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The Market Continued To Scream: OVER PRICED!!!!!

A report from the Wall Street Journal. “The federal agency that insures mortgages for first-time home buyers is tightening its standards, concerned it is allowing too many risky loans to be extended. The Federal Housing Administration told lenders this month it would begin flagging more loans as high risk. Those mortgages, many of which are extended to borrowers with low credit scores and high loan payments relative to their incomes, will now go through a more rigorous manual underwriting process, the FHA said.”

“Roughly 40,000 to 50,000 loans a year likely would be affected, or about 4% to 5% of the FHA-insured mortgages originated annually in recent years, according to Keith Becker, the agency’s chief risk officer. ‘We have continued to endorse loans with more and more credit risk,’ Mr. Becker said. ‘We felt that it was appropriate to take some steps to mitigate the risks we’re seeing.'”

“The move is an about-face from a 2016 decision to loosen underwriting standards. At the time, the FHA removed an earlier rule that required manual underwriting for mortgages with credit scores below 620 and a ratio of debt to income above 43%. ‘Since that happened, we have observed a steady increase in the endorsement of higher-risk loans,’ Mr. Becker said.”

“The government agency’s $1.3 trillion insurance portfolio is now filled ith a large share of loans made by nonbank mortgage lenders. The biggest FHA lenders last year were Quicken Loans Inc., loanDepot Inc., and Fairway Independent Mortgage Corp., according to Inside Mortgage Finance.”

The Orange County Register in California. “One big challenge of aggressive construction to fix the region’s housing affordability headache is developers’ fear of overbuilding. Building permits for 56,523 units — single-family and multi-unit projects — were filed in the region last year. Yes, last year’s planning looks good when comparing it with the 2013-2017 average. Permits were up 4,567 units, a 9 percent boost, in 2018 vs. the previous five years. But last year was down 1,750 units (3 percent) vs. 2017 and was the second decline in three years.”

“Look at 2018: Southern California’s real estate market stalled and builders in the seven-county region cut permitting by the largest amount since the Great Recession ended. 2018’s slightly cooling job market helped create a large local supply of unsold newly built homes. And as summer began, homeowners were rushing to list their existing homes for sale. More competition for sellers, at a minimum, diminished builders’ immediate need to create more single-family homes.”

From ENR California. “The three-tower Oceanwide Plaza project in Los Angeles suffered from a series of serious design issues and delays in the two years leading up to January, when work stopped, according to a lawsuit by a major subcontractor.”

“In addition to tens of millions of dollars in back payments, Webcor’s lawsuit also seeks to foreclose on a mechanics lien on three-tower hotel, condominium and restaurant project being built in downtown LA by Oceanwide. If successful, the foreclosure on the mechanics lien could force the sale of the property.”

From The Real Deal on New York. “The forecast for Manhattan’s luxury residential market continues to be bleak, as year-to-date sales declined for the third consecutive first quarter. There were 27 contracts above $4 million signed last week – valued at $199.5 million – according to the latest luxury market report from Olshan Realty.”

“‘In my opinion, the luxury market continued to scream: OVER PRICED!!!!!’ wrote Donna Olshan, the realty firm’s president.”

The Winona Post in Minnesota. “As they draw up a new grand plan for downtown, Winona city staff and consultants sat down with Winonans last week to pick their brains. ‘I think a lot of college students think downtown and they think bars, but for the other students … it’s a real letdown,’ Elizabeth Meinders said, explaining she felt there is not enough to do downtown other than drink. Responding to a question about what kind of housing Winonans want to see downtown, Meinders pointed out that many recent development projects focus on upscale apartments.”

“‘“They’re always luxury apartments and market-rate apartments, and I don’t know who that is that’s buying a luxury apartment in Winona,’ she said. ‘Even as a professional, I can’t spend that kind of money on an apartment.'”

The Florida Alligator. “Of the nearly 56,000 students at UF, 80 percent live in off-campus housing, said Nora Kilroy, the director of UF Off-Campus Life. Six new luxury apartment complexes, similar to The Standard, will be built by 2020, meaning the majority of UF students will have to decide between better a location or a lower cost.”

“‘There are a lot of students who can’t afford these new apartment complexes,’ said City of Gainesville Commissioner At-large Helen Warren. ‘As more of these off-campus high-quality, luxury apartments are built, it’s going to have an impact on apartment complexes that are 10, 20, 30 years old.'”

“Patrick Murray tries to forget the day when he frantically ran through his apartment at West 20, grabbing his belongings off the floor as water spewed out of his toilet. When it took management an hour to respond to the flooding, he couldn’t stay another year.”

“‘If I tell you ‘Hey, water’s flying out of the toilet, please come quick,’ and it takes you almost an hour to come, that’s unacceptable,’ Murray said.”

From Nicki Swift. “Bravo’s Real Housewives franchise nets big ratings as well as big bucks for its stars, but that doesn’t mean the Real Housewives themselves are good at managing their money. Though some stars from the franchise pull in more than $1 million per season, a lot of them find themselves in dire straits. Several of the housewives have filed for bankruptcy, while others have been taken to court (and in the case of Teresa Giudice, hauled off to prison) over their money matters.”

“Former RHOC star Peggy Tanous filed for bankruptcy in 2013. In documents obtained by Radar Online, Tanous claimed that her only income at the time was listed as $2,500 in child support from her ex-husband, Micah, whom she’d never publicly acknowledged divorcing. Tanous’ home was foreclosed after she missed a whopping 75 mortgage payments.”

“Radar Online reported in February 2015 that Tanous owed $1.5 million on her Irvine, Calif. property, which was allegedly only worth $840,000. She also reportedly owed $300,000 on a second mortgage from a different bank for the home. She was three days from a foreclosure sale when she filed for bankruptcy in 2013, the site claimed, and, in 2015, her mortgage lender asked a judge to lift her bankruptcy protection because she didn’t have equity in the property.”

“The Real Housewives of New York star Bethenny Frankel was already a mogul when she became a TV star. She hinted that all that glittered within the Bravolebrity realm wasn’t gold in an August 2018 interview, telling Money magazine of her less-savvy peers, ‘They can’t afford the lives they’re living. And if the music stops, they’re going to get in some trouble.’ For some of the housewives, the music stopped long ago, but they’re still dancing their way deeper into debt.”

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This Post Has 38 Comments

  1. I sensed a great disturbance in the force, as if millions of FBs screamed out at once and were suddenly silenced.

    2. The image this suggests in my mind is Peter Schiff dressed as Obi-Wan Kenobi… Do you find that odd?

  2. ‘The move is an about-face from a 2016 decision to loosen underwriting standards. At the time, the FHA removed an earlier rule that required manual underwriting for mortgages with credit scores below 620 and a ratio of debt to income above 43%. ‘Since that happened, we have observed a steady increase in the endorsement of higher-risk loans’

    Wa? But we have been assured that loanin’ is super tight?

    ‘manual underwriting for mortgages with credit scores below 620 and a ratio of debt to income above 43%’

    Risk layering. It’s been going of for years.

    1. Wait, what! I have seen posts here by some of the “it’s different this time” shills stating how lending would not allow this to happen again. Almost seems like we are heading down the same road as we did during HB.1 🎢

  3. ‘the foreclosure on the mechanics lien could force the sale of the property’

    The F word? In California!

    ‘If I tell you ‘Hey, water’s flying out of the toilet, please come quick,’ and it takes you almost an hour to come, that’s unacceptable’

    Another installation in the “new luxury student airboxes are junk” file.

  4. “The federal agency that insures mortgages for first-time home buyers is tightening its standards, concerned it is allowing too many risky loans to be extended.

    The Onion’s business model is no longer viable, as these farcical news stories outdo even the most outlandish satire.

  5. “The federal agency that insures mortgages for first-time home buyers is tightening its standards, concerned it is allowing too many risky loans to be extended. The Federal Housing Administration told lenders this month it would begin flagging more loans as high risk. Those mortgages, many of which are extended to borrowers with low credit scores and high loan payments relative to their incomes, will now go through a more rigorous manual underwriting process, the FHA said.”

    Can someone please explain the difference between high risk and subprime? Oxide!?

    1. And what was the category of loan defaults that surged in Attom reports before they stopped reporting it? FHA circa 2014.

    2. High Ri$k = loanmoaner$ $uffer eviction operation$

      $ubprime = loanmoaner$ $uffer higher credit card balance$ + repo$$ession of $70,000 $tatus vehicle.

    3. “Risky” is an official term now defined by the FHFA.
      “Subprime” unofficially mean FICO below 640.

      Of course journalists effed it up and used general laymen’s definitions for both words. Even in general terms, risky and subprime mostly overlap, but not always.

      Example of subprime but not risky: Someone with a $50K income and 580 FICO takes out a $30K mortgage for single-wide in Pensacola.

      Example of risky but not subprime: Someone with a $100K income and 800 FICO builds a credit rating financing and paying off a car and having lots of empty credit cards. The person buys a $900K bungalow in Seattle.

      And yes, it was the prime borrowers who defaulted the most. That was the fault not only of the buyer, but of the idiot banks. Banks relied too heavily on FICO and not enough on income in their underwriting software.

      1. “And yes, it was the prime borrowers who defaulted the most. ”

        That’s because the definition of a prime borrower is stupid. It’s defined as 620 and above. It’s the equivalent of saying someone with a DUI and 2 speeding tickets is a “prime” driver. No they’re not.

        1. Even if Prime is 800 and above, basing repayability on FICO instead of income is as stupid as it gets. Yet, the gov backed up Fannie and Freddie for doing exactly that.

      2. Mega.Bank$ = $afe & too Maga.2.FAIL!

        NONbank$ = $acrificial lamb$ … HousingBubbleBu$t ll !!!!

        Bowling $tone$: “I’m in tatter$!

        Work and work for love and $ex
        Ain’t you hungry for $uccess, $uccess, $uccess, $uccess
        Does it matter? (shattered)
        Does it matter?
        Ah look at me
        I’m $hattered
        I’m $hattered
        Look at me, I’m a $hattered, yeah (shattered)
        Pride and joy and greed and $ex
        That’s what makes our town the be$t
        Pride and joy and dirty dream$ and still $urviving on the $treet
        And look at me, I’m in tatter$, yeah
        I’ve been battered, what does it matter
        Does it matter, uh-huh
        Does it matter, uh-huh, I’m a $hattered..

  6. “In addition to tens of millions of dollars in back payments, Webcor’s lawsuit also seeks to foreclose on a mechanics lien on three-tower hotel, condominium and restaurant project being built in downtown LA by Oceanwide. If successful, the foreclosure on the mechanics lien could force the sale of the property.”

    LOL

  7. Looked at some listings in my zip code over the weekend and I continue to see the trend I noted a couple months ago – some existing home listings that are notably higher than comparables from last year, as well as other current comparables. As in up +100-175 sq/ft.

    Since geography and history have prevented anything resembling a typical subdivision being built here, I’ve taken to mentally dividing houses up into various buckets based on year built, lot size and any major features like a notable location or feature such as waterfront. And generally each ‘bucket’ has had a reasonable bell-curvish distribution of asking prices when measured per pound or sq/ft.

    And now this spiking of prices for otherwise unexceptional properties (eg, 50 years old, 2000 sq ft, nothing special location) relative to others in their ‘bucket’. But I am seeing prices cuts on the ones from a couple months ago.

    My guess is they are taking the same tactic that some stores do with big sales – raise the list price so the sale price looks like a big discount while it’s actually the non-sale price. In this case, it would be so that when the listing shows up in MLS/Zillow/Redfin people will see “price (recently) reduced” indicator displayed along with it.

    Any idea if that’s actually a RE tactic to try and push a listing, or am I reading too many conspiracy novels?

    And to answer the question: OVER PRICED??? YES!!!

    1. I’ll note those are asking prices that are spiked. The majority of similar home recent sales during the winter had (non-trivial) price cuts.

    2. I wish i kept the link on Zillow but yes, builders are adjusting prices up 100k then back down in order to snag unwitting knife catchers.

    3. I have noticed the same in my area. Homes that say I sold and got removed last December have been popping back up as new listings and priced above the previous dec 2018 price. These are still sitting unsold and price reductions are kicking in on a few that I have watched. It’s a pretty pathetic sales tactic that I am sure these expert realtors encouraged to the sellers. Like you said it like a store raising the price then marking it down to make it look better. Unfortunately for the used shack dealers, it’s not working. On a side note, I am witnessing some of the lower end (750k and below which is low for my area) shacks go pending that say there for months in end. The last of the knife catchers appear to be believing the UHS “spring time buy now before your priced out forever / I’m going to die if I don’t eat” pitches. Good thing those 620 Credit score and 60k/yr salaries can afford them that 750k home. So much stupid out there!

      2. Also happening here in the two ZIP codes I regularly track. One particularly laughable one has been using it to inch the already ridiculous asking prices higher, I’m assuming to cover the taxes being paid on new construction teardowns that have been gathering dust for the past several months.

        The older, smaller homes that were demolished to build these white elephants would have sold in weeks at prices a lot more buyers would be able to afford. But no, decent housing in safe, desirable neighborhoods with good schools around here is a luxury for only the rich elites now.

    4. Seeing the same thing in my SoCal zip code. Like the increased sales from last month got RE agents thinking they can draw enough fans that they can boost ticket prices to this bubble’s farewell tour. I think they are going to be playing to a lot of empty seats. These home prices are beyond the reach of any middle class person who hasn’t inherited the down payment because, with the cost of living, you can’t save enough for a down payment on a middle class income. I just wonder how much farther the central planners can extend this epic everything bubble…slash interest rates, expand the Fed balance sheet again, QE to infinity? Surely, they won’t let the assets backing the debt laden banking system deflate.

    5. Ok, so I’m not just seeing patterns in the data where there is none.

      It looks like.. what’s that word? … desperation … creeping into the market… hoping to get one last sale at peak prices.

  10. “The move is an about-face from a 2016 decision to loosen underwriting standards. At the time, the FHA removed an earlier rule that required manual underwriting for mortgages with credit scores below 620 and a ratio of debt to income above 43%”

    Cue the MSM cries of Trump Racism. How dare he tighten FHA rules?

    Doesn’t he know every person of color is guaranteed a mortgage by the govt?

    The real crazy part is that someone with a sub 620 fico can get a mortgage at all. And I don’t think this will change much. All this does is force human to approve the loan vs a computer approving the loan. The approval will still happen. These are federal govt bureaucrats remember.

    1. “Bend, OR … As De$perate $ellers $lash!”

      Knot the one$ who in$talled outdoor Pizza oven$ !

      1. “Knot the one$ who in$talled outdoor Pizza oven$ !”

        Bronx lunch, $5. What’s a DebtDonkey do? Borrow $5000 for a pizza oven.

        7 day 5 star vacation, $5,000. What’s a DebtDonkey do? Borrower $500k for a vacation home.

        Foolish DebtDonkeys.

        1. Bronx lunch, $5. What’s a DebtDonkey do? Borrow $5000 for a pizza oven.

          I love the way you put that.

        2. “Foolish DebtDonkeys” … Ha!

          Witch beg$ Thee que$tion: “how many pizza partie$ can Thee Fooli$h DebtDonkey$ eat/$ell with $quare.ca$h before they is “elooooooongated into Thee eviction operation$?

          Mr.Ben has demon$trated the length of eviction time$ … many time$ here.within!

        3. I’ve got another one for you:

          Tuesday night movie deal at local theater, $5. What does a debt donkey do? Build a $10k theater room.

  13. If FHA is tightening it is a fairly good bet that the non performing portfolio is growing. They have for a long time had a high proportion of non performing assets. Actually as an insurer, they do not wind up with assets until a claim is made but you get the idea. Some skelatons in the closet already.

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