The Sky is Falling!
Sometimes it would appear that way per all the negative press that abounds regarding real estate. NOT that I am burying my head in the sand – there’s no question a good chunk of California is experiencing some serious pains, and even here in SF where in 14 years, I rarely if ever, saw a short sale until last October; I’ll admit to it becoming far less of the rare example, at least for the southern part of the city.
That being said – the doom machine has long been at work where the press is concerned and no where is there a better way to see that, than to revisit some historic headlines from era’s gone by.
Please do enjoy, North American Title passed them my way several months ago…
“The prices of houses seem to have reached a plateau, and there is reasonable expectancy that prices will decline.” Time Magazine, 1947
“The goal of owning a home seems to be getting beyond the reach of more and more Americans.” Business Week, 1969
“The era of easy profits in real estate may be drawing to a close.” Money Magazine, 1981
“Most economists agree…a home will become little more than a roof and a tax deduction, certainly not the lucrative investment it was…” Money Magazine, 1986
“Financial planners agree that houses will continue to be a poor investment.” Kiplinger’s Personal Financial Magazine, 1993
“A home is where a bad investment is.” San Francisco Examiner, 1996.
https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0805.pdf
Anonymous at March 7th, 2008 at 3:47 am ( )JUMBO GSE guidelines:
For principal residences, fixed-rate loans are limited to 90% LTV/CLTV for a purchase, and 75% LTV/95% CLTV for a no-cash-out refi. ARMs are limited to 80%/80% on a purchase and 75%/90% on a no-cash-out refi. CASH OUT REFIS ARE NOT ALLOWED.
4. For second homes and investment properties, the maximum LTV/CLTV is 60% in all cases for purchases and no-cash-out refis.
5. Minimum FICO for any loan is 660, with a minimum of 700 for LTVs greater than 80%.
6. One-unit properties only.
7. On a primary residence, existing subordinate liens must be resubordinated. The new loan cannot “cash out” an existing subordinate lien.
8. No late mortgage payments in the preceding 12 months.
9. 45% maximum DTI, with ARMs qualified at fully-amortizing fully-indexed rate.
10. Full doc only.
11. For purchases, the borrower must make at least 5% of the down payment from his or her own funds.
12. A full appraisal with interior inspection is required on all loans; if the property value is more than $1 million, a field review appraisal is also required.
13. Loans are subject to all current pricing adjustments, plus another .25 for FRMs and .75 for ARMs.
Anonymous at March 7th, 2008 at 3:36 pm ( )Some feedback about the two comments above…
1. these guidelines have been out for a while, they just finalized them/publicized them yesterday
2. this really doesn’t change much of anything for the types of borrowers that will qualify for the new super-conforming loans (full-doc borrowers), as the items listed in the second anonymous comment are pretty standard fare, and have been for quite some time (even prior to the so-called melt-down)
3. what really will matter is when they are available to the consumer (looks like April 1 and May 1, but the banks might take them on earlier in some cases), as well as what the rates look like. the mortgage folks I’ve talked to don’t believe there will be much of a break on these loans. maybe 0.5% from the current jumbo loans (which are a 7.875% today)
either way, thanks for posting the guidelines. not everyone sees these on a regular basis like we do…
Matt Lanning at March 7th, 2008 at 3:45 pm ( )Seems funny when you read them in retrospect. Especially that last one!
Florida Waterfront Real Estate at March 7th, 2008 at 6:56 pm ( )Doesn’t look like the GSE’s will be any help to the distressed homeowner with JUMBO loans. Pretty clear they want no part of that market. Rates went up again today, would not be surprised to see rates jump to 10%, foreclosure and BK numbers are driving up credit risk.
Anonymous at March 7th, 2008 at 9:13 pm ( )Florida Waterfront Real Estate said…
Seems funny when you read them in retrospect. Especially that last one!
March 07, 2008 10:56 AM
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Yes, especially since in 1996 the hype-based dotcom economy was right around the corner!
And let’s not forget the later credit explosion enabled by the Greenspan Fed.
Since the former popped some time ago, and the latter is drying up quickly now… what’s coming next to keep the local real estate “game” going?
sf jack at March 7th, 2008 at 10:05 pm ( )So, maybe it’s not falling.
I’m sure SF won’t be impacted at all by a recession. (and yes, I’m just talking about the City, Matt)
Though it sure seems like a long ways from the “go-go buy a house, any house” days here locally.
*******
Jim Rogers: ‘Abolish the Fed’
Topics:Interest Rates | Inflation | Ben Bernanke | Employment | Consumers | Federal Reserve | Federal Budget (U.S.) | Economy (Global) | Economy (U.S.)
By CNBC.com | 12 Mar 2008 | 09:54 AM ET
“Federal Reserve Chairman Ben Bernanke should resign and the Fed should be abolished as a way to boost the falling dollar and speed up the recovery of the U.S. economy, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe Wednesday…
The Federal Reserve announced on Wednesday a rescue package that it would put around $200 billion into banks and investment houses and allow them to put up risky home-loan packages as collateral.
Wall Street responded to the news with the biggest rally of the year, but Rogers reminisced of the 1970s, when the Fed printed money to avert a recession, boosting inflation and then forcing interest rates to more than 20 percent to keep a lid on price rises…
‘Socialism for the Rich’
The Fed’s move to accept risky collateral is not part of the central bank’s business, he added.
‘What is Bernanke going to do? Get in his helicopter and fly around the world and collect rents? That’s absurd,’ Rogers said.
A recession may be a good way to clean up the economy, while trying to prevent one may cost more and actually worsen the recession, Rogers said. Also, investment banks should be allowed to fail.
‘Listen, investment banks have been going bankrupt since the beginning of time. If people make mistakes — if you bail out every investment bank that gets in trouble, that’s not capitalism, that’s socialism for the rich,’ he said.
The weakest financial institution is Fannie Mae, in Rogers’ opinion, ‘but all of them have problems.’”
http://www.cnbc.com/id/23588079
Or:
http://tinyurl.com/39obog
*******
ECONOMIC FORECASTING SURVEY
Most Economists in Survey
Say Recession Is Here
Poll Shows Sharp Drop
In First-Half Forecasts;
Retail Sales Decline
By PHIL IZZO and SUDEEP REDDY
The Wall Street Journal
March 13, 2008; Page A14
“Economists in the latest Wall Street Journal forecasting survey are increasingly certain the U.S. has slid into recession, a view reinforced by new data showing a sharp drop in retail sales last month.
‘The evidence is now beyond a reasonable doubt,’ said Scott Anderson of Wells Fargo & Co…
The survey marked a precipitous shift toward pessimism from the previous survey, conducted five weeks earlier…
Almost half the economists surveyed said a recession this year could be worse than the 2001 and 1990-91 downturns…”
http://online.wsj.com/article/SB120534519452630845.html
Or:
http://tinyurl.com/2l8ecm
*******
Op-Ed
Columnist
Betting the Bank
By PAUL KRUGMAN – New York Times
Published: March 14, 2008
“Four years ago, an academic economist named Ben Bernanke co-authored a technical paper that could have been titled ‘Things the Federal Reserve Might Try if It’s Desperate’ — although that may not have been obvious from its actual title, ‘Monetary Policy Alternatives at the Zero Bound: An Empirical Investigation.’
Today, the Fed is indeed desperate…
What if this initiative fails? I’m sure that Mr. Bernanke and his
colleagues are frantically considering other actions that they can
take, but there’s only so much the Fed — whose resources are limited,
and whose mandate doesn’t extend to rescuing the whole financial
system — can do when faced with what looks increasingly like one of
history’s great financial crises.”
http://www.nytimes.com/2008/03/14/opinion/14krugman.html
Or:
http://tinyurl.com/2q3u7b
*******
U.S. faces severe recession: NBER’s Feldstein
Friday March 14, 10:55 am ET
By Ros Krasny
“BOCA RATON, Florida (Reuters) – The United States is in a recession that could be ‘substantially more severe’ than recent ones, National Bureau of Economic Research President Martin Feldstein said on Friday.
‘The situation is very bad, the situation is getting worse, and the risks are that it could get very bad,’ Feldstein said in a speech at the Futures Industry Association meeting in Boca Raton, Florida.
There’s no doubt that this year and next year are going to be very difficult years.”
http://biz.yahoo.com/rb/080314/usa_economy_feldstein.html?.v=1&printer=1
Or:
http://tinyurl.com/2wdqoe
sf jack at March 14th, 2008 at 7:41 pm ( )Thanks for the articles, Jack.
As usual, I take a different view of things… Even the ALWAYS-negative Edward Leamer from the UCLA Anderson Forecast is saying that although housing sucks across California, and is largely responsible for a sluggish economy, it will NOT result in a recession in 2008 or the foreseeable future…
http://www.anderson.ucla.edu./x19722.xml
And you all know how little I think SF will be affected by even a major crisis in other housing markets (which some are certainly seeing right now).
There’s no question that people are hurting in some markets, and there’s no question that some buyers are being a bit hesitant in the SF market, but mostly they’re waiting for the final details on the “super-conforming” loans to become public.
Whether there’s a huge interest rate benefit or not, people will know the score and will move forward with their plans to buy a home, at whatever price their income and interest rate will allow them to afford.
And with any luck, we should see that start happening as early as next week.
Will it bring us back to the frantic markets of yesteryear? Probably not. But it’s just one more reason that the SF market will just keep plugging along.
Matt Lanning at March 14th, 2008 at 8:00 pm ( )Based on the headlines from their very own press releases, it is my opinion that the UCLA Anderson Forecast hasn’t been very good at predictions.
Now honestly, Matt and all of you other faithful real estate cheerleaders, go below and look at the dates associated with the headlines for the forecasts.
Ask yourself if you can NOW really believe what the Anderson Forecast is saying today about California’s economy?
[See for yourself; also note that I do not believe headline writing constitutes a forecast, nor that headline writing and forecasting, or neither or both, or one or the other, are easy. But jeez, this is what they get paid for - no wonder Christopher Thornberg ditched the place for Beacon Economics
http://www.beaconecon.com/people/c_thornberg.html
All below, but for my bracketed comments, from:
http://uclaforecast.com/
******
UCLA Anderson Forecasters Predict a Short and Shallow Recession for the U.S, Followed by a Weak Expansion; California Is Weighed Down by Weak High-Tech Sector, But Will Turn Around by Mid-2002
December 5, 2001
UCLA Anderson Forecast
[Verdict?
Right and wrong.
Right on US economy, very wrong on high-tech sector.]
*******
UCLA Anderson Forecasters See U.S. Economy Staggering Forward with Possibility of Another Tumble;
California Prepares for Recovery After 2001 Downturn
March 26, 2002
UCLA Anderson Forecast
[Verdict?
Wrong and wrong.]
******
UCLA Anderson Forecast Notes Potential Drops in Housing Prices and Productivity;
Foresees Rising Interest Rates and Weakness in Housing Market
California State Budget Crisis is an Ongoing Concern
December 8, 2004
UCLA Anderson Forecast
[Housing drops in 2004?
Weakness in housing in 2004?]
******
UCLA Anderson Forecast Continues to Warn of Slow Growth for National Economy
“Soft Landing” Expected for Both California and Los Angeles
September 28, 2005
UCLA Anderson Forecast
[Soft landings in 2005?]
*******
UCLA Anderson Forecast Predicts “Weakness” In The National Economy Due To Problems In The Housing Market
California Economy To Experience Similar Conditions as State’s Real Estate Market Cools; No Recession Forecasted for the U.S. or California
December 7, 2005
UCLA Anderson Forecast
[Weakness in 2005?
Problems in the 2005 housing market? Where?]
******
UCLA Anderson Forecast Predicts “Meaningful Downturn” in the National Economy Due to Higher Interest Rates, Weakness in the Housing Sector; California Economy to Experience Job Losses as State’s Real Estate Sector Cools
No Recession Forecasted for the U.S. or California
LOS ANGELES, April 27, 2006 —
[Meaningful downturn in 2006?
Job losses in California in 2006?
Where? When? How?]
*******
UCLA Anderson Forecast Calls for Real Estate Slowdown in California;
No Statewide or National Recession Seen
LOS ANGELES, June 21, 2006
[What real estate slowdown in 2006 in California?
(OK. Maybe in a couple places. Can anyone, anywhere, point those out?)]
******
UCLA Anderson Forecast Predicts Soft but Turbulent Landing for National Economy
California Real Estate Sector to Continue Decline Leading to Economic Slowdown
LOS ANGELES – In its third quarterly report of 2006
[Soft and turbulent?]
******
UCLA Anderson Forecast Holds the Line: No Recession in National Forecast
But decline in California real estate sector continues
LOS ANGELES – In its fourth quarterly report of 2006, the UCLA Anderson Forecast refuses to join the growing chorus of experts predicting a recession. The Forecast notes in particular that, “manufacturing is not poised to contribute much to job loss,” and, “real interest rates are very low and there is no evident credit crunch, not on the horizon.” The report concludes that in light of these conditions, the problems in the housing sector are less severe than they would be otherwise. In short, the decline in the housing sector will be isolated and, while a drag on the national economy, is not enough to cause a recession during the forecast period. The forecast for California is much the same with a declining housing market slowing the economy but, without a secondary source of economic distress, it’s not enough to cause a recession.
[I quote: "there is no evident credit crunch, not on the horizon."
So as 2007 dawns, THE YEAR OF THE CREDIT CRUNCH - there is not one predicted on the horizon.
And no national recession forecast?
A year later, they just admitted (Mar '08) there will be a national recession.]
********
No Recession Imminent For National Economy
Subprime Credit Crunch to Contribute to Longer than Expected Period of Below Trend Growth
LOS ANGELES, April 2, 2007 – In its first quarterly report of 2007, the UCLA Anderson Forecast remains steadfast in its belief that the national economy does not face recession, though the group’s economists concede that length of the current, below trend growth period leaves them “increasingly nervous.” The Forecast in particular notes that, “ … the credit crunch in the subprime mortgage market will likely trigger a second leg down in the housing market in terms of output and prices.”
The Forecast asserts that the slowed economy may well endure longer than previously expected, but that better-than-expected consumption, a “less-negative” trade sector and at least two and possibly three rate cuts will keep Gross Domestic Product (GDP) positive throughout 2007. In California – and in spite of some positive news in the form of revised employment revisions – the UCLA Anderson Forecast looks for a “significant slowing of the California economy in 2007, as the double-whammy from construction and mortgage finance creates drag on the rest of the (state’s) economy.”
[So less than a year ago - no national recession is imminent?]
*****
UCLA Anderson Forecast: U.S. Economy Not In A Recession, “But It Is Certainly Close.”
In California, Slumping Housing Market Will Finally Impact Job Growth
LOS ANGELES, June 19, 2007 – In its second quarterly report of 2007, the UCLA Anderson Forecast continues to believe that the national economy is not in a recession, though the group’s economists now say the economy is “certainly close” to recessionary conditions. The Forecast asserts that real growth in 2007 will be 1.8%, “roughly on par with the near-recessionary environment of 2002,” when real GDP advanced at 1.6%.
[Three months later, we're "close" to a recession!]
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UCLA Anderson Forecast: U.S. Economy “A Near Recession Experience”
California Will Avoid Recession but Doldrums to Last Another Year
LOS ANGELES, September 12, 2007
[Only another year?
So on September 13, 2008 - all is clear?!]
******
UCLA Anderson Forecast Reports Plenty of Troubles but No Recession on the Horizon
In California, Sluggish Economy will Continue
LOS ANGELES, December 6, 2007 – In its fourth quarterly report of 2007, the UCLA Anderson Forecast holds steadfast to the basic tenet of a forecast they have been making throughout the year, that the national economy is not technically in a recession, nor is there a national recession on the economic horizon. Though the economy is experiencing difficulty rooted in the problematic real estate sector, as well as the result of such things as higher oil prices and a troublesome rate of consumer debt, the UCLA Anderson Forecast does not see the possibility of enough job loss to trigger a
n actual recession.
[No recession nationally?
Are they sure about that?
I just heard them this week on KCBS (all news radio San Francisco) say there will be a national recession; but not one in California]
sf jack at March 14th, 2008 at 10:11 pm ( )this page for some reason is far off to the right of my browser, I am using Maxthon 2, please fix, I enjoy reading your post.
refi rates at April 14th, 2010 at 3:27 pm ( )