Continues to Rise

Lenders filed 53,943 Notices of Default (NoDs) during the April-through-June period. That was up 15.4 percent from 46,760 for the previous quarter, and up 158.0 percent from 20,909 for second-quarter 2006, according to DataQuick Information Systems of La Jolla.

Yikes! If that isn't what they call "The writing on the wall".

I guess Fannie Mae is a major focal point in this transition for the Real Estate industry. There are changes taking place that may have a major negative impact on independent Real Estate Agents.

My understanding is that there is going to be a major fallout for Independents over the next 12-18 months. Loans are going to be given but only under strict circumstances and under the same guidelines that were used in the 1970's. Everything will now need to be verified and if you cannot afford the payment, you won't be getting the loan, bottom line.

So, for those of you who are in the Real Estate SEO sectors (Independents), what are your plans for the future? If I'm not mistaken, this is the biggest news to hit the Real Estate industry in quite some time.

Company is seeing home price depreciation at levels not seen since the Great Depression.

[edited by: encyclo at 2:16 pm (utc) on Aug. 12, 2007]
[edit reason] fixed links [/edit]



 2:50 pm on Aug 14, 2007 (gmt 0)

Where do you see that? I am in this business and its dead. Brokers don't have the money to buy leads plus the only people today looking (most of them anyway) to refinance are those people that are part of sub-prime problem. There is nobody willing the loan them any money.

Errr....everywhere? We can't even meet the demand for leads for many clients. Of course the market is brutal, but not everyone is packing it in. Those that are hanging around are buying more leads than ever.

Of course, if you are selling leads and are having issues, there is something SERIOUSLY wrong with your product. I can find 10 resellers in the next 10 minutes that will buy leads for top dollar.

Also, if you are in "the business", and are not just a refinance bandwagon broker, in most areas of the country there are still a ton of people buying houses to live in. Your fault if you were a one trick pony...


 3:07 pm on Aug 14, 2007 (gmt 0)

It will take a lot of efford to convince many people of the reallity, specially when it turns out that they are very wrong.

They are very clever and made a great investment ... they can sell their houses for a big profit when ever they want. If you try to convince them ... you are just jealous.

Fortune Hunter

 3:26 pm on Aug 14, 2007 (gmt 0)

I read in the NYTimes about a year and a half ago about houses in Florida being sold then flipped and then re-flipped to other flippers, with the prices going higher and higher and higher, just like when internet stocks were routinely selling for $600 per share. It's a bubble.


I see where you are coming from with this, yes, like the dot com implosion this is a bubble plain and simple. Unfortunately as with all other bubbles when they pop you have a bunch of "victims" who say they were mislead and need help from the government, blah blah. Then we end up with new draconian regulations that only make it harder for responsible people to do business.

This concept of flipping or showing home values shooting up with no real underlying reason is covered in detail in a great book called "Empire of Debt" it was one of the best books I read last year on politics, bubbles - real estate and otherwise, and economics. Anyone interested in learning more about what is happening today could do worse than reading that book. I believe it came out in 2006 so you can probably get it at the library.


 3:36 pm on Aug 14, 2007 (gmt 0)

The subprime drama is overblown.

I disagree- we haven't seen the worst of it yet.

And only about 13 percent of those are late on payments, with the majority of late payers working through their problems with the banks.

That may have worked last year when the housing market was still booming. People late on their payments could easily find a buyer and unload the house. It's a completely different market now, with more houses for sale for longer periods of time on the market and sellers getting less than they are asking. Plus, with the recent credit crunch, it's more difficult for some people to get a loan, which reduces the pool of buyers even more.

With approximately 254,000 mortgages in foreclosure at the moment — up from roughly 219,000 last year — the subprime meltdown has given us an increase of 35,000 mortgage foreclosures over the last quarter. Since the average subprime mortgage clocks in at almost exactly $200,000, we’re looking at an approximate $7 billion increase in foreclosed value in the first quarter of this year.

That's a almost 20% increase since last year- hardly an insignificant amount. And that's just for the first quarter of the year. The rest of this year is when we'll be seeing a huge number of the ARMs issued 3 years ago finally resetting their interest rates, causing monthly payments to skyrocket, which is most likely to casue the number of late payments and foreclosures.

Tying this back into the OP, I also think there is still going to be a huge demand for loans/refinancing. But my guess is that with strincter loan guidelines, the bar will be raised for what qualifies as a qualified lead.

There may also be demand for businesses related to foreclosure and ankruptcy. I can also see the possibility for a boom in companies buying houses then renting them to the people they just bought them from.

[edited by: LifeinAsia at 3:40 pm (utc) on Aug. 14, 2007]


 4:07 pm on Aug 14, 2007 (gmt 0)

I have a friend who recently lost his house. A sad case, as he inherited it from his mother. He had bad credit, and used the house as a piggy-bank. I'm assuming he was paying the mortgage out of the loan proceeds. The loan finally totaled $640,000 - it was sold at auction for $585,000, so the lender lost at least $55,000, plus, of course, missed payments and expenses.

Here's the shocker, though - it was sold to a bank! (Not the one that financed it.)

It appears to be over-valued at $585,000, though, and it's unlikely the bank can get more than $540,000 - if they sell fast!

I can only surmise that banks are trying to offset their losses in sub-prime loans by now jumping in and buying "bargains". Only they aren't necessarily bargains.

I'm told the house was bought as part of a "package". So, they may have made-out on other properties in the package.

ARE there people who buy houses and rent them to the people who lost them? Doesn't sound like a fun business to be in, nor would I think it is practical. How many people would want to stay in the house they just lost, and how many could afford the rent?

I'd think you'd just wind-up with tenants with bad credit who like to punch holes in the walls.


 4:24 pm on Aug 14, 2007 (gmt 0)

ARE there people who buy houses and rent them to the people who lost them? Doesn't sound like a fun business to be in, nor would I think it is practical. How many people would want to stay in the house they just lost, and how many could afford the rent?

I have no idea- that just popped into my head. But since monthly mortgage payments are usually a lot higher than comparable rents, a person may no longer be able to afford the mortgage because the ARM adjusted way up, but could still afford the market rent.

If it's a choice between the added expense of moving to a different, unfamiliar house/apartment or being able to stay where you currently live, I think a lot of people would opt to stay if they had a choice. For the new owner, they don't have the hassle of having to advertise and run credit checks on prospective tenants, losing rent until able to find a tenant, or having to deal with evicting the previous owners.

It's sounds like a potential win-win situation in certain cases.

I'd think you'd just wind-up with tenants with bad credit who like to punch holes in the walls.

But this is always the potential when renting. Not all people who are going to lose their houses because of adjusting ARMs have bad credit. Perhaps poor planning skills.

Also, there would probably be people who may be able to afford the new rates (at least for a while), but would prefer the lower rent, so would sell their house for this type of deal before it entered foreclosure.

So, real estate people on the list- IS there a market for such a thing as this? Could there be in the future?

[edited by: LifeinAsia at 4:26 pm (utc) on Aug. 14, 2007]


 11:42 am on Aug 16, 2007 (gmt 0)

As you may have guessed im in the UK, I work in housing - housing for people on low incomes, what Ive seen over teh last ten years of this boom have earth moving.

Around 2000 I started to see people who had always been in arrears with their rent etc getting mortgages, we in the office joked that we would see them again soon.

Around 2004 - 2005 we started these people return having sold their houses as they couldnt really afford them. Many were being repossessed for non payment of mortgage, for some odd reason these people thought they could fob off the bank with the same sob story they gave when the rent was due.

Same period of time we started to come across tenants with around £100000 (hundred thousand pound) credit card debts, people with low incomes.

2006 - 2007 Trickle turned into a flood of returning tenants after losing their homes, due to non payment.

At the same time we saw a massive increase in phone calls from owners asking ifwe did mortgage rescue packages.

This hadnt happened for 15 years or so.

My point is, hang on to your hats this has been a long time in the making and hasnt even started properly yet.


 5:54 am on Aug 17, 2007 (gmt 0)

Apparently I was wrong in believing the "subprime" issue is specific to the US. The London Stock Exchange is caught up in the same volatility (down 4% yesterday), and according to the Telegraph there are 750,000 Britons with subprime mortgages.


 9:02 am on Aug 17, 2007 (gmt 0)

It's affecting all financial markets internationally because funds in just about every country bought into the US sub prime market through residential mortgage-backed securities to a greater or lesser degree. As the old saying goes, when Wall St sneezes the world catches a cold.

The sub-prime market in the UK isn't, currently at least, in trouble. It isn't as large a market and has never been as extreme in the way it lends as the US one is/was plus the whole housing market and the regulatory climate is quite different - though who knows, there sure have been crazy increases in house prices.

But the drops in the value of markets and the rising cost of wholesale credit that are currently affecting international markets are directly related to the US crisis.


 12:47 pm on Aug 17, 2007 (gmt 0)

2007 August 16

Yesterday was probably a big smack in the face for many as it was one of the biggest roller coaster rides for the stock market.

The market appeared to be on a steady downward spiral after problems at Countrywide Financial Corp. confirmed investors' fears that credit problems are spreading. Moreover, for much of the day, investors shrugged off the Federal Reserve's injection of $17 billion into the banking system and appeared to be angling for a rate cut instead.


 2:31 pm on Aug 17, 2007 (gmt 0)

there sure have been crazy increases in house prices.

Actually, Britain's rise in housing prices has been much greater than the U.S.! Several countries are well out in front of the U.S. for housing appreciation over the past few years.


 3:19 pm on Aug 17, 2007 (gmt 0)

SlyOldDog: If I were American and faced the prospect of paying off a huge debt with attachment to wages the rest of my life I would emigrate.

LifeinAsia: If you didn't have the money to pay off your debt, where are you going to find the money to emigrate?

Easy. Get a home equity loan, buy a house abroad, walk out of your old house. We will see more of that happenning wery soon - walking out on unbearable loans.

martinibuster: It is exactly like in the Dot Com Bubble

much worse IMHO

frontpage: The subprime drama is overblown.

Your numbers may be correct... although numbers coming out of US gov. statistitians lately are nothing more than what they are - "lies and statistics", the show is just getting started. First serious ARMs "race" i.e. wave of adjustments is about to hit this fall. And there will be more.

with the changes that took place in Bankruptcy laws last year

Banks saw it coming, it was in their powerpoint charts, and they begged the government, and government passed the bucked to Joe homeowner. How nice!

martinibuster: what your plans are based on the current state of the market?

wait untill reall gloom and doom hits, then maybe buy one or two properties on the cheap.


 3:27 pm on Aug 17, 2007 (gmt 0)

Easy. Get a home equity loan, buy a house abroad, walk out of your old house.

But if your credit has already taken a hit (by having your wages garnished), it's less likely you'll be able to get an equity loan, precisely because of fears about you doing exactly what you plan to do.

We will see more of that happenning wery soon - walking out on unbearable loans.

We're already seeing that- that's what the the OP was about.


 4:52 pm on Aug 17, 2007 (gmt 0)

LifeInAsia, ok, u r right, by the time I finished reading this thread I really forgot what OP posted :) But it will get much worse IMHO

We will also see one or a couple of major builders go under. No doubt. This will be way, way bigger than "just subprime".

But if your credit has already taken a hit

and you didn't have cash, you shouldn't have been buying a house in the first place. I don't see how US Government can say it was not a predatory behavior by the lenders, and not let these people into bankrupcy.

A week ago I fired my Credit Card company because they charged me $128 late payment fee. They've been changing payment date every month so that I couldn't automate payments through my bank, and ofcourse as they expected I've misplaced one bill. Since I pay full balance every month, I am NOT a profitable customer to them, so it was in their interest to screw me at least once. I call this predatory behavior too, I think this out to be regulated.

The whole credit expansion theory made a few people ultra rich, and many, many completely broke. The problem is - this boomerang is coming back now. I think the dollar ought to collapse even more, as it is now practically on par with Canadian...going down fast...if someone wants a quick 30% a year profit, here's a tip - just buy US dollar bearish ETF

This is how the Gov (see, I intentionally don't use "the Fed", as in US "the Fed" is a group of private FOR PROFIT corporations) is planning to deflate Real Estate bubble - they will just inflate the dollar. People will not see much of a housing price crash and will assume economy is fine...yet there will be higher and higher prices all around. The Gov will support all sorts of "funky" theories just to tell everyone that what they see is not inflation, like that Chinese are bad, that oil reserves are depleted, that there's global warming, that it's because it needs to finance "war on terror". People will believe anything they see on TV.

That's probably why "as seen on TV" sites are doing so well ;)

Back to OP - I think independent Real Estate agents are about to see a slowdown on par with a 2000 tech job slump. I know a couple who've been buying rental properties to support themselves through it.


 4:52 pm on Aug 17, 2007 (gmt 0)

Did I say all that? Darn, I need a life :))))


 7:01 pm on Aug 17, 2007 (gmt 0)


Banks saw it coming, it was in their powerpoint charts, and they begged the government, and government passed the bucked to Joe homeowner. How nice!

Begged the government for what?

Banks and lending institutions are a big part of this problem. Their greed is what helped many subprime borrowers jump into the home-buying market. Plus, lenders saw an opportunity to make more money with the flipping craze.

Yes, potential homebuyers who did not qualify should have been smart enough to understand the terms and agreements they were signing.

But lenders basically relaxed their standards buy pushing ARM loans and approving "less-than-good" credit folks who otherwise wouldn't be approved for home ownership.

It's like a bar that serves too many drinks to a man who is becoming unspeakably drunk.

The bar (the lender) wants to make the money, but they know there's the potential problem with a drunk (home owner) walking around.

We should blame the subprime homeowners (drunks) for not making the best decisions, but we should also blame the lenders (bar owners) for shoving an elixir in their faces.


 8:06 pm on Aug 17, 2007 (gmt 0)

Begged the government for what?

to pass bankrupcy "protection" law i.e. basically not allow people to go bankrupt if they can't pay the mortgage. That let them pilage Joe home owner, profit on flipping, without worrying much about consequences of defaulting mortgages when it all starts deflating. This basically will create a lot of 21st century slaves, IMHO.

See, The Gov should punish the lenders, and they should've been punishing themselves because people would go bankrupt, but people can't, and the Gov doesn't care, because the Fed (private Cartel) is banking the profits ...no pun intended

Fortune Hunter

 10:15 pm on Aug 17, 2007 (gmt 0)

I disagree- we haven't seen the worst of it yet.

Yes, I think you are right, sort of. I do believe it should get much worse and if left to the market place to sort out I believe you are right it would get a lot worse. However in this case just like with the S&L screw ups in the 80s Congress will come riding in on their horse they stole from someone else using money that they stole from you and every other tax payer and "rescue" us. Then they will sell it to us by labeling as a move to "return soundness and confidence to the banking system".

Which anyone who has even a passing knowledge of economics should realize is called a BAIL OUT! Which will cost all of us taxes for years and years while the real crooks (irresponsible banks and borrowers) will walk away and let someone else pick up the tab for their stupidity violations.

Can you tell I am a bit cynical :)



 10:35 pm on Aug 17, 2007 (gmt 0)

what I don't like in this is that the US trouble puts entire world into trouble.
And in short to mid term it is more about psychology than about real trouble. Just look at the stock markets during the last 10 days.


 10:14 am on Aug 19, 2007 (gmt 0)

We are all interlinked these days.


 7:34 am on Aug 24, 2007 (gmt 0)

Essex boy, care to elaborate on what you are seeing?

Which areas? I assume Essex, but its a long way, and a lot of different areas from London to the coast.

Is it still only people on low incomes who are struggling, or are you seeing any signs of it spreading? There is a hint of this is your comment about people asking for mortgage rescue packages.


 7:21 am on Aug 27, 2007 (gmt 0)

Over on MSN, Bill Fleckenstein [articles.moneycentral.msn.com] has been writing about this for ages.

It's going to be ugly, its going to get worse. Does anyone live anywhere now where the median home price is 2.5X - 3X the median income? The typical salary to home price ratio suggested for people to buy? Not in most places in the US.

Outside of Philly in my zip, median income is about 60-65K, avg median price of homes on the market is probably $300K - $350K. Almost everything just sits and anything that is close to affordable is a 120 yr. old fixer upper.

This mess will affect consumer spending. The housing ATM is now closed. Retail sales will start to be affected. If the fed starts lowering rates or injecting to much cash, it will just sustain the bubble and make it all the more painful when it finally deflates.

It's time to pay the piper, let the air out of this thing and pray for the best.

The biggest problem IMHO it that nobody in the financial community was responsible for their actions. If anyone in the mortgage origination of sales chain had any responsibility for the loans they facilitated, they wouldn't have made half the loans they made. If you know your buddy has bad credit and can't afford to pay back 100K and has no prospect of paying back 100K, wuld you loan them 100K? Of course not. But if you could loan them someone elses money and get a $10,000 commission on the loan and bear no responsibility if the loan went into default, you'd probably make the loan. That's how this whole scam operated.

Fortune Hunter

 11:13 pm on Aug 28, 2007 (gmt 0)

The biggest problem IMHO it that nobody in the financial community was responsible for their actions. If anyone in the mortgage origination of sales chain had any responsibility for the loans they facilitated, they wouldn't have made half the loans they made.


Not to worry my man, in today's day and age nobody has to take responsibility for their actions, ever. The government will do it for them. The Congressional bail out crew is hard at work as we speak to "fix" all of this so nobody will feel any pain from this...except maybe that responsible, tax paying, borrower that has to pick up the tab for this mess, buy hey, they won't mind, they never complain loudly to their Congressional reps. Besides once we tell them it is for their own good to "return confidence" to the markets they will swallow it no problem and go right back to sleep and forget all about it once the market peaks up a bit.


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