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Independent Real Estate Agents
Black Friday 2007-08-03
pageoneresults




msg:3419641
 2:27 pm on Aug 11, 2007 (gmt 0)

Greenspan... Endorsement of Subprime?
[realonomics.net...]

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
[dqnews.com...]

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]

 

martinibuster




msg:3419680
 3:48 pm on Aug 11, 2007 (gmt 0)

There was an article in the local paper about desperate sellers turning to real estate auctions to unload their houses. They profiled one buyer as he bid against another bidder and at the end he won a three bedroom home in a suburb for $495k, including auction fees. The buyer said he was going to immediately put it back on the market for more than what he paid.

The loose lending fueled a boom in flipping but there has to be a bottom and hopefully we're going to be approaching it soon. A responsible legistlature would put an end to all loans that fuel speculation in the housing market and nudge a return to people buying homes for shelter, not fast profits.

The drop in prices, imo, reflects what homes would cost if there weren't so many people buying homes to flip instead of live in. I say bring it on. Homes are for living, not for flipping.

pageoneresults




msg:3419681
 3:53 pm on Aug 11, 2007 (gmt 0)

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.

I want to expand on the above a bit. 53,943 NoDs in 3 months. Up 15.4% from the previous quarter. 158% from the same quarter last year. 158%. I'd say that is rather major, wouldn't you?

For those of you not familiar with what is happening, we had this real estate boom that was fueled by ARM (Adjustable Rate Mortgages). Many people purchased properties at these unbelievably low "introductory rates". For example, you could start off with a mortgage payment of $3,000.00 per month for the first year. But, when that rates adjusts, your payment could now be $6,000.00. And when it adjusts again, it could now be $9,000.00. Yes, the math is that simple.

What we are now going to see are all those properties purchased using ARMs going into default as the statistics are clearly showing. New loans are going to be difficult to get. Independent Brokers are going to have a tough time qualifying buyers.

I would imagine this really changes plans for quite a few people in the Real Estate SEO Industry?

jtara




msg:3419689
 4:06 pm on Aug 11, 2007 (gmt 0)

Develop web sites for hair dressers and cab drivers! A lot of these "real estate agents" are going to have to go back to their old jobs! ;)

A friend of mine drives a shredder truck. That is, he drives a truck around to businesses picking up their trash, and transports it under lock and key to a shredding facility.

He calls on a lot of mortgage offices, etc. He describes them as caverns full of empty desks. He says he gets an eerie feeling whenever he walks into these offices.

limoshawn




msg:3420095
 11:46 am on Aug 12, 2007 (gmt 0)

martinibuster is spot on here.
Having been in the real estate industry for the past 18 years as a licensee, investor, developer, and SEO I can say with some authority that what we're looking at is a "snapshot in time" that can be used to to facilitate what ever gloom and doom is needed for that news broadcast.

The bottom line is that the core of the real estate industry is healthy. If we look outside of today's snapshot we see that the three years leading up to the current "situation" most of the country was realizing what I like to call stupid appreciation. In some areas real estate was appreciating at over 30% which is insane considering the normal average appreciation since the beginning of all recordkeeping has been 3%. There is no market (not even California) that can sustain that kind of growth for any amount of time.

We are currently in a correction cycle. The real estate ATM is closed, time to go back to work.

celgins




msg:3420356
 9:13 pm on Aug 12, 2007 (gmt 0)

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?

At present, my web development duties have nothing to do with the real estate industry, but I am searching for a house to buy. We keep hearing... "it's a buyer's market." That may be, but the only reason it seems to be, is because seller's homes aren't selling. This, of course, drives many sellers and home builders to lower their asking prices.

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.

I sort of agree, but I'm also not an industry analyst. While I think lenders will be more critical of who they lend to, I don't think they will totally avoid new homebuyers, or even "risky" homebuyers. Maybe they should spend more time investigating the purpose of the home purchase. If someone has purchased three homes in the past 1.5 years under three separate ARM's -- what does that tell you?

Homes are for living, not for flipping.

True.... and as stated earlier -- flipping helped influence some of the current problems we're seeing.

lgn1




msg:3420710
 12:23 pm on Aug 13, 2007 (gmt 0)

I don't see why the US lenders don't just work with the mortgagee. Its better to have some profit come in from a mortgage rather than let it go in default.

If the mortgagee cant afford the interest rate jump, then they should reach a compromise, based on what they can afford, rather than turn a good loan into a forclosure.

Up here in Canada, the last thing a bank wants to do, is own property. They will negotiate the interest rates, or do a interest only repayment, extent the term, or basically bend over backwards, to avoid forclosure, if you work with them.

Its just basic greed, why these subprime lenders are going under in the USA. Instead of working with the client, they forclose, and end up with a porfolio of forclosed properties, which depresses the market, and they lose money when they sell the property. Repeat enought times and the subprime lender goes belly up.

At least I will stop seeing all those annoying ARM animated banner ads (you know, the ones where the clients are dancing on the roofs).

jtara




msg:3420794
 2:18 pm on Aug 13, 2007 (gmt 0)

I don't see why the US lenders don't just work with the mortgagee. Its better to have some profit

There's no profit to be made by "working things out with the mortgagee". The profit was supposed to come when the rates stepped-up. They lose money on the front-end of the loan.

The borrowers couldn't afford the houses in the first place - they were only able to afford them with a loan that was subsidized in the front end. They were assuming that property values would continue to rise rapidly, and they would either flip or refinance (with another ARM) when their loans adjusted.

Then the music stopped.

pageoneresults




msg:3420805
 2:31 pm on Aug 13, 2007 (gmt 0)

The borrowers couldn't afford the houses in the first place - they were only able to afford them with a loan that was subsidized in the front end.

And even then, they were probably stretching their budget waiting for this...

They were assuming that property values would continue to rise rapidly, and they would either flip or refinance (with another ARM) when their loans adjusted.

Then the music stopped.

Hehehe, it didn't stop, it just changed. Before it was a calming "everything is just fine" tune. Now it is more like a Bela Lugosi theme. ;)

And, with the changes that took place in Bankruptcy laws last year (I'm guessing they saw the writing on the wall too), we're going to have a lot of people here in California carrying a Monkey (Gorilla) around on their back. Their wages will be attached by the government and they will be forced to pay "what they can" to their Creditors. Its not going to be a pretty sight. Filing for Personal BK is not what it used to be. You "will" be paying back "what you can afford" for the rest of your life if need be.

lgn1




msg:3420897
 4:13 pm on Aug 13, 2007 (gmt 0)

The borrowers couldn't afford the houses in the first place - they were only able to afford them with a loan that was subsidized in the front end.

So the subprine lenders was lending money based on speculation in the real estate market, and not on Gross Debt ratios, total debt ratios, stability of income, credit worthiness, etc of the customer.

Looks like the underwriters were on drugs?

mojomike




msg:3420913
 4:31 pm on Aug 13, 2007 (gmt 0)

Being long term and positive cash-flow investor in real estate, I have been out of the market for since 2002, everything that I was trying to buy was a negative yield ( non positive cash-flow ). now I will wait, it's getting closer and I feel that in about 5 month I should be able to find one or 2 properties.
-Mike

abbeyvet




msg:3420974
 5:40 pm on Aug 13, 2007 (gmt 0)

Loans are going to be given but only under strict circumstances .... if you cannot afford the payment, you won't be getting the loan

And isn't that perfectly logical?

If that had been applied all along, as it should have been, all along this could not have happened. Greed, from the bottom to the top of the chain, and the frankly stupid type of lending and borrowing that fed it drove the boom to its inevitable conclusion. Now the banks and the borrowers are screaming to be bailed out. That won't help much in the long term either, it's like paying off a teenagers maxed out cards - they'll just go off and max them out again if there's no pain.

LifeinAsia




msg:3421002
 6:20 pm on Aug 13, 2007 (gmt 0)

I agree- the ones doing the risky loans (the loaners AND the loanees) were basically gambling, using the real estate market as the vehicle instead of tables at Las Vegas. Just like any gambling/investment, there are associated risks.

One has to wonder how many of the people who are currently being (or soon to be) burned by the downturn in the sub-prime market were also "victims" of the dot-com market crash.

No one likes to hear that they realistically can not afford to buy a home. But that's exactly what a lot of people should have been told. Home ownership is certainly not a right; it's a privilege that needs to be earned (in terms of fiscal responsibility).

My wife and I desperately wanted to be home owners for years. But we faced reality and accepted that we weren't in a position to afford a house. Eventually, our circumstances improved and an opportunity came up that allowed us to buy a house. But before we jumped in, we ran and re-ran the numbers numerous times to make sure we could afford it.

Yes, we also "gambled" an went with an ARM and interest only loan. But we're paying a lot more than just the interest portion every month. We also went for the higher rate and have another 9 years before the interest rate adjusts. We expect to probably move to another house within the next 5 years, but we also have an almost 4-year cushion after that in case our circumstances change. Regardless, we've been going forward planning on the worst-case scenario that we'll still be in the house and mortgage rates will be through the roof at that time, so we'll have a sufficient cushion built up by then.

pageoneresults




msg:3421020
 6:50 pm on Aug 13, 2007 (gmt 0)

But, everything that is happening and about to happen is going to have a trickle down effect. I know we have SEOs here who rely solely on those independents for income. How does this affect your business model from this point forward? Are you going to build Hair Stylist and Cabbie websites as jtara suggests?

limoshawn




msg:3421046
 7:08 pm on Aug 13, 2007 (gmt 0)

How does this affect your business model from this point forward? Are you going to build Hair Stylist and Cabbie websites as jtara suggests?

pageoneresults, I don't see anything from the seo side changing, other than getting better. There are still agents out there doing business and needing seo services, even more so than before because it takes more effort for the agents to get business.

mfishy




msg:3421062
 7:36 pm on Aug 13, 2007 (gmt 0)

Demand for mortgage/refinance leads is higher than ever. Lenders are brutal with tighter guidelines, but at the end of the day mortgage brokers still need leads...

ebound




msg:3421072
 7:48 pm on Aug 13, 2007 (gmt 0)

The next phase in this bust is the recasting of ARMs. The Majority of ARM's written over the last few years are set to being adjusting in late 2007.

To give you an idea of the recent popularity of ARMs - Applications for ARMs accounted for 33 percent of all loan applications in 2004.

Imagine what happens when the rates on these loans begin to adjust in a time when:

-Creative mortgage products that have afforded people their overpriced homes over the last 5 years have disappeared
-Lending standards are supertight and down payments are back to 80-20
-The Secondary Market still isn't buying loans
-Home prices are falling around the US.
-Foreclosures are rising

Homeowners with adjustable rate mortgages that are set to recast are facing tough times. Most will face payment shock when their ARMs begin to recast. At this point they look to refinance in a market that's gone dry. It will take very good credit and large down payments to qualify. Monthly payments are certain to rise as they refinance into more traditional loans.

This has affected the subprime market, the alt-a market and looks to be headed to the prime market. Things will be getting much worse before they get better.

SlyOldDog




msg:3421138
 8:58 pm on Aug 13, 2007 (gmt 0)

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. Anything in that new bankruptcy law banning emigration for trailer trash who are in hoc up to the eyeballs? They should have thought of that one when they made the new law :)

What irks me is these people who took on the loans were often ignorant. Half of them wouldn't know an interest rate if it came up and bit them on the arse. And guess who will pay? These poor suckers will have attachment to wages while the banks who are responsible get a free lunch ticket courtesy of the treasury's anti-contagion policy.

LifeinAsia




msg:3421141
 9:04 pm on Aug 13, 2007 (gmt 0)

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.

If you didn't have the money to pay off your debt, where are you going to find the money to emigrate? And why put yourself in a position where your earning power is likely to be much lower?

Fortune Hunter




msg:3421191
 10:20 pm on Aug 13, 2007 (gmt 0)

so many people buying homes to flip instead of live in. I say bring it on. Homes are for living, not for flipping.

Not sure I would agree with that, I have flipped some houses, but I should define flipping in that I rehabbed them first from serious dumps to sparkling beautiful, then I "flipped" them for more money than I paid.

My wife and I desperately wanted to be home owners for years. But we faced reality and accepted that we weren't in a position to afford a house. Eventually, our circumstances improved and an opportunity came up that allowed us to buy a house. But before we jumped in, we ran and re-ran the numbers numerous times to make sure we could afford it.

I did the same for my first house. This is a responsible way to go. Probably like you, because I did it this way I have a ton of equity in my current house with a 4.5% interest rate. I am sitting rock solid. If more people bought homes this way we probably wouldn't have sky high foreclosure rates. You are absolutely correct, home ownership is a privilege, but way too many think that it is a right and buy with no money down in a house waaaayyyy too expensive for their budget and loan terms that will kill them with the slightest change in the market.

I know we have SEOs here who rely solely on those independents for income. How does this affect your business model from this point forward? Are you going to build Hair Stylist and Cabbie websites as jtara suggests?

I don't work in this space per se, but I am a firm believer that if the market removes one opportunity it creates several new and equally lucrative ones in the process. For the sharp investor and entrepreneur with cash and a head on their shoulders I believe a new opportunity can be found quickly, maybe even better than the old one.

martinibuster




msg:3421220
 10:56 pm on Aug 13, 2007 (gmt 0)

Not sure I would agree with that, I have flipped some houses,...

I see where you're coming from, and that you are actually adding value to the transaction. What I had in mind relates more to what I have heard about first hand and read. For instance, I know of one couple where the husband is a loan clerk at a local bank branch. Not the most high paying job, and that's in South Carolina. The husband has been buying homes exclusively to put them back on the market as soon as he can. This is not a wealthy person. He's a run of the mill middle class bank clerk.

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.

Similar to the dot com bubble where cable shows popped up about buying and selling stock, there are cable television shows about buying and selling homes for building up personal fortunes. Is it time to worry when a buying/selling trend hits cable TV?

Take for example, "Flip this Home", a show on the A&E Cable Channel. According to this news report [msnbc.msn.com]:

...authorities and legal filings claim that Leccima’s true passion was a series of scams that included faking the home renovations shown on the cable TV show and claiming to have sold houses he never owned.

...McGee and others say Leccima’s episodes of “Flip This House,” A&E’s most popular show, were elaborate hoaxes. His friends and family were presented as potential homebuyers and “sold” signs were slapped in front of unsold houses. They say the home repairs — the lynchpin of the show — were actually quick or temporary patch jobs designed to look good on camera.

That's a case where the cable TV flipper cheerleader was faking it. Oh man...

And then you have big name brands like The Discovery Channel producing shows called, Flip That House [tlc.discovery.com] too. It is exactly like in the Dot Com Bubble days. While the shows demonstrate people renovating homes, I don't believe home renovation/flipping has been behind the steep rise in home prices seen across the country.

powerstar




msg:3421251
 11:59 pm on Aug 13, 2007 (gmt 0)

Demand for mortgage/refinance leads is higher than ever. Lenders are brutal with tighter guidelines, but at the end of the day mortgage brokers still need leads...

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.

If you are in the mortgage business you must be blind if you didn't see it coming

frontpage




msg:3421257
 12:12 am on Aug 14, 2007 (gmt 0)

The subprime drama is overblown.

Examples:

Currently there are about 44 million mortgages in the U.S., and less than 14 percent of them are subprime. And only about 13 percent of those are late on payments, with the majority of late payers working through their problems with the banks.

So, all in all, when you work through the details and get down to the number that really matters, only about 0.6 percent of U.S. mortgages are currently in foreclosure. That’s up a hair from roughly 0.5 percent last year. That’s it.

Actually, that’s not it. Things are actually better than the numbers suggest, since subprime-mortgage homes are less expensive than prime-mortgage homes. This makes sense. Wealthier people, generally, can afford costlier homes than less-wealthy people. The recent subprime surge brought large numbers of moderate-income families into the home-ownership market, and their houses are less expensive than most. Therefore, the dollar impact of the subprime default is smaller than if it were a prime default.

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.

ebound




msg:3421272
 12:32 am on Aug 14, 2007 (gmt 0)

The subprime drama is overblown.

I'm going to go out on a [strike]limb[/strike] very sturdy branch and say this mortgage market implosion will be worse than the S&L Crisis of the 80's.

celgins




msg:3421311
 1:44 am on Aug 14, 2007 (gmt 0)

I'm going to go out on a [strike]limb[/strike] very sturdy branch and say this mortgage market implosion will be worse than the S&L Crisis of the 80's.

Maybe. I just hope to buy a home before interest rates jump into the 8%-9% range.

pageoneresults




msg:3421347
 2:47 am on Aug 14, 2007 (gmt 0)

I can't speak for other regions, but this sure paints an ugly picture for Californians...

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.

I do believe we are also looking at particular areas being hit the hardest. California's Real Estate Boom has been off the charts. I've seen properties go from $250,000 to $500,000 in less than two years. It has forced many to "share with family". So much so, that some communities are now enforcing a "number of persons" per dwelling regulation.

We're sorry, but you just cannot squeeze 12 family members into a 1,000 s.f. residence. Also, we don't appreciate you taking all 12 of the visitor parking spots either. ;)

I don't think this is your typical Ebb and Flow of the industry either. This is probably the Real Estate Tsunami of the Decade? Yes? No? I see differing opinions.

Are other countries experiencing what we are in the United States as far as real estate goes?

jomaxx




msg:3421378
 3:49 am on Aug 14, 2007 (gmt 0)

Re other countries... I believe the "subprime" thing is specific to the US. I'm in Calgary (Canada), which is very hot. Prices seem to have plateaued for the time being, but I'm not aware of any signs of liquidity problems or a drop in real estate values.

As for the lack of judgment involved in lenders making "introductory" subprime offers, or in buyers overextending themselves by accepting them, no comment.

plumsauce




msg:3421479
 6:42 am on Aug 14, 2007 (gmt 0)

And, with the changes that took place in Bankruptcy laws last year (I'm guessing they saw the writing on the wall too), we're going to have a lot of people here in California carrying a Monkey (Gorilla) around on their back.

I take it that this realistically, only applies to individuals since corporations just die an early death.

Isn't this just so special.

Big business shoots itself in the foot with a cannon in the name of profits/market share and then gets a law passed to ease the pain.

When are people going to realise that governments exist to protect the interests of those with the most influence?

Case in point, copyright infringement, ... is a civil matter, unless you are the RIAA, in which case you can get all kinds of law enforcement officials to help out.

Think back to the great depression. Picture cops cracking heads with batons to break up general strikes. They never get it. They are cracking heads of people who are more like them than not, to protect people who are the least like them.

Oh, Canada has adjustable rate mortgages, and below prime rate mortgages too. They just don't call them sub-prime. Ask your friendly banker.

Paco




msg:3421627
 11:15 am on Aug 14, 2007 (gmt 0)

Starting to look familiar in Spain ... almost all adjustable rate mortages ... interest rates going from around 2% to over 4% and going up. Big booble, 10-20% apreciations per year were common. Banks relaxed their loaning criteria, made loans longer ... many people invested in the market as money was cheap and as everybody knows "house prices never go down" ...

Media says price rises slowed, I know cases of new constructon going down 20% and not being sold (they were easily sold one year ago). Our market is some months behind the US, but heading in the same direction.

Construction is really important for the Spanish economy, so the employment problems that will follow when we don't build so many houses, will also have a big impact as people without job, will have a hard time paying mortages.

Other European countries seem to be in a similar situation.

microcars




msg:3421794
 2:01 pm on Aug 14, 2007 (gmt 0)

in case you have not noticed, there has also been a tremendous boom in new condos being built.

maybe 25-50% of the units used to be pre-sold before the construction began. These were speculators buying them who then flipped them to other speculators.

Then "regular" people got in on the "action" with interest only, 100% ARMs thinking it was a "can't lose" investment.

Now that it is not as easy to get those Interest Only, 100% loans, the buyers/speculators have dried up and many people who "invested" in new condos are now stuck with multiple mortgages that they will have to be paying.
They got No Interest 100% 2 year ARMs thinking they were going to flip the place before the interest rates started rising and and now they are stuck.

My wife is a Realtor and she saw this coming years ago.
The actual market for homes to live in is still good though.
It is the "Real Estate as investment" market that is tanking big time.

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