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The Housing Unrecovery: Mortgage Application Drought Continues

Tyler Durden's picture


The unaffordability-train rolls on in the US housing market. While it may destroy the housing-recovery-will-save-us meme (even as homebuilder stocks are the worst performing since the FOMC and many are sliding to 52-week lows), the facts are that a rising mortgage rate (now over 4.50% for the first time in 2 years) does reduce dramatically what the average household can afford to pay (given that people - unlike banks and governments - have limited incomes and balance sheets). Mortgage applications fell for the 8th week of the last 9 at the fastest year-over-year pace in 3 years and slumped to 2 year lows. This bodes extremely ill for home sales and the 'recovery' upon which it has already become dependent (as we noted here).

Worst Year-over-year change in 3 years...


which tends to front-run the shift in home sales... (inverted mortgage rates relative to a lagged home sales index).


and as a reminder... this DOES impact affordability - no matter how much your friendly local realtor or mortgage broker tries to explain still-generational-low mortgage rates - it's simply all about the marginal move...


Get back to work Mr. Bernanke...


Charts: Bloomberg


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Wed, 07/10/2013 - 08:58 | 3737009 andrewp111
andrewp111's picture

OK. Markets fluctuate, and no trend can be followed into infinity.

Wed, 07/10/2013 - 09:04 | 3737021 Badabing
Badabing's picture

Goldman Sachs cant lend us money because it is buying all the uranium in the world.

Its only a matter of time until a bank becomes a nuclear power!

Wed, 07/10/2013 - 22:18 | 3740071 boogerbently
boogerbently's picture

So, if we want to start selling houses again.........

Wed, 07/10/2013 - 08:59 | 3737010 LawsofPhysics
LawsofPhysics's picture

No worries, banks and bankers will simply start buying/selling amongst themselves and their political puppets...

Now where have we seen this before...

Wed, 07/10/2013 - 10:04 | 3737168 Cognitive Dissonance
Cognitive Dissonance's picture

It seems even mortgage applicants have been trained to BTFD (in interest rates).

<Get to work Bernanke. Time to warm up the chopper.>

Wed, 07/10/2013 - 10:21 | 3737229 asteroids
asteroids's picture

The Charisatan has made the banks whole. They now own Mcmansions. But, the average person can no longer afford to buy. Somethings gotta give. Either housing falls, or people get real jobs and huge pay raises. Since the FED has no interest in jobs, you gotta think that housing is going to stay flat or go down for a very very long time.

Wed, 07/10/2013 - 10:48 | 3737330 Seer
Seer's picture

Good little Americans will be incited to "Buy American," to buy those McMansions no matter!  If you don't then you're a terrorist (and TPTB will then move you into the BIGger House).

Wed, 07/10/2013 - 10:25 | 3737240 ArkansasAngie
ArkansasAngie's picture

How about Benny stop working.  How about he declare a work stoppage.  No bailing out of banks.  No manipulating the markets.  No buying of bonds.  No giving of money to Europe.  No secret deals with prosecutors/regulayors.  etc. etc. etc.

Wed, 07/10/2013 - 10:52 | 3737352 Seer
Seer's picture

Ever hear of the phrase "greasing palms?"  If they stop then the Game stops.  All nearly everyone knows is The Game.  W/o the "grease," which we know cannot continue forever, it all seizes up.

Wed, 07/10/2013 - 15:10 | 3738551 Nothing but the...
Nothing but the truth.'s picture

  And with the help of all the fudged numbers coming out of the government, the phantom economy and state sponsored ponzi scheme will simply roll along

Wed, 07/10/2013 - 09:03 | 3737013 Mercury
Mercury's picture

...and as a reminder... this DOES impact affordability - no matter how much your friendly local realtor or mortgage broker tries to explain still-generational-low mortgage rates - it's simply all about the marginal move...


Until prices adjust.

This is the kind of protracted BS you get when markets (for loans or houses) are never allowed to properly clear.

Wed, 07/10/2013 - 09:04 | 3737032 disabledvet
disabledvet's picture

i like this comment. one of my favorite lines from the movie stripes is when the park their jolopy in the no parking zone and the guy exclaims "you can't park that here!" they respond "we're not parking that car. we're abandoning it!"

Wed, 07/10/2013 - 10:07 | 3737049 Mercury
Mercury's picture

Recently on the high end (where mortgage rates have also been artificially low) loans are much more regularly approved for these (well-healed) borrowers...after the now requisite amount of compliance theatre.  As a result there are currently bidding wars left and right for RE in premium, local markets.

So, as has been the theme since at least 2008, the poor and the rich are getting the most for the least while the middle class gets squeezed the hardest.

Wed, 07/10/2013 - 11:36 | 3737578 tip e. canoe
tip e. canoe's picture

check out the price history of those "high-end" homes that are selling (outside of the "trendy neighborhoods").

in most cases, you'll see a significant (and i mean, SIGNIFICANT) decrease from the original "offer price".

Wed, 07/10/2013 - 11:43 | 3737613 Mercury
Mercury's picture

Try buying a condo in Boston or New York.

Wed, 07/10/2013 - 11:55 | 3737671 JPM Hater001
JPM Hater001's picture

You have to view those systemically. Demand is a factor in all markets. These just happen to be locked in by water with more trying to get in than out.

Of course that's only till we just convert it into a prison. Then the bankers don't have to relocate.

Anyone seen Pliskin? Where is that bastard?

Wed, 07/10/2013 - 10:30 | 3737257 Slim
Slim's picture

Great comment. 

What mainstream people seem to be missing is that taking interest rates from 6% to 3% (using rough numbers) doesn't make a person who could buy a $300,000 house into a person who can buy a $500,000 house.  It puts the $300,000 house at a $500,000 price point thanks to foolish people exceeding tightly controlled inventory.  You saddle a $100K famlily with a $500K principal balance and regardless of monthly payment, it's very painful if anything goes wrong.  The meteoric rise in housing prices courtesy of cheap credit has vastly outpaced gains in income which is why buyers don't have 20% down anymore. 

All speculation and wreckless leverage.  At some point a lesson is learned here and I very badly don't want to be collateral damage for these fools.

Wed, 07/10/2013 - 11:20 | 3737477 tip e. canoe
tip e. canoe's picture

great comment as well, stickiness works both ways.  

once the glue comes off. watch out below.

Wed, 07/10/2013 - 11:38 | 3737592 Seer
Seer's picture

"Until prices adjust.Until prices adjust."

Can't help but think about all the ARMs: it's like juggling with running chainsaws.  As "fun" as things are in the US, just watch how it goes up in smoke in Canada (ARMs are almost a requirement up there; Australia is another place I watch, and there too things are likely to really send up the smoke*)

* I was poking around looking for info on Australia's housing bubble and I ended up sidetracking upon this article/paper which I thought others here might like to hold on for a reference (I'll hold it to beat anyone over the head with it should they proclaim: "no one could have seen it coming"):

Munich Personal RePEc Archive No One Saw This Coming": Understanding Financial Crisis Through Accounting Models

Wed, 07/10/2013 - 09:01 | 3737018 I am Jobe
I am Jobe's picture

ah the dream the hope and the memories. Fuck sheeples wake up. Long way to the bottom.

Wed, 07/10/2013 - 11:41 | 3737604 Seer
Seer's picture

I left the "memories" before they turned to nightmares... and now am on new "memories," which I find will be much harder to ratchet down from (at some point, without a shovel, it's kind of hard to get any lower... unless, that is, someone else is using a shovel to set you 6' down).

Wed, 07/10/2013 - 09:02 | 3737020 Dingleberry
Dingleberry's picture

FHA implemented rules for lifetime PMI this summer. I wonder if that is affecting the market. Seems like it should with so many buying already stretched to their limit.

Wed, 07/10/2013 - 09:21 | 3737078 Rainman
Rainman's picture

Goobermint will not let subprime lending die. Making home loans to the low income 580 FICO crowd is still madness.

Wed, 07/10/2013 - 09:57 | 3737151 AynRandFan
AynRandFan's picture

Very illuminating article.

Wed, 07/10/2013 - 13:20 | 3738067 Seer
Seer's picture

The "goobermint" is just doing what the masters tell them to do- not enough volume in the "wealthy class" so they have to stir up "dirt"...

It's The System.  To borrow from Jethrow Tull's Locomotive Breath:

"Old Charlie stole the handle and
The train won't stop going"

If we pay attention we'll see that there never was a "handle."  ANY growth within a finite environment WILL eventually end.  The promotion of growth is either a short-term -screw a few- bubble or a long-term -screw a LOT (cataclysmic)- bubble, no matter how short or long, a bubble IS a Ponzi in action and it will ALWAYS terminate.  It's more a mechanism/system (predicated on growth) than a "who" ("goobermint" or "TPTB," though the influence as pertains to duration and scope is highly affected by these "who").

Wed, 07/10/2013 - 09:02 | 3737024 SheepDog-One
SheepDog-One's picture

Just because you build it doesn't mean they'll come.

Wed, 07/10/2013 - 09:04 | 3737027 hairball48
hairball48's picture

And who is surprised by all this?

Wed, 07/10/2013 - 13:23 | 3738082 Seer
Seer's picture

Well, according to the status quo that would be "EVERYONE!"

Wed, 07/10/2013 - 09:04 | 3737031 Esso
Esso's picture

Unrecovery? Unpossible!

Wed, 07/10/2013 - 09:05 | 3737035 disabledvet
disabledvet's picture

it's the Cliff's of Insanity!

Wed, 07/10/2013 - 10:26 | 3737248 ArkansasAngie
ArkansasAngie's picture

How come Unelect isn't a word?

Wed, 07/10/2013 - 09:11 | 3737045 NoDebt
NoDebt's picture

Getting clubbed over the head like a baby harp seal.

Just put Mom's old house on the market before the 4th of July holiday.  My timing is no better than Stolper, apparently.


Wed, 07/10/2013 - 09:12 | 3737053 SheepDog-One
SheepDog-One's picture

No problem though....hey as long as they can drag hockey-helmeted equities higher that's all that really matters.

Wed, 07/10/2013 - 09:13 | 3737057 digitlman
digitlman's picture

But....but...there has NEVER BEEN a better time to buy!





Wed, 07/10/2013 - 16:47 | 3738953 brady
brady's picture

I've randomly gone through open houses even though we aren't in the market. It's kind of interesting. Anyway, for the last five years typically the first thing out of the realtor's mouth (following a canned greeting) is "there's never been a better time to buy!"

At least I have a solid list going of realtors we won't use.

Wed, 07/10/2013 - 09:17 | 3737067 22winmag
22winmag's picture

Solution... live under a bridge and take out a student loan, so you can get a better job, so you can make more money, so you can buy a bigger house.

Wed, 07/10/2013 - 09:20 | 3737070 CheapBastard
CheapBastard's picture

The housing market is stalling in my son's area where he is considering buying when prices correct (revert) to the mean. Higher rates and slower economy mainly. Realtors there crack me up. They keep saying, "Better buy now, this house won't last " and yet when you look at Zillow, Trulia, any of them dozens of houses have been on the market for 90 days or longer.


It's sad for people (families) who are hard working and saving and encounter such BS spin 24/7. They must do their own research to compare and also rea dblogs like ZH and Dr Housing Bubble to get the truth.

Wed, 07/10/2013 - 09:41 | 3737115 CrashisOptimistic
CrashisOptimistic's picture

Good info.

Of course, if the hedge funds buying 1000s of foreclosures are the source of buying, for cash, the mortgage apps aren't too important.

Though when they find that their rental spreadsheet isn't providing any decent returns and try to dump what they bought, which may be now, then the absence of mortgage apps could be a killer.

Wed, 07/10/2013 - 10:14 | 3737197 MachoMan
MachoMan's picture

Not really, the unwind is fraught with the same problems as the run-up.  As idiots kept buying hand over fist during the run-up, they were setting their own comps and ended up just bidding up themselves.  The reverse will be true on the way down.  I think they're stuck holding a material number of the properties.

The question is whether that is really all that bad...  well, the only way it would be bad is if there is some opportunity cost...  and, as shitty as virtually all other investment options out there presently, I'm not sure "less than expected" returns are particularly troublesome.  There is still money to be made renting, especially for cash purchasers (and at large discounts at that).  While they're scared shitless at the idea of having to manage real property, I think the market will likely form around them in that they'll be able to find middle men to handle all the work for them (e.g. management companies that specialize in handling large books).  While this obviously effects the bottom line (the middle men want their due), it doesn't take it all away.

Now...  on the other hand if you could be so lucky as to never have a day of trading losses each and every quarter, ad infinitum/nauseum, then you might find these returns a bit sobering.

Wed, 07/10/2013 - 10:36 | 3737243 RockyRacoon
RockyRacoon's picture

Fortunes to be made in the rental business!  Sure.  Having been (formerly) in the property management business for 20 years, I can tell ya that the purchase price is only the first of their problems.  I managed for some docs and lawyers in the 1980s who got all hyped by the "no money down" property bug.  It was painful for them to find out that they were paying a down payment, just on the installment plan with the negative monthly cash flow.  One vacant month and that "down payment" went up drastically.  They'd run the property in the ground by leasing to anything that breathed, then come to me to "fix" their problem -- hiring a black-hat if you will.  Once you engage a property manager you get two things right off the bat: 1. More negative cash flow, and 2. Someone who will never manage it like it was their own.  Myself included, up to a point. 

I have stories that would make your skin crawl.  We managed a few Section 8 complexes and that was a real eye-opener.  After reaching just over 2,000 units I called it quits.  If you add 150 to 200 units to your business you'll need another office or on-site person, and there goes a large part of the management fees in overhead.  ...and another link in the chain of responsibility is added to the mix.  A conscientious manager will get burned out sooner or later.   It's a 24/7 job if done right.  Any property manager who wears a suit/tie every day is not the guy you want unless it's purely upper level office space.  For residential property, daily wear is jeans and dirty sneakers.

Oh, and maintenance/repairs.  That's another book.

Wed, 07/10/2013 - 10:03 | 3737167 Stoploss
Stoploss's picture

Make sure he waits. These "owners" are foreign all cash buyers, primarily Canadian and Chinese.

Guess what they're sitting on now?

House prices are over valued by 50% right this very second.

Raise cash an wait for the smell of shit in the air, then move in with the cash since they will be taking any offer to get out of the tax burden.

Wed, 07/10/2013 - 10:14 | 3737203 DeadFred
DeadFred's picture

Even my massively overheated local market is cooling. Two of the houses that sold last month went for less than the asking price. Unheard of!

Wed, 07/10/2013 - 13:35 | 3738132 Seer
Seer's picture

Back when the "B" word was first starting to crack the MSM surface I'd had a friend(?) who was in the mortgage business sending me his business pitches (got on his mailing list).  I replied to one of these e-mails that I "knew better."  The response that I got back was nearly unimaginable- he threw everything at me, accusing me of being the most arrogant human on the planet.  Sometimes I spend mental energy on visions of wiping his face with all of this, but he's not worth any more energy than that (neither is anyone else [I have a family member along these lines and I don't much talk to him anymore]).

All people really need to know is: Food, Shelter and Water; and, the concept of being able to assess and live within one's means (not what Wall Street and Madison Ave tell you what your means are [which are over-inflated in order for them to suck off of that inflated valuation]).

Wed, 07/10/2013 - 09:18 | 3737071 q99x2
q99x2's picture

Everyone pays cash these days. Loans are so last century.

Wed, 07/10/2013 - 09:22 | 3737082 orangegeek
orangegeek's picture

Philly Housing Index Weekly is nothing but down.


Housing prices should continue to decline - no buyers at current price levels.

Wed, 07/10/2013 - 09:29 | 3737094 Osmium
Osmium's picture

There is a simple explanation for the decline in mortgage applications.  The consumer is sitting on a mountain of cash.  They no longer need a loan to buy a house as most of them will be cash transactions.

Wed, 07/10/2013 - 09:44 | 3737124 CrashisOptimistic
CrashisOptimistic's picture

They saved up all that cash from the proceeds of their part time jobs.

Wed, 07/10/2013 - 13:38 | 3738139 Seer
Seer's picture

And those part-time jobs disappear because everyone is saving rather than spending on the goods/services that those part-time jobs deliver!  Rock and hard spot... soft landing my ass...

Wed, 07/10/2013 - 09:45 | 3737126 SheepDog-One
SheepDog-One's picture

You mean the avg 'consumer' out there with a part time job at best has a safe in the basement with around $150,000 cash in it?


Wed, 07/10/2013 - 10:16 | 3737211 Osmium
Osmium's picture

I kinda thought using mountain and cash in the same sentence would give it away, but I guess not.  So here it is.



Wed, 07/10/2013 - 09:58 | 3737152 Lendo
Lendo's picture

I don't get the facination with home ownership.

My neighbor moved after being in his house since 2005.  He sold for a $50K loss on paper and then moved into a smaller house and effectively doubled his property taxes.  He justified it by saying the new house is over $100K less than in was in 2007.

I looked over at his big, dumb, Chevy Traverse and it all started making sense.  We're fucked.

Wed, 07/10/2013 - 10:48 | 3737334 Quaderratic Probing
Quaderratic Probing's picture

Given the choice to do math or shoot yourself in the head, people will take the gun every time.

Go buy a $1 coffee at MCD and give the kid $1.27 see if they enter it in the machine so they know what change to give you.

Wed, 07/10/2013 - 11:11 | 3737442 skipjack
skipjack's picture

I don't know about most, but my motivation to own property is driven by the need for a farm - grow food, raise and train horses, run my businesses out of an office on the farm.


You generally can't do that long term with rental property.  If you end up having to move because of landlord issues, you have a problem finding new office space and a home for the horses.  No thanks.


Good, productive, cared-for farmlands will always have a value.  The trick is to not go overboard on the structures on the land.

Wed, 07/10/2013 - 13:59 | 3738226 Seer
Seer's picture

I was right with you up until... "raise and train horses"  WTF?

Unless the horses are draft/work horses* I see little economic/energy difference between horses and Hummers.  Proof is in all the "pony" farms I see going up for sale (and the hay suppliers): I've seen folks on Craigslist (great place to actually get a pulse on what's going on out there) selling $65k (used) horse trailers- NEVER do I see folks selling livestock trailers, and, especially, not large, pricier ones.

* Sure, one day a regular old horse will be good for transportation, but that day is a bit of a ways off, far enough away in my view to not be economically sound to engage in at this time (in addition to "free" horses I"m also seeing a LOT of people scrambling to attract horses for boarding [losing clients]- there's a glut, and while this looks like a great "buy-low" opportunity I'm thinking that there are better returns to be had).

"The trick is to not go overboard on the structures on the land."

That's one valuable piece of advice I gleaned from Joel Salatin.

It's about maintenance.  Most people completely gloss over the maintenance issues: that's why we'll see many of those McMansions decay at a very rapid rate.  I've got a few small buildings and they're enough to keep maintained: came with the property and I'm still trying to get them caught up on maintenance.  EVERYTHING for my animals, however, is portable.  I don't even have anything big for feed storage, which kind of sucks: had the feed mill folks tell me I should be buying in super-sacks because I'm buying the same amounts in bags- I replied that I couldn't get a super-sack through the doorway of my (feed) shed (I cannot increase the size of the doorway w/o introducing a lot of problems)- I either spend my energy (and more $$) on maintaining a larger structure or I spend my energy on shuffling bags around...

Wed, 07/10/2013 - 11:18 | 3737464 MachoMan
MachoMan's picture

Without the math behind the moves, we're at a loss to say whether he was crazy or not...  locally, the math would work out something like this:

Home Price: $200,000 [Loan amount $194,000 w/ 3% down]

Starting Date: January 1, 2005

Ending Date: December 31, 2012

Note Payment: 30 year @ 5.75% (~national average in January 2005)

Property Taxes: $2,500/year

Homeowner's Insurance: $1,600/year

Maintenance Fees/Repairs: $500/year

Monthly Rent For Equivalent House + Renter's Insurance Policy: $2,000

Assumed annual inflation rate: 3%

Return on savings: .25%

Marginal Tax Bracket: 25%

Realtor fees of future sale: 7% (on $200,000)

Appreciation: 0%

Closing Costs not included in loan amount: $2,500

According to MSM's simple rent vs. buy calculator (too lazy to calculate everything;, you're looking at renting costing ~$73k more over the 8 year period (present value)...  less the $50k in depreciation, and you've still got a net positive for Mr. Crazy homeowner man...  PMI is noticeably missing, but that wouldn't add more than $50/mo. to the cost of home ownership (~$5k).  Still net positive for Mr. Homeowner...

Now, take away the tax savings from the mortgage deduction, and you're looking at about a $10k cost (over 8 years) to own the home vs. renting...  [and my guess is that he could have sold for a pretty nice profit in 2007/2008].  I would gladly pay this amount to not have to screw with a landlord and get to do whatever the hell I want with the property, e.g. hanging pictures.

While there are certainly risks to home ownership, e.g. removal of deductibility of mortgage interest, depreciation, etc., the actual cost isn't so bad.  What will be incredibly bad is when the cost to rent decreases (given that no one can pay)...  until that day, your guy probably wasn't out much.  Looking forward, I agree it's a much more difficult decision whether to rent or buy, but looking at the past, I'd say your neighbor came out alright.

Wed, 07/10/2013 - 12:10 | 3737732 vespasolo
vespasolo's picture

Yes all true but:


I'd like to know who only has $500/year maintenence costs on a home?  I would estimate it at close to $300/month or $3600/year.

I think the rent comparison is too high even for 2005. You can rent a $200,000 home in most cities for about $1,500 or less. 

Right now its hard to find homes renting for 2k on zillow unless its high scale.  1200 gets you a good home in most cities.


And if the ZeroHedge narrative is correct, rental prices should only be going lower along with home prices.


Change the rent to $1500 and the maintence to $300/month and owning still edeges out, but is worth the risk to MAYBE make 16k over 8 years?

Thats $166/month.  I can find another way to make 2,000/year with less risk.


I owned for a while and now I rent. Both have had their upsides, but currently I prefer to not worry about coming up with

some large sum of money for an improvement to a house or wondering when the next "its different this time" goes pop.




Wed, 07/10/2013 - 14:19 | 3738326 MachoMan
MachoMan's picture

All very valid concerns.

Maintenance costs largely depend on how old it is...  I was presuming a new build (although it was not stated in my assumptions).  I think "maintenance" costs are largely "batch" issues, meaning I live in a house for 10 years and if I want any chance to sell it, then I'll need to rehab the shit out of it and put whatever is in style at the time.  I also think homeowners tend to do quite a bit of the maintenance themselves...  so for the occasional "X needs patching" bit, it doesn't cost much more than some elbow grease and materials.  Needless to say, on a new build, a lot of the potential maintenance issues ought to be significantly mitigated.

The rent is based on my locality...  I agree that presently there is basically a rent ceiling in the $1,600/mo. range.  Meaning, landlords offering properties of any size/cost cannot charge more than this.  However, I don't think it's always been like this.  At this square footage/quality range ($200k), the rental would have to be an executive/temporary residence...  given the gap between owning and rental costs, it would not yield any long term tenants...  it would be 2 wage earning professionals renting a house while theirs is being built or while they're surveying the area (fresh in from out of state).  The number of rentals in this price range ($200k house) is incredibly small locally.  $1,500/mo. would be "cheap" (historically) for a solid new construction $200k house.  The $2k/mo. was also with a renter's insurance policy...  I'd concede maybe $100/mo., but a $500/mo. reduction would be objectively too cheap and more heavily biased to present conditions.

And yes, rental prices will continue to go down as will housing prices...  no way around it.  The question is whether they will depreciate more quickly than other asset classes.  Investing in a land of anchors...

Wed, 07/10/2013 - 15:48 | 3738725 Seer
Seer's picture

I don't advocate anything because, as this thread shows, it's all situational- it depends on one's requirements.

I spent 5 years renting (and for those years I also commuted via bicycle- missed ONE day- grr!).  All was in line with goals (based on my Seer-ness) that were shaped 5 years prior.  I bought property.  It was 10 years in the making...  I'm now 2 1/2 years in to a big shift and I have not a single regret.

"but currently I prefer to not worry about coming up with

some large sum of money for an improvement to a house or wondering when the next "its different this time" goes pop."

For me, I prefer to not have to worry about answering to the whims of a landlord: I didn't care for rent increases (as well as poor response times for repairs), though I do see rent increases as becoming less likely; I also cannot see how rents can really come down much without crushing landlords, which then creates a situation in which you're subjected to prospective buyers parading around you [I have one customer whose family, renting, had to vacate because the house was being sold]).  I've had landlords from heaven and landlords from hell...

Also, for me, I have a place where I can produce food.  One of my landlords would have flipped out big time if I'd disturbed his lawn: I'd thought about setting up an escrow account to cover reconstruction of the lawn, but since I thought him an idiot I figured I'd rather spend energies getting away from him and his "holdings."

I also have a wood lot, increasing home energy costs isn't something that I have to worry too much about.

I'd like to think that I'm wise.  When I bought my place I sunk a lot of money (relative to the home's "valuation") into the roof- I likely won't see any $$s going there for the remainder of my life- an investment to be sure, though if scrap metal becomes more valued I might have to put the dog on extra alert!

Also, I control my water and sewer expenses: I have, at a fairly high volume, what would closely be considered inexhaustible amount of water available: I tend to shy away from using words suggesting absoluteness, as there are very few real absolutes.

I do think that it's a good point to quantify (project) maintenance expenses.  Though many might scoff at the thought of $300/mo maintenance costs, I figure that this amount isn't necessaries high if one treats the home's cost as a depreciation expense, depreciates over the span of the loan: land cost/valuation not applied.  $300/mo over the course of a 30 year loan would be $108,000, which I don't think sounds outlandish (for the real value of an average home): in the past, though not a future guarantee, there's residual value (my head starts to hurt when trying to calculate this vs. mortgage interest costs, but I think that this was all factored in [in this thread]?)

Another item to factor in is whether one would be comfortable being where one is currently should TSHTF.  I don't think that either the banker or the landlord has an advantage on their capacity to evict someone, in which case I am not sure there's a strategic advantage as far as "squatters' rights" goes.

For me, my "ownership" (I'm really just the caretaker- it's NOT going with me when I die) allows me to be engaged with the "future" NOW.

Although I am proud of what I've done so far and like to speak of it, my POINTS here are more for information that others might consider in their decision-making process: I'm not hyping a book to sell- I have ZERO interest in pumping up to sell my place (it's where I've chosen to die).  I am in no way criticizing anyone who is renting- my periods of renting were essential in helping me get to where I am now.  BUT... at some point someone needs to have a long-term plan, and the execution of that plan should move someone to the position of being able to feel that he/she is "there," that their sense of security is being accounted for: strategically, if one were renting a great place then there might not be any real difference, assuming that one could be there when TSHTF (figuring "squatters rights" and all).

In conclusion: get to where you need to be as soon as you can.  Establish acceptance in any community early because it'll be much more difficult to do so as a Johnny-come-lately.

Disclaimer: I claim the right to change anything that I say, do or have done (assuming I can hide it! :-)), and that this does not invalidate what I have said here and now (as of this moment in time it is considered valid).  Translation: it's my damn story and I'm sticking to it! Feel free to plagiarize!

Wed, 07/10/2013 - 10:04 | 3737172 Hohum
Hohum's picture

Article should mention the difference between refi applications (about 75%) and purchase applications.  Refi seems to be dead in the water, but I think purchase is still up YOY.  Of course, that may not last very long because of rising rates.

Wed, 07/10/2013 - 11:42 | 3737606 Poofter Priest
Poofter Priest's picture


I'm in the 'business'.

My refi work has all but dried up while my purchase work has greatly increase from its ususal percentage.

This is a sign of people jumping into buying before the expected rate climb.

The problem for them will be as the rates climb, the principle (or price) will go down. The bowl of money for this market is finite. Raise rates or taxes, prices go down.

So I expect my work will be drying up soon.

Wed, 07/10/2013 - 10:12 | 3737190 Judge Crater
Judge Crater's picture

Yet all you hear on the network nightly news shows is how the housing market has recovered and how there are people flocking to buy a dwindling supply of housing stock.  Could it be that the likes of anchor Diane Sawyer are bald faced liars?  I wonder how the news shows tonight will put a positive spin on the McClatchy newspapers report yesterday about the new policy telling all federal employees and contractors to act as informers for the government, to act as thought police for Obama.  Failure to report suspicious signs of employee conduct will be a criminal offense.  The only thing missing from this scheme is to have elementary schools be required to instruct students to rat out their parents if the parents represent an "insider threat."  Meanwhile, I see more and more "House For Sale" signs.  ABC should either tell anchor Diane Sawyer to cut down on her meds or require her to work Fridays after 3PM.  Both actions will lead to Sawyer's departure.   

Wed, 07/10/2013 - 15:57 | 3738769 Seer
Seer's picture

You like hearing people lie?

I haven't watched TV for years.

But we "know" that there wasn't any lying going on several years ago (when the BIGGER balloon was being blown), right?

Seeing as you are judicial -"Judge Crater"- I figured you'd appreciate this from a site called "The Judiciary Report":

Wed, 07/10/2013 - 10:46 | 3737324 Meat Hammer
Meat Hammer's picture

Affordability?  Meh....that never stops the American sheeple from over-extending themselves.  Remember the last bubble? People were putting down-payments on credit cards, borrowing it from their grandparents, taking out personal loans......whatever it took to get in before the prices went up too high.  

Human nature is to buy something because it's expensive.  If the other guy is paying top dollar for something, then I'd better get in on this.  If Coach purses were better quality but $50, nobody would buy them.  

The average 'Merican doesn't read financial blogs, especially Zero Hedge; he just follows the herd, and the herd is saying all is well.

Plus, municipalities are already spending the money coming in from higher property taxes, so they'll pressure state and federal gov to relax lending standards even more to keep this train rolling.  I fully expect to see 0% ARM and other creative bullshit financing being implemented sooner than later.  

Blow bubble, get tax revenue, bubble pops, bail out banks, raise taxes for the kiddies, start new bubble...



Wed, 07/10/2013 - 16:24 | 3738862 Seer
Seer's picture

NOTE: I always look forward to your posts!

It's all kind of messy when we actually start talking about "affordability" (though I often use this word a lot) because we are pretty much using it in context with a totally fucked up valuation system (commanded from high that way).

"Human nature is to buy something because it's expensive."

And humans tend to go against Nature...  My wife is Filipino, and Filipinos (old-school Filipinas anyway) tend to be attracted to that which is least expensive!  I struggle with getting my wife to understand how to actually measure real value: she might go through a whole bunch of "less expensive" stuff and end up paying what an "expensive" thing might be (and thereby missing out on the sweet-spot of "value" as a result).  My previous wife was the opposite, and I really don't know what's a tougher starting point to correct (my current wife will actually listen to me and isn't afraid of changing her position- she actually cares to be involved in a partnership).

"municipalities are already spending the money coming in from higher property taxes"

I hear this, but, and without any zoning changes or other changes specific to my property, my property taxes have DECREASED.  I am wanting to state this here after stating it elsewhere and I'd like to add in (and here comes the chorus of "a ha!")- they ARE slated to INCREASE for 2014 (though, they'll still be lower than a few years ago, post bubble).  At least I can say that I'd proven that it CAN happen: timing and duration are always a bitch!

"I fully expect to see 0% ARM and other creative bullshit financing being implemented sooner than later."

That gave me a good laugh (which you seems happens quite a bit when I read your postings).  100-year 0% ARMs!  (Canada backed away from the cliff after pushing 40-year mortgages) Just don't take the Red Pill and realize that you can NEVER sell!  TPTB will adjust your payments indirectly through inflationary practices, but don't worry, such things aren't measured as being important, things like food and energy, so TPTB have decided to reduce your tax load by not attempting to put such extra numbers in all the important documents that have to be created in order to make your life better!  WIN WIN!

"Blow bubble, get tax revenue, bubble pops, bail out banks, raise taxes for the kiddies, start new bubble..."

I'm thinking that the outlook for recruits (to support TPTB) is starting to not look so good...

Wed, 07/10/2013 - 17:13 | 3739047 Meat Hammer
Meat Hammer's picture

I'm not sure if you were complimenting me or mocking me.  No matter.  I'm glad I can be a source of entertainment for you. 

Maybe I generalized a bit much...

IMO many Americans have a tendency to believe that something is of better value because it's expensive.  

Introductory ARM's that come with the promise of a chance to refinance before the rate adjusts and your payment goes up by $900/month.  

Regarding taxes, I should've mentioned I was giving an anectdotal example.  Here's an article regarding what's going to happen to many unsuspecting home owners near me.

I loved the pic.

Wed, 07/10/2013 - 18:02 | 3739196 Seer
Seer's picture

MH, I'm COMPLIMENTING you!  Really, I always look forward to reading your posts.  Your avatar+username always gets me chuckling!

My reasoning for property taxes being held down (in general) is based on the (obvious) fact that people's incomes are dropping (can't get blood from a rock) and, and here's the BIG KICKER, who is owning more and more property these days?- pressure from banks is likely going to exert itself- we know how banks are able to get their way!  I won't bet on this because I, well, I just won't: I wager/bet on a straight-up transaction basis that delivers real goods and services (no betting on horses).  It's not that I think that taxing entities will have mercy on the little people; quite the opposite- I think taxing entities will do what they always do, and that's to side with the big powers.  Right now they'll push a bit upwards just to make it look like they're being receptive to the govt workers (other than the Department of Terror most agencies, not at the federal level, have been reducing), but then it goes the other way as banks start taking on more defaulted properties (as the QE shit ends).

Hell, it's as good a story as anyone else has!  And, it was the story that I was telling even BEFORE I experienced it personally: am I good at being able to create situations for myself? perhaps; perhaps some luck does come in to play; regardless, my Seer-ness called it.

It's all based on my overall philosophy, a philosophy right in line with ZeroHedge's "On a long enough timeline the survival rate for everyone drops to zero."  I hold this to be true of everything, fiat and, yes, taxes...


Wed, 07/10/2013 - 18:30 | 3739278 Seer
Seer's picture

I read some of the comments in that article and ran across this and thought it worth sharing:

The gist of it is that this is yet another perfect example of why one ought not paint with large brushes.  There are always outliers running around.  The Prop-8 thing doesn't exist everywhere (outside of CA).  And, again, my personal experience has also provided additional reason for cautioning against the Big Brush treatment: I like challenges, so whenever I see "never," "always" etc I tend to poke a bit harder to see how well such claims hold up: rarely do they.  Yes, the averages might lean that way, but I prefer to let each individual place her/his interpretation on the outcome/risk since risk is highly dependent upon who is wearing the shoes.  Most talk involving absolutenesses are about creating divisions (which is exactly what TPTB require!).

Wed, 07/10/2013 - 10:51 | 3737350 RobD
RobD's picture

Here is my little RE story. We put our 80k underwater house(In Reno Nv) up for a short sale last August. Got a first day list offer, for over the asking price. There was already another appointment to see the house so we put off the first offer for 24h and they came back with a higher bid(crazy people bidding against themselves lol). We accepted the offer and passed it on to the banks(MetLife held/serviced the first and First TN held the 2nd). After about 9 months MetLife approved the SS but while First TN was making up there mind MetLife sold their entire mortgage holdings to JP Morgan Chase. Chase went along with the deal but then First TN refused the deal. We reapplied to Chase who offered to give First TN a little more of the pie but it seems that sometime after Chase bought the note they sold it to some "Investor". This investor has decided not to go with the short sale so we are back to where we started almost a year later. As Nevada is a recourse state I have stayed current on my payments so I knew it was a long-shot. So I'm stuck being a debt slave for now.

Wed, 07/10/2013 - 11:32 | 3737549 tip e. canoe
tip e. canoe's picture

4 words for ya:


Wed, 07/10/2013 - 18:08 | 3739215 Seer
Seer's picture

Holy crap!

My wife and I were talking about Reno just the other evening.  A friend of hers bought a home to retire in there.  My wife shakes her head because she can't imagine living in that kind of heat again (she's from Manila).

As was suggested- demand to see the note!  And please update us with (we hope) happier news!

Wed, 07/10/2013 - 11:18 | 3737458 skipjack
skipjack's picture

If you have no other (tracable) assets outside of retirement funds, recourse is nothing worse than a bad credit report and a judgment that can't be enforced. If you have little disposable income, you are pretty saffe from wage garnishment as well...or just move out of the state.


Find a new place to live, stop paying (or vice versa depending on your robosigning status) and let the banks foreclose.  WTF do you care ?  The banks can eat the loss.  Don't keep paying on a losing proposition...unless renting is more expensive.

Wed, 07/10/2013 - 11:58 | 3737690 W74
W74's picture

Renting is usually more expensive.  I couldn't get a mortgage in 2009 and KNEW I was going to be in the same spot for 3-4 years.  The difference would've been a $550/mo. mortgage on a $150K house with 30K down (and I was willing to put double that too) versus anywhere from $1000-1300/mo. in rent for a crappy apartment (Townhomes going for $1,500+ and SFH's going for $1950+).  And with rent the neighbors are HORRIBLE.  Would've really loved to have a house then, but didn't "qualify" despite income, great savigns and good (if underused) credit.

Now that I have mortgage lenders calling me offering me loans, now that the rules have changed, and now that I can definitely get a mortgage....I don't even want a house.  I want to GTFO of here.

Wed, 07/10/2013 - 12:09 | 3737731 MachoMan
MachoMan's picture

Your plan is contingent upon the debtor lying under oath...  Not something I would recommend.

Wed, 07/10/2013 - 11:36 | 3737570 dunce
dunce's picture

People with jobs have money and buy houses, that is where the turn around must start.

Wed, 07/10/2013 - 18:15 | 3739234 Seer
Seer's picture

Banks most certainly do have "people" engaging in such activities, in which case I'd think that one needs to qualify "people with jobs."

Demographics pretty much has set the course.  I figured that future generations are going to be less inclined to go for a McMansion than a McBurger.  My "McMansion" is a small farm that I hope will attract younger people who are interested in continuing my work... I figure this the best way to diffuse the growing demographic divide that's descending.

Wed, 07/10/2013 - 12:04 | 3737712 dirtbagger
dirtbagger's picture

Much of the housing mess was caused by the general population thinking that the home ownership was a get rich quick investment - mass stupidity and greed.   Until buyers start looking at houses as shelter and understand it is a wasting asset, the housing market is going to remain skewy.   For people that consider their home as a place to live, there is little benefit for prices to appreciate beyond inflation rates. 

The FED's policy to reinflate the S&P and house prices is a fools errand.  The sad consequences of QE and ZIRP is that a portion of the trillions of fairy dust dollars have entered the housing market searching for yield and are now creating house bubble 2.   The housing market will only stabilize when homes are affordable at 3.0 to 3.5 times income.   A few points change in 30 year rates will not have that much impact in a stable housing market. 

Wed, 07/10/2013 - 18:42 | 3739319 Seer
Seer's picture

"Much of the housing mess was caused by the general population thinking that the home ownership was a get rich quick investment"

Not that this sense wasn't out there, but I don't think it was necessarily as prevalent as you suggest.  Yeah, the marketing types hopped it all up in this way, with those "Flip This Shit" TV programs (the "News," the "Financial" "experts"....).  I think that a lot of people just plain saw the ability to get out from under the heels of a landlord and used the "it's an investment" line to help link in with the "message."

The "mass stupidity" is, for most, in hindsight (again, only a small percentage of us called all of this)- the madness of crowds is pretty tough to combat.  The "greed" part is a struggle, it's a struggle to actually qualify- at what point does someone looking to bolster their personal wealth fall into the "greed" department?  Hard to be the judge... though I'm in no way any 1%-er according to the Western world, the rest of the world would have a pretty fair position by claiming that I AM in the 1%, in which case the "greed" word would sure to be fair game in such context (my trying to become a farmer is my way of asking for forgiveness and giving thanks).

Wed, 07/10/2013 - 12:07 | 3737723 ghostfaceinvestah
ghostfaceinvestah's picture

The decline in refi business is going to put a lot of people on the street.  Many, many mortgage businesses will go out of business as they realize finding the elusive purchase buyers is a lot harder than they think.

Wed, 07/10/2013 - 14:26 | 3738377 Atlantis Consigliore
Atlantis Consigliore's picture

its the VEGAS Syhndrome;  65,000 homes empty foreclosed or 90 days NOD;  over;  they live there rent free and mtg free 


foreclousre moratorium is it....DONT PAY,  DRAW BENEFITS, LIVE TAX FREE.


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