Housing+Crisis

[[file:research paper.doc]]
**Housing Crisis in U.S. ** []  “Our investment models can range from a one-year earn-out to six years,” Avilasays, which means the firm can try for some of the near-term opportunity with partially-built neighborhoods even as it banks on a longer-term, low pulse, “tepid” recovery scenario. - what does this suppose to mean? Unfortunately, it’s likely going to take fear, fear of missing something later by not paying for it now, fear of a worse outcome than one can imagine as prices still soften, to draw people back into a sustainable universe of demand for new homes. – what could be the worse outcome? - 5/9/2011 []  [] <span style="background-color: transparent; border-bottom: windowtext 1pt solid; border-left: medium none; border-right: medium none; border-top: medium none; color: #000000; display: block; font-family: Times New Roman; font-size: 16px; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; padding-top: 0in; text-align: left; text-decoration: none; vertical-align: auto;"> <span style="background: white; color: #000000; display: block; font-family: Times New Roman; font-size: 16px; line-height: normal; margin: 0.25in -3.5in 0.25in 0.5in; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: #333333; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">and engage in a community for the long term. However, homes are expensive and most people <span style="background: white; color: #000000; display: block; font-family: Times New Roman; font-size: 16px; line-height: normal; margin: 0.25in -3.5in 0.25in 0.5in; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: #333333; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">need to borrow money to get one. <span style="background: white; color: #000000; display: block; font-family: Times New Roman; font-size: 16px; line-height: normal; margin: 0.25in -3.5in 0.25in 0.5in; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: #333333; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">The conditions were right for people to achieve that dream. In the early 2000s, mortgage interest <span style="background: white; color: #000000; display: block; font-family: Times New Roman; font-size: 16px; line-height: normal; margin: 0.25in -3.5in 0.25in 0.5in; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: #333333; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">rates were low, which allow you to borrow more money at a lower monthly payment. In addition, <span style="background: white; color: #000000; display: block; font-family: Times New Roman; font-size: 16px; line-height: normal; margin: 0.25in -3.5in 0.25in 0.5in; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: #333333; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">home prices increased dramatically, so buying a home seemed like a sure bet. Lenders <span style="background: white; color: #000000; display: block; font-family: Times New Roman; font-size: 16px; line-height: normal; margin: 0.25in -3.5in 0.25in 0.5in; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: #333333; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">understood that homes make good collateral, so they were willing to participate. – <span style="background-color: transparent; color: red; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">how did the <span style="background: white; color: #000000; display: block; font-family: Times New Roman; font-size: 16px; line-height: normal; margin: 0.25in -3.5in 0.25in 0.5in; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: red; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">mortgage interest decreased that allowed so many people to borrow money easily? <span style="background-color: transparent; color: #000000; display: block; font-family: Times New Roman; font-size: 16px; margin-left: 0.25in; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: #333333; font-family: 'Times New Roman','serif'; font-size: 16px; line-height: 115%; text-decoration: none; vertical-align: auto;">They had plenty of equity, so why let it sit in the house? Homeowners refinanced and took second mortgages to get cash out of their homes' equity. Some of this money was spent wisely, and some simply maintained a standard. – <span style="background-color: transparent; color: red; font-family: 'Times New Roman','serif'; font-size: 16px; line-height: 115%; text-decoration: none; vertical-align: auto;">what about the people who didn’t spent it wisely? Later bussinesses who found the housing market profitable began to partcipate and later too many houses were sold at the same time and caused the market to erupt. <span style="background-color: transparent; color: #800080; font-family: Times New Roman; font-size: 16px; text-align: left; text-decoration: underline; vertical-align: auto;">[]
 * <span style="background-color: transparent; color: #000000; display: block; font-family: Times New Roman; font-size: 16px; line-height: normal; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: #000000; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">The first step in the chain dates back to 1938, when the Federal National Mortgage Association (Fannie Mae) was established by the Franklin Delano Roosevelt administration to provide funds to banks so that they would be able to loan potential homeowners money to purchase their homes. The Federal Home Loan Mortgage Corporation (Freddie Mac) was created in 1970 to buy mortgages, repackage them, and sell them to investors. With the creation of these institutions, the concept of securitization was introduced, and the dynamics of banking changed dramatically
 * <span style="background-color: transparent; color: black; display: block; font-family: Times New Roman; font-size: 16px; line-height: normal; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: black; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">“We have the ability to partner with builders, with developers, with financial players, or even build out a community with our own home building operators,” Avilasays. – <span style="background-color: transparent; color: red; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">The ability/power to control the housing market…. “even build out a community”
 * <span style="background-color: transparent; color: black; display: block; font-family: Times New Roman; font-size: 16px; line-height: normal; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: black; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">Encore, like some of the other well-heeled funds joined at the hip with home building operators and land acquisition expertise, has the advantage of starting with a balance sheet free and clear of paying too much for land. What it buys, it can insist on paying a low number because its decisions don’t need vetting by a land committee, and Encore can pull the trigger as quickly as it wants to if the deal pencils to its underwriting hurdle rates.
 * <span style="background-color: transparent; color: black; display: block; font-family: Times New Roman; font-size: 16px; line-height: normal; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: black; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">Low prices, low interest rates, extra added features, and lower cost-of-ownership promises thanks to higher efficiency have not quite won the day as far as driving buyer urgency into the market. – <span style="background-color: transparent; color: red; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">even with features like low prices and other shenanigans doesn’t have much effect as b4.
 * <span style="background-color: transparent; color: black; display: block; font-family: Times New Roman; font-size: 16px; line-height: normal; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: black; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">The only thing I owe is $400k on my "second home" in Las Vegas. If I sell the home I will be losing out one 30k and I don’t have that much.– <span style="background-color: transparent; color: red; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">it is hard to believe that most of the consumers own a 2nd home in which they cannot pay the mortgage because of some situation. When an owner sells a house on short sale, it is possible that the lender will lose the deficiency balance. However, in some states such as Florida, the lenders can pursue the deficiency loss up to 4 years and if the consumer has another home, the lender can lien (sell) that property as collateral. Some form of security for the lenders are needed as home owners cannot pay their mortgages. No matter what form of security is available, it is bad for both the lenders and the consumer if the consumer cannot pay the mortgage.
 * <span style="background-color: transparent; color: black; display: block; font-family: Times New Roman; font-size: 16px; line-height: normal; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: black; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">Though the 10% jump in starts announced this morning created a sense of relief among investors, when you dig past the headline number, you realize that most of the gain came from multi-family starts -- not single family homes. New construction of single-family homes rose by a less spectacular 4.3% to an annualized rate of 438,000. While the gain was encouraging, starts are still 9% below last year's level. -- <span style="background: #fcf7f7; color: #e33131; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">less houses will be built because multi-family houses will use up less up money to buy an apartment that is part of mulit-family house.
 * <span style="background-color: transparent; color: #000000; display: block; font-family: Times New Roman; font-size: 16px; line-height: normal; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: black; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">As home prices fall and banks tighten lending standards, people with good, or prime, credit histories are falling behind on their payments for home loans, auto loans and credit cards at a quickening pace, according to industry data and economists. -- <span style="background: #fdf7f7; color: #fa3333; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">even with good credit score (prime) cannot keep up with the mortgage due because of the economic recession in which the unemployment rate rose to 12.5% at the end of the year . 2/12/2008
 * <span style="background-color: transparent; color: purple; display: block; font-family: Times New Roman; font-size: 16px; line-height: normal; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background: #fcf7f7; color: #292424; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">In 2007 … The mortgage crisis was a result of too much borrowing and flawed financial modeling, largely based on the assumption that home prices only go up. Greed and fraud also played important parts. – <span style="background: #fcf7f7; color: red; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">people were ignorant and didn’t want to believe that home prices will go down because of the capitalistic society in which people want more and more money.
 * <span style="background-color: transparent; color: #000000; display: block; font-family: Times New Roman; font-size: 16px; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: #333333; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">Owning a home is part of the 'American Dream'. It allows people to take pride in a property
 * <span style="background-color: transparent; color: #000000; display: block; font-family: Times New Roman; font-size: 16px; text-align: left; text-decoration: none; vertical-align: auto;"><span style="background-color: transparent; color: #333333; font-family: 'Times New Roman','serif'; font-size: 16px; text-decoration: none; vertical-align: auto;">With home prices skyrocketing, homeowners found enormous wealth in their homes.