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The Reason Banks Can’t Lend Is Because There Isn’t Equity To Lend On, It’s A Chicken And Egg Scenario

A report from Reuters. “U.S. homebuilding dropped by the most on record in April and permits for future construction tumbled. The report from the Commerce Department on Tuesday added to dismal data this month showing a staggering loss of 20.5 million jobs. Housing starts tumbled 30.2% to a seasonally adjusted annual rate of 891,000 units last month, the lowest level since early 2015. The percentage decline was the biggest since the government started tracking the series in 1959.”

“‘Fewer people are going to be interested in buying a home and committing themselves to years of mortgage payments when they are concerned about their job and income prospects,’ said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.”

The Orange County Register in California. “Home sales plummeted in Southern California in April, the first full month caught in the grip of the coronavirus lockdown, new housing figures released Tuesday show. Tighter lending standards also made it much harder for homebuyers to get financing last month. Non-traditional loans vanished, minimum FICO scores were raised and jumbo loans used to buy higher-cost homes grew scarce. ‘Buyers were less able to secure loans during this time,’ said Taylor Marr, lead economist for Redfin. ‘LA, in particular, has a higher-than-average share of homes that (require) jumbo loans.'”

“Additionally, buyers fearful of future price drops paused their search process or withdrew their offers. About 40% of buyers withdrew offers in April, said CoreLogic Deputy Chief Economist Selma Hepp.”

From Realtor.com. “The vacation home rental market, dominated by such players as Airbnb, VRBO, and HomeAway, has taken a huge hit. Many homeowners who had relied on rental income have been forced to either try to sell their homes or completely revamp their business model to stay afloat. ‘One of the things we’re seeing is a remarkable collapse of the short-term rental market, particularly in cities. The viability of running dedicated Airbnb operations is not looking good right now,’ says professor David Wachsmuth, who studies home-sharing platforms at McGill University’s School of Urban Planning.”

“A pair of nightlife hot spots saw the biggest increases in furnished short-term rentals in the United States: Nashville, TN, with a whopping 185% leap, and Austin, TX, with 160%. The number of furnished rentals being offered for longer stays in New Orleans shot up 48%—sixth highest in the U.S.—though, it probably would’ve been far higher had local governments not banned nearly all short-term rentals six months ago.”

“‘It’s causing [rental] prices to fall in areas that had a lot of short-term rentals,’ says Brett Richman, broker and owner of Nola Homes Co. ‘Landlords are heading for dark times. They’re used to getting, like, $5,000 a month and now are looking for tenants for $1,200 per month.'”

From NBC 2 in Florida. “For more than a month, vacation rental homes on Fort Myers Beach have been empty. ‘It has devastated us and the fact that we’re not currently open right now, every day it’s really sucking the life out of our companies,’ said Peter Albert with Coastal Vacation Properties.”

From KOAA in Colorado. “It’s usually the start of the busiest time of year for Airbnb hosts and short term rental owners, but with COVID-19 still an issue some owners are getting creative in order to stay afloat. Airbnb Host Elliott Orsillo said, ‘I think I was adequately scared in February.’ That’s how Orsillo felt when news of the coronavirus first started to spread. ‘We kind of saw the writing on the wall.’ He shared that a big wave of cancellations came through. ‘We’re running at probably…two-thirds both on a booking rate and on an occupancy rate.'”

“Ryan Spradlin, a short term rental owner, said he’s experienced ‘somewhere in the range of $10,000 to $15,000 worth of cancellations.’ Orsillo said, ‘We’ve also flipped a lot of the units to more of a longer-term rental so whether it’s finding someone that’s looking for three, six, or twelve months fully furnished…that’s helped kind of create some stability there.'”

“If you’re a host struggling right now Spradlin suggests checking out the Colorado Springs Short-Term Rental Alliance group on Facebook for advice and support.”

The Wall Street Journal. “Many investors have long wagered that the student-housing sector was a safe bet even during tough economic periods. The pandemic is threatening that notion. An online fall semester could prove disastrous for them, and in some places it’s already shaping up that way. ‘Everybody’s got heartburn,’ said Shawn Lubic, director of student housing capital markets at Cushman & Wakefield, which advises investors and markets properties in the sector. ‘We’re at the mercy of the schools.'”

“Student Housing Solutions, which serves students near three Florida campuses including Florida State University, said it has leased for the fall about 60% of its properties. That’s about 15 percentage points behind preleasing levels at this time last year. ‘Operators believe student housing is recession proof,’ said Jennifer Pearce, chief executive of Student Housing Solutions. ‘But we’re not pandemic proof.'”

“Analysts say the pandemic has undermined the notion that student housing is always a safe bet, and some warn that even campuses planning to open could soon change their minds. ‘It just takes one outbreak to shut it all down again,’ said John Pawlowski, a senior analyst at real-estate research firm Green Street Advisors.”

“Green Street last week downgraded industry giant American Campus Communities Inc. to sell from hold, citing concerns that occupancy could take a near-term hit. American Campus shares are down 20% since March 13.”

From Capital News Service. “The Great Recession that fueled a mortgage and housing crisis more than a decade ago has faded from memory for most Americans. But not for millions of homeowners–mainly in rural and minority communities–who continue to struggle with depressed home values and underwater mortgages. And now, worries of a new recession brought on by the coronavirus crisis could compound their troubles.”

“‘COVID is going to introduce a period of lower demand for housing,’ said Jason Richardson, the director of research and evaluation for the National Community Reinvestment Coalition. ‘This is important, since it is this demand for housing that supports home values,’ he said, adding that within a few months he expects areas where home values have been depressed for years to see values fall even further.”

“An analysis of CoreLogic data by Capital News Service found 10 clusters across the United States with high levels of underwater mortgages, including parts of Maryland, New Jersey, Connecticut, Illinois and Iowa. According to a separate analysis by CoreLogic published in March, Maryland–one of the nation’s wealthiest states–ranks seventh in the nation for the percentage of underwater residential properties.”

“The unprecedented COVID-19 pandemic has put a financial strain on families everywhere, but families without equity in their homes are more likely to end up in foreclosure, according to CoreLogic’s chief economist Frank Nothaft. ‘If you’re in negative equity, (you) may be better off allowing the foreclosure,’ he said.”

“Negative equity is a big problem for families because it erodes their net worth and weakens their sense of financial security. Many homeowners depend on rising home equity to start or grow businesses, pay college tuition, retrain for better jobs and fund their retirement.”

“Richardson contends that bank lending practices are part of the problem. ‘If no one is getting loans, you will see home values remain low,’ he said. ‘The reason that (banks) can’t lend to these communities is because there isn’t equity to lend on. It’s a chicken and egg scenario.'”

“In Wicomico County, Maryland’s top agricultural county, the percentage of underwater mortgages was 9.14 percent at the end of last year, the highest of any county. Within Wicomico, four ZIP codes had underwater mortgage rates higher than 10 percent. In Prince George’s County, which borders Washington D.C., and has a predominately African-American population, three ZIP codes reported negative equity rates greater than 10 percent at the end of last year.”

“Yolanda Muckle, president of the Prince George’s County Real Estate Association, said while the situation in the county has improved dramatically in recent years, the problems that linger can be attributed to previously inflated home values and ‘people getting loans during the housing crisis that weren’t good and now they can’t pay off these loans.'”

“Jeff Tucker, an economist at Zillow Group Inc., said another reason why black and Hispanic borrowers have a higher level of negative equity is because they are more likely to have low-down-payment mortgages. ‘That lower share of equity in their homes makes homeowners of color much more likely to experience negative equity in the event of a modest decline in home prices,’ he said.”

“If the economy contracts and home prices decline, as Zillow is currently forecasting, Tucker said these issues could be exacerbated and more borrowers will fall underwater. He added that borrowers who opt for mortgage forbearance via the CARES act could also find themselves in trouble. ‘If many of those borrowers defer payments for several months, they could also find themselves underwater when accounting for the deferred payments,’ Tucker said.”

“CoreLogic economist Nothaft expects that the pandemic will cause significantly slower home price gains nationwide, but especially in Connecticut and New Jersey, two COVID-19 hotspots that already have large numbers of underwater mortgages. The CoreLogic research team has forecast 2020 foreclosure rates based on the recent high level of unemployment insurance claims. In a scenario where 20 percent of Americans are unemployed, Nothaft estimates that 5.5 million homeowners will be 90 days delinquent, in foreclosure proceedings, or 90 days into a forbearance proceeding with their lender. ‘Even for an economist, the numbers are just mind boggling,’ he said.

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This Post Has 125 Comments

  1. ‘If you’re in negative equity, (you) may be better off allowing the foreclosure’

    Here we go again.

  2. ‘another reason why black and Hispanic borrowers have a higher level of negative equity is because they are more likely to have low-down-payment mortgages. ‘That lower share of equity in their homes makes homeowners of color much more likely to experience negative equity in the event of a modest decline in home prices’

    So there’s a downside to this type of lending Jeff?

    May 25, 2018

    “In his corner of American finance, where hard selling meets hard luck, Angelo Christian is a star. Each time Christian sells a home loan, the company he works for, American Financial Network Inc., takes as much as 5 percent. Many of Christian’s customers have no savings, poor credit, or low income—sometimes all three. Some are like Joseph Taylor, a corrections officer who saw Christian’s roadside billboard touting zero-down mortgages. Taylor had recently filed for bankruptcy because of his $25,000 in credit card debt. But he just bought his first home for $120,000 with a zero-down loan from Christian’s company. Monthly debt payments now eat up half his take-home pay. ‘If he can help me, he can help anyone,’ Taylor says. ‘My credit history was just horrible.’”

    “Christian can do this kind of deal because he is, in effect, making the loan on behalf of the federal government through its most important affordable housing program. It’s a sweet deal: He gets his nearly risk-free commission. Taylor puts no money down. If things go south, the government ultimately bears the risk. Many borrowers ‘are living paycheck to paycheck and, if they lose their jobs, they go into default immediately,’ says John Burns, a housing consultant.”

    http://thehousingbubbleblog.com/?p=10443

    1. Jeff conveniently skips over that part. When you have a combination of widespread financial illiteracy and unscrupulous salespeople and lenders, where does (and where should) the blame fall?

    2. Jeff said: “He added that borrowers who opt for mortgage forbearance via the CARES act could also find themselves in trouble.”

      That mortgage forbearance is low hanging fruit; irresistible. It’s like free rope to hang yourself!

      1. If you buy now you can skip the payments for 90-days, or maybe 60-days since June is near. A second wave, and maybe skip ’em until 2021?

  3. “The viability of running dedicated Airbnb operations is not looking good right now”

    Get a job, parasites.

    2. Arlington VA housing worthless? In fantasy land maybe. Majority of homeowners are living large off the taxpayer protected by the union goons. And the biggest globalist of them all, Bezos, is setting up shop in Arlington and with most jobs paying over 100K. Arlington, VA is probably one the “safest” areas , regarding housing, in the country. And I don’t say this with any sort of gratitude. I hate what has happened to the northern VA area.

  5. More salt and fat and diabetes coming to replace independently owned businesses:

    “As the coronavirus permanently shutters some small businesses, big fast-food brands like Domino’s Pizza, Chipotle and Wendy’s that were doing well before the crisis want to grow – or continue pre-existing expansion plans – after the pandemic subsides.

    David Deno, chief executive officer of Outback Steakhouse parent company Bloomin’ Brands, told Reuters in an interview that “I don’t mean to wish ill on anybody, but there’s going to be real estate opportunities,” for new stores or relocations to areas with “better visibility, better access and better parking.”

    “Brands that are doing well in this environment should have an opportunity to expand their footprint,” said David Gibbs, Yum chief executive officer, in an earnings call in late April. “There’s no reason to think that this brand… is not going to be a growth business long term. And unit development is a big part of that.”

    “It’s really a time of opportunity for these firms to entrench themselves into where they want to be,” said Susan Wachter, professor of real estate finance at the Wharton School of the University of Pennsylvania. “The retail landscape is going to be open for redeployment and for expansion of the firms whose market share is growing.”

    https://www.reuters.com/article/us-health-coronavirus-restaurants-chains-idUSKBN22V1J5

    The local Smashburger location closed, apparently permanently, while the local independent Italian restaurant/bar remains open for pickup orders. I ate some Taco Bell on the road last week, over $9 for three original crunchy tacos, one chicken soft taco supreme, and a drink. What a ripoff…

    1. ‘open for redeployment’

      = Most of you guys are fooked.

      Yeah, I don’t know what’s up with taco bell. I can get the same food for half at del taco. I never buy drinks. Sugar water is bad, mm-kay. And I can make my own tea.

    2. I’ve tried Smashburger, and thought it was a ripoff too. Plus, the music inside was at near rock concert volume. But I guess that’s what the millenials like.

      1. All the “boutique” burger joints are pricey. When I want a burger I’ll just go to Wendy’s.

        1. just go to Wendy’s

          I have no problem eating a steak or a homemade burger from ground sirloin. A Wendy’s leaves me feeling slightly ill. Don’t know why. Not a problem since I stopped traveling for work.

    3. The local Smashburger location closed

      I feel bad for those guys and some similar places that have come out of Boulder in the last decade or two. They kind of perfected taking normal American junk food and took it just a bit upscale and it worked. Problem is, in the age of corona, if your model is upscale fast food with no drive-through (because you’re upscale after all) you’re screwed. If people are going to put on a mask and go stand in line somewhere they want to do it for something more special than that. I will do it for good Texas BBQ or sushi but that’s about it.

    1. Calacanis said commercial RE in S.F. specifically…but have no doubt residential S.F./Bay Area RE will follow and being that California is a non recourse state anticipate there will be many strategic defaults like when the last bubble popped. Saw several coworkers do that last time with seemingly minor consequences…

  7. “‘It’s causing [rental] prices to fall in areas that had a lot of short-term rentals,’ says Brett Richman, broker and owner of Nola Homes Co. ‘Landlords are heading for dark times. They’re used to getting, like, $5,000 a month and now are looking for tenants for $1,200 per month.’”

    OH DEAR

    Lets hope no one paid $800k for a $200k shack.

    1. $5000 to $1200 is kinda of an amazing reduction

      Was there really that many vacation folks looking for 1 and 2 week accommodation?

      1. Was there really that many vacation folks looking for 1 and 2 week accommodation?

        Maybe near the beach in Hawaii. In New Orleans? Maybe during Mardi Gras.

  8. “Many homeowners depend on rising home equity to start or grow businesses, pay college tuition, retrain for better jobs and fund their retirement.”

    Why not depend on savings for those things? Kind of crazy to borrow against your shelter or expect young people to subsidize your retirement with debt.

    1. Why not depend on savings for those things?

      Because what the bank will pay you is close to zero, while they loan it out to credit card holders for much, much more? The other option is stawks.

      It’s a bubbly world.

  10. ” It’s a bubbly world .”

    I agree. It’s a gamblers world that rigged. I hate it. But, it’s so Wall Street the 1920s.

    I think wealth should be made the good old fashion way, not by fake markets and speculation on it.

    This is not right to turn shelter into a Ponzi Scheme.

    1. I think wealth should be made the good old fashion way, not by fake markets and speculation on it.

      Working is for losers. Rent seeking is for winners. That is the new “work ethic”.

      What people know is that they are falling behind with the day job: no raises, the health insurance gets more expensive every year, college costs for the kids are mind boggling and as they get older the layoff monster lurks in the shadows. It isn’t surprising they are trying something else. Some get sucked into multilevel marketing. Some pour their life savings into some sort of franchise biz. Others try to create side hustles on E-Bay or Etsy. And some speculate with real estate.

      3. And some speculate with real estate.

        And those are the ones who made the real money since 1996 as long as they didn’t lose it all in 09. Many of the others noticed and followed suit.

      4. Working is for losers. Rent seeking is for winners. … What people know is that they are falling behind with the day job

        @In Colorado – Really well put and spot on – It’s an ever present anxiety for the majority of the middle (and even upper-middle) class. The message is clear that ‘working hard for is loozers(tm)’ and it’s also clear that no one in power or the media or any of the cultural gatekeepers (think: Hollywood, Disney, etc) is going to come out and admit just how badly the majority of people are being fooked over by the system bought by and enacted by an elite concerned with deeper entrenching themselves.

        @bergera – Spot on with the ‘decline phase of empires’ thought…

        What really does a number on the psyche is comparison to others who are more successful – and unfortunately we live in a time were we plaster the names and stories of the outliers and extreme successes everywhere via all our wonderful media/communication technologies.

        The stories of the one guy who ‘starts a company, has a hit product, gets bought out for millions’ is repeated ad-nauseam while people forget the hundreds of others of the guy’s co-workers and friends who didn’t. I can give multiple first-hand accounts of such successes thanks to my career in software.

        I do believe this distortion makes things in general worse and many people more miserable (believing they failed).

        1. What really does a number on the psyche is comparison to others who are more successful

          I call this the “I know a guy …” syndrome. Everyone seems to know a successful rent seeker. The dude who hardly works and drives 100K cars and lives in a mansion.

          As you mentioned, the failures are all invisible. The guys who over extend and then lose everything in a crash are quickly forgotten, and the ones who didn’t succeed never existed.

          What is interesting (for me) is how the syndrome has evolved. It used to be “I know a guy who makes $80/hr and he only went to high school”. This was the typical reply I would get from some people after telling them to learn marketable skills if they didn’t want to be poor.

          1. As you mentioned, the failures are all invisible.

            Just like all the braggarts who post about their winning stock picks on financial sites and elsewhere, or the degenerate gamblers in Vegas. You never hear about the losses.

          2. The pdf above covers that and its observations are pretty old. Basically, the prosperity of a society weakens subsequent generations as so much unearned wealth gets squandered and the work ethic wanes. We see the decline everywhere.

            And there is a part of human nature to always compare ourselves with those above us on the socioeconomic ladder, forgetting to note those below us and their struggles. We drive past a shanty town with hundreds of homeless ignoring them and wondering how the neighborhood Karen can afford to buy a second home in France that she brags about on social media.

            The reality is the portion of the population that is moral and hard working is dwarfed by those that aren’t at this point. There is no escape from fate. Our forefathers were storming the beaches of Normandy and Iwo Jima to free the world from fascism and we cant even go to our own beaches to sit in the sun or swim, lest we get taken to jail to sit in a cell that was occupied only hours prior by a child molester some judge set free because “pandemic”.

            The leftist elites want a civil war.

          3. The leftist elites want a civil war.

            I can’t see that ending well for them. I’ll put my money on the right every day of the week.

          4. I call this the “I know a guy …” syndrome.

            For those with a career in software/high tech, this is even more prevalent, given all the entrepreneurial activity of the past 30 years. My facebook friends list is deliberately kept under 100 people. At least 4 of the people on my list have a net worth of over $100M. One of whom used to report to me about 2 decades ago, and I sold him a car of mine for $1300 because he needed basic transportation – this before he decided to strike out on his own (he’s since appeared in a Super Bowl commercial among other things).

            There’s a nasty red pill/mgtow related side-effect of that particular conversation. Take the guy mentioned above, and the hundreds of co-workers I’ve have who haven’t struck it big. Most of those guys are ‘classic engineer’ types – introvert tendencies, work long hours and are able to make $75-150k/yr or so. Most got married and had kids. Many of their wives become aware that their husbands worked with or know someone who hit big and start thinking “hey, you worked with this guy who was just a {beta} like you but now he’s a big, rich success. Why aren’t you? I coulda married him instead!” etc, etc.. Combine that with the fact these guys are generally low on the “bad boy/exciting” scale and the wives can afford to stay home (with kids or without) and you got a recipe for lots of affairs and surprise divorces. More than one co-worker has come to me and asked “What does it mean when says ‘I love you, but I’m not in love with you” ?

          5. Most of those guys are ‘classic engineer’ types – introvert tendencies, work long hours and are able to make $75-150k/yr or so.

            That scale goes a little higher in CA, but yeah. One advantage of marrying a entrepreneur from China is that she knows she has a better chance of striking it rich than I do, so she puts more pressure on herself than on me in that area. I don’t like the pressure but I can live with it under that circumstance.

          6. At least 4 of the people on my list have a net worth of over $100M.

            I don’t know anyone who hit it that big. A few guys worth a few million, who got into Microsoft or somewhere else early enough that their stock options had a non trivial value when they vested.

            Most guys I know who “did really well” in the stock options casino only scored a few hundred K. Nothing to sneeze at, but not lifestyles of the rich and famous either.

            I had my share of options that wound up worthless over the years.

          7. More than one co-worker has come to me and asked “What does it mean when says ‘I love you, but I’m not in love with you” ?

            It means she’s already got your replacement lined up.

          8. I don’t know anyone who hit it that big.

            I seem to have an ability to know various people in my industry. Mostly just being in the right place at the right time.

            To reveal probably too much – One of the guys on my list was an early 80s hire at Microsoft who led up one of the main programs in “Office” for a while and was there for decades. Another was someone I tried hard to hire, but some guy named gaben was starting a game company. Another went all-in on what he thought was going to happen to mobile phones back in 07 with something apple was about to release.

            I myself went though a buyout of the company I was at by Balmer&co. Netted me about $660k worth of NSO options (strike price of $0.61) after major dilution, but between the ex-wife, taxes, an albatross of a big house in tejas, and the stock tanking for most of the 2000s, that was soon exhausted. With my personal situation(s), I never was able to take much risk compared to those guys. (Until recently anyway).

          9. It means she’s already got your replacement lined up.

            @rip – and already taken for a test drive…

          11. @rip – and already taken for a test drive…

            And everyone knows, except you. 🙂

            Haha. Nailed it, fellas.

          12. And everyone knows, except you.

            Every nerdy engineer type should spend some time in Asia before that happens to them. They’ll be able to stress a lot less and think a lot more clearly. Living a sheltered life results in stupid decisions in that situation.

    1. The off-campus party scene at Football Factory State University back in the day was off the chain crazy. Cheap rent, cheap beer, cheap live music shows, and the best used record stores in the Midwest.

      Online higher education is a waste of time and money.

      1. “Online higher education is a waste of time and money.”

        That just might true.

        It used to be that a four-year college degree was a guarantee of a modest middle-class life with one income and decent benefits. Globalism ended that idea, and the young prospects know it.

  14. I have pretty much given up on Matt Drudge. He has gone completely off of his rocker about COVID, and his site seems to be about nothing more than trying to incite as much fear and hysteria in the masses as he possibly can, about anything and everything.

  16. “U.S. homebuilding dropped by the most on record in April and permits for future construction tumbled. The report from the Commerce Department on Tuesday added to dismal data this month showing a staggering loss of 20.5 million jobs.

    And yet the Fed’s Ponzi markets are up by hundreds of points. The total disconnect to economic fundamentals says everything there is to say about these rigged, broken markets.

  17. ‘Fewer people are going to be interested in buying a home and committing themselves to years of mortgage payments when they are concerned about their job and income prospects,’ said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.”

    Gems of wisdom like that there are what earns Mark the big bucks.

  18. “Home sales plummeted in Southern California in April, the first full month caught in the grip of the coronavirus lockdown, new housing figures released Tuesday show. Tighter lending standards also made it much harder for homebuyers to get financing last month. Non-traditional loans vanished, minimum FICO scores were raised and jumbo loans used to buy higher-cost homes grew scarce.

    This mix market is looking an awful lot like a bursting housing bubble, Thornberg.

  19. The viability of running dedicated Airbnb operations is not looking good right now,’ says professor David Wachsmuth

    The class dunce could make the same observation, professor.

  20. “A pair of nightlife hot spots saw the biggest increases in furnished short-term rentals in the United States: Nashville, TN, with a whopping 185% leap, and Austin, TX, with 160%.

    Is that a lot?

  21. ‘Landlords are heading for dark times. They’re used to getting, like, $5,000 a month and now are looking for tenants for $1,200 per month.’”

    Um, yeah…about that $1,200 a month…I’m thinking more along the lines of oh, say, $900.

  22. “If you’re a host struggling right now Spradlin suggests checking out the Colorado Springs Short-Term Rental Alliance group on Facebook for advice and support.”

    I think I’ll pop onto that site and share some rat kabob recipes.

  23. Everybody’s got heartburn,’ said Shawn Lubic, director of student housing capital markets at Cushman & Wakefield, which advises investors and markets properties in the sector. ‘We’re at the mercy of the schools.’”

    I don’t have heartburn, Shawn. My oldest is starting college this Fall, but I’m not playing your f**king game.

  24. ‘Operators believe student housing is recession proof,’ said Jennifer Pearce, chief executive of Student Housing Solutions. ‘But we’re not pandemic proof.’”

    “Operators” are clueless. Parents in the oligarch-pillaged former middle class can’t afford the soaring costs of tuition, much less luxury student housing.

    1. The smart “Operators” used that lie to convince the lenders to finance the projects, which they then ‘flipped’ upon completion to a greater fool to operate…

    2. It will be interesting to see how many HS grads are going to take the year off. I read that CU Boulder proudly announced that they would not raise tuition this Fall. As if big annual increases are normal.

      I’m sure that the leadership at many non elite private schools are sweating bullets right now. If I was some make work administrator (say in “Diversity”) at one of those schools, I’d start looking for a new job right now.

      1. My son would like to transfer to CU at the end of next year. His grades weren’t good enough to get in as a freshman. So I’ll be watching developments there closely. I’ve told him IF he can get in I recommend that he do it BUT he’ll need to live with his mom because I can’t afford tuition AND Boulder room and board for him. He’s less excited about that idea.

  25. “Negative equity is a big problem for families because it erodes their net worth and weakens their sense of financial security. Many homeowners depend on rising home equity to start or grow businesses, pay college tuition, retrain for better jobs and fund their retirement.”

    Millions of sheeple who blindly followed the “advice” of REIC touts and shills on globalist media outlets are going to be forever inoculated against trusting the MSM or realtors.

    1. CoreLogic’s chief economist Frank Nothaft:

      “…Many homeowners depend on rising home equity to start or grow businesses, pay college tuition, retrain for better jobs and fund their retirement….”

      Frank Nothaft conveniently left out all the loan owners who HELOC’d themselves into oblivion by buying expensive new cars, taking expensive vacations, and generally p*ssing away money on useless bling.

      Looks like party time is over, Frank.

    2. are going to be forever inoculated against trusting the MSM or realtors

      I don’t know. A lot of people who got burned last time jumped back into the pool as soon as they could get a loan.

      1. Hell yeah. I know a lot of folks who act like the previous crash never even happened. It’s ancient history and therefore can never be repeated.

        I still hear people at work talking about how it’s a “great time to buy cause rates are low” Like rates will ever get over 3.5-4% again. They never will.

        My friend just bought a house to diversify his “portfolio” which consists of nothing as he is dead broke. But he took out a 500K mortgage cause his home will appreciate 5-8% a year and he will make out.

        Good luck with that.

          1. I tried to warn him but he is going to make a killing in home appreciation. Or so he says.

          2. “…but he is going to make a killing in home appreciation.”

            Hopefully, or else you and I will have to repay his banker.

  26. In Prince George’s County, which borders Washington D.C., and has a predominately African-American population, three ZIP codes reported negative equity rates greater than 10 percent at the end of last year.”

    Predatory lending! I’m waiting for the NAACP-backed “Dey never shudda gibben me dat loan” MSM sob stories and lawsuits to start.

  27. In a scenario where 20 percent of Americans are unemployed, Nothaft estimates that 5.5 million homeowners will be 90 days delinquent, in foreclosure proceedings, or 90 days into a forbearance proceeding with their lender.

    I’m no gypsy, but when I look at my crystal ball I foresee millions of vacant foreclosed shacks getting dumped onto the market over the coming months and years.

    1. I foresee millions of vacant foreclosed shacks getting dumped onto the market

      Really? Why wouldn’t the Fed find a way to buy them first in order to prop up prices to save the banks?

      1. a way to buy them

        Buying houses has got to be the least efficient way imaginable to “save” banks.

        1. Not if the comps are the key to everything. You only have to buy just the ones that would result in reduced comps. That keeps most of the workers slaving away to pay full price for their little piece of heaven so that you don’t have to buy theirs too.

      2. Why wouldn’t the Fed find a way to buy them first in order to prop up prices to save the banks?

        Indeed. Didn’t we all talk about the “shadow inventory” here for years?

      3. Really? Why wouldn’t the Fed find a way to buy them first in order to prop up prices to save the banks?

        They already are. Mortgage Backed Securities are one of their biggest purchases during this “crisis.”

        1. They already are. Mortgage Backed Securities are one of their biggest purchases during this “crisis.”

          Those are water under the bridge for the banks, aren’t they? I think saving the banks means shielding them from losses AND making sure the comps don’t fall too far and result in additional losses due to cascading defaults.

          1. AND convince everyone that house prices will continue to go up (flat won’t do it) AND increase household income to raise the ceiling of debt tolerance.

          2. increase household income to raise the ceiling of debt tolerance.

            Or you can fake that one by lowering interest rates, right?

          3. by lowering interest rates

            The money handlers need 3% to make a living of it. Doesn’t look like there is a lot of wiggle room.

          4. The money handlers need 3% to make a living of it. Doesn’t look like there is a lot of wiggle room.

            NIRP. Even if it’s only for them.

  28. From the doom and gloom Orange County CA article:

    “For now, home prices are continuing to rise, thanks in part to mortgage interest rates near all-time lows.

    The median price of a Southern California home — or the midpoint of all sales — was $547,500 last month, up 4.3% from April 2019, CoreLogic figures show.”

    So prices still going up, nothing, not a pandemic, not job losses, nor lack of financing will stop it. So sad, we threw in the towel and rented our Carlsbad place in 1 day and secured a rental in Dana Point for the next year, no need to ever come back into the office, so live anywhere.

    1. All this carnage and they say prices are up. Pretty much everywhere they say that. Does that smell right to you when we see UHS say prices are getting slashed in Austin or Seattle or Las Vegas? There are FB’s with two shacks in Seattle – public school employees no less. Short memories.

      Here’s something to think about. Lending has nosedived. Do you think prices are up in the face of that? Or is it the median statistic being used to yet again hide the truth? One more thing: have you noticed nobody is reporting price reductions anymore? It used to be reported every month by multiple sources (like redfin). Why is that?

      1. Oh, and 30 million people just got the can, several million stopped paying their mortgage, and people are talking about a depression. Sure, shack prices are up!

        1. Just wait until the unemployment runs out and the forbearance lump sums come due. You’re looking at forced sales, walkaways and foreclosures.

          I don’t think we’ll realize how much damage has been done until everything opens up and all the free money and relief programs run out.

          1. Just wait until the unemployment runs out

            I expect that there will be a lot of pressure to extend the Federal unemployment supplement, though I wouldn’t be surprised if it’s a lot less generous the second time around.

          2. I expect that there will be a lot of pressure to extend the Federal unemployment supplement

            …around the same time there is a lot of pressure to automatically refi the ones who still promise to try to make their payments if they can just get out from under the forbearance bill.

          3. to automatically refi

            Yup.

            Many on this blog are anticipating an avalanche of cheap foreclosures to buy, like they did last time. But we remember what happened last time: the deep pockets got first dibs at the best foreclosures, many were not offered and went into the shadow inventory (which the PTB denied existed). Special refi programs were offered for those underwater, etc. until they were able to reinflate the bubble.

            This time I expect them to be even more proactive, because the last thing they want is a market flooded with cheap foreclosures. They will manipulate the market even more than last time. Meanwhile unemployment, homelessness and opiod overdoses will suge.

          4. Worse yet, all the foreclosures and defaults from the last round are still sitting there….. without a buyer in sight. Now wave 2.0 is just getting under way as prices continue to plummet.

            Ooooph.

            Santa Clara, CA Housing Prices Crater 10% YOY As Construction Costs Slip Under $50 Per Square Foot

            https://www.zillow.com/santa-clara-ca-95051/home-values/

            As one bay area broker conceded, “Housing prices are cratering and have no where to go but down.”

          5. This time I expect them to be even more proactive

            Me too, they’ve made a much bigger mess this time. And I think they know that now each time they come up to bat a strikeout means their career is over. Or worse. They are riding the tiger now…

          6. we remember what happened last time

            China pulled off the biggest credit expansion in human history and one of the poorest countries on the planet became the manufacturing powerhouse. This happened after our housing bubble peaked. Caused a global commodities boom, which is well into collapse mode now.

            “They” are going to need a much bigger and different Miracle this time and it’s going to need to start in the next few days.

            I’ll just be going fishing.

    2. “…So prices still going up, nothing, not a pandemic, not job losses, nor lack of financing will stop it…”

      Really?

      I happen to live in South OC and every MLS service (Redfin, ZipRealty) that I use daily emails price reductions, ‘back on market’. Even many ‘new listings’ are actually scams in which the MLS number was changed. (I keep a long time database of properties I happen to be interested in)

      So where are all these prices increases? Are they hidden under someones backyard mulch pile?

      No increase in Irvine, Newport Beach, Corona Del Mar, generally speaking for at over 1 year, way prior to all this COVID nonsense.

    3. Regardless what the median says, the market is in a shambles. If a couple of rich people buy a few houses in a zip code and it makes the median go up, big whoop. 50 million newly unemployed will not bode well for housing.

      1. I agree. But how many of the 50 million were actual home owners or potential home owners? Seems to me a small percentage are folks who own the businesses getting clobbered but most are working crappy service industry jobs and are currently making more in unemployment. Those aren’t the folks who are buying houses any time soon.

        Now they will stop paying rent but when the smoke clears they will just be evicted. The “no evictions” orders are just Doctors buying a little more time for their terminal patients.

        1. but most are working crappy service industry jobs and are currently making more in unemployment

          Yup, they are the lion’s share of the newly unemployed.

      2. And all those suckers that signed up for 30 years of payments on a rapidly depreciating asset are hanging by a thread as housing prices crater.

        Coppell, TX Housing Prices Crater 13% YOY As Dallas Housing Market Turns Toxic

        https://www.movoto.com/coppell-tx/market-trends/

        As a noted economist questioned, “Why buy a house when you can rent one for half the monthly cost? Buy it later after prices crater for 70% less.”

  31. While there is zero possibility that any Deep State operatives will ever be brought to justice for their treasonous actions, the railroading of General Flynn by the FBI should be enough to red-pill anyone who has been paying attention to this travesty of justice. It’s also telling that not a single Democrat professes to be bothered by the FBI conspiring to trample on Flynn’s rights to due process while engaged in a witch-hunt orchestrated by a high-level cabal of conspirators in the Obama White House.

    https://www.foxnews.com/politics/christopher-wray-republicans-fbi-director-jim-jordan-mike-johnson

    1. Nobody will ever go to jail for this.

      I don’t want another election, I want a civil war.

  32. “For now, home prices are continuing to rise, thanks in part to mortgage interest rates near all-time lows.The median price of a Southern California home — or the midpoint of all sales — was $547,500 last month, up 4.3% from April 2019, CoreLogic figures show.”

    – I commented on this article yesterday.

    http://housingbubble.blog/?p=3381
    The San Francisco Chronicle in California. “Sales of existing, single-family homes in April — the first month to show the full force of the coronavirus — dropped a stunning 30.1% statewide and 37.4% in the Bay Area compared to the same period last year, but median prices were more or less unchanged, according to a survey released Monday by the California Association of Realtors.”

    “‘It’s not a fire sale,’ said Leslie Appleton-Young, the association’s chief economist. ‘Typically, prices are sticky on any movement down when sellers don’t have to sell. When you get into a foreclosure situation, you have a bigger problem.’”

    “‘I would call (the decline in sales) dramatic, sudden, breathtaking,’ Appleton-Young said. ‘What it shows is an inability to transact for buyers and sellers and unwillingness to move forward with transactions.’”

    – So does anyone see the cognitive dissonance between the two articles?
    – Sales volume is WAY down in CA. Volume leads sales.
    – Median price is a LAGGING indicator. Realtors love to use this trick when sales are softening.

    “Figures don’t lie, but liars figure.” – Mark Twain

    “There are three kinds of lies: lies, damned lies, and statistics.” – Mark Twain

    – I think to expect higher RE prices with all that’s going on is not realistic at best and disingenuous at worst. Look at the meltdown in employment, tighter lending standards, STRs. My BS detector is flashing red! Let’s see how price looks about 6 months from now. Let the dust settle a little bit before jumping to conclusions. Sheesh!

    “If you don’t read the newspaper, you are uninformed.  If you do read the newspaper, you are misinformed.”  ~Author unknown, commonly attributed to Mark Twain or Thomas Jefferson

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