And Realtors Wept - Part II

As a follow-up to the previous post And Realtors Wept, the hits keep coming:

American Home Mortgage has offically declared bankruptcy today according to Bloomberg.

Where is that cushy mattress when you need it?

Rising Rates + Stricter Lending Standards = Fewer Qualified Buyers

Take heart, my real estate flogging friends.

There IS still a pool of prospective homebuyers still out there.

But indeed, that watering hole of prospective home buyers is about to get a whole lot smaller.

Ah, and then finally - a valuable nugget of common sense and operational wisdown from Wells Fargo and Wachovia banks!:

"Raising rates and imposing stricter standards on some of their most creditworthy borrowers as slumping demand in the mortgage bond market chokes off funding."

"Making it tougher for the most creditworthy borrowers to get mortgages may worsen the two-year-old housing slump and threaten U.S. economic growth by reducing the number of people who can buy houses or how much they can afford to pay."

This means that fewer people in Orange County, and the state of California for that matter, will qualify for a home mortgage loan at all. Those that manage to qualify for a mortgage loan, given the inconvenient median gross income in Orange County of $75,000 per annum, will not be funded to buy homes in the $500K to $750K range. It's highly questionable whether the average Orange County resident (local renter or new arrival) will be able to fund even a $400,000 home.

This begs to question who is going to show up with an "S" on their chest and buy up the rising inventory of OC homes priced in the stratospher of $550 to $800K?

And where will these lending restrictions leave sale prices?

There's only one direction.

Down town.

And if one considers the May 2006 numbers, there were only 495,000 licensed real estate agents in California (one real estate agent for every 52 adults in the state). The self-proclaimed "competitive industry" is going to get a whole lot more competitive. We're talking stifling competition.

It's no longer who you know in that PDA roladex. It'll be who you know who has liquid money in the bank, a steady job for over 6 months, a good-to-fantastic freaking credit rating - and this other little annoyingly absent pre-requisite called "an interest in buying a home right now" during this shittiest of real estate markets ever known.

Assuming realtors find that qualified, and more importantly, informed but motivated, prospective homebuyer, how much home is he/she qualified to purchase? How does that match up with the inventory list of homes and their actual for-sale prices?

Not well, one must admit.

On the other end of the equation, OC homesellers are expecting a little something too. Not much really, just their $300,000 markup on the home sale transaction. I mean, afterall, they earned it. They deserve it. And when they bought the house from the realtor a few years ago, that realtor promised it.

The greed. The deception. And the revulsion, once the rancid truth rears it's ugly head.

Sure, you can lie some of the time. Just not all of the time. Sometimes you need to say the truth to maintain credibility and stay in business.

Orange County Realtors, just say it: "It's not a good time for me to take your money right now. It's not a good time to buy a home. It's better for you to wait."

You can say it.

They know.

It's all coming to a head.

What a wicked web have we woven!?

And Realtors wept

American Home Mortgage, one of the largest and most well-known mortgage lenders in the United States of America, just announced the layoffs of 7,000 of it's 7,750 employees. AHM has also stopped accepting mortgage loan applications following a cease and desist order from the states of New York and Connecticut as an investigation into violations of mortgage banking laws at the company goes into overdrive. More will be known as to AHM's business future following hearings August 24th to determine whether the cease and desist order will be permanent and whether AHM can even keep it's lending license going forward.

AHM CEO Michael Stauss:

"It is with great sadness that American Home has had to take this action which involves so many dedicated employees. Unfortunately, the market conditions in both the secondary mortgage market as well as the national real estate market have deteriorated to the point that we have no realistic alternative."

More evidence that the real estate market is slowly, but surely unraveling.

Let's hope the guy behind the curtain comes out with a mattress to ensure that soft landing repeatedly promised by the NAR, that group of oh so in-the-know, trusted advisors.

Cramer Says: "Dump Your House"!

Jim Cramer from CNBC on the collossal housing crash and whether you should keep paying your mortgage on a so-called "asset" declining in value, or just dump your losses and rent.

Very compelling statement also on prioritization of paying your bills: Pay off credit cards first, THEN pay your mortgage.

Nice!

Transcript Courtesy of Housing Doom:

Here's the video link: http://tinyurl.com/2kqgnf

Transcript:

Torabi: "I have to bring up a video we did yesterday that was entitled ‘Walk away from your house’". Torabi: "Jim Cramer says, y’know, ‘there is a time to walk away from your house’. To re-visit the video yesterday, you said, ‘when your house is down 20%, essentially, when you have no more equity left…’"

Cramer: "Right"Torabi: "…that’s a good time to sell…"

Cramer: "Yeah"Torabi: "… but what [unintelligible] because that"

Cramer: "Well not just sell, to walk away. You can’t sell it."

Torabi: "How do you walk away?"

Cramer: "Well you just default on the mortgage. It makes huge economic sense. You go rent. Uh, you don’t want to lose your job, so you keep your car. Uh, you keep your credit cards so you can buy, and all that really happens is is that you made a bet and you lost, so don’t compound it by continuing to pay."

Torabi: "Now the hierarchy of debt, you were saying also that y’know, your credit card debt should be less of a priority than if your house is losing value"

Cramer: "Oh, yeah, credit cards are much more important than your house. Remember, your house is only a good bet if you can build equity. But if you are going to lose money each month, you might as well rent. You shouldn’t own."

Torabi: "And, but, yesterday you’re also saying there are no places in this country where there is value in homes. A lot of homes are depreciating…"

Cramer: "No, No, there is no place where [mumble] you wouldn’t be down on your home if you bought it in 2006, that’s what the issue is. So, I’m saying that buying homes in 2006 was like buying the Nasdaq in February of 2000. They’re very very similar - it was better to be margined out than to continue to put capital against those Nasdaq stocks."

Cramer: "There was a report this morning by David, I believe it was David, uh, Blitzer, on, when I was on with the wonderful and fabulous Erin Burnett and it was that the, some housing prices have, uh, been, have actually stopped going down and some are going up and I just think that’s not true. I think, like, bad CDOs, and, like, bad leveraged loans, the actual mark to market is down everywhere. I get that from the 5 homebuilders whose conference calls I listen to. There are no up markets, and there are markets that are falling 20-30%, and those are the ones where it’s much smarter to walk away from your house."

Torabi: "Is the 20-30%… what’s that based on, or is that just…"

Cramer: "It’s where the, uh, purchase prices are, uh, when you back in the discounts. The discounts are very hard to see, cause all the homebuilders do two things: One is is that they offer incentives that don’t surface, so the list price is $250,000, but you’ll get rebates just like a car, so the list price of a car is $25,000, y’know, but you’re really only paying $18,000, so take in that, and the second thing is is that there’ll be Realtors, and what’ll happen is is that you’ll say ‘look - the list price is $225,000′, but you can negotiate down and go $190,000. I’m using the negotiable prices.

Cramer: "This is happening in the inland empire, in Sacramento, uh, it’s happening in Phoenix, it’s happening in Denver, and it’s happening in Las Vegas, and in southern California, uh, anywhere near the bread, the so-called bread basket, Modesto, these are all places where there’s tremendous overbuilding, and where it may pay to leave your house."

Hey Jim,

"Boo-Yah!" from overpriced and overvalued Orange County, Southern California.

Sub-Prime Bailout: Where will the money come from?

New York Democratic Senator Chuck Schumer has the answer. He wants $300 million in Federal money to help subprime borrowers keep their homes.

So the answer to the question is: you.

You will pay for it.

Unfortunately 70% of Americans believe that the "Federal Government" is some giant building with arms and legs that walks around and "does shit".

Wrong. The government is us! We fund it. Federal money is the people's fucking money!

Will someone in New York please explain that 7th grade Civics fact-of-life to their idiot senior senator?!

$300 billion dollars. Why?

Where will this "federal money" come from?

Why now interfere on the side of arrogance, stupidity and financial ineptitude in a market economy?

Why now interfere to help people keep their homes, who lied on their stated income loans and who, for all practical purposes, have no business whatsoever owning a home in the first place?

What economic and legal precedence are we trying to establish?

How will market's react?

What message does this federal government interference send to renter and homedebtors who pay taxes, who controlled their greed, who ignored the overexhuberance of the corrupt real estate industry, who chose to live within their financial means and who chose not to carelessly mortgage away their futures?

In case you have forgotten, Mr. Schumer, the above described individuals are your constituents as well.

The correct answer is to allow the market to correct itself. Indeed such a serious correction is economically painful and catastrophic for many American families, some of whom had only the best intentions - wanting to own an abode to live and raise a family. But the correction serves other import functions. It shakes out the investment crooks, flippers, liars, illegal opportunists and - to be frank - the financially inept. Good people and financially inept people are, in America, not mutually exclusive.

This comes across as cold and perhaps Darwinesque to say. I don't mean that subprime borrowers get no help at all. But I don't like the idea of allowing loan do-overs that, under normal market lending standards, would make no business sense at all.

Most of us support and believe in the merits of a laissez faire capitalist economy. Hard times like these remind us how imperfect that system can be.

Taking money away from people who didn't gamble to bail out other people who did, is irresponsible and unrepresentative of Senator Schumer and any of his supporters.

Of all industries in the United States, the real estate market is the one in most need of a market correction. Only the American oil industry makes as serious challenge from second place.

The real estate industry also requires a healthy dose of cartel-smashing government regulation.

That, alongside grand jury hearings of the N.A.R. for fraud, are the only government interference worthy of discussion right now.

Greed, ignorance and financial illiteracy hits America's wealthy and well-educated too

The following article in Bloomberg paints a pretty bleak picture as to the state of the U.S. housing market. Even a well-educated woman with a Master's Degree - smart, intelligent, hard-working can fall victim to financial illiteracy, greed and ignorance too.

If there can be one take away from this article, it might be never to sign anything, ANY-THING, without reading it, reviewing it, fully understanding it and ALSO accepting the consequences of it.

How has the United State of America regressed from a nation of industrious, rugged individualists into to a country of overgrown children - financially incompetent, greedy, self-centered individualists who, only after realizing the folly of their delusional decisions, look to the a parental federal government to take away other people's money, in order to lift them out of a financial deathpit of their own making?

Don't answer that question. I don't want to know the truth anymore...

A Little HELP From My.......Friends?

Well, it's about time!

I mean, when you're financially strapped and upside down on your home mortgage, there's absolutely nothing wrong with raising your heavy hand and asking for a little help.

Those California homedebtors microns away from going postal due to pending foreclosure and bankruptcy should be relieved to learn that H.E.L.P. will indeed be arriving!
Home Experts for Loan Preforeclosure, that is.

A stellar organization of H.E.L.P.ers will soon be opening offices all over the country in the coming months, including lovely, sunny, everyone-wants-to-live-here, 15%-home-value-growth-is-in-the-bag-for-2006-because-Gary-Watts-said-so-California.

What fantastic news for those strapped homedebtors! When you're in deep financial trouble, it's just great for someone to take the time out of their busy day to bend down, extend a hand and lift you out of the cesspool of real estate hopelessness.

I mean, just read what the article has to say about these unfortunate souls:

"There is a burgeoning of news items of home owners having to sell their properties as rising tide foreclosures of the collapsing subprime mortgage market. These generalities and statistics often obscure the real human tragedies that lie behind such stories. HELP works to make sure people can stop foreclosure, and raise funds against their properties to settle with pressing creditors."

Well, a great many of these human tragedies could have been avoided with a little financial literacy, a whole lot less stupidity, and greed by the dolts who signed the dotted line, ......but let's not get into that now.

This development is super-duper, and I don't want to sour the moment.

Gee, I wonder who these Experts are, and where they have been for the last 5 years prior to the train derailment that is the real estate industry as we are coming to know it?

You know, far be it from me to ask a dumb-ass question here, but could it be...I mean, is it just possible that these so called freaking "Experts" are the same kind of goofball "Experts" that got you into this f'ed-up financial suicide mess in the firstplace?

Unfortunately at this point in the game, it's not like the upsidedowners have a Disneyland-long line of ethical, real-estate professionals to turn to for help right now.

"No, I get by with a little help from my friends. I get high with a little help from my friends. Could it be anybody?......"