I really need a house, but have been scared out of this market.

Without clear title, you own nothing. Apparently, if the house has been mortgaged in the last ten years or so, clear title is problematic to impossible to obtain. And title insurance is now being written to insure that it insures nothing.

The houses in my neighborhood are selling at 30% of their most inflated value. My house which was appraised at $400,000 in 2008 just sold for $135,000. We paid $189,900 for it in 2002. We have four empty/abandoned houses and one on the way to foreclosure in a three block area that I know of. It is hard to tell if a home is empty sometimes. There is a house around the corner selling for $100,000 and one down the street that has been on the market for a year selling for $95,000. All of these homes are in good shape and are on the American River.

Let people stay in their homes? Hell NO.

I need to move soon, but I am leary of buying anything these days. Some areas of the country seem somewhat more stable in terms of housing & pricing, but other parts of the country are very unstable. Prices seem to go down, then go up a while, then plummet again.

I believe that the neighborhood where I currently rent has more empty homes in foreclosure than meets the eye. The banks, etc, are not always “advertising” that the homes are for sale.

Caveat emptor!

Since I sold real estate for a living, I feel quite competent to comment on this.

It began when Heckle and Jeckle were in the White House, and their puppet Ben Bernanke came on board. They told him to raise interest rates when the word “sub-prime” was new. Thus began the long back-up. Imagine a train stretching from New York to L.A., that’s real-estate, and it also works from the bottom up, not the top down.

For example; I have a $50,000. house and I want to buy a $100,000 house, while that guy wants the $200, 000. house that you are selling. If I can not sell my $50,000 house, everybody is SOL.

The morons can give the banks all the money in the world, but if nobody has a job then nobody can buy a house. Do you see how this problem has been compounded by years of “Moronity”?

I consider my house to be a roof over my head, nothing less or more. With the morons in control real-estate can only get worse.

Here in San Francisco, real estate developers have finally closed on their purchase of local government, and the Planning Commission is actually entitling the construction of new housing in neighborhoods where prices are falling and those homeowners minted during the boom are finding themselves under water.

This, as California’s population growth has leveled off in relative terms.

RE: Principle Reduction…. what about those of us who saved and put down large down payments? I’m not underwater…yet. But if someone lets people who put little or nothing down reduce their principle amounts, what happens to my value? Do I get principle reduction also? If not, why not?

I recently heard on NPR a family who had put zero down (and actually took money extra in the deal) belly-aching when their phooney-baloney teaser rate went up. They wanted to stay in “their” house but couldn’t afford the payments and couldn’t understand why the bank wouldn’t just reduce what they owed. Damn.

I consider my house to be a roof over my head, nothing less or more.

You highlight a crux of the current problem, where, during the rule of Heckle & Jeckle (thx for that), everyone was encouraged to see their home as this big-time “investment” and ATM machine. This brought about the whole “flipping” scheme, which was stupid. Some people made a lot of money thru flipping, but it just artificially drove up the price of housing & at the end when the music stopped, a lot of people were left holding real estate that was worth way less than what they paid for it.

And now we have “ghost” neighborhoods, a lot of real estate has dropped in value to the point where some have lost value on homes purchased many years ago.

Insane. I’ve always avoided owning real estate because I move a lot and never really trusted that I could sell when I needed to. I think I’m way ahead of the game, despite “missing out” on the vaunted real estate tax deduction.

Somewhere or other I heard that the equity people have in their houses is the second largest asset owned by middle class families, next to the future value of their Social Security. Not to worry! Your home equity may be going down the tubes but your Social Security will follow it shortly.

“they need to stabilize, through modification programs with principal reduction”

Sorry. Disagree. This is where I part with most liberals. I simply will not support anything that basically presses a “reset button” for people who made poor decisions. Yes, the banks are crooked. Their wrongs does not mean we reward people for buying homes in what was clearly an insanely over-priced market. If fraud occurred for a particular mortgage, the bank should be punished and it should be taken into account when reassessing the mortgage. But a blanket modification with principal reduction, driven by the government? No. No way.

I’m really not sure what the answer is, but I have to agree with you at least somewhat. I’m really uncomfortable with a blanket reset button, too, and although I utterly agree that the banks & a lot of related real estate industry types are criminally negligent & should be held accountable, I also have reservations about some proposed solutions.

For sure, many people knew that they were buying “too much house,” and they willingly signed up for stupid loans that made no sense. I know some intelligent people where I work, who took out a loan with no down payment, and used the proceeds from the sale of their prior home to buy “stuff” like new cars & vacations. Why should they be “rescued” from their own stupidity, greed & poor decision-making???

It would be great if the banks & mortgage loan industry was held accountable for their side of the bargain, but just giving people “another chance” when they engaged in foolish and greedy practices often is not the answer.

I am as flaming of a far-left liberal as they come, but I have deep reservations about how this all panned out. If I’m smart enough to know that I shouldn’t buy a house when the prices are INSANE, then I think other citizens should have been smart enough, too (I’m no genius). It’s about common sense.

Up here in Vermont, the housing problem hasn’t been so bad. (Neither have the TeaBirchers).

But the Real Estate market hasn’t figured out the housing bubble has burst, either. 10 years ago a certain house was $85,000. Now it’s on the market for $380,000 and the real estate agents don’t understand why it isn’t selling!

The banks are still refusing to lend to anyone that isn’t independently wealthy, in order to prevent middle class from being homeowners.

For example, I just looked at a nice two story home on one acre that was for a realistic price: $75,000. But it turns out that somewhere in there was a ‘manufactured home’, AKA ‘trailer’. Because the banks discriminate against the lower middle class and the poor, the rates for that place are prohibitively expensive. The banks have colluded to prevent the homeowner from being able to sell his property.

So the banks get to keep fake money on their books (by artificially jacking up the value of a home) and shake down the homeowner that had no way to know that home prices were artificially inflated?

The homeowner is responsible for the bank’s intentional malfeasance?

See, that’s why I am a Liberal. I side with the middle class homeowner that got robbed by thieves in suits, not the obscenely wealthy bank owners that are extorting real money from the homeowners to pay for artificial numbers in their ledgers.

I would disagree with you and exkiodexian to this extent – the only way to make sure that the banksters at all levels – especially the big banks and mortgage servicers, take the deserved hit for their many frauds is to force them to take a bath by re-setting the principle for most of the mortgages.

Otherwise, there will be a few, selected low-level individuals who might, repeat might be convicted of a crime but the vast majority of the perpetrators of the fraud will get away with their millions intact.

For every home that was sold at or near the peak of the bubble, in addition to a buyer that’s under water on the mortgage, there’s a seller that walked away with a bundle of dough. Just as many of one as the other. Why don’t we hear about those sellers? They were paid off in full by the lender that assumed the new mortgage. What happened to that money? It didn’t just go up in smoke.

I was just thinking the other day, that in some ways I wish I would have just rented instead of buying for all those years. I actually thought that the equity in my house would be my retirement. Man, was I wrong. For a variety of reasons. Sucks, donut?

Tangential– From “How Allstate Used Sampling To Confirm BofA/Countrywide Lied About Virtually Everything When Selling Mortgages” (by Tyler Durden on 12/28/2010 17:43 -0500):

A few days ago, news broke that MBIA was allowed to use statistical sampling in its ongoing Bank of America fraud lawsuit. This happened despite the Countrywide acquiror’s loud protests. And now, courtesy of today’s brand new lawsuit against BofA (and Agent Orange himself) filed by Allstate, in which the insurer “seeks unspecified damages, alleges fraud, negligent misrepresentation and violation of U.S. securities laws” we know just why Bank of America was so very against allowing sampling to be used by plaintiffs. According to the full report (pdf attached below), Allstate has determined that Bank of America misrepresented virtually everything in its prospectuses

The above post includes a copy of the lawsuit filed yesterday (Mon. Dec. 27, 2010), Allstate Insurance Company v. Countrywide Financial Corporation.

Page 3 of 150 of the filing, “Attachment to Civil Cover Sheet for Allstate Insurance Company v. Countrywide Financial Corporation” has the complete list of Plaintiffs and Defendants.

Well I was just about to give a big spill, but you did it for me. ;-)

You know I’ve said this before but it is my opinion that the best way to recover from all this is for there to be a giant paid in full program for all homes purchased before 2007. Now, before anyone gets all upset let me explain.

First, the banks have already been paid for these mortgages 3 times over.
Second, they will then be able to clear their books of the bad assets.
Third, People will be able to stay in their homes or get them back.
Fourth, the market will stabilize and there won’t be any empty houses on the streets.

And Fifth, Schools, children, and city/county tax basis will not be knocked out from under them. I see it as a win for all, and a punishment for predators for risking unregulated securities that really are not a security in the traditional sense of the word. They, the banks have wrecked the housing market and the homes, livliehoods, and businesses of every community across this nation.

Totally OT of houses – Cenk just interviewed Sheila Jackson Lee, and she had her real hair going, not the crown thing that I’ve many times said I wanted to adopt. What a great gal! And, beautiful too.
Back to your house woes post. It does indeed suck. As everyone knows.

What are you smoking?

The foreclosure crises, continuing 10% unemployment, gas creeping past $3.00 a gallon and heading up (new commodities bubble), and Obama about to gut the budget.
Yeah, I really believe all those economists forecasting a stronger economy next year./s

Virginia Slims. Seriously. Something has to be done. If they do prinicipal reduction it will take them years to try to figure out how much and how each person deserves this or that.

People have not paid for their houses three times over. They ALL signed on the line, just as I did. The banks lent them money at a certain rate. Some people agreed to a ridiculous deal and were not realistic about paying the “rent”. I’m not saying the mortgage industry weren’t total assholes in taking advantage of peoples idiocy, they did.
I wish things were different, but what I wish means nothing to the reality of it.
If you think the banks are going to turn over the deeds to peoples houses who bought before whenever, that’s just not going to happen.

Don`t buy, rent. Stay out of the housing market if you can. The days when people could accumulate wealth through capital gains on their homers is over. The rate of return on housing, unlss you get into a prime neighborhood, is no higher than the rate on your savings account.

A 12 month change that is a 0.2% decrease sounds like stability to me – not prices caving.

What am I reading incorrectly?

In any case I agree with the thrust of your article.

I can’t believe the ignorance that is displayed on this thread by folks who call themselves “liberals.” You know NOTHING about recessions, their causes, the housing market, finances — you name it.

I would expect this level of ignorance on a right-wing blog but not on FDL. VERY discouraging.

I’m still wondering why this commenter thinks they need to own a house.

“the vicious cycle of foreclosures-lower home prices-more underwater borrowers-foreclosures”

Please forgive my denseness, but could someone explain the second half of this “cycle” – how does being an “underwater borrower” lead to foreclosure?

Why do you think liberals are smarter than conservatives? We all think Our Crowd is smarter, but, basically we’re all bruised fruit.

More anecdotalism here: We were going to buy this coming year. We’d been home owners, well, for decades, then sold in 2006 because we were going to live abroad for a time. Upon returning, we decided to rent a year until we got things sorted out and ourselves settled down.

In addition to the insane hoops lenders now make people jump through just to get the lousiest of mortgage rates, and the games they’re playing with requiring multiple assessments, and the obviously questionable title histories — added to continuing declines in house prices… We just don’t take to risk our modest nest-egg at this point. Especially not when these lenders are playing games and foreclosing on people who never missed a payment.

So we’re now in the market for a long-term rental. Maybe one day we’ll look at buying again, not unless the banksters are reined in.

Ignorance and stupidity are different.

Demi, sorry I had to leave for a few. I did not say the homeowner paid for their home 3 times. I said the banks have been paid three times.
First, they sold nasty mortgages, then they grabbed all earnings from retirement accounts, then they put these mortgages on the market to sell them as a security. After that, the government bailed them out.

If you don’t mind my asking, what kind of interest rates were offered to you?

I do own a home. ONe that I have been paying for for 28 years. It is almost paid for. I am not asking for a free ride. I am thinking outside the box in a way that will put an end to the mess the banks have made.

If you cannot see that the banks have gotten money hand over fist using peoples homes, and probably commercial real estate as well that is not my fault.

Oh, I hear what you’re saying. As we are not trying to be stupid nor ignortant here, not all the mortgages were nasty. Just some. Mine was a while ago. I’d love to be bailed out too, but I’m going to just try to tread water. I’m trying to be realistic. Smokes or not.

Never thought it was your fault. Why would you think that?

I’d love to see principal reductions. However, I don’t think that will save people or the RE market right now. Seriously, there are no jobs and people can’t make mortgage payments without work. Throwing them out of their homes causes more deterioration. Anyway, that was my opinion.

The banks have already been paid many times over for homes. That’s all.

Maybe I read you wrong. I didn’t mean to appear insane.

Seriously, there are no jobs and people can’t make mortgage payments without work.
This. I. Know. Thank you.

I don’t know how you have an economic recovery with home prices falling.

This is the key sentence in the post. EVERYONE will suffer if home prices continue to fall. NO ONE will benefit except the TBTF bailed-out banks and speculators. ALL of you who feel all up-and-moral about evil home owners who bought too much house are missing the point of the post.

This debacle was NOT caused by homeowners. If you think it was, please turn in your “liberal” or “progressive” credentials. Homeowners do NOT need to be punished. They are the VICTIMS here.

These are right-wing themes designed to shift blame.

EXACTLY!

Not everyone will suffer, those that buy at the bottom of the market, when it finally arrives, will do just great. Those will be people that saved their money, didn’t jump into a big mortgage on a big house, and don’t have a dump truck full of credit card debt. What’s wrong with those people being rewarded?

if underwater, you cannot refi
if you live in AZ, CA, FL, NV and bought or did a refi in the past 5 yrs you are likely underwater
so if you have any change in income, usually you could refi to reduce your pymt to keep your home, so if your spouse is laid off or hours cut, etc etc

but in this economy, with your home underwater you can no longer do that

also, if you are underwater and lose job and have to move for new job and sell, you still owe $ to the bank, but say you have no $, you lost job, thats why you need to move, your state, say NV is underwater and 15% ue, you want to look for work in SD let’s say,

so what can you do now? underwater, no $ (you used it up while looking for work).

if you are in a non recourse state, AZ CA for example, you will be foreclosed on and/or walk away from the home.

they cannot come after you for the difference b/w what they, servicer, gets in the short sale, remember you likely tried REFI, no dice, underwater; tried sale, no dice you still owe $ and neighborhoods are SWAMPED with 2 yrs of supply, you tried HAMP, BWAAAHAAA!!!, so now you walk

servicer got fees stringing you along ‘losing’ your HAMP application as you spent all your savings waiting for HAMP mod while looking for work, now no savings cannot catch up on mortgage and you cannot even afford your moving truck to SD to seek work

that is what Obamas Housing ‘Plan’ aka TBTF EXTEND AND PRETEND sponsored by Geithner and Obama! tm. has done for America.

as more people are laid off, and dont kid yourself, over 400k NEW UE claims filed in every report means layoffs are still happening out there, for example the peeps who got retail Holiday work will be let go as shoppers pull back as the housing double dip becomes more clear as a national issue, all those peeps, God Bless, and others are going to be the next to join the horror of being underwater HAMP app and the hell that follows

I put 20% down and had a 30% cushion between what I borrowed and what the home appraised for, still since I am in AZ I am underwater.

The US economy will NOT recover until the American middle class consumer, who drives the global economy despite much protestations to the contrary, is deleveraged of their largest debt, their mortgage debt.

We need real mortgage relief.

HOLC wouldve done it
even CATO is recommending HOLC
Also with HOLC comes Recourse which will then end the walkaway factor, or at the very least mitigate it.

Obama has overseen over 5 million foreclosures on his watch. It is a disgrace. Treasury and Fed KNEW all about the mortgage foreclosure fraud and HAMP failure, it was designed to fail.

TBTF running our economy IS NOT WORKING. Fire Geithner.

“Those will be people that saved their money, didn’t jump into a big mortgage on a big house, and don’t have a dump truck full of credit card debt. What’s wrong with those people being rewarded?”

There aren’t enough of them to buy all the vacant houses! I would like to note that the only reason mods would ever occur would be to support housing values, that’s YOUR house, Dearie (talking to Dearie above now, nailhead). What more do you want? You’re the bagholder in this reality, as is everyone who owns a house bought during the bubble. It’s you who takes the hit, or the banks.

Default now, keep your money.

Thank you for responding.

Jim White is upstairs!
Obama’s Cowardice on Guantanamo Continues, Unites Insurgents Against US

There’s nothing wrong with those people being rewarded. But I certainly wouldn’t sacrifice our overall economy to supersize that reward.

Folks that played thier cards right will end up in the best shape provided that we stabilize the market and breath some life back into the economy.

But if we just allow things to go into freefall, everyone’s gonna lose. When your neighbor’s house is forclosed on, your property value goes down. When the economy falters, it’s your job at risk. In a deflationary crash there really isn’t a bottom unless we define one.

We’ve already passed the point where over half of the current forclosures are prime rather than subprime crapola. So I think that an effective remedy is overdue.

Most of them bought another house or a condo. If they were retiring, they probably moved and bought there, and might have invested the remainder.

the HAMP program could be put to this purpose

Even if used correctly, HAMP is only $75 Billion right?

Seems like trying to put out a forest fire with a squirt gun.

They only have to reduce it to the market rate for a similar house. Doesn’t require anything more complicated than that.

Yeah, but how do you know whether you’re one of the lucky ones that’s buying at the bottom? Especially since the report here says we haven’t hit bottom yet.

(I was slightly amused by the story on this at the LA Times, where someone was reported as saying that things are going to get better soon. Yeah, right; housing prices are still dropping, unemployment is still going up, and the @#$%^&*()s in DC don’t want to do any of the things that would help Joe and Jane Average.).

So you are okay with taxpayers being forced to pay the cost for all the bankers screw-ups. A Taxpayer makes the same mistake the bankers made, exkiodexian says screw ‘em.

“they need to stabilize, through modification programs with principal reduction”

Sorry. Disagree. This is where I part with most liberals. I simply will not support anything that basically presses a “reset button” for people who made poor decisions.

You do mean the banks and other financial institutions, right?

Yes, the banks are crooked. Their wrongs does not mean we reward people for buying homes in what was clearly an insanely over-priced market.

It was crystal clear to the people selling, packaging, etc., those predatory loans. It was intentionally made unclear to those predated.

If fraud occurred for a particular mortgage, the bank should be punished and it should be taken into account when reassessing the mortgage.

Excellent idea! How about when fraud occurred for an entire market? That is what happened.

But a blanket modification with principal reduction, driven by the government? No. No way.

What has gone on so far is the very definition of moral hazard. What happens to B of A and its ilk is not really my concern. It’s long past time to start piercing some corporate veils and criminally prosecuting the perpetrators of the biggest fraud in human history.

There’s only one way to hit the reset button that can stabilize housing prices (I know this would be detrimental for people waiting for a “dead cat bounce” so they can move from their studio apartment into a beach house, but we all make sacrifices). Remember that home prices are related to interest rate, the lower the rate, the higher the price, or to put it another way, since most people are constrained as to how much they can pay monthly, lower rates mean they can afford a bigger mortgage.

Instead of Uncle Sam only taking over worthless mortgages, it should take over the paying ones as well. The government could make a standing offer to finance (or refi) any mortgage with a fixed 2.0% 30 year mortgage (The cost of money for Uncle Sam is the Federal Reserve’s 0.25% interest on reserve rate). Anyway, 2.0% is a pretty big drop from the current mortgage rates (currently around 4.4% for a 30 fixed, 3.4% for a 5/1 ARM), and it would mean home buyers could buy more house for their available payments. I suppose if Uncle Sam was taking over the mortgage anyway, it could unilaterally change the terms of the existing note to the 2%/30 terms (assuming the homeowner didn’t object). :o)

Then to keep home prices from falling any lower, each federal mortgage could include a home equity protection policy (which typically insure that the price won’t drop below “sale price” for 15 years).

If that doesn’t do the trick, nothing will.

Another way to approach it is taking up an idea that economist (and Abba Lerner protege) David Colander offered a couple years ago:

The key element in Colander’s plan is the use of foreclosure vouchers. The government would allot foreclosure vouchers to taxpayers according to income levels, with the lowest earners receiving the biggest voucher amounts and with people in certain high income levels excluded from the scheme.

For recipients who cannot use the vouchers because they are not facing foreclosures or are not interested in buying foreclosure properties, they can sell their vouchers on the secondary market at a discount. The discounted vouchers would attract investors to the foreclosed housing market, creating housing demand, restoring home prices and ultimately contributing to the nation’s economic recovery.
http://www.realestateproarticles.com/Art/2813/265/Middlebury-Economist-s-Scheme-for-Foreclosure-Prevention.html

sorry I’m late to the discussion – it’s been a good one. My anecdote – fall 2007 and my wife and I (who moved to the Bay Area from MN) decided to buy. The prices were a shock – but we figured we were just rubes from the midwest. There was a house listed for $995,000 in Redwood City – nothing special – 3 bedroom ranch with a pool. We offered $950k and were turned down. At that point a light went off and I said to my wife – this is nuts. Dropped out of the market and saw that the house sold 6 months later for $900k. We are still renting and see no reason to buy. I feel sorry for anyone in this mess because our government doesn’t seem up to the task of handling this problem – let alone any other. Prices will not stabilize until unemployment drops. Also, anyone consider maybe time to lower inventory – maybe bulldoze a lot of homes in over built areas????

Yup.