Mortgage company out of business (Johnson City: sales, real estate, foreclosure)

[dreamofmonterey]

my friend started a mortgage company in downtown Johnson City- they had to close down. Any thoughts/comments on what's happening in the housing market these days?


sunny

[sliverbox]

Well, whatever your friend did running the business might have had something to do with it's success. But nationally, the housing market is in decline. There are a few things happening all at once that could have an impact on housing, the lending industry, and anything else related to it.

First of all, many state governments are cracking down on lending practices that got to slack. The subprime industry was HUGE. In some parts of the country like where I live out in CA, more than 60% of all homes bought since 2003 were with subprime loans. There were/are enormous amounts off startup loan companies here not unlike the dot-com hysteria of the 90's. California alone has over 500,000 Real estate agents. I'm not sure of what those numbers might be in TN, but I imagine that nationally, a LOT of people got themselves involved with real estate one way or another. With a declining market, there is simple too much competition and there will probably be many who lose their jobs as a result.

Secondly, housing price got too high in many metropolitan areas- including some of the choice areas in TN. The foreclosure rate in most states has been doubling, even tripling in numbers for the last year or so. Those numbers come from resetting ARM and IO loans as well as on homes that were bought by people who lacked financial means to pay for them. Everyone got caught up in the frenzy and some bought without consideration. With less people buying and new homes still being built like mad, there exists a strong possibility of a housing slump-or worse- a crash.

In conclusion, many people have compared the housing boom to the tech boom. I wouldn't say that their analysis is entirely unreasonable. The fallout from this has really only just started and where it is heading is anyone's guess.

In my opinion, a fallout would be a good thing because we've gotten really far from economic fundamentals and there is only so much non-existent money you can squeeze out of the population before the party ends.

[Tony1790]

Well there is a thread that speaks to the housing market in TN and in general that I've posted some views on, as well as others on this chat room.

I can't speak to the severity of the mortgage crisis in TN (MBmouse better suited for that) but here in WA state and nationally there is an ongoing crisis and credit crunch orgininating from the Subprime lender implosion. Thus far on a national basis there are 44 lenders that have went belly up since Dec 06, with more to follow. Lots of FBI investigations with regard to fraud and abuse, currently there is a special on ABC news in that vein, how unsuspecting borrowers were lured into Interest only or Neg AM, ARM loans with prepayment penalties that trapped them in the homes. But to be honest, yes many of these lenders bent over backwards to stick it to the borrowers, but many of the borrowers let their judgement be impaired with a fair bit of greed as well. If it sounds too good to be true, it probably is, that's just as relevant today as it was in the past.

I'm not saying that things are bad or will get bad in TN, maybe not, definitely not now according to most on this board and that is a good thing.

I for one cannot be a bigger bear on lending and housing due to my personal bias and involvement in real estate currently, so my views and comments will have to be taken with a grain of salt

But on the news yesterday was that new homes sales are down by a huge margin and inventory is up.....if you are in CA, FL or the Northeast this should not be news to you.

Yesterday my mortgage broker told me that the lending business here in WA state is in total chaos with many real estate deals failing due to the lenders pulling credit approvals from people after they were already approved. My own home has not closed yet due to this problem as well!

My movers are scheduled to be here on Monday to pack up my stuff so that I can move to TN or somewhere The mover's rep came by yesterday to pre-inspect, he said business was slow and that the few people he has moved have had their selling prices reduced in order to sell, he said that prices are coming down. Of course I already knew that, that was why I was selling everything off

Anyway, sorry in advance to be negative on housing, I actually feel everyone should own a home, that wants to, but the macroeconomic scene right now is not looking good....well for sellers anyway......buyers should do ok.

p.s. Anyone see what Bernarke had to say on housing and the possibility that it's slow down may drag the economy into recession?

Tony in WA
(trying to move south)

[dreamofmonterey]

We are in a recession, most definitely. I went to a huge mall yesterday and NO ONE was buying. Anything. Also in town many car dealers are going belly up.

Oh, but I guess people who have stock in Halliburton are still telling the media the economy is great. I don't buy that spin.

sunny

[sliverbox]

My parents still live in east TN. From what my dad says, it sounds like his observations of his area are not entirely different from CA, WA, AZ... etc etc. People are buying way more than they could afford. We assume that since TN is so cheap in comparison to places like the West Coast that surely everyone must be jumping on the chance to move there. But not exactly. Mostly snowbirds from places like MA and NJ.

See, the whole problem with the picture is that there is a clear supply and demand problem. I live in the Bay Area of CA and part of the reason prices went through the roof is that there are strict regulations regarding building new homes. This has gotten to the point where people are actually angry about it. But the result is that the supply is suppressed... the prices are higher. But just like the rest of the country, CA has a sensational rise in values that far outstripped the economy's capability to provide realistic means to keep on at the pace. So people here- just like in TN- bought over their heads.

In TN and many other parts of the Southeast, there are few if any regulations on housing, where you build it, and how you build it. So every single time I visit, there sits an ENORMOUS supply of new homes. This in turn causes more supply, less demand, and a lowering of existing properties. last time I checked, TN was close to the top of the list in terms of foreclosure activity. I think MI, FL, CO, CA, NY, MA, and a few others have since eclipsed this. But the big picture is that housing in general is in for a potential free fall, and for who knows how long.

Regardless, I think TN will probably continue to have enough out of staters moving in. But I do wonder about the quality of the people moving in in terms of what they will contribute to the economy. I am afraid many just moved to TN only for cheap prices. If they aren't planning on contributing to the job market and simply using their stockpiles of cash from wherever thet came from to supplement their lives, then the state economy could suffer.

Again- I have no crystal ball... I'm just glad I didn't buy a house in CA!!

[dreamofmonterey]

If they aren't planning on contributing to the job market and simply using their stockpiles of cash from wherever thet came from to supplement their lives, then the state economy could suffer.
_________________________

True. Just like Florida. People who are semi-retired dont need to "contribute" to the job market if all the job market offers are mediocre service type jobs.

sunny

[Tony1790]

Originally Posted by sunnyhelena

True. Just like Florida. People who are semi-retired dont need to "contribute" to the job market if all the job market offers are mediocre service type jobs.

sunny

True, but welcome to the New America, thanks to corporate greed and political compliancy, the world labor arbitrage has shifted everything that can be shifted to places like China (manufacturing) and India (tech support/IT business).

The only jobs that they can't ship out are service jobs, even the few good jobs like construction, etc are taken up by the illegal workers, which acts as a wage suppressor, keeping wages low.

I love that they say inflation is under control, when medical costs, college costs, Gas, and most of all housing costs are thru the roof. We are talking about 200% to 300% inflation in the price of housing in a 3 to 4 year timeframe. That is historic and waaaay out of the norm, and anyone that says that housing can't come back to normal has never lived thru a housing price collapse, ala, CA/FL/OK, etc in the 80's, 90's and now the 2000's

And yet minimum wage on the federal level hasn't been raised in over 10 years, what is it like $5.15? Unfreaking believable, but anyway......they plan on raising it over the next 2 years to $7.15.

So yes I am a follower of the economy, it is pretty interesting, that's mainly due to my being a History major. It's like watching history in the making, they are still talking about the Tulip mania in Holland, what like 500 years ago (give or take a century) I think they will be talking about current times far into the future....don't forget the great depression went from a real estate bubble in FL to the stock market bubble to bust and eventually lead to such social disorder that people like Hitler, Stalin and Mussolini were able to rise up.

OK, I'm getting way down in the weeds now, time for me to quit talking history and start packing for my pending move.

Take care,

God bless all and pray for the best.

Tony

[dreamofmonterey]

so true-Tony- Bank of America now has their biggest Customer svce in Pakistan and India. How lovely. I cut up their cards last year.


sunny

[Tony1790]

Originally Posted by sunnyhelena

so true-Tony- Bank of America now has their biggest Customer svce in Pakistan and India. How lovely. I cut up their cards last year.


sunny

Bank of America, they are the same ones who were competing to give credit cards to illegal aliens......just a symptom of too much easy credit....they currently see it as expanding their customer base and seeking higher yields. Eventually they will see it as giving credit to a class of people who have shown a propensity to break the law and who will be hard to track down if the economy were to decline too much and they begin to default like the rest of the country soon will.

Oh how we forget our history and ignore the lessons of our forefathers, even bankers, I'm just sad to see the lessons of the great depression generation totally gone now. Don't borrow, work hard, keep debt low, save money, etc. Everything is opposite day now.....borrow as much as you can, keep up with the jones's, buy want you want when you want it, don't save, don't work hard, hire that hard work to an illegal, etc, etc, etc.

Well for me, I'm debt free once my house closes, no car payment, no credit card debt, have some cash in the bank, but I still have to find a decent job and find a place to live/buy. I'm still buying a home, for shelter, not investment, it may well go down in value, but if I can buy cheap enough it won't matter as long as it doesn't leak

Take care.

Tony

[dreamofmonterey]

well- you are being smart. How many kids do you see who cant afford to buy lunch-make 15k a year or whatever-have to have a brand new car- (That devalues over 60% the first year) My grandfather grew up in the Depression. I learned alot from that generation. Americans have the worst debt of any country- we are inundated with marketing/spin and easy credit (which later explodes in our faces).

What you are saying is so true. And who will pay when the illegals default on their credit cards?-the CONSUMERS-not Bank of America. Its sad.