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Forbearance Is Not Debt Forgiveness, Nobody’s Giving You Any Money

A report from the Star Advertiser in Hawaii. “Munro Murdock, founder of Love Hawaii Realty and Love Hawaii Villas, was living the dream up until a few months ago, helping owner clients generate millions of dollars in vacation rental revenue. The company, which has dozens of vacation rental properties under management, last year serviced about 1,000 groups going to Hawaii and 5,000 guests. The start of this year looked good too. Then, COVID-19 brought a surge of cancellations amid new coronavirus fears and government lockdowns.”

“‘In about one week’s time, we had 100 cancellations that equated to hundreds of thousands of lost revenue,’ Murdock said. ‘We had to lay off or furlough nearly every single person that works for us. Normally, in a year we have five to 10 cancellations — we’re (over 150).'”

“Some vacation rental properties already are in forbearance, and some will move into short sales and foreclosures, which will impact Hawaii real estate. Distressed properties could include businesses or homes where the owner rents out a portion of it to subsidize high living costs. Some owner-occupied homes also might have been leveraged to buy investment properties.”

The Real Deal on Florida. “Miami developer Harvey Hernandez is facing another lawsuit — this time alleging his company is delinquent in payments on his downtown Miami condo tower. The lender is suing Hernandez, after his company allegedly defaulted on a $2 million loan for the Centro tower. The owner of the loan is now seeking to foreclose on nine condo units at the 352-unit, 37-story building at 151 Southeast 1st Street.”

“The lawsuit comes two months after a company tied to Hernandez settled a suit against Airbnb, which alleged that his company, NGD Homesharing, defrauded the short-term rental company in a partnership and stole $1 million. In 2016, Hernandez’s development company was sued over a failed robotic car garage he installed at the luxury condo tower Brickell House in Miami. In September, a Miami-Dade County judge awarded the Brickell House condo association $40.6 million from the development group after the technology malfunctioned and left residents without a working garage.”

From Miami Agent Magazine in Florida. “Lack of access to Federal Housing Authority mortgage loans continues to inhibit growth of Miami’s existing condominium market, according to a recent report released by MIAMI Realtors, which noted that of the 9,307 condominium buildings in Miami-Dade and Broward counties, only 13 were approved for Federal Housing Administration loans, down from 29 last year, according to Florida Department of Business and Professional Regulation and FHA.”

“‘I think the number is even lower today — it should be about eight right now,’ said Danielle Blake, chief of public policy for MIAMI Realtors.”

“‘Whether it’s eight or nine or 10 FHA-approved condos in Miami, effectively it’s really zero,’ said Anthony Askowitz, broker-owner of RE/MAX Advance Realty. ‘It’s really sad because condos represent 70% of our housing here in Miami, and not having access to FHA loans really limits their purchasing power. When condo boards remove that 10% of reserves, they need to know they’ve cost themselves not only potential buyers, they’re also lowering the value of their properties.'”

From Buffalo News in New York. “The next victim of the coronavirus lockdown could be the value of your house. The local housing market has been one of the bright spots of the Buffalo Niagara economy over the last five years. Homes have been selling fast, and prices have been rising by an average of about 7% a year over the last three years, creating wealth for homeowners in a way that largely hasn’t happened here in decades.”

“But the Covid-19 recession could change that. With one in four local workers out of a job – at least temporarily – the pool of potential buyers has shrunk significantly. Many higher-paid workers have seen their incomes drop, either from layoffs or pay cuts. ‘People don’t have the money they had. They’re using up their savings to survive,’ said George Palumbo, a Canisius College economist. ‘Housing values will fall. We don’t know how much they will fall. We don’t know how long they will fall.'”

From Habitat Magazine in New York. “The Real Estate Board of New York (REBNY) reports that New York City’s total sales volume and total residential transactions decreased significantly to reach lowest points since the first quarter of 2014 and fourth quarter of 2011, respectively, according to its first-quarter 2020 Quarterly Residential Sales Report. The data does not reflect the expected significant decline in market activity as a result of the coronavirus public health crisis and subsequent executive orders, including the stay-at-home order that went into effect on March 22. ‘Market indicators have warned New Yorkers that the housing market was entering a downturn even before the coronavirus pandemic caused an unprecedented public health and economic crisis in New York City,’ says REBNY President James Whelan.”

“The real estate industry generated more than half (53%) of the city’s total annual tax revenue in the last fiscal year.”

The Boston Herald in Massachusetts. “Boston-area rents, already beginning to soften slightly, likely will drop more as the coronavirus crisis wears on, experts say — especially as September approaches with likely far fewer college students looking to live in Boston. ‘We’ll start to see vacancies, first appearing on that higher end, and then it eventually will hit the middle of the market,’ Skylar Olsen, senior principal economist at Zillow, told the Herald. ‘And there’s extra reason to believe that rents will go soft in college towns like Boston.'”

“Demetrios Salpoglou of the local leasing platform Boston Pads wrote in a recent post that ‘Many landlords mentioned that they were asking for rents at the same price or perhaps even at a slight discount to encourage tenants to stay.’ Salpoglou said that a market analysis of the area shows that there are far more available apartments than normal.”

From CNBC. “Dana Rice, a real estate agent with Compass in Maryland, has been walking buyers through her listings over a smartphone or tablet so the buyers can ask questions in real time. Others are doing Facebook Live showings for groups. Sellers should also be very careful not to overprice their homes. There may be little to choose from on the market right now, but with the economy in free-fall, bidding wars are few and far between.”

“‘Buyers are not desperate, so the pricing strategy still must be sound,’ said Rice.”

From News 10 San Diego in California. “As unemployment soars in the US, many people are looking for ways to stretch their monthly budget. Millions of them have turned to mortgage forbearance. According to the financial tracking firm Black Knight, more than 3.8 million homeowners have entered forbearance plans with their mortgage provider, as of April 30. That represents 7.3% of all mortgages in the US.”

“‘Forbearance is not debt forgiveness. Nobody’s giving you any money,’ says Mark Goldman, a Loan Officer at C2 Financial Corp. ‘Forbearance means they’re forbearing the current payment that is due. But, somehow, that payment that’s been deferred is going to have to be repaid.'”

“The surge in forbearances could also hurt the housing market, creating cash-flow and liquidity issues for major lenders. Black Knight says that forbearance requests are declining, and could peak at around 4.5 million mortgages this summer. But Black Knight also says as many as 8 million mortgages could go into forbearance if the coronavirus pandemic continues. That would put 16% of all US mortgages in forbearance.”

“Goldman explains that would make it very difficult for people looking to buy a home to find willing lenders. ‘If a lot of people go into (forbearance), that’s going to shut off the cash flow in the mortgage world,’ he explains. ‘That’s going to drive up the price of mortgages. It’s going to drive up the credit requirements. It’s going to make it more difficult for people to get loans.'”

The Press Democrat in California. “Ross Liscum, a Santa Rosa real estate broker, said he was actually surprised there was wasn’t less activity in the housing market, given the ‘total shutdown’ in the community in April that closed businesses, schools and some government functions. Even as sellers begin to list more homes, Liscum said he expects buyers to be more reserved than they were three months ago.”

“‘I think the pendulum is going to swing. It’s going to be a buyer’s market now,’ he said. ‘There are a limited number of buyers out there actively looking. If a buyer has interest and makes an offer, sellers are going to be looking at them more diligently just because they may not see another buyer for a while.'”

“New listings are ramping up. There were 154 single-family homes listed for sale from May 1 to 8, double the number listed two weeks earlier, said Erika Rendino, co-owner of Re/Max Marketplace in Cotati. The DeWolfes have resources, they have a home to sell. But they’re also weighing their options. ‘We need to decide if California is worth the California premium’ said Kevin DeWolfe. ‘Sonoma County in general is just too expensive.'”

The Wall Street Journal. “When Nevada’s governor ordered all nonessential businesses to close, Rick Schmidt told his wife, ‘there goes the Strip.’ With it, went the jobs of scores of borrowers who owe him money. Mr. Schmidt is the chief executive of WestStar Credit Union, which caters to the employees of Nevada’s gaming industry. Thousands of blackjack dealers, bartenders and hotel housekeepers who have loans and savings accounts there are now out of work.”

“One in five of WestStar’s borrowers has asked for a deferral on a car or home loan, a number Mr. Schmidt expects to go up as casinos stay closed to control the spread of the coronavirus. ‘We see the good parts of having that tight community all the time—we know our members, we know their employers, we know what they need,’ Mr. Schmidt said. ‘The bad part we’re seeing now.'”

“Over time, regulators have relaxed restrictions on who can join, and some credit unions now resemble bigger commercial banks. The largest of them, Navy Federal Credit Union, has more than nine million members and $125 billion in assets—larger than many regional banks. But many still resemble Endurance Federal Credit Union, which is based in Duncan, Okla., and was founded in 1960 for Halliburton Co. employees and other oil-field workers.”

“Sinking demand has pushed oil prices so low that many wells in Texas and Oklahoma are closing. Halliburton has laid off or furloughed more than 4,500 employees in the U.S. since the beginning of March, including almost 600 in Duncan, according to notices filed with a state employment office. That trickles down to other companies that employ Endurance members.”

“‘This many people, in a town this size, hurting all at the same time,’ said CEO Chris Bower. ‘Find me a big bank where that’s true.’ Endurance has $155 million of assets, including $95 million in car loans. Mr. Bower said the credit union has given 90-day deferrals to many customers and stopped repossessions. ‘You’re just putting a Band-Aid on a huge wound. But what’s the alternative?’ he said. ‘I don’t want to own a parking lot full of cars.'”

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This Post Has 132 Comments

  1. ‘Over time, regulators have relaxed restrictions on who can join, and some credit unions now resemble bigger commercial banks’

    Relaxed regulations? But lending rock solid?

    ‘The largest of them, Navy Federal Credit Union’

    This outfit is seriously subprime, and has been for years. VA lending went up over 1000% since last decade. Wrong way Mel strikes again.

    2. I’m seeing some price movement in South Florida – the ugly houses are dropping faster, while the new contemporary builds are holding steady by those with bottomless pockets and those bailing from NYC.

      1. My recollection is that happened for a while last time too. The nice stuff had small discounts and continued to sell in lower volumes while the trash went back to its natural price quickly as it became home to squatters or abandonment. Then as the good stuff started to nose over in earnest the Fed stepped in.

        1. Where in the Fed’s mandate is it authorized to intervene in the housing market by putting a floor under prices? It’s pretty difficult for prices to reach affordable levels under the circumstances they have created.

          1. Where in the Fed’s mandate is it authorized to intervene in the housing market by putting a floor under prices?

            We can’t expect them to just stand by while their friends go broke, can we? I, for one, am honored to be processed into their runway foam.

  2. ‘Some vacation rental properties already are in forbearance, and some will move into short sales and foreclosures, which will impact Hawaii real estate. Distressed properties could include businesses or homes where the owner rents out a portion of it to subsidize high living costs. Some owner-occupied homes also might have been leveraged to buy investment properties’

    Well that was fast. And using shacks to gamble on more shacks? Rock solid lending dammit!

      1. By design IMO. They require everyone flying in to self quarantine for 2 weeks, and even those flying between islands! No other state imposes that on out of state residents, but these scumbags impose it on it’s own residents traveling between counties, which are the islands.

        The big wigs want to destroy the economy and specifically vacation rentals in order to buy them up for cheap. I don’t have a dog in the hunt, just observed how the elites here operate. All economic opportunities they carve out in the legislature (like legal pot) get scooped up by those same people and those connected to them. Not much has changed since the sugar plantation days.

        1. No other state imposes that on out of state residents

          TX does.

          https://dshs.texas.gov/coronavirus/travelers.aspx
          “Information for Travelers Undergoing Self-Quarantine
          On April 27, 2020, the Gov. Abbott issued an Executive Order (GA-20) to eliminate the mandatory 14-day quarantine period for individuals traveling from Louisiana. Under GA-20, the mandated 14-day quarantine for travelers from the following areas remains in place: California; Connecticut; New York; New Jersey; Washington; Atlanta, Georgia; Chicago, Illinois; Detroit, Michigan, and Miami, Florida.”

          1. Delaware had 14 day quarantine signs at the border when I blew through there a few weeks ago.

  3. ‘there goes the Strip’ With it, went the jobs of scores of borrowers who owe him money. Mr. Schmidt is the chief executive of WestStar Credit Union, which caters to the employees of Nevada’s gaming industry. Thousands of blackjack dealers, bartenders and hotel housekeepers who have loans and savings accounts there are now out of work’

    ‘One in five of WestStar’s borrowers has asked for a deferral on a car or home loan, a number Mr. Schmidt expects to go up’

    This would be a problem if there wasn’t a bubble. Observe the folly of expecting a shack wealth effect as a foundation of an economy.

    ‘Central banks may do more harm than good, says head of India’s central bank’

    June 18, 2016

    “A bridge that relies on wealth effects, you better hope that you got enough growth to justify the asset price increase which created the wealth effect in the first place.”
    — Raghuram Rajan

    https://www.marketwatch.com/story/in-interview-indias-rajan-says-monetary-policy-has-run-its-course-2016-04-15?siteid=yhoof2&yptr=yahoo

    1. “This would be a problem if there wasn’t a bubble. Observe the folly of expecting a shack wealth effect as a foundation of an economy.“

      +1

      – No direct mention in the article of housing/asset bubbles due to Fed accommodation, or related financialization of the U.S. economy, but I think it’s there if you read between the lines. Fed critics, esp. other central bankers, are as rare as hen’s teeth, so I’ll take what I can get.

      – There’s no “virtuous cycle” in an asset bubble. The end result is always the same. They pop, leaving the asset class in worse shape that when it started, necessitating even larger bubbles that follow.

      “Raghuram Rajan, governor of the Reserve Bank of India, has been leery of the unconventional monetary policy tools used by central banks since the financial crisis.”

      “Perhaps the most cogent critic of Fed quantitative easing policy, Rajan says the asset-price boost that comes with it may disappear if these assets can’t grow into their valuation. That risks still haunts the U.S. economy, he said.”

      Rajan: “This is the problem of the bridges. If you build a bridge it has to reach to the other side. So I think a bridge that relies on wealth effects, you better hope that you got enough growth to justify the asset price increase which created the wealth effect in the first place. So there is some sort of virtuous cycle that gets kicked off which becomes self-fulfilling over time. The alternative is you kick off the wealth effect now, but over time people realize the wealth ain’t coming and then you have an asset price adjustment. I think the jury is still out on which one we’re going to go through.”

      “Rajan: For sure, more moves in the direction of accommodation ought to be thought of very, very, carefully. Because we haven’t seen all the moves so far pay off. And at some point, like the generals in World War I, sending people over the trench and seeing them mowed down, you start asking whether this tactic actually works.”

    2. This would be a problem if there wasn’t a bubble. Observe the folly of expecting a shack wealth effect as a foundation of an economy.

      Real estate bubbles destroy an economy, and benefit precious few. The largest monthly outlay in most budgets is shelter. When you jack up shelter prices it steals money from all other businesses and industries. It also makes it nearly impossible to start a business on the commercial side. Yet I have not ever heard a word about this from anybody who has anything to do with policy.

      1. Think of the Housing Bubble as a massive syphon that sucks wealth away from Main Street American households into the coffers of FIRE sector firms, and you will understand why the Fed regards backstopping the Housing Bubble as essential.

  4. In a world where Price equals Value, where these two terms become interchangeable, you get this:

    “The next victim of the coronavirus lockdown could be the value of your house.”

    Note the term “the value of your house”. The writer could have just as easily used the term “the price of your house” but he didn’t.

    “The local housing market has been one of the bright spots of the Buffalo Niagara economy over the last five years. Homes have been selling fast, and prices have been rising by an average of about 7% a year over the last three years, creating wealth for homeowners in a way that largely hasn’t happened here in decades.”

    Now the writer has decided to use the word “price”. The price rise created wealth. This price rise was not caused by some sort of magic, it was caused by strangers who have decided to pay up for houses using money that probably belonged so somebody else. Nevertheless these strangers, by their actions, ended up creating wealth for numerous other strangers.

    “But the Covid-19 recession could change that. With one in four local workers out of a job – at least temporarily – the pool of potential buyers has shrunk significantly. Many higher-paid workers have seen their incomes drop, either from layoffs or pay cuts. ‘People don’t have the money they had. They’re using up their savings to survive,’ said George Palumbo, a Canisius College economist. ‘Housing values will fall. We don’t know how much they will fall. We don’t know how long they will fall.’”

    “Housing values will fall”. Now the writer has decided to go back to using the term “value”. The word “value” has a different ring to the ear than the word “price” so a skillful writer will use the one word when he wants to convey a certain ring to the ear and he will use the other word when he want to convey a different ring.

    Have any of you guys ever noticed this?

    1. The two words “house” and “home” also are words that have the same meaning when it comes to talking about real estate but they, too, have different rings to the ear. Here, try out these two terms: “house prices” and “home values”. Which one of these two terms sounds sort of cold and harsh and which one sounds warm and fuzzy? A skillful writer will use one combination of words when he want to convey a certain spin and he will use the other combination of words when he wants to convey a different spin.

          1. I have never seen such rapacious greed as that which has taken place in the rental market.

      2. I think you’re looking too deeply. “Price” is simply the number when you’re deciding whether to buy. “Value” is the number after you’ve bought it.

        The connotations of the words “house,” “home,” “rowhouse,” and “townhome” are a separate study.

      3. Mr. Banker,
        Yes, thank you for your elucidation. Have seen these uses of language exactly as you describe here for many years.

    2. ‘Note the term “the value of your house”. The writer could have just as easily used the term “the price of your house” but he didn’t.’

      The problem with this term “value” is that it is ambiguous, having different meanings in different contexts. That’s one reason why God created adjectives.

      For instance, fundamental value (of or relating to essential structure, function) has to do with the amenities which the occupants of a home enjoy, such as having a kitchen for cooking,a backyard for barbecues, bedrooms for sleeping, a garage for parking, and workplace proximity and suitable transportation alternatives for commuting.
      Fundamental value may be permanently changed by the COVID-19 pandemic, particularly if living in large urban areas loses its appeal.

      By contrast, market value is
      the price which some buyer is willing to pay for a home. This is obviously linked to fundamental value, as more attractive places to live will tend to command a higher market value, but is distinct due to the dependence of market value on the availability of financing. For example, if lenders are handing out government guaranteed subprime loans like candy to anyone who can fog a mirror, then market values can increase dramatically with no change in fundamental values.

      By contrast, market value inexorably declines in times such as the present, when the economy is on its back with many unemployed, and the operation of the housing market is severely impaired by the coronavirus quarantine measures, even for those in a position to buy, and lending standards are reverting to historic norms of precaution. But this drop in market value doesn’t necessarily imply a commensurate reduction in fundamental value. If anything, the fundamental value of occupying a home that accommodates your daily living and work needs is much higher when you are stuck there 24/7.

    3. nice analysis Mr Banker

      And here is the thing – there is not a lot of industry in Buffalo. They lost heavy industry 20-30 years ago – and now light industry.

      A lot of the jobs were re-hab’ing older housing stock in Buffalo and surrounding town. As well as the service industry – bars/pubs/microbreweries

      M&T Bank will have to be bought in the next year or so – and those were some the high paying jobs.

      In addition, a ton of fed transport $s was pumped into Buffalo Metro Rail and adjacent. With CV19 who is going to fight for upstate – certainly not Schumer who need $s for NYC union workers

    4. “Note the term “the value of your house”. The writer could have just as easily used the term “the price of your house” but he didn’t.”

      “Home is where the heart is.” – Pliny the Elder

      “Price is what you pay. Value is what you get.” – Warren Buffett

      – “Houses” are now just another commodity, while they used to be shelter, a place to live and raise a family. A house can be made a home, but not when it’s an investment to flip. Just another symptom of a financialized economy.

      – In my view, a house is a depreciating, illiquid asset with high overhead, in need of constant maintenance and repair. New roof. New sewer line. New furnace, A/C, hot water heater. It never ends. Then there’s interest payments, insurance, taxes, HOA/COA fees. Where does it stop? Does this sound like something that should be rapidly appreciating in price? No. Only if the asset “price” is inflated due to machinations and manipulations of artificially low interest rates, reduced lending standards, including DTI, FICO scores, down payments, etc. There’s no reason for higher house prices over time without artificial asset bubbles and price inflation. The Fed has directly targeted housing and stock markets for “the wealth effect”, a discredited theory that underlies our entire “economy.”

      – People have been sold a bill of goods. RRE isn’t the path to riches. It only seems that way when the asset bubble is inflating. Not so much when it’s popping.

      – Throwing in a freebee:
      “I could end the deficit in 5 minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for reelection.” – Warren Buffett

      1. “In my view, a house is a depreciating, illiquid asset with high overhead, in need of constant maintenance and repair. New roof. New sewer line. New furnace, A/C, hot water heater. It never ends. Then there’s interest payments, insurance, taxes, HOA/COA fees. Where does it stop?”

        Those are among the bone-chilling costs of home ownership that BlueSkye referenced above. Add to that the risk that you may lose the ability to make loan payments due to kob loss at the exact time that housing prices are dropping like a rock, due to widespread job loss in a recession*, and you have a complete loser of an investment.

        * I am speaking from personal experience, having lost my job in the early 1990s recession a year after buying a home. It really and truly sucked.

        1. Job, not kob…(I’m a poor phone typist).

          I should add that we were fortunate to have savings, a low mortgage payment, and alternative income sources at the time I lost my job, so we did not have to sell our house into a collapsing market. People who bought recently at nosebleed prices with subprime loans may not be so lucky.

      3. “I could end the deficit in 5 minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for reelection.” – Warren Buffett

        So true. Their re-election is the only thing they really care about.

        It seems like a very long time since anyone in that august body fretted about the debt ceiling, or uttered the words “balanced budget.”

        1. “I could end the deficit in 5 minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for reelection.” – Warren Buffett

          I forgot about this quote, but it needs to be copied and pasted all over the place, especially where politicians read.

      4. It only seems that way when the asset bubble is inflating. Not so much when it’s popping ??

        Depends on your motivation when buying…For me, I really don’t give a rats a$$ if it goes up or down in value….

        1. I really don’t give a rats a$$

          Sure, and those unfortunate people you advised to go as deeply into debt as they could qualify for to buy a house at bubble prices. Them too.

          1. people you advised to go as deeply into debt as they could ??

            Trolling again I see…So how is it that you know that I advised ?? Captain Cook must be bored…What, no mermaids around right now ??

      5. Yeah a house is a depreciating asset just like a car. People need to budget for houses like they budget for a car. Expect that its going to cost money. Accept that you’re not going to recoup that money. Accept that those payments are the cost of ownership.

    5. price = seller’s return
      cost = total expense (which often exceeds price)
      value = buyer’s return (based on his notion of worth)

  5. $840,0004 bd3.5 ba3,603 sqft
    2896 Bear Howard, Flagstaff, AZ 86005

    5/16/2020 Listed by bank $840,000
    Foreclosed – The lender assumed this property during foreclosure proceedings and now owns it.

    https://www.zillow.com/homedetails/2896-Bear-Howard-Flagstaff-AZ-86005/7368310_zpid/

    Just down the street:

    $487,469 3 bd 2.5 ba 2,341 sqft
    3050 Bear Howard, Flagstaff, AZ 86005

    ‘This is an amazing single level Forest Highlands home on the 5th hole of the Canyon Course. Large private lot with gorgeous Ponderosa’s! HUD Home Sold AS IS by elec bid only FHA Case #023-425351 FHA IN & 203K eligible. Avail 12/23/19 Open to Owner Occupants for the first 15 days on the market, with all bids received during this period opened and reviewed simultaneously on the 11th day. If no acceptable bids are received, the property will then be available to all bidders, with bids reviewed daily ‘

    https://www.zillow.com/homedetails/3050-Bear-Howard-Flagstaff-AZ-86005/7368382_zpid/

    Forest Highlands is a gated golf course thing, every exclusive doncha know. I’ve mentioned this before: last decade I was spending about half my initial foreclosure time in places like this, as these people walked away left and right.

    Here’s a question: what the heck is HUD/FHA doing backing loans in a place like this? These are almost all second shacks for people from Phoenix, etc.

    1. That first house is kinda funny with all that green. It looks like it was made of Lincoln Logs.

    3. Here’s a question: what the heck is HUD/FHA doing backing loans in a place like this? These are almost all second shacks for people from Phoenix, etc.

      HUD is a sick joke. I remember their guaranteed rural loans program which was expanded to include cities and towns. But that’s not rural, you’d say. But they considered it rural because it just wasn’t right smack dab in the middle of a huge city, it was a small city of 50k or whatever.

      We know why they’re doing this. It’s MONEY. They are desperate to keep the bubble inflated and the lobbyists and special interests’ bellies full. The only question now is what sort of shenanigans they’re going to resort to to prop it all up – AGAIN. They are doubling and tripling down on all of the failed policies.

    4. HUD/FHA doing backing loans in a place like this? These are almost all second shacks for people from Phoenix, etc. ??

      I agree….Primary residence only….

  6. “Goldman explains that would make it very difficult for people looking to buy a home to find willing lenders. ‘If a lot of people go into (forbearance), that’s going to shut off the cash flow in the mortgage world,’ he explains. ‘That’s going to drive up the price of mortgages. It’s going to drive up the credit requirements. It’s going to make it more difficult for people to get loans.’”

    It’s also going to stop stupid, pointless faux luxury from penciling out for the greedy builders who have been throwing affordable homes under the bus.

    1. Thank you for pointing out one of many upsides to the real estate reset underway.

      The gloom cloud served up by MSM-cited real estate experts these days is thick enough to be able to cut it with a knife.

      1. Oh there’s another 3 Trillion coming, so Blackrock can buy them up at inflated prices like last time.

        1. Did BlackRock manage to offload its real estate HODLings before the coronacrisis struck? If not, they must be living in a world of pain about now.

          1. Their stock price took a walloping last week.

            US Indexes End Lower Tuesday
            S&P 500 down 2.05%
            May 12, 2020 | About: BLK
            …
            In the S&P 500 real estate and industrials led losses for the day. In the S&P 100, the following stocks led losses and gains:

            BlackRock (NYSE:BLK) -8.37%

          2. Black rock is an investment manager and just manages it’s clients money.

            You are thinking of American homes for rent which loaded up on single family homes when under private venture capitalists ownership and offloaded then entire portfolio in 2013.

      3. FACEBOOK ads went from 99% Bloomberg “Mike Get It Done” add to 5% Trump and Biden, and 95% realtors listing ads. I need to get an ad blocker for FB!

          1. I thought the same thing but remembered he had a little one to share pictures of.

  7. Is now a good time to be sitting on a large pile of cash?

    My biggest question about whether to buy the BRK share price dip is not about whether the company has too much cash on the sidelines while the Fed undertakes heroic efforts to prop up risk asset prices. Rather it concerns the successor plan. Uncle Warren is a year younger than my dad, who retired 25 years ago, and his personal perspective is still the public face of Berkshire-Hathaway. Is he replaceable?

    The other concern regards how much they are currently losing in core businesses, such as high end real estate sales. I’m guessing they are losing a bundle.

    FA Center
    Opinion: Warren Buffett hasn’t lost his touch and Berkshire Hathaway’s critics — as usual — are short-sighted
    Published: May 16, 2020 at 2:01 p.m. ET
    By Mark Hulbert
    Keep expectations real when a skilled investor lags the market
    Photo by Alex Wong/Getty

    Should you dump Berkshire Hathaway stock because it’s lagging the market?

    At least several longtime fans of Berkshire Chairman Warren Buffett apparently think so, as does my fellow MarketWatch columnist Howard Gold. Buffett’s transgression, at least in part: being too defensive, sitting on a large pile of cash.

    Clearly, the numbers don’t look good for Berkshire Hathaway stock (BRK.A, -1.06% BRK.B, -0.98%), which is down almost 25% so far this year, versus a 10.9% loss for the S&P 500 (SPX, +0.39%). Moreover, last year the stock also lagged the S&P 500 by a significant margin: 11.0% to 31.2%, respectively. (These returns reflect the reinvestment of dividends.)
    …

          3. Dont get me wrong. Nothing against folks that live in mobile park. However, 4 or 5 years ago my wife looked at some mobile home near Huntington Beach. Great price, several blocks from the beach. Guess what, you don’t own the land and need to pay land lease $2.8k per month in addition to paying for the mobile home. Yeah no thanks.

          4. A trailer park near Rehoboth Beach, DE, has older 2/1 trailers for about $50K with $700/mo lot rent. Includes water, mowing, tax, trash, pool. Probably not a bad deal if you’re a single mom selling taffy on the boardwalk. You could house yourself and a couple kids for a thousand bucks a month. (we’re talking pre-COVID when people still bought taffy) It would be a squeeze, and not a great life, but it would be sustainable if you stayed healthy.

          5. Guess what, you don’t own the land and need to pay land lease $2.8k per month in addition to paying for the mobile home.

            Whoa, now that’s some lot rent. Even in Boulder it was only $500 when I bought the doublewide back in 2009. I think the ex is paying about $700/mo now on it. It’s the only way to live cheap in Boulder.

          1. “Businesses” such as this are what Occasional Cortex wants to throw trillions more of your tax dollars at.

  8. Do we believe the following? I thought that the city income tax – especially on the high paid financial/securities/insurance sectors would generate more than that especially with a almost 5% rate on high earners

    —-
    “The real estate industry generated more than half (53%) of the city’s total annual tax revenue in the last fiscal year.”

    1. “The real estate industry generated more than half (53%) of the city’s total annual tax revenue in the last fiscal year.”

      Nobody loves a housing bubble more than the local county assessor.

  11. Did your defensive real estate investments get shlonged by the novel coronavirus?

    Market Extra
    How the coronavirus recession has rewritten the traditional bear-market playbook
    Published: May 16, 2020 at 2:32 p.m. ET
    By Chris Matthews
    Utilities, consumer staples and real estate have disappointed in recent weeks
    MarketWatch photo illustration/iStockphoto

    Traditionally defensive equities sectors have performed surprisingly poorly during the ongoing coronavirus recession while typically cyclical sectors, most especially information technology, have remained a bulwark for investors, and these dynamics may be reason for investors to rethink time-tested concepts of defensive and offensive investing, analysts say.

    The concept of defensive investing was popularized by Warren Buffet’s mentor Benjamin Graham in his 1949 book “The Intelligent Investor” in which he advised conservative investors to stick to “shares of important companies with a long record of profitable operations and in strong financial condition.”

    Certain sectors of the economy, including utilities and consumer staples, have long been home to a large proportion of such firms, and shares of these companies have been especially prized during economic downturns because they have a history of maintaining profits and dividend payments, even during the worst of times.

    But it may now be time to re-define the concept of defensive investing.

    “Our definition of defensiveness has changed,” Rebecca Chesworth, head of equity, sector and ESG strategies at State Street Global Advisors told MarketWatch. Investors who employ an ESG strategy examine criteria such as environmental, social, and governance factors.

    “We’re demanding more from defensive companies in terms of cash flow and quality of the balance sheet, but also we’re seeing technology stocks as a defensive play because tech products are now a staple purchase that people will carry on buying whatever,” she said.
    …

  12. A metric that I recall from last time around was that realistic, sustainable house prices are roughly equal to 10 years rent…locally that would cut prices in half, back to 2010 levels. Expect to see LOTS of strategic defaults here in California again if and when that happens as we are a non recourse state. from the web…
    “There are currently 12 non-recourse states: Alaska, Arizona, California, Connecticut, Hawaii Idaho, Minnesota, North Carolina, North Dakota, Texas, Utah, and Washington. In non-recourse states, the lender may foreclose, but as mentioned, they must accept whatever they receive from the foreclosure sale, which usually spells out a loss.”

    1. 2010 prices were many multiples higher than long term trend price and triple construction cost.

    2. sustainable house prices are roughly equal to 10 years rent

      It was often said 100 months rent. It is perhaps useful in a rough sense for those who cannot do math, will never move (ever) and those who do not and will never have savings. If it might happen that rents/prices will go up or down it is meaningless.

      Our economy has been hit by a meteor(.gov). We are already well into a new (to some) process of declining household income, home prices and rents. To buy anytime soon at 100 x rent would be financial suicide.

      1. Agree, if there is any economic stability in the future it is a long ways off and I will not be buying anytime soon…but that figure worked well for me when I bought in a stable market waaay back in 1997, paid $115K for a place that would have rented for about $1000/mo and my total payment was that much including property taxes and insurance. Bought w/ a GI Bill loan and zero down, sold in early 2007 just before the bubble popped (thanks in large part to the HBB) for $315K…

    3. A metric that I recall from last time around was that realistic, sustainable house prices are roughly equal to 10 years rent

      That makes perfect sense at normal interest rates. But they’ve intentionally driven interest rates artificially low in order to distort that calculation and make everyone willing to buy at 20 years worth because that brings the mortgage payment in line with rents. It’s a howmuchamonth calculation.

      1. It’s a howmuchamonth calculation.

        For those without savings. The other end of the stick is 0% interest earned on savings.

  13. Is it safe to assume that the worse the real economic news, the more the stock market will go up?

    Bad economic news inevitably leads to bigger bailouts and increased stimulus.

    1. The Financial Times
      Coronavirus business update 30 days complimentary
      US economy
      Jay Powell warns US recovery could take until end of 2021
      Fed chair says economy may not fully bounce back until virus vaccine is available
      Jay Powell has said more emergency measures may be needed to mitigate the economic damage from the pandemic
      © AFP via Getty Images
      Lauren Fedor in Washington 2 hours ago

      Federal Reserve chair Jay Powell has warned that the US economy may not “fully recover” until there is a vaccine for Covid-19, and possibly not until the end of 2021.

      “Assuming there is not a second wave of the coronavirus, I think you will see the economy recover steadily through the second half of this year,” Mr Powell told CBS News in an interview that aired on Sunday. “So, for the economy to fully recover, people will have to be fully confident. And that may have to await the arrival of a vaccine.”

      Mr Powell said the economy would eventually recover, but “it may take a while . . . it could stretch through the end of next year, we really don’t know”.
      …
      Mr Powell said last week that “additional policy measures” might be needed from the Fed and fiscal authorities to prevent greater long-term damage to the US economy.

      The Fed’s crisis-fighting measures, including cuts in base interest rates to near-zero and a series of special programmes to supply liquidity, have led to sharp rebounds in financial markets from lows in late March.

      But economic data remain bleak. US unemployment surged to a postwar high of 14.7 per cent in April, with more than 36m Americans filing for unemployment benefits since the coronavirus pandemic first spread to the world’s largest economy.
      …

      1. A couple financial advisors are saying that the economy will come back, but never to the levels it was in January. He expects unemployment will drop, but hover around 10%. People are just going to convert into saver mode instead of spend indiscriminately.

        1. People are just going to convert into saver mode

          That would be logical. People who went into this situation in a condition of debt just lost at the game of musical chairs.

      2. US recovery could take until end of 2021 ??

        I would like to think that but I have significant reservations…Hell, we don’t even have a clue what the new normal is going to look like…

    2. Federal Reserve
      The Fed
      Fed says pandemic has created U.S. financial sector fragility that will last for some time
      Published: May 16, 2020 at 9:25 a.m. ET
      By Greg Robb
      Financial institutions, including banks, could experience strains
      Regulators are urging banks to give their customers loans to help them weather the coronavirus national emergency. FREDERIC J. BROWN/AFP/GettyImages

      The coronavirus pandemic has created a fragile U.S. financial system that could last “some time,” the Federal Reserve said Friday.

      “The strains on households and business balance sheets from the economic and financial shocks since March will likely create fragilities that last for some time,” the central bank said in its latest semi-annual report on the financial sector.

      As a result, banks and other financial institutions “may experience strains as a result.”
      …

      1. The fragility was already in place long before the first U.S. case of COVID-19 was confirmed, in the form of a massive debt buildup during the protracted period of extraordinary accommodation over the preceding decade. But the coronavirus pandemic certainly provides a convenient scapegoat.

        History has not dealt kindly with the aftermath of protracted periods of low risk premiums.

        — Alan Greenspan

        1. “The fragility was already in place long before the first U.S. case of COVID-19 was confirmed, in the form of a massive debt buildup during the protracted period of extraordinary accommodation over the preceding decade.”

          +1

          – Recall the repo funding crisis starting in Sept., ’19.
          – Yes, “The Everything Bubble”, including stocks, corp. bonds, and RE (CRE+RRE) was already popping before the CCP virus pandemic in Q1, ’20.
          – The Fed and other central banks caused it by 10+ years of easy money and low rate policies; it was “baked into the cake.”
          – Yes, the pandemic is already being used as a convenient scapegoat. The Fed can do no wrong. /s
          – The Fed has blown 3 asset bubbles in 20 years, all of which popped and caused massive financial dislocations each time. In case anyone’s wondering, yes, this is the third one. 3 epic fails in 20 years. 3 “100 year events”, and yet the Fed is still in charge of the economy. Does anyone else see a problem with this picture? Hello? Bueller?

    1. Nearly $1M for that POS?!

      And yes, nice profit they’re trying to get after only 2 months ownership.

      2. Original owner probably selling or their kids. New tax rate will be based on the sale price. They probably paid 2019’s taxes and the new buyer will be on the hook for the new tax value in 2020. Around 10k I think, ouch.

    4. “With a little love this is the perfect starter home for a growing family or someone looking to build some equity. Boasting a large corner lot, space to park the RV or boat,”

      So somebody with a boat or RV is going to buy a million-dollar “starter home?”

      1. I suppose the message is “live free of work”

        The American dream used to be “have a good paying job”. Now it’s about becoming a rent seeker.

        Working is for chumps.

        1. Working is for chumps.

          Partly because it doesn’t pay like it used to and not coincidentally a lot of the jobs went elsewhere.

  16. “Endurance has $155 million of assets, including $95 million in car loans. ”

    So the majority of their “assets” is money that doesn’t currently exist, i.e. the loan payments that haven’t come in yet. And under current conditions, a lot of those payments won’t come in.

  17. I’m doing some research this afternoon, came across this:

    $400,065 5 bd3 ba2,268 sqft
    3530 Estate Dr, Stockton, CA 95209

    Foreclosure information
    12/16/2019 Foreclosure auction unpaid balance
    9/18/2019 Home in default $20,793 past due
    2/5/2018 Loan issued $335,468

    https://www.zillow.com/homedetails/3530-Estate-Dr-Stockton-CA-95209/15281497_zpid/

    This is actually a pre-foreclosure as the auction is scheduled for the court house on May 29th. The auction referred to above was likely postponed. They didn’t last long. I’m seeing a lot in Santa Clara.

    1. What is the point of them listing pre-foreclosures? They can’t sell it until after they foreclose. Are they trying to gin up interested parties so they don’t have to hold it longer after they take it on the courthouse steps, or are they hoping to draw bidders to the courthouse steps?

    2. $250,577 3 bd2 ba1,110 sqft
      449 Pine St, Modesto, CA 95351

      12/29/2019 Foreclosure auction $91,263 unpaid balance
      9/18/2019 Home in default $3,096 past due
      3/18/2013 Loan issued $93,769

      https://www.zillow.com/homedetails/449-Pine-St-Modesto-CA-95351/15997651_zpid/?

      What caught my eye about this one was the property preservation date stamp in the photos – January 2012. A fully furnished house! That takes me back to when I’d be asked to secure a secondary door (so the FB could still get in) and take photos of all their junk.

      DATE EVENT PRICE
      3/19/2013 Sold $95,500
      Source: Public Record
      2/12/2013 Listing removed $95,500
      Source: PMZ Real Estate
      2/1/2013 Price change $95,500 (-4.5%)
      Source: PMZ Real Estate
      1/19/2013 Listed for sale $99,950 (+81.7%)
      Source: PMZ Real Estate
      10/5/2012 Listing removed $55,000
      Source: SACM
      5/8/2012 Listed for sale $55,000 (-40.2%)
      Source: SACM
      7/24/2009 Sold $92,000 (+162.9%)
      Source: Public Record

      Based on the price history I’d guess this pink beauty has now been sold and and about to be foreclosed for a second time in 8 years. Auction is at the courthouse on 7/20/20, so save your pennies! Cash only.

      1. No F**king way anyone buy this for 250k. Ben, what’s the starting bid and the min reserve? It’s in Modesto so $55k to $92k is about the range that makes sense.

      2. Central A/C = single window unit stuck through the wall. Priceless.

        The expensive finishes glued into a tiny crap shack screams mania.

          2. It’s got no windows… is this typical?

            Only for meth heads or wannabe flippers who don’t even have the cheddar for a few Home Cheapot vinyl jobs.

            Modesto is the kind of place where you get murdered in your own front yard just because.

          3. It’s got no windows

            It’s got no siding either. Basically a garage with unfinished attached shed.

    4. 400K for an OK but not great neighborhood in Stockton? At least its close to the nicest Walmart in town. Didn’t anyone in Stockton learn from the last bubble? It’s pop hit Stockton harder than any other city in California. Here we go again.

      1. It’s not about “learning,” it’s about market timing the FED’s Weimar proclivities.

  18. I’m guessing a lot of homeowners will be shocked upon discovery that the forbearance they were generously offered eventually ends up subtracting from the value of their accumulated equity, especially if market values plummet over their period of nonpayment.

    1. generously offered

      It was never that. Just an incentive to stay hidden under their beds and not out in public, for a time.

  19. Superior, CO Housing Prices Crater 16% YOY As Boulder County Turns Toxic On Mortgage Defaults And Appraisal Fraud

    https://www.movoto.com/superior-co/market-trends/

    As a noted economist said so eloquently, “I can ask $50k for my 10 year old run down Chevy pickup but where is the buyer at that price? So it is with all depreciating assets like houses and cars.”

    1. Whomever it was who was able to buy up crude oil on the cheap a couple of weeks ago (and was able to store the stuff) now gets to enjoy sitting in the catbird seat.

    2. With recent talk of supply cuts, it seems negative oil prices are henceforth off the table.

      Coronavirus business update 30 days complimentary
      Oil
      Cheer spreads through US oil market as lockdowns ease
      Prices climb after operators cut output faster than many analysts expected
      Oil products supplied to the US market — a proxy for demand — hit 16.8m barrels a day in the first week of May
      © AFP via Getty Images
      Derek Brower, US energy editor 5 hours ago

      Analysts in the US oil market are growing increasingly confident of stronger prices, as coronavirus lockdowns ease and consumption creeps up just as production plummets.

      On Friday, West Texas Intermediate, the US crude benchmark, closed at $29.65 a barrel, up more than 40 per cent since the start of May, as traders responded to improving supply-demand fundamentals.

      Oil products supplied to the US market — a proxy for demand — hit 16.8m barrels a day in the first week of May, said the federal Energy Information Administration. That is 4m b/d less than a year earlier but, crucially for market sentiment, 9 per cent higher than the week before.

      US petrol demand, down about 30 per cent from a year ago, rose 3 per cent in the past week, said Patrick De Haan of GasBuddy, which analyses fuel prices and consumption.

      “It’s a partial resumption of economic activity,” said Mr De Haan, explaining the modest uptick. “Also, we’re getting cabin fever.”

      The brighter outlook comes just ahead of an ominous moment for the market, as front-month WTI expires on Tuesday. Last month a historic capitulation during frantic trading a day before the contract expired drove its price to minus $40 a barrel, spreading havoc from China to North Dakota.

      Regulators last week cautioned traders to be prepared for another plunge below zero. Duly warned, speculators have this time exited the contract in good time — open interest on Friday was about a third the level it hit in the days before expiry in April.

      “Never say never, but the potential for negative oil is very low at this point,” said Stephen Schork, editor of oil-market newsletter The Schork Report.
      …

    1. “Another Real Estate Crash Is Coming
      By Shehryar Qazi

      The COVID-19 crisis, like the subprime mortgage crisis a decade ago, has sparked major public interventions to stabilize the financial markets. But the Fed isn’t stepping in to bail out the real estate sector — and the big losers are set to be ordinary households.”

      If they bailed out real estate back in 2012 when Quantitative Easing was limited, why wouldn’t they do it again this time, now that it is Unlimited? Either everyone who requests a bailout gets one this time, or else the Fed has some challenging choices ahead!

      1. ordinary households

        I think that if the Fed can keep the bankers happy at the cost of households, they will.

      1. “Simply asking for forbearance screwed him.”

        People who became accustomed to loans getting handed out like candy seem shocked and dismayed to learn that the rules changed overnight.

        A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.

        — Mark Twain

  24. ‘If a lot of people go into (forbearance), that’s going to shut off the cash flow in the mortgage world,’ he explains. ‘That’s going to drive up the price of mortgages. It’s going to drive up the credit requirements. It’s going to make it more difficult for people to get loans.’”

    “That’s going to drive up the price of mortgages.”
    “It’s going to drive up the credit requirements.”
    “It’s going to make it more difficult for people to get loans.”

    Hey Goldman, you forgot one…

    “It’s going to make real estate prices PLUMMET.”

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