From:
http://iarnuocon.newsvine.com/_news/200 … nd-realityThe intent and structure of the CRA was to ensure that qualified individuals in poorer markets were able to gain access to credit. The CRA itself had nothing to do with over-inflated appraisals, home flipping, the direction of otherwise qualified individuals into subprime adjustable rate mortgages, the invention of derivatives, or the game of hot potato that financial institutions played with securitized packages of bad loans.
deeznutz1245 wrote:
@ Topal63
The American dream has quickly gone from owning your own house and a little piece of land, to not losing it. I understand exactly what you are saying, I too am starting my own small business. I have only been at it for about 6 months, I rent a small office and have only 3 guys that work for me part time. I cannot afford to quit my job and roll the dice. That takes tremendous balls and I commend those who do but, when people are losing homes and the rest can't qualify to get one the consumers stop spending and that will hurt business big and small. What I am trying to point out is that no matter how you look at it small business will be effected, whether it's bad or good. I happen to think it will at least restore confidence in the consumer and make them spend again.
California and Florida are your enemy. I am not kidding. The markets here and in California are having a huge impact everywhere. The speculation and unit flipping was a huge problem and a major catalyst for the downward spiral now occurring in the housing sector price spike. Most people who bought here never intended to live in these homes or condos. They were bought & sold; that money, or none even (OPM 100% financing), then was used to leverage another or more units. This went on... all over South Florida.
For example some antics that went on (are currently going on) in the high-end condo market:
The market value of downtown condos has plunged as much as 50 per cent, from a peak average price of $500 to $700 (U.S.) a square foot to as low as $300 a square foot - or less than it costs to build a condo.
And the bottom may still be nine months or more away because a giant wave of new units is about to hit the market, sending prices tumbling further.
More than a dozen cranes dot the downtown skyline as work continues on several new projects. Estimates are that as many as 25,000 new condo units are under construction (this year 2008) in a six-kilometre stretch of downtown. That's more than twice the number of new condos all of Miami-Dade County typically absorbs in a year; all in that one small strip downtown.
It was an investor/speculator driven market downturn. There are often no homeowners to be found. 80% and 90% building vacancy rates. Often, no one ever intended to live here. They were looking for easy money - it was like a pyramid scheme as long as the next wave of speculators and investors was greater than last wave - the whole thing kept going.
Miami condo crush luring foreign investorsBuyers from Europe, Latin America and the U.S. Northeast target city
http://www.msnbc.msn.com/id/8863085/MIAMI - They have thought-provoking names like Opera, Axis and The Venture, condominiums that will line Miami’s bayfront skyline.
These high-rises are part of a condo crush spawned by the nation’s housing boom and buoyed by active investors from Europe, Latin America and the U.S. Northeast that target the city because of its worldly feel and relative affordability.
“When you look around the world and you consider the factors of the environment, climate, amenities, risk and appreciation, Miami ranks way high up there,” said Jorge Perez, chairman of The Related Group of Florida. The Miami-based developer plans to build more than 15,000 units in South Florida and Las Vegas in the next four years — with buyers already lined up for many of them
Look at this retarded article from 2005 -
"relative affordability" - while it is true money was coming-in from all over. It wasn't because of affordability or lifestyle - they were investing and speculating and not just in condo.s; they drove market prices through the roof(!) and never intended to live here. It wasn't a residential purchase someone planned on living in.
Futures traders on the CME Group exchange are predicting Miami will be the worst U.S. regional housing market over the next four years with prices falling nearly 30 percent.
2005 was pretty much the peak of the market, here is an trite article form the
WSJ.
http://www.realestatejournal.com/buysel … llen2.htmlThe Ups and Downs of Flipping Condos for Fast Cash
by Terri Cullen
From The Wall Street Journal Online
November 10, 2005
Low interest rates and a condo building boom have been fueling condo "flipping" -- when investors buy and quickly sell condos to reap a profit. The gains can be huge: A First American Real Estate Solutions study of hot real-estate markets found that the annualized rate of return for three-to-six-month flips of residential homes was usually 20% to 40% or more above the market appreciation rate. Condos made up between 20% to 30% of the sales.
WHAT TO DO: With condo flipping, the risks can be as great as the rewards. Because the condo market is prone to speculation, condos typically lose value more rapidly than other homes during recessions. Investors buying into a cooling market may find it difficult to quickly sell, and may not make enough profit to cover the transaction costs, or could even sell at a loss. It's also getting harder to flip, as developers crack down on speculators. Amateurs need to tread carefully: flipping has attracted the attention of the IRS and investors could face an audit.
At this point in 2005 this article is rather stupid. Everyone knew the prices had soared beyond reason already.
Talk about stupid bitches, OMG check out this idiotic opinion:
http://www.cnbc.com/id/26904853Why Not Bail Out The Housing Speculators? Really!
n all the talk of all the differing bailout plans, one little mantra of all the lawmakers as well as the regulators and the President is, "Of course we won't bail out the speculators, those who made money investing in homes and then flipping them for a profit."
Ok, I realize this may not be a very popular point of view, but may I ask the question: Why Not??
It seems to me that housing is a commodity. Maybe it didn't start out that way, but it sure became that way. Donald Trump made a fortune on real estate, and nobody punished him, in fact he got a job punishing "apprentices" who wanted to be just like him. So if housing is a commodity, then why is it so evil to trade on its futures, like cattle or soybean. A home is an equity as well, so what's wrong with trading it like a stock?
Here we are talking about bailing out all the investors who traded on the mortgages that allowed speculators to buy and sell the homes, why can't we give the speculators a break too? If we allowed speculators to get in on the refi and modification programs from the government and private sector (they are specifically barred from the FHA program), then perhaps we could stem a bit of the price plunges in the housing market by preventing an awful lot of foreclosures.
I just don't think it's fair to pick and choose among investors, to decide that some are fine and others are the cause of trouble. I don't believe that a person who invests in a condo with the intention to sell it at a higher price is any different than an investor who buys a stock with the same end game in mind. Is it because stocks are on paper and homes are on streets? Well, there's an argument there, but investment homes can be rented to lower income folks who need a place to live. They can also be lived in by investors as they wait for their equity to accrue.
Let's be careful, in all this blaming and bailing, that we don't choose to favor one investor group over another.
Yeah why not give money to the speculators that drive home prices up. I mean come on it's not housing; where people live; it's just a commodity to be traded. [/sincere if she said it] [/sarcasm if I did]
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There is a myth, that's gaining inertia as a meme, that deregulation caused the crisis... I personally don't think so. Money was just looking for a home, investment money that is... and greed descended on the housing market then exploited it in so many
legal ways.
The Gramm-Leach-Bliley Act of 1999 passed the Senate with 90 votes (8 against, 1 absence: John McCain, who supported the legislation) and was signed into law by Bill Clinton. It had little to do with the issues at play in the current crisis: lending standards and the amount of debt banks can take on relative to their equity. The upshot of the Gramm legislation is that it allows financial services companies to diversify their lines of business: Commercial banks can engage in investment banking, banks can offer brokerage services, and you can have an IRA at the same place you have your checking account.
What we have here is a case of what economist Paul H. Rubin calls “folk economics” — value-laden myths that do not reflect financial realities.
It is not at all clear what, if anything, Gramm’s legislation has to do with the current difficulties in the market, other than the fact that Democrats instinctively recoil when they hear the word “deregulation.”
Gramm-Leach-Bliley did not create securitization and collateralized debt obligations. It did not change the rules for banks’ leverage ratios. If anything, Gramm-Leach-Bliley mitigated some risks by allowing financial companies to diversify their businesses, and it is the most diversified firms that are best weathering the storm. Which makes sense: An investment portfolio is more stable the more diversified it is. The firms that have spectacularly imploded have mostly been non-diversified commercial banks, like Countrywide, or pure investment banks, like Lehman Brothers. But the broadly diversified megabanks are enduring — taking a hit from housing, sure, but they have other lines of business to sustain them. And we should not forget: Without the Gramm-Leach-Bliley reforms, Bank of America would have been legally forbidden to take over Merrill Lynch — very possibly leaving taxpayers on the hook for that one, too. Morgan would not have been able to buy Bear Stearns without Gramm’s reforms.
Last edited by topal63 (2008-09-29 20:31:51)