Housing Crash Is Hitting Cities Thought to Be Stable (NYT)

[somone]

http://www.nytimes.com/2011/02/14/business/economy/14dip.html

Housing Crash Is Hitting Cities Thought to Be Stable
By DAVID STREITFELD

SEATTLE — Few believed the housing market here would ever collapse. Now they wonder if it will ever stop slumping. The rolling real estate crash that ravaged Florida and the Southwest is delivering a new wave of distress to communities once thought to be immune — economically diversified cities where the boom was relatively restrained. In the last year, Seattle homeowners experienced a bigger price decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix.

The bubble markets, where builders, buyers and banks ran wild, began falling first, economists say, so they are close to the end of the cycle and in some cases on their way back up. Nearly everyone else still has another season of pain. “When I go out and talk to people around town, they say, ‘Wow, I thought we were going to have a 12 percent correction and call it a day,’ ” said Stan Humphries, chief economist for the housing site Zillow, which is based in Seattle. “But this thing just keeps on going.”

Seattle is down about 31 percent from its mid-2007 peak and, according to Zillow’s calculations, still has as much as 10 percent to fall. Mr. Humphries estimates the rest of the country will drop a further 5 and 7 percent as last year’s tax credits for home buyers continue to wear off. “We went into 2010 feeling gangbusters, thanks to Uncle Sam,” Mr. Humphries said. “We ended it feeling penniless, with home values tanking.”

The fact that even a fairly prosperous area like Seattle was ensnared in the downturn shows just how much of a national phenomenon the crash has been. The slump began when the low-quality loans that drove the latter stage of the boom began to go bad, but the resulting recession greatly enlarged the crisis. Many people were unable to get a mortgage, and others simply gave up the hunt. CoreLogic, a data firm, said last week that American home prices fell 5.5 percent in 2010, back to the recession low of March 2009. New home sales are scraping along the bottom. Mortgage applications are near a 15-year low, boding ill for the rest of the winter...

[MadHound]

1. And now that we're going to see the mortgage interest deduction slashed,

Along with Community Block Grants and other such programs, the housing market will just go downhill faster and faster.

[customerserviceguy]

11. Don't forget that rising interest rates

will have a similar effect.

The housing market in Seattle tends to inflate exceptionally, with all the water surrounding the place, there's no place to build additional housing stock, except in suburban areas that are already quite overbuilt themselves.

I know, I worked in title insurance in the greater Seattle market from 1976 to 1989.

[msongs]

2. good thing our fearless leaders still hve trillions for corporate military spending eh? nt

[katnapped]

3. And tax cuts for the rich!

Don't forget that!

Must...keep...priorities...straight

[lonestarnot]

10. And bonues for corporate welfarers! Don't forget them either!

[Shagbark Hickory]

4. When are ppl going to stop blaming the banks and start blaming the schmucks that paid

rediculous amounts for their house?

The lenders are partly to blame, yes, but so are the people who paid a million dollars for a small 800 sf cottage.
Seattle, I am talking to you.

[MadHound]

5. Ah yes, let's blame the victim,

Especially those millions of people who actually paid a reasonable price for their house, and still find themselves underwater.

[Shagbark Hickory]

8. No sir ree. The victims are the people that could never afford to buy a house in seattle.

Because of all the get-rich-quickers and the people that thought they could just over pay for a house with someone else's money then sell the house a few years later at a profit and then move somewhere bigger.
The writing was all over the wall.
This was going to come crashing down.

If people bought only what they could afford without "creative financing" and said "no" to sellers instead of get in bidding wars over run down properties just because their realtor says that's what everyone's doing, then we'd never be in this mess.

[Warpy]

9. It's not just that. The whole mess happened

because banks knew some loans were bad and turned them into "assets" whose origin they hid as they sold them to institutional investors from pension funds to whole countries---then they bought derivatives betting against those very "assets." That's the house of cards that fell down and took the whole economy with it and the systemic problems at the top have still not been addressed, much less fixed.

People are not the problem. They stretched themselves thin to pay a mortgage on a piece of property because that's been the main route to a solvent retirement in the absence of decent pensions, owning one's home free and clear instead of having to pay constantly rising rents. They did the right thing.

The bankers are the ones who perpetrated fraud and the bankers are the ones who crashed this economy. Remember, those mortgages in places like Seattle would have been perfectly safe if we didn't have U-6 unemployment approaching (and probably exceeding) 20%.

Blaming mortgage holders is obscene. That post is disgraceful.

[Shagbark Hickory]

13. What I think is disgraceful is for-profit housing that prices people out of the market

when it became SOP to buy a house one couldn't even come close to being able to afford with someone else's money.
There's plenty of blame to go around but if you think that the bubble could keep inflating in places like seattle, you're in need of a basic economics 101 course.

In many places hardest hit but the "bust", people would buy houses with the bank's money. Then sell them 6 months later at a 20% increase in price.
People would pay outrageous sums for run down shacks because they suddenly became very valuable.

Some people would take the run down shack over the park bench if it was all they could afford. During the housing bubble, many folks couldn't even afford that. The only way to get a roof over your head in place like seattle, unless you're a literally a millionaire, is to take out some form of creative financing. Even with higher salaries, the salaries were not keeping up with housing prices.

So yeah, I'm blaming the people that did that instead of telling the seller their price was too high. They willingly got suckered.

[Little Star]

6. I will not blame the people! Those that you are talking about...

are few in the scheme of things and your argument simply justifies the scam the banksters have going on. Yep, its still going on, nothing has changed. Banksters are to blame. Their greed is what brought the US to it's knees. Their greed alone did that.

[JackRiddler]

12. Yeah, when are ppl finally going to buy the right-wing schmuck propaganda?

Because clearly, it was those deadbeats who made the banks lend them money without any of the traditional checks, and then slice and package their mortgages into fraudulent securities, and then get AAA ratings, and then sell the junk paper to suckers around the world who believed in the ratings, and then borrow trillions to make trillions in side bets, all the while having Cramer and the rest of the clowns on TV talk about how housing would continue rising by 20 percent a year forever, amen.

[Shagbark Hickory]

14. You're jumping the gun. Before the bets were made on mortgage backed securities, someone said ...

"Yes, we'll take it" and enthusiastically submitted a signed sales contract for a house that was worth nowhere near the price being paid.
And often under the assumption and advice of a realtor, because even though the houses were a rip off, they were going up in value very rapidly because people continued to pay the price.

Although one can definitely make the case that the home buyer is the victim, how much due diligence does it really take to see that if a house is going up 20% in value every 6 months but salaries are not going up 20% and and adjustable interest rate is going to go way up in just a few short years, that this was clearly an unsustainable cycle?

Many people wrapped up in the foreclosure mess are or have lost their homes due to losing their job. And they may not even bought a house in the last 10 years or even lived in a city that had a housing bubble. My gripe is NOT with them. I repeat, is not with them.

Once again, my gripe is with the people that agreed to pay significantly more for a house than it was worth under the assumption they could just sell it later at a profit, even if they never actually pay down any of the principle on the loan.
The dillwad HGTV viewers that were going to flip houses or rent them out and make a mint. I blame them.

We have some underlying problems with our housing system. In my view, I hold housing sacred. It's one of those things like healthcare, that should be non-profit. Everyone needs a place to live. The forces of the market only bars entry to that basic need.

Good luck finding a rethuglican that agrees with me on that premise.

[JackRiddler]

15. In short, your beef is with the suckers of the scam.

First note, many of them were conned into buying subprime at terrible conditions when they would have normally qualified for standard mortgages. But leaving aside this group...

More importantly, regardless of their motives or ability to pay, almost none of them would have been able to get mortgages prior to the bankster decision to aggressively expand the subprime market and do all they can to find buyer-suckers. It was the banksters who set up this market, not the "demand."

[Shagbark Hickory]

17. Yes. Just the same as I would blame ....

... the banksters.

These people made bad decisions. And they did so with the intent of making money. Many of them knowing or not bothering to fully understand the business decision they were making or the risks. Their home was an investment aimed at short term gains.

I also blame the people that sold them the loans and everyone involved in the transaction. But it was the buyer who ultimately pulled the proverbial trigger. Even though others may have persuaded them to do so, they are responsible first and foremost.

[JackRiddler]

18. It's like you're blaming the (greedy) Ponzi scheme victims instead of Ponzi...

A scam is still a scam, even if it preys on the worst impulses of greedy suckers (a characterization I would not make of most subprime borrowers, but I'll let it stand for the point of addressing your argument). Madoff's suckers were also all wide-eyed and greedy, but that doesn't change the fact that Madoff set up a scam. You don't say "caveat emptor" on patent frauds. Same applies to what was done by the banksters in the mortgage market. I could sit here for years and wish a magic box would give me a 20 percent return every year. That wouldn't make me a nice person, but still, if someone came to take advantage of my greed by knowingly selling me a fake magic box, THEY are the responsible party and the criminal. I'm still only a sucker.

[txlibdem]

24. Amen to that. We had to fight to get a fixed rate mortgage

Here's how it went when we bought in 2004. We kept having to demand a fixed rate loan but at every turn the mortgage broker or his rep kept trying to convince us we'd "be better off" in an adjustable. What they weren't telling us is that their commission check from an adjustable is higher.

Then on the day we went to sign the papers they had gone against our wishes and drawn up an adjustable mortgage agreement. I wouldn't have known had I not been so damn cynical that I never sign anything till I read the damn thing. This was the mortgage broker selected by our buyer's agent so I was shocked and we were going to walk right then and there but our agent asked us to stay for just another half-hour so they could "correct their mistake" and get a fixed rate contract typed up.

Yeah right. The banks started the corruption and it flowed right down to the agents and brokers on the street. Needless to say we'll never use that lady as our real estate agent again either.

Blame the poor working man and woman who foolishly trusted these crooks? Hell no.

[Hannah Bell]

20. the evidence clearly shows that banksters were making loans to anything with a pulse,

had targets, & went out & actively solicited people who they couldn't have had reasonable expectations would be able to keep up the payments.

it was a moneymaker at least two ways.

sure, there were people flipping houses. vultures always join a feeding frenzy, but they didn't start it. the banking/financial community could have cut it off at any point by tightening lending; they loosened requirements instead to keep it going.

the fed could have tightened too.

your post is ridiculous, seriously.

[Shagbark Hickory]

23. I'm curious on where you stand on for-profit housing, hanna bell.

Bubble and bust system or everyone can afford to have a decent roof over their head and live as equals with people of other income levels instead of in the ghetto.
What say you?

[Hannah Bell]

19. +100

[Little Star]

7. Oh yeah, unrec.

[JackRiddler]

16. Huh? Shoot the messenger?

[Little Star]

22. Sorry. I was so mad at one of the comments in your thread....

that I accidentally did the unrec and then announced it. Talk about seeing red! Please accept my apology.

[SoCalDem]

21. Seattle real estate "blossomed" when Californians sold at hugely inflated prices down here

and started buying up Seattle real estate (which was THEN , a bargain).

Norther Californians in the IT industry who could work anywhere there was a laptop, and who traveled to Seattle for business fell in love with the beauty and then ruined their local real estate of the locals who were priced out of the market..

This happens everywhere.. Albuquerque/Santa Fe saw it, so did all the little burgs in Colorado that used to be dirt cheap.

Wealthy people with money to burn look for "cute" out-of-the-way places to build their retreats in, and soon it become ultra-chic (Montana/Idaho are now favorites). Once word gets out, the locals cannot afford to buy anymore..