Investors a big share of home defaults in 4 states

[Up2Late]

Source: Reuters

Investors a big share of home defaults in 4 states

Fri Aug 31, 2007 4:03pm ET135

By Patrick Rucker

WASHINGTON, Aug 31 (Reuters) - Real estate speculators account for a large share of failed loans in four states hard hit by foreclosures, according to a leading mortgage-lending trade association.

While non-owner occupied homes account for 13 percent of defaults among prime-rate mortgages across the country, the rate is much higher in Nevada, Florida, Arizona and California, according to a report by the Mortgage Bankers Associations released on Thursday.

Through the end of June, defaults among non-owner occupied homes with good credit terms were 32 percent in Nevada, 26 percent in Arizona, 25 percent in Florida and 21 percent in California, the group said. "Defaults are on the rise in most parts of the country, but it is not always the case of a homeowner losing his or her home," Doug Duncan, the chief economist for the Mortgage Bankers Association, said in a statement. "It is often the case of an investor gambling on a continued increase in home values and losing that gamble."

Investors and builders flooded markets like Arizona, California, Florida and Nevada, pushing up the inventory and prices of homes. As the housing market has cooled in recent months, many of the investors who bought homes in those markets are now stuck with properties with ballooning payments and no ready buyers, Duncan said.

Read more: http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-08-31T200351Z_01_N31275774_RTRIDST_0_ECONOMY-SUBPRIME-DEFAULTS.XML

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See, THIS is the REAL reason for the current crisis in the Mortgage market, but it's so much easier for our so-called "president" and the Republic Party and the wolves on Wall Street to blame the "people who bought more house that they could afford..." instead of their own policies of de-regulation (translation: scrapping old Laws) and "smaller government" (translation: fewer people working in the offices that process and enforce the Laws that regulate Republic Party business "people."

[Up2Late]

1. More here...

<http://marketplace.publicradio.org/shows/2007/08/31/PM200708312.html>

TEXT OF STORY

Tess Vigeland: So everyone from consumer advocates to members of Congress and now President Bush want to extend a helping hand to homeowners on the verge of defaulting. But a new study from the Mortgage Bankers Association suggests some of those borrowers might not be so deserving of that help.

It turns out house flippers and real-estate speculators may be driving a huge share of the nation's mortgage woes. Marketplace's Sam Eaton has that story.

Sam Eaton: Investors that drove much of the double-digit gains in some of nation's hottest real-estate markets are now dragging those same markets down.

The Mortgage Bankers Association reports that as many as a third of the defaulted loans in places like Nevada, Arizona and Florida belong not to homeowners, but to speculators....

(more at link) <http://marketplace.publicradio.org/shows/2007/08/31/PM200708312.html>

[Snarkoleptic]

5. Many of the most ill-timed spec purchases were done by...

mortgage industry 'professionals' who'd never seen a market downturn.
They bought the Carlton Sheets DVD's and watched 'Flip this house' and were certain that they couldn't lose.
OOOPS.

[roseBudd]

11. Anyone who has seen Flip that House knows the flippers went for candy. granite, cherry etc

They took modest homes in modest neighborhoods and made them overly glitzy.

[Gormy Cuss]

7. The last quoted person, Retsinas, is a former HUD official

and is a nationally recognized senior housing analyst.

Nicolas Retsinas directs the Harvard Joint Center for Housing Studies. He says it's a case where too many people bet on the market — and lost.

Nicolas Retsinas: They very commonly got adjustable-rate mortgages because they only intended to hold the property for a little while. So as the market turned — and turned so dramatically — it's not a surprise that investors are caught at the turn.

The Mortgage Bankers Association says many of those investors are simply walking away. Some put down as little as two to three percent on their properties. But the number of defaulting investors still pales against the ranks of homeowners in trouble.

Retsinas says more than a million people are on the verge of losing their homes. And he says that's who should be singled out for help.

The level of investor foreclosures should be of concern in the four states with high rates but the reality of the 11% national rate means that 89% of those in foreclosure are owner-occupants.

[sandnsea]

2. Not just Republicans

I fought with people on DU for several days about this. It's hard to get change to protect the people when there's plenty of Democrats to line up along side Republicans - and it's always surprising how many people will do it when money is the issue.

[Up2Late]

3. Here's a link to a PBS News Hour report on the "Housing Boom" from 2005 and more...

...links to older reports at this link too: <http://www.pbs.org/newshour/bb/economy/jan-june05/housing_5-17.html>

[aquart]

4. Thank you. That's exactly what it is.

Speculation run rampant. Here's a thought: when people start referring to something as a "bubble," isn't that the time to get the hell out, not in?

[Up2Late]

6. Take a look at this! August 2007 Economic Forecast from The Mortgage Bankers Association

Take a look at this bit of unreported News!

August 2007 Economic Forecast from The Mortgage Bankers Association:

<http://www.mortgagebankers.org/files/Bulletin/InternalResource/56297_.pdf>

Look a the ACTUAL numbers as compared to the wishful thinking Forecast numbers next to the line: Inventory Investment (Bil. Chain 2000$)

Anyone know what that means?

And do those numbers look as bad to you as they do to me?:shrug:

<http://www.housingamerica.org/RIHA/RIHA_NewsArticle.aspx?56297>

[no_hypocrisy]

8. Speculation is speculation.

What we're experiencing now is similar to the stock speculation of the 1920s where you could buy shares of stock for ten percent down, owe the rest to your broker, wait for the value of your stock to go up, sell, pay your broker, and re-invest your profit into more stock purchases, using ten percent down. And like 1929, the ride came to a conclusion when speculators stopped buying and sold, making the overall value of the purchases first stagnate and then decrease, leaving other speculators with investments that would cost them their wealth. The villain was easy credit and the value of the investment seemingly going up perpetually. Makes no difference whether it was stock or real estate.

I knew something was up four years ago at the law firm where I worked. A piece of property to be purchased by a strawman would be ready for closing on a Monday and the same property would be ready to be sold and scheduled for a closing four days later with an increase of five figures. Flipping. No repair or rehabilitation of the building or the land. Just flipping.

[sendero]

10. Folks need to understand,....

.... that just because a house was purchased to live in doesn't mean it wasn't purchased speculatively.

Any home where the purchase decision was based on the expectation that the value/price would rise, well that IS SPECULATION. And plenty of "homeowners" were involved in it, you can rest assured.

[fed-up]

13. BINGO!!! nt

[Honeycombe8]

14. Not really. You left out the time element.

EVERYONE expects his home to increase in value eventually. That's because that is ALWAYS what happens with real estate in the U.S., over time....unless a neighborhood falls apart or a catastrophe occurs or something. It's not speculation when some increase in value over time is the norm. It would be speculation to expect a decrease in value over time, since that is the exception.

I would say that speculation involves the expectation of a CERTAIN increase in value WITHIN A SPECIFIED PERIOD OF TIME. That is....a speculator/investor may buy a house, anticipating a 10% increase in value within 12 or so months of purchase. A typical homebuyer, though, would expect the home to increase some unspecified percentage by the time they go to sell it in 5 to 20 years....and they are almost always right about that. So it's not really speculation, when an increase in value is the norm.

[sendero]

15. Yes...

... I left that out for the sake of simplification. Forget time line, if you expect your house to increase in value greater than the real rate of inflation, you are a speculator.

[rustydad]

16. Yes

My son is a resent purchaser of a home to live in. He sold a condo his new wife owned for 600 thousand and bought a 3bed/2bath small lot tract house with terrible landscaping for 1 million. He is a fireman and makes about 100 thou a year with lots of overtime. He is just barely making it. I tried to talk him into selling the condo at the peak a year age and renting for a while until the bubble was collapsed but to no avail. He figures that in the long haul it will all come out OK. My fear is that unlike Great Depression One, number Two will never end. We stand at the cliff of diminishing resources world wide, specially clean energy. In the 1920s and 30s we had no such resource issues. There was plenty of everything except money and jobs. Things are very different today. Bob

[Sen. Walter Sobchak]

9. nothing new and good!

When I worked on bankruptcy filings real estate "investors" were the most frustrating cases, with everything from idiots who got in over their heads "flipping" houses to just outright idiots who took out multiples of mortgages to buy properties that had nowhere to go but down.

I would see these losers who got their education in real estate from late night infomercials, reality tv and misc. get rich quick seminars. I even saw a couple who mortgaged a paid for house to buy a house in Hollywood they wanted to flip - they didn't have a fucking clue what they were doing and were oblivious to things such as the perils of asbestos, mold, pre-war plumbing and wiring. They honestly believed that all they had to do was put down some tile and paint and they would cash in with a $200,000 profit.

Then you get the people who don't have a pot to piss in bidding on property on the courthouse steps sight unseen - well guess what uncle cracker, your now responsible for cleaning up a meth lab and oh yeah - these guys will virtually always default on their first mortgage payment and your home sweet meth lab is going to need more than a little paint.

Fuck Them All!

[fed-up]

12. I have notified two "flippers" that the foreclosed houses they just bought were former meth labs

One already knew, but claimed that "the charges were dropped" and so it didn't really matter

and the second was somewhat upset to find out that she bought a worthless property




Unfortunately the property I bought for a home was not bought at foreclosure, but was bought from the nephew of the owner that had lived there 50 years. What he didn't tell me was that his step-son had been busted for cooking meth in a travel trailer on the property....



If a person is buying or renting a property they need to check with the neighbors and their local police/sheriff to find out if there ever was a meth lab on the prop0erty. Only 5-10% of meth lab are ever busted, so checking with the neighbors is of utmost importance. Clean-up costs can run from $3K-$100K....

Of course the media and realtor's association have done little to educate us about this huge problem....

[Sen. Walter Sobchak]

17. well the meth lab flip never makes it on A&E or TLC

the biggest drama/trauma their flippers seem to encounter is a contractor not showing up, hell I understand the shows on A&E are 100% staged and fictional.