OK now I'm getting scared..

creative destruction?

OK, so you admit you are here as a bear primarily to talk down the market?

No I'm not here to talk down the market. Why is it that anytime someone mentions something that doesn't favor price increase for real estate, they are automatically trying to 'drive down the market'? I log on to see what the market is doing & when the unemployment rate hits a 26 year high, that's very scary especially when you consider all of the money the government has already pumped into the system. The collapse of all the subprime loans was different b/c that was just pure utter greed catching up to itself but seeing almost 10% of ALL Americans without jobs, there is nothing good about that.

creative deconstruction.

Stay Calm.
Destruction is key to evolution. Business cycles like this has happened for centuries. We'll come out of this lean and mean....

one man gathers what another man spills...

"The collapse of all the subprime loans was different b/c that was just pure utter greed catching up to itself but seeing almost 10% of ALL Americans without jobs, there is nothing good about that."

Even during good times unemployment rate was 5%. There will always be unemployment....*period*.

The reason you don't own an apt Luchias is that there was a bubble that inflated prices beyond ordinary people's means. That bubble was driven by cheap debt that was too easy available.

But the reason the unemployment figures are rising is that the economy is contracting. Before this recession began, there was no "employment bubble" that was a corollary to the housing bubble.

The two things are not directly linked. You should be able to afford a decent apartment and you deserve to have that opportunity without it costing you or your friends or your family their job security.

You should not have to give up one to get the other. In fact, you (and the rest of us) should demand access to both.

I hope so ericho75 Maybe I'm more scared than necessary b/c this is the first major financial downturn I've ever been through. I was only a kid in 1986 so I had no comprehension of what was actually happening but this time I'm definitely old enough to understand & I can't help but be scared thanks for the reassurance.

You make excellent points Graffiti, thanks.

"If this is the only way I'll ever be able to afford Manhattan then you know what, I don't want it. I don't want to be able to buy an apartment there b/c hundreds & thousands of hard working people are losing their jobs and can no longer afford their to pay their mortgages."

This is exactly what I've been arguign for months on SE. If we see the 50%+ price declines the mega bears want, then it will be accomanied by very high unemployment, reduced services, and a poorer quality of life. What good is a 60% discount if you do not have a job?

"Before this recession began, there was no "employment bubble" that was a corollary to the housing bubble.

The two things are not directly linked."

WRONG. Employment in NYC was direcrtly linked to the housing bubble. It was the finance people in NYC that were packaging and selling mortgage backed securities full of toxic subprime mortgages. Without the casino atmosphere on Wall St. there never would have been a housing bubble and a recession.

you have to remember most of these people purchased at 50 to 75% of what these apts are selling at....most will still make a HEFTY profit even if the apts go down 30%....i feel worse for us who have to pay the PREMIUMS onthese apts......

The end-of-the-worlders on these sites forget that the ones that truly lost their shirt on the NYC market are the ones that bought in 2007-2008 AMD NEVER BOUGHT BEFORE. Not saying this is a marginal fringe, clearly many were caught shortsighted but if you bought in 2002 or prior and sold at 75-200% profit to buy an "inflated" property you are still well ahead of any renter on a cah-flow basis.
Life all comes down to timing, but the last 15 yrs have given many the chance to "trade up" while keeping their CF below 25% of take home.

This is exactly what I've been arguign for months on SE. If we see the 50%+ price declines the mega bears want, then it will be accomanied by very high unemployment, reduced services, and a poorer quality of life. What good is a 60% discount if you do not have a job?

I agree with you Alpine.

you have to remember most of these people purchased at 50 to 75% of what these apts are selling at....most will still make a HEFTY profit even if the apts go down 30%....i feel worse for us who have to pay the PREMIUMS onthese apts......

Mhillqt I hear your point too. I guess ideally if there were more balance built into the system, things would've never spiraled out of control in the 1st place. I wish the powers at be could just come up with a FAIR system that works for the common good instead of just a chosen few b/c in the end, those chosen few are still very rich--even with the downturn, and the rest of us suffer. That isn't a Democracy it's a Banana Republic.

WRONG. Employment in NYC was direcrtly linked to the housing bubble. It was the finance people in NYC that were packaging and selling mortgage backed securities full of toxic subprime mortgages. Without the casino atmosphere on Wall St. there never would have been a housing bubble and a recession.

gotcha alpo brains
and thats why you remain so bullish real estate

This has nothing to do with my OP but does anyone know if there is a forum on Curbed.com? I could swear I read some where that there is but when I go to their website, I can't seem to find it anywhere.

It was the finance people in NYC that were packaging and selling mortgage backed securities full of toxic subprime mortgages

Some blame the seller of dope, others the junkie. One would not exist without the other...

i'd guess it depends on the sellers' tactics. once ensnared, hard to exit.

particularly when the seller receives affirmation from the media, the neighbors and the powers that be.

All things do not exist without the other. Is it the dealer or the junkie....? That's the philosophical debate.

I'd think a praying mantis analogy might be better.

Easy mortgage credit(lax lending standards) did not cause people to fall over themselves to buy. I view it as more of a catalyst.

So you wouldn't argue that it has become a natural progression in life to own a home? And that wasn't viewed as a normal desire? And prices didn't become totally inaccessible for many, if not most, buyers? And that nonetheless they were told that: they could afford it; they would be allowed to buy it; and not to worry because prices would certainly continue to rise.

and you would claim that the average person who bought had the analytical capacity to realize that there was something wrong with all three of those elements, despite the fact that the phenomenom was raging around him/her, and being affirmed by no less than the government, as well as the media and joe the plumber? right.

Won't excuse the mortgage brokers..A stock broker has to follow a "know your customer rule".The fact this is not done with mortgages where the dollar exposure is multiples of what a typical person assumes in a brokerage account is ridiculous. And 90% of borrowers on stated doc loans filled out a form 4506 T,,so virtually every lender could have known whether the mortgage was money good, even if it was Alt-A...

And, I won't excuse the government who put in place a chief regulator who read to many Ayn Rand books, and did nothing to ensure reasonable margin existed with respect to any and all lending.

However there is something called Individualism, which is really part of the free market system. Determining whether a home purchase is a good idea, utilizes the same skill set when car shopping, figuring out a car lease and doing a monthly budget.

Sure, the government should enforce basic regulations and ensure information is provided, like making sure a broker doesn't fail to disclose a low cost FHA option in favor of a high cost sub prime mortgage lender or ensuring the mortgage terms are clearly laid out, but we can't put all the blame on the vendors and regulators. Ignoring for a moment that there was some predatory lending which targeted the elderly or other susceptible victims, the vast majority had the resources to "check it out".

"However there is something called Individualism, which is really part of the free market system. Determining whether a home purchase is a good idea, utilizes the same skill set when car shopping, figuring out a car lease and doing a monthly budget."

Riversider, the myth of the rational investor has been pretty well debunked. You're describing ideology, not reality - the same ideology that Ayn Rand and her followed.

It's all about behavioral finance, which is what Aboutready is describing. People make decisions within specific contexts.

drat. "that Ayn Rand and her ilk followed." Need coffee.

Ayn Rand's biggest fan: Alan Greenspan. Hmmm.

So I guess there isn't a forum on curbedNY lol Thanks anyway guys.

Mhillqt - you really have to stop fixating on the "hefty profits" people will make who bought years ago. You didn't take the chance, you didn't buy then, so concentrate on the here and now.

Lucias, there's no forum such as Streeteasy offers as far as I am aware. You can comment on specific posts.

the people who purchased 2005 and on will not get there money back for a very long time. It has not made any sense to own over rent for years and prices will have to decline 35 percent from here to make sense again. Sit back grab a beer and watch as economics takes over.

Ayn Rand's biggest fan: Alan Greenspan. Hmmm.

http://graphics8.nytimes.com/images/2009/08/02/business/02bbt2_500.jpg
That's Ayn right next to Alan..

the myth of the rational investor has been pretty well debunked.

There's a difference in thinking something is a good deal versus buying something you can't afford.

Thanks for letting me know evnyc

in a free market working properly loans that defaulted in large numbers within a year of being underwritten would never have occurred.

the delinquencies are now spreading to prime borrowers, who can no longer "afford" their mortgages. many of them bought overpriced properties, but with better credit. tell them about the free market, and how it rewards the just. they'll often tell you they just wanted to own their own home.

something many here espouse.

"If we see the 50% price declines the mega bears want, then it will be accomanied by very high unemployment, reduced services, and a poorer quality of life."

I'm unconvinced. 50% price declines would get us back to what? 2000? Was there very high unemployment, reduced services, and a poorer quality of life in 2000?

Sept. 5 (Bloomberg) -- So right after the Bear Stearns funds blew up, I had a thought: This is what happens when you lend money to poor people.

Don't get me wrong: I have nothing personally against the poor. To my knowledge, I have nothing personally to do with the poor at all. It's not personal when a guy cuts your grass: that's business. He does what you say, you pay him. But you don't pay him in advance: That would be finance. And finance is one thing you should never engage in with the poor. (By poor, I mean anyone who the SEC wouldn't allow to invest in my hedge fund.)

That's the biggest lesson I've learned from the subprime crisis. Along the way, as these people have torpedoed my portfolio, I had some other thoughts about the poor. I'll share them with you.

1) They're masters of public relations.

I had no idea how my open-handedness could be made to look, after the fact. At the time I bought the subprime portfolio I thought: This is sort of like my way of giving something back. I didn't expect a profile in Philanthropy Today or anything like that. I mean, I bought at a discount. But I thought people would admire the Wall Street big shot who found a way to help the little guy. Sort of like a money doctor helping a sick person. Then the little guy wheels around and gives me this financial enema. And I'm the one who gets crap in the papers! Everyone feels sorry for the poor, and no one feels sorry for me. Even though it's my money! No good deed goes unpunished.

2) Poor people don't respect other people's money in the way money deserves to be respected.

Call me a romantic: I want everyone to have a shot at the American dream. Even people who haven't earned it. I did everything I could so that these schlubs could at least own their own place. The media is now making my generosity out to be some kind of scandal. Teaser rates weren't a scandal. Teaser rates were a sign of misplaced trust: I trusted these people to get their teams of lawyers to vet anything before they signed it. Turns out, if you're poor, you don't need to pay lawyers. You don't like the deal you just wave your hands in the air and moan about how poor you are. Then you default.

3) I've grown out of touch with ``poor culture.''

Hard to say when this happened; it might have been when I stopped flying commercial. Or maybe it was when I gave up the bleacher seats and got the suite. But the first rule in this business is to know the people you're in business with, and I broke it. People complain about the rich getting richer and the poor being left behind. Is it any wonder? Look at them! Did it ever occur to even one of them that they might pay me back by WORKING HARDER? I don't think so.

But as I say, it was my fault, for not studying the poor more closely before I lent them the money. When the only time you've ever seen a lion is in his cage in the zoo, you start thinking of him as a pet cat. You forget that he wants to eat you.

4) Our society is really, really hostile to success. At the same time it's shockingly indulgent of poor people.

A Republican president now wants to bail them out! I have a different solution. Debtors' prison is obviously a little too retro, and besides that it would just use more taxpayers' money. But the poor could work off their debts. All over Greenwich I see lawns to be mowed, houses to be painted, sports cars to be tuned up. Some of these poor people must have skills. The ones that don't could be trained to do some of the less skilled labor -- say, working as clowns at rich kids' birthday parties. They could even have an act: put them in clown suits and see how many can be stuffed into a Maybach. It'd be like the circus, only better.

Transporting entire neighborhoods of poor people to upper Manhattan and lower Connecticut might seem impractical. It's not: Mexico does this sort of thing routinely. And in the long run it might be for the good of poor people. If the consequences were more serious, maybe they wouldn't stay poor.

5) I think it's time we all become more realistic about letting the poor anywhere near Wall Street.

Lending money to poor countries was a bad idea: Does it make any more sense to lend money to poor people? They don't even have mineral rights!

There's a reason the rich aren't getting richer as fast as they should: they keep getting tangled up with the poor. It's unrealistic to say that Wall Street should cut itself off entirely from poor -- or, if you will, ``mainstream'' -- culture. As I say, I'll still do business with the masses. But I'll only engage in their finances if they can clump themselves together into a semblance of a rich person. I'll still accept pension fund money, for example. (Nothing under $50 million, please.) And I'm willing to finance the purchase of entire companies staffed basically with poor people. I did deals with Milken, before they broke him. I own some Blackstone. (Hang tough, Steve!)

But never again will I go one-on-one again with poor people. They're sharks.

(Michael Lewis is the author, most recently of ``The Blind Side,'' and is a columnist for Bloomberg News. The views he expresses are his own.)

the delinquencies are now spreading to prime borrowers, who can no longer "afford" their mortgages.

Those 90% LTV mortgage were evil. If borrowers were forced to pony up 20-25% down payment they would have acted more rationally. It's like the person who pays for their groceries with cash spends more wisely than those that use credit cards.

I'm confused, Riversider. The only thing that article did for me was make me dislike Mr. Lewis. Anyone worth less than 10M is poor? And his anger at the proposed "bailouts" for the "poor" when he neglects to mention the Wall Street bailouts? Please.

even people who put down 30% can no longer extract any equity or sell to cover in many locations. BECAUSE THEY PAID TOO MUCH. which is fine if you don't have to sell, but if you do, you're screwed.

and you probably thought you were making a good financial decision.

banks had a responsibility to underwrite appropriate loans. end of story.

post87, plus we already have the unemployment, services are being reduced, etc. might as well get the price correction with the pain.

riversider, you continually take things out of context, misquote. where's the link? i've read a ton of lewis, that doesn't sound like lewis to me.

xellam , Lewis wasn't serious, He's just being funny, as was I for posting it.

Ahh, I'm sorry. Hard to tell meaning sometimes online, and I'm afraid we're a bit too old for emoticons.

yeah distressed sales are starting to pop up in Manhattan. Certain buildings have more then one. Atelier people are blowing up all over the place. People purchased in that building so high right out of the gate they never had a chance.

Interesting fact is that many of the mortgages experiencing defaults were not "full doc" loans, often stated income. Borrowers who didn't disclose their incomes to the lenders cannot now absolve themselves of guilt.

lol. who allowed the no doc loans? santa claus?

But Riversider I thought that it was the bank's due diligence to make sure that these people could actually afford the loan. How could they have given them money without verifying their work history? Why would a financial institution lend money to someone without at least making sure that they had some form of an income to pay the money back? Why even invent a 'non-full doc loan' to begin with?

luchias, because the government was providing extremely cheap money that needed to be used by the banks. and use it they did, and then some.

Luchias,
When banks held mortgages, they had every reason to make sure they would get paid back, through a combination of ensuring sufficient equity and a Debt to Income ratio that supported the mortgage payment, the first being more important since income changes as time goes on.
What changed? Lenders could transfer the risk to the government and by extension the tax payer. Many of our politicians in fact berated these government institutions for performing due diligence with regards to LTV standards.
Eventually Borrowers, lenders, and regulators wer lulled into complacency as home prices rises rose. Everyone kept arguing that risk was being mis-priced and pointed to low default rates. Borrowers assumed if they got into trouble they could sell their house and/or refinanced. Lenders assumed they could foreclose and sell the house at a profit.
When optimism is high and ample funds are available for investment, investors tend to migrate from the safe to risky. Lenders who refused to service the borrowers who could qualify for more aggressive financing in this environment risked going out of business.

http://www.levy.org/pubs/wp74.pdf

Wow thanks for breaking it down for me Riversider & AR I'm glad I joined a credit union right out of high school. It's still in the same building & has the same name as it did when I joined unlike many of the huge banks we see today. And also unlike those huge banks, my little credit union didn't lend to people without making sure they had a steady income, minimal debt etc. So when all of these crazy loans were going on in 2006 & 2007 I was completely oblivious to them. I've always known my CU would never give me a loan without verifiable income so I would've never tried b/c I'm sure they would've just laughed in my face and shut the teller window.

take a look at this, from UD. a good, long look at the report from T2 is also recommended. look who's now at the top of the chart (and those aren't no-doc loans):

http://www.urbandigs.com/2009/09/prime_deliquencies_acceleratin.html

Nice to hear Luchias,
The traditional rule of Finance was that monthly cost of housing (rent or mortgage) should comprise less than 30% of income. This was ingrained in the American psyche for decades. Funny how a little Mr. Housing Bubble caused such an amnesia outbreak.

So what is a prime mortgage anyway?
http://www.socketsite.com/archives/2008/03

IF THIS IS THE GOOD STUFF G-D HELP US!

/fannie_maes_new_confirming_loan_limit_guidelines_in_sum.html

Maximum Loan to Value ratio (LTV) is 90% on fixed mortgage
- Maximum LTV is 80% on an adjustable
- Maximum LTV is 60% on an investment property
- Private mortgage insurance must be bought for all loans with LTV &gt80%

- Max Debt to Income ratio (DTI) of 45%
- FULL documentation of everything required

yes, they're just continuing the bubble. the next leg down could be brutal. tax incentives, "we have hit the bottom," prices will only go up from here, opportunity of a lifetime, etc.

and then yahoo headline, "never been a better time to buy."

you've been priced out for 5 years, young family, believe employment is steady, looks much better than before. what do you do?

who should know better here? who?

On the surface Fannie & Freddie's DTI (30% on average) seems ok, but that's the front end. Fannnie & Freddie loans were routinely above 80 CLTV%(second lien?), so this was only the front end DTI the back end DTI was seriously higher. The Democrats in Congress blocked George Bush from regulating the GSE'S more harshly(Bush may have gotten a few things wrong, but he did understand the GSE risk).

Now what kind of sane person commits half their gross income to real estate related endeavors?

i'm not even going to touch that one. home depot is finally here with my dishwasher. have a good weekend.

Re. no-doc loans... just because someone allows you to do something does not mean you check your brain and do it. Is there ANY place for personal responsibility in this fiasco?

From what I gather a 90% LTV loan for a borrower that is relatively new into their career is responsible, but lending to someone @ 70% LTV that over-paid and lost their job is bad underwriting. My take is if the loan worked, we look back and call it responsible lending, and if it did not we say otherwise.

Basically, wouldn't you say that anyone who bought with less than 10% down, and in many cases were allowed to buy with 0% down, were basically renting? That's why it's so easy for these people to walk away from their homes.

The bank won't let them just walk away if they have any personal ability to pay.

They're walking away because they don't have any "personal ability to pay", which is why they got into trouble in the first place. Haven't you read all the newspaper articles about people doing just that, renting a new place, and saying they will buy again later?

Bank letting you walk after defaulting depends on whether state is recourse or non-recourse and the balance involved and finances of borrower. NY allows for deficiency judgments.
***********************************
and when the borrower puts down too little say 10% it does start looking like rent

A borrower who gets into trouble on a loan where they put down more sweat equity, might go to greater lengths to hold onto a property(i.e. obtain a second job, borrow from relatives, etc). There are many things he might do, that he is not legally obligated to do. High LTV loans have been shown to default more frequently than Low LTV loans. And in a non-recourse state like California, the borrower has every incentive to walk once the loan is significantly under water.

and yet so many of you here still blame realtors for this. i blame bankers and democrats (not necessarily in that order).

unless the broker was suznne!

stoogeh8tr
Brokers deserve a great deal of the blame, The NAR is one of the largest most effective lobbysts in the country pushing for
Tax Credits on housing
Killing bills that allow consumers to know the energy efficiency of the homes they buy
Killing bills that limit the Portfolio size of Fannie & Freddie Mac
Killing bills that create competition for brokerage services....
the list goes on and on and on.
http://www.americanhomeowners.org/AHGA/Legislative%20Alerts/wallstreetproof.pdf
http://thehill.com/business-a-lobbying/4112-efficiency-codes-give-heartburn-to-realtors-builders

http://thehill.com/business-a-lobbying/4112-efficiency-codes-give-heartburn-to-realtors-builders

Energy efficiency is often described as the low-hanging fruit in the fight against global warming. Conserving energy is cheaper than building a new nuclear power plant and technologically less challenging than storing a coal plant’s carbon dioxide emissions underground — two other emissions-reduction strategies.

But a provision in congressional climate and energy bills designed to reduce the energy sucked up by commercial buildings and residential homes is getting a poor reception from struggling realty and building sectors, which argue new efficiency codes will raise the costs for homes and commercial properties and have the potential to stall a recovery from the recent market collapse.

The National Association of Realtors, National Association of Home Builders and Commercial Real Estate Development Association were among nine building and realty trade groups that wrote House members last month expressing “strong opposition” to energy-efficiency language in the House climate change measure that was recently adopted by the Energy and Commerce Committee. The word “opposition” was written in bold letters.

http://www.realtor.org/fedistrk.nsf/files/testim_hr1728_042309.pdf/$FILE/testim_hr1728_042309.pdf

Your Realtor thinks the "safeguarding the consumer" with regards to mortgages needs to be balanced against.....translation, "we need lots of mortgages of all types so we can sell houses and earn fat commissions"

http://www.opensecrets.org/orgs/summary.php?id=D000000062
(Center for Responsive Politics)

The National Association of Realtors represents the nation’s real estate industry. While the bulk of its issues tend to deal with property management and control, the group also lobbies members of Congress and the administration on virtually every issue facing business, including health care reform, bankruptcy legislation and tax cuts. One of its biggest issues in recent years has been a move toward deregulating the financial services industry. For years, real estate agents have successfully warded off attempts by banking interests to delve into the sale and management of property. One of the keys to the group’s success: It supports Democrats and Republicans almost equally.

unbiased Maxine Waters on real estate brokers..
http://www.house.gov/apps/list/hearing/ca35_waters/CH060725_realestaetmarket.html
First, I believe that we are all for competition that will benefit the consumer. However, I am not sure that we should be reaching any conclusions about what is the most appropriate real estate services model -- traditional or non-traditional. I can not envision purchasing real estate without my real estate broker and agent. I am sure there are many of you who feel the same as I do. And while there has been tremendous growth in the use of the Internet in real estate transactions, I am not comfortable that the expansion of real estate services via the Internet will afford consumers the opportunity to save money in the long run or to have their interests adequately represented.

http://www.opensecrets.org/politicians/contrib.php?cycle=2008&cid=N00006690&type=I&mem=
Top 20 Contributors to Campaign Cmte
Rank ↓ Contributor ↓ Total ↓ Indivs ↓ PACs ↓
1 National Assn of Realtors $12,000 $2,000 $10,000
2 Credit Union National Assn $10,250 $250 $10,000
3 Intl Brotherhood of Electrical Workers $10,000 $0 $10,000
3 Machinists/Aerospace Workers Union $10,000 $0 $10,000
3 Service Employees International Union $10,000 $0 $10,000
6 People Helping People $8,000 $0 $8,000
7 Operating Engineers Union $7,500 $0 $7,500
8 Palms Residential Care $5,850 $5,850 $0
9 American Assn for Justice $5,000 $0 $5,000
9 BRIDGE PAC $5,000 $0 $5,000
9 Carpenters & Joiners Union $5,000 $0 $5,000
9 National Air Traffic Controllers Assn $5,000 $0 $5,000
9 Teamsters Union $5,000 $0 $5,000
9 United Steelworkers $5,000 $0 $5,000
15 Atlanta Restaurant Partners $4,600 $4,600 $0
16 Century 21 Excellence $4,000 $4,000 $0
16 Cordoba Corp $4,000 $4,000 $0
16 Mac Ii $4,000 $4,000 $0
16 Metro Disposal $4,000 $4,000 $0
20 Steptoe & Johnson $3,500 $1,000 $2,500

In March of 2003 we went to war in Iraq that cost much in life and dollars, after seeing the tech bubble collapse, 9-11, several other domestic and international terrorist incidents or attempts, bad economy, etc. etc.

Today we all know the reasons why 6 months later the market turned and rocketed for 4+ years.

But then it looked pretty ugly and who would have thought the equity market would have done well for a good stretch.

Markets are hard to predict.