Refinance Bill Drastically Alters Market

[CA renter]

[quote=sd_matt]My realtor told me that the big four banks have stopped putting any more inventory on the market. How long for..I don’t know.[/quote]

Interesting…I also heard that one of the biggest banks has gotten some sort of authorization to hold inventory off the market for five years. They aren’t even going to rent them out, apparently. They are going to board them up and maintain them for five years.

Anyone else hearing these types of rumors?

[permabear]

[quote=CA renter]Interesting…I also heard that one of the biggest banks has gotten some sort of authorization to hold inventory off the market for five years. They aren’t even going to rent them out, apparently. They are going to board them up and maintain them for five years. [/quote]

It would not surprise me based on history. In the Great Depression 1.0, people were actually paid to knock down homes in order to rid communities of dilapidated properties inhabited by squatters. Plus, it helped reduce inventory.

The modern equivalent that banks are now undertaking is to make homes unavailable – vacant – basically the same thing, assuming the banks can carry the costs. In the Great Depression 1.0, banks went out of business, which rendered that approach moot.

[permabear]

[quote=CA renter]Interesting…I also heard that one of the biggest banks has gotten some sort of authorization to hold inventory off the market for five years. They aren’t even going to rent them out, apparently. They are going to board them up and maintain them for five years. [/quote]

It would not surprise me based on history. In the Great Depression 1.0, people were actually paid to knock down homes in order to rid communities of dilapidated properties inhabited by squatters. Plus, it helped reduce inventory.

The modern equivalent that banks are now undertaking is to make homes unavailable – vacant – basically the same thing, assuming the banks can carry the costs. In the Great Depression 1.0, banks went out of business, which rendered that approach moot.

[permabear]

[quote=CA renter]Interesting…I also heard that one of the biggest banks has gotten some sort of authorization to hold inventory off the market for five years. They aren’t even going to rent them out, apparently. They are going to board them up and maintain them for five years. [/quote]

It would not surprise me based on history. In the Great Depression 1.0, people were actually paid to knock down homes in order to rid communities of dilapidated properties inhabited by squatters. Plus, it helped reduce inventory.

The modern equivalent that banks are now undertaking is to make homes unavailable – vacant – basically the same thing, assuming the banks can carry the costs. In the Great Depression 1.0, banks went out of business, which rendered that approach moot.

[permabear]

[quote=CA renter]Interesting…I also heard that one of the biggest banks has gotten some sort of authorization to hold inventory off the market for five years. They aren’t even going to rent them out, apparently. They are going to board them up and maintain them for five years. [/quote]

It would not surprise me based on history. In the Great Depression 1.0, people were actually paid to knock down homes in order to rid communities of dilapidated properties inhabited by squatters. Plus, it helped reduce inventory.

The modern equivalent that banks are now undertaking is to make homes unavailable – vacant – basically the same thing, assuming the banks can carry the costs. In the Great Depression 1.0, banks went out of business, which rendered that approach moot.

[permabear]

[quote=CA renter]Interesting…I also heard that one of the biggest banks has gotten some sort of authorization to hold inventory off the market for five years. They aren’t even going to rent them out, apparently. They are going to board them up and maintain them for five years. [/quote]

It would not surprise me based on history. In the Great Depression 1.0, people were actually paid to knock down homes in order to rid communities of dilapidated properties inhabited by squatters. Plus, it helped reduce inventory.

The modern equivalent that banks are now undertaking is to make homes unavailable – vacant – basically the same thing, assuming the banks can carry the costs. In the Great Depression 1.0, banks went out of business, which rendered that approach moot.

[ucodegen]

[quote pri_dk]
Another problem with the general “let the market settle where it may” approach is that it ignores transaction costs. Sure, we can let all these homes sit vacant, move slowly through the courts over many years, sell them at auction to investors and eventually have the same people back in them as renters. That would be the textbook “market” approach, but it carries a lot of deadweight loss – $trillions in assets sit idle and lots of money goes to middlemen who create no real value.
[/quote]
You are assuming that I am a proponent of this approach – effectively another strawman argument.

If the bank takes possession through foreclosure, they should be responsible for the house as an owner would be. This includes property taxes, HOA fees, MRs and maintenance of the property.

This way, while it is vacant, it is costing the bank money and time. They would rather have the money producing something than costing them.

PS: what you mentioned above is not considered a ‘transaction cost’. It is more akin to ‘opportunity cost’.

[quote pri_dk]
$trillions in assets sit idle and lots of money goes to middlemen who create no real value. Transaction costs in real estate are huge, and even bigger when they involve a legal process like foreclosure.
[/quote]
The huge cost is a cost in the foreclosure is a cost to the bank, and it is largely due to inefficiencies in the bank. Not all banks have that problem, and some are getting much more efficient at foreclosures. Remember, when a bank loans out money, that money has to come from somewhere… most likely peoples pensions, CDs etc (other peoples money). These ‘other people’ want to be paid too, so the money the bank is lending out, is not free to the bank.

[ucodegen]

[quote pri_dk]
Another problem with the general “let the market settle where it may” approach is that it ignores transaction costs. Sure, we can let all these homes sit vacant, move slowly through the courts over many years, sell them at auction to investors and eventually have the same people back in them as renters. That would be the textbook “market” approach, but it carries a lot of deadweight loss – $trillions in assets sit idle and lots of money goes to middlemen who create no real value.
[/quote]
You are assuming that I am a proponent of this approach – effectively another strawman argument.

If the bank takes possession through foreclosure, they should be responsible for the house as an owner would be. This includes property taxes, HOA fees, MRs and maintenance of the property.

This way, while it is vacant, it is costing the bank money and time. They would rather have the money producing something than costing them.

PS: what you mentioned above is not considered a ‘transaction cost’. It is more akin to ‘opportunity cost’.

[quote pri_dk]
$trillions in assets sit idle and lots of money goes to middlemen who create no real value. Transaction costs in real estate are huge, and even bigger when they involve a legal process like foreclosure.
[/quote]
The huge cost is a cost in the foreclosure is a cost to the bank, and it is largely due to inefficiencies in the bank. Not all banks have that problem, and some are getting much more efficient at foreclosures. Remember, when a bank loans out money, that money has to come from somewhere… most likely peoples pensions, CDs etc (other peoples money). These ‘other people’ want to be paid too, so the money the bank is lending out, is not free to the bank.

[ucodegen]

[quote pri_dk]
Another problem with the general “let the market settle where it may” approach is that it ignores transaction costs. Sure, we can let all these homes sit vacant, move slowly through the courts over many years, sell them at auction to investors and eventually have the same people back in them as renters. That would be the textbook “market” approach, but it carries a lot of deadweight loss – $trillions in assets sit idle and lots of money goes to middlemen who create no real value.
[/quote]
You are assuming that I am a proponent of this approach – effectively another strawman argument.

If the bank takes possession through foreclosure, they should be responsible for the house as an owner would be. This includes property taxes, HOA fees, MRs and maintenance of the property.

This way, while it is vacant, it is costing the bank money and time. They would rather have the money producing something than costing them.

PS: what you mentioned above is not considered a ‘transaction cost’. It is more akin to ‘opportunity cost’.

[quote pri_dk]
$trillions in assets sit idle and lots of money goes to middlemen who create no real value. Transaction costs in real estate are huge, and even bigger when they involve a legal process like foreclosure.
[/quote]
The huge cost is a cost in the foreclosure is a cost to the bank, and it is largely due to inefficiencies in the bank. Not all banks have that problem, and some are getting much more efficient at foreclosures. Remember, when a bank loans out money, that money has to come from somewhere… most likely peoples pensions, CDs etc (other peoples money). These ‘other people’ want to be paid too, so the money the bank is lending out, is not free to the bank.

[ucodegen]

[quote pri_dk]
Another problem with the general “let the market settle where it may” approach is that it ignores transaction costs. Sure, we can let all these homes sit vacant, move slowly through the courts over many years, sell them at auction to investors and eventually have the same people back in them as renters. That would be the textbook “market” approach, but it carries a lot of deadweight loss – $trillions in assets sit idle and lots of money goes to middlemen who create no real value.
[/quote]
You are assuming that I am a proponent of this approach – effectively another strawman argument.

If the bank takes possession through foreclosure, they should be responsible for the house as an owner would be. This includes property taxes, HOA fees, MRs and maintenance of the property.

This way, while it is vacant, it is costing the bank money and time. They would rather have the money producing something than costing them.

PS: what you mentioned above is not considered a ‘transaction cost’. It is more akin to ‘opportunity cost’.

[quote pri_dk]
$trillions in assets sit idle and lots of money goes to middlemen who create no real value. Transaction costs in real estate are huge, and even bigger when they involve a legal process like foreclosure.
[/quote]
The huge cost is a cost in the foreclosure is a cost to the bank, and it is largely due to inefficiencies in the bank. Not all banks have that problem, and some are getting much more efficient at foreclosures. Remember, when a bank loans out money, that money has to come from somewhere… most likely peoples pensions, CDs etc (other peoples money). These ‘other people’ want to be paid too, so the money the bank is lending out, is not free to the bank.

[ucodegen]

[quote pri_dk]
Another problem with the general “let the market settle where it may” approach is that it ignores transaction costs. Sure, we can let all these homes sit vacant, move slowly through the courts over many years, sell them at auction to investors and eventually have the same people back in them as renters. That would be the textbook “market” approach, but it carries a lot of deadweight loss – $trillions in assets sit idle and lots of money goes to middlemen who create no real value.
[/quote]
You are assuming that I am a proponent of this approach – effectively another strawman argument.

If the bank takes possession through foreclosure, they should be responsible for the house as an owner would be. This includes property taxes, HOA fees, MRs and maintenance of the property.

This way, while it is vacant, it is costing the bank money and time. They would rather have the money producing something than costing them.

PS: what you mentioned above is not considered a ‘transaction cost’. It is more akin to ‘opportunity cost’.

[quote pri_dk]
$trillions in assets sit idle and lots of money goes to middlemen who create no real value. Transaction costs in real estate are huge, and even bigger when they involve a legal process like foreclosure.
[/quote]
The huge cost is a cost in the foreclosure is a cost to the bank, and it is largely due to inefficiencies in the bank. Not all banks have that problem, and some are getting much more efficient at foreclosures. Remember, when a bank loans out money, that money has to come from somewhere… most likely peoples pensions, CDs etc (other peoples money). These ‘other people’ want to be paid too, so the money the bank is lending out, is not free to the bank.

[DWCAP]

[quote=pri_dk] The problem with many of these points are that they are based upon abstract notions and not a practical course of action. It’s too late to fret about moral hazard. We have to act. Moral hazard won’t be a problem moving forward anyway, because lenders are now going to be very careful with their funds for very long time.
[/quote]

What history I know does not support your point here. Moral hazard will resurface with a vengence, but it will take a few years. The United States is rife with examples of poor lending and land booms/busts. Southern Ca has been doing that pretty steadly for the past 30 years or so. We have not learned our lesson, and will not learn our lessons because we have almost no respect for history or ability to learn from it.

[DWCAP]

[quote=pri_dk] The problem with many of these points are that they are based upon abstract notions and not a practical course of action. It’s too late to fret about moral hazard. We have to act. Moral hazard won’t be a problem moving forward anyway, because lenders are now going to be very careful with their funds for very long time.
[/quote]

What history I know does not support your point here. Moral hazard will resurface with a vengence, but it will take a few years. The United States is rife with examples of poor lending and land booms/busts. Southern Ca has been doing that pretty steadly for the past 30 years or so. We have not learned our lesson, and will not learn our lessons because we have almost no respect for history or ability to learn from it.

[DWCAP]

[quote=pri_dk] The problem with many of these points are that they are based upon abstract notions and not a practical course of action. It’s too late to fret about moral hazard. We have to act. Moral hazard won’t be a problem moving forward anyway, because lenders are now going to be very careful with their funds for very long time.
[/quote]

What history I know does not support your point here. Moral hazard will resurface with a vengence, but it will take a few years. The United States is rife with examples of poor lending and land booms/busts. Southern Ca has been doing that pretty steadly for the past 30 years or so. We have not learned our lesson, and will not learn our lessons because we have almost no respect for history or ability to learn from it.

[DWCAP]

[quote=pri_dk] The problem with many of these points are that they are based upon abstract notions and not a practical course of action. It’s too late to fret about moral hazard. We have to act. Moral hazard won’t be a problem moving forward anyway, because lenders are now going to be very careful with their funds for very long time.
[/quote]

What history I know does not support your point here. Moral hazard will resurface with a vengence, but it will take a few years. The United States is rife with examples of poor lending and land booms/busts. Southern Ca has been doing that pretty steadly for the past 30 years or so. We have not learned our lesson, and will not learn our lessons because we have almost no respect for history or ability to learn from it.

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