http://online.wsj.com/article/SB125903489722661849.html?mod=WSJ_hpp_LEFTTopStories "These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into an already saturated market. Economists from J.P. Morgan Chase & Co. said Monday they didn't expect U.S. home prices to hit bottom until early... [more]
http://online.wsj.com/article/SB125903489722661849.html?mod=WSJ_hpp_LEFTTopStories
"These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into an already saturated market. Economists from J.P. Morgan Chase & Co. said Monday they didn't expect U.S. home prices to hit bottom until early 2011, citing the prospect of oversupply.
Home prices have fallen so far that 5.3 million U.S. households are tied to mortgages that are at least 20% higher than their home's value, the First American report said. More than 520,000 of these borrowers have received a notice of default, according to First American."
...
"More than 40% of borrowers who took out a mortgage in 2006 -- when home prices peaked -- are under water. Prices have dropped so much in some parts of the U.S. that some borrowers who took out loans more than five years ago owe more than their home's value.
Even recent bargain hunters have been hit: 11% of borrowers who took out mortgages in 2009 already owe more than their home's value."
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Response by Mack123
about 16 years ago
Posts: 59
Member since: Oct 2009
Yep. This is a problem. We just recently put in an offer on an apartment at what is a current value/comp but found that the seller cannot sell for our price because they paid substantially more than that during the bubble & mortgaged all but the minimum. There's an impasse because as a buyer, you would have to be an idiot to pay bubble prices right now, even if the seller did.
I feel a little bad for the sellers, but people have to realize that most of the buyers right now are only buying because we've been disciplined enough to wait for a buyers market. I have no intention of giving up that edge~ there's no apartment that is worth it.
"The modest recovery in home prices is beginning to falter, according to data released Tuesday.
The Standard & Poor’s/Case-Shiller home price index, a closely watched measure of 20 metropolitan areas, barely rose in September, increasing 0.3 percent on a seasonally adjusted basis.
Nine of the cities in the index fell in the month, including Boston, Seattle, New York and Charlotte."
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Response by Mack123
about 16 years ago
Posts: 59
Member since: Oct 2009
And I happen to know well many finance people, who were once spending machines, who have learned a great lesson from this market. Even those who weren't directly impacted by it, the fall of Bear et.al. was a real eye-opener for a lot of WS'ers & gave them the sense that it could all end at any time. Those sitting around rubbing their hands together in anticipation of this year's bonus season to make everyone start throwing money out the window again should prepare yourselves for a let-down.
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Response by anonymous
about 16 years ago
We are comparing apples to oranges here. The NYC market is different due to the supply of co-ops. No boards would ever approve a buyer with the wacky mtgs people took out in other parts of the country. Plenty of established condos would not either. The folks in trouble here are those in new developments who bought at the top and may or may not have an unconventional mortgage. Are we really talking about more than 10% of the market here? I doubt it. Fact is prices are rising in prime areas. Is this the bottom or just a dead cat bounce before we head lower? I think the former.
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Response by truthskr10
about 16 years ago
Posts: 4088
Member since: Jul 2009
Actually I think this situation is what holds back true inventory numbers of apartments on the market.
I've watched several apartments of interest to me go on the market for a price well out of "my comp."
After acris researching these units, I would find they had more paper on the unit than they were worth, and the reason why the stubbornly high ask price.
Later to see most of these units end up "delisted." Some ended up rented and most just temporarily off market. Most people will not accept "losing money" on their property if they can help it. If they can't sell it to cover what they paid plus the tax they paid and the broker fees to sell it, they are holding on to it. And that's fine, as long as they are willing to ride out the storm and have a job to maintain holding the property. You can't force someone to sell until they have to.
The move now will be on the banks and short sale willingness.
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Response by NYCMatt
about 16 years ago
Posts: 7523
Member since: May 2009
"No boards would ever approve a buyer with the wacky mtgs people took out in other parts of the country. Plenty of established condos would not either."
Condo "boards" (associations) have absolutely no say in how a buyer finances his apartment.
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Response by The_President
about 16 years ago
Posts: 2412
Member since: Jun 2009
Actually, only 21% of home owners are under water, but of course rounding up to 25% sounds better so that this way the WSJ can put "1 in 4" on the front page. But hey, dont let facts and that pesky 4% get in the way of a catchy headline!
it's actually 23% according to CoreLogic (WSJ) and 21% according to Zillow. not surprising that Bloomberg would choose the report with the lower number.
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Response by 30yrs_RE_20_in_REO
about 16 years ago
Posts: 9881
Member since: Mar 2009
"No boards would ever approve a buyer with the wacky mtgs people took out in other parts of the country. Plenty of established condos would not either."
I think you'd be surprised at what loans got past any number of Coop Boards. This is especially true on refi's after the unit owner was in the building a number of years with no mtc payment issues.
(plus while I don't think Matt is not universally correct, I think it's a number approaching zero so for all intents and purposes he hit the nail on the head. i.e. you would be surprised at what rules some wacky Condo Associations have adopted)
Yep. This is a problem. We just recently put in an offer on an apartment at what is a current value/comp but found that the seller cannot sell for our price because they paid substantially more than that during the bubble & mortgaged all but the minimum. There's an impasse because as a buyer, you would have to be an idiot to pay bubble prices right now, even if the seller did.
I feel a little bad for the sellers, but people have to realize that most of the buyers right now are only buying because we've been disciplined enough to wait for a buyers market. I have no intention of giving up that edge~ there's no apartment that is worth it.
Yup. Sellers hoping they will get a premium on bubble prices are in for some serious disappointment. I hope they're going to enjoy living in their overvalued assets for a long time, because no one seems to think this recovery has legs:
http://www.streeteasy.com/nyc/talk/discussion/16478-wsj-1-in-4-borrowers-is-under-water
"The modest recovery in home prices is beginning to falter, according to data released Tuesday.
The Standard & Poor’s/Case-Shiller home price index, a closely watched measure of 20 metropolitan areas, barely rose in September, increasing 0.3 percent on a seasonally adjusted basis.
Nine of the cities in the index fell in the month, including Boston, Seattle, New York and Charlotte."
And I happen to know well many finance people, who were once spending machines, who have learned a great lesson from this market. Even those who weren't directly impacted by it, the fall of Bear et.al. was a real eye-opener for a lot of WS'ers & gave them the sense that it could all end at any time. Those sitting around rubbing their hands together in anticipation of this year's bonus season to make everyone start throwing money out the window again should prepare yourselves for a let-down.
We are comparing apples to oranges here. The NYC market is different due to the supply of co-ops. No boards would ever approve a buyer with the wacky mtgs people took out in other parts of the country. Plenty of established condos would not either. The folks in trouble here are those in new developments who bought at the top and may or may not have an unconventional mortgage. Are we really talking about more than 10% of the market here? I doubt it. Fact is prices are rising in prime areas. Is this the bottom or just a dead cat bounce before we head lower? I think the former.
Actually I think this situation is what holds back true inventory numbers of apartments on the market.
I've watched several apartments of interest to me go on the market for a price well out of "my comp."
After acris researching these units, I would find they had more paper on the unit than they were worth, and the reason why the stubbornly high ask price.
Later to see most of these units end up "delisted." Some ended up rented and most just temporarily off market. Most people will not accept "losing money" on their property if they can help it. If they can't sell it to cover what they paid plus the tax they paid and the broker fees to sell it, they are holding on to it. And that's fine, as long as they are willing to ride out the storm and have a job to maintain holding the property. You can't force someone to sell until they have to.
The move now will be on the banks and short sale willingness.
"No boards would ever approve a buyer with the wacky mtgs people took out in other parts of the country. Plenty of established condos would not either."
Condo "boards" (associations) have absolutely no say in how a buyer finances his apartment.
Actually, only 21% of home owners are under water, but of course rounding up to 25% sounds better so that this way the WSJ can put "1 in 4" on the front page. But hey, dont let facts and that pesky 4% get in the way of a catchy headline!
http://www.bloomberg.com/apps/news?pid=20601103&sid=att2nsux_fFo
it's actually 23% according to CoreLogic (WSJ) and 21% according to Zillow. not surprising that Bloomberg would choose the report with the lower number.
"No boards would ever approve a buyer with the wacky mtgs people took out in other parts of the country. Plenty of established condos would not either."
I think you'd be surprised at what loans got past any number of Coop Boards. This is especially true on refi's after the unit owner was in the building a number of years with no mtc payment issues.
(plus while I don't think Matt is not universally correct, I think it's a number approaching zero so for all intents and purposes he hit the nail on the head. i.e. you would be surprised at what rules some wacky Condo Associations have adopted)
_________________________
David Goldsmith
DG Neary Realty Ltd.