Mortgage problems hit Houston market

[musicman]

One of the nation's largest mortgage lenders, Houston-based Aegis Mortgage Corp., stopped taking new loans Monday, amid a day of news that signaled tougher days ahead for lenders and homebuyers.

"It's a bloodbath out there," said Mark Cady, senior vice president of Market Street Mortgage in Houston.

The announcement came on the same day New York-based American Home Mortgage Investment Corp. filed for bankruptcy protection and Cleveland-based National City Corp. also stopped taking applications for new loans in its wholesale division.

Falling home prices nationwide and a rise in foreclosures have scared investors away from buying securities backed by home loans.

That, in turn, has led to tougher lending standards and higher interest rates.

For example, late last week, Wells Fargo upped its interest rate on a 30-year fixed rate on its better quality large loans to 8 percent from 6.875 percent.

Tighter lending practices have led to a housing crunch nationwide as prices skyrocketed and then began to fall, making it harder for people in financial straits to sell their homes.

While Houston home prices have not experienced wild increases, the drop-off in subprime loans has already begun affecting home sales, as buyers with bad credit or little money for a down payment can't get loans.

On a positive note, the company said there's still liquidity in the commercial market and there are investors who will pick up the slack.

full article

[Guest danax]

There have been lots of people who really should've never been allowed to buy a house getting them in the past 5 years or so, and now all of that has ended, which is not good for the lower-end builders who sold to a lot of these buyers, but it will stabilize neighborhoods in the long term as only the more responsible and financially solid buyers will be able to own, just like in the old days.

[stolitx]

One of the nation's largest mortgage lenders, Houston-based Aegis Mortgage Corp., stopped taking new loans Monday, amid a day of news that signaled tougher days ahead for lenders and homebuyers.

"It's a bloodbath out there," said Mark Cady, senior vice president of Market Street Mortgage in Houston.

The announcement came on the same day New York-based American Home Mortgage Investment Corp. filed for bankruptcy protection and Cleveland-based National City Corp. also stopped taking applications for new loans in its wholesale division.

Falling home prices nationwide and a rise in foreclosures have scared investors away from buying securities backed by home loans.

That, in turn, has led to tougher lending standards and higher interest rates.

For example, late last week, Wells Fargo upped its interest rate on a 30-year fixed rate on its better quality large loans to 8 percent from 6.875 percent.

Tighter lending practices have led to a housing crunch nationwide as prices skyrocketed and then began to fall, making it harder for people in financial straits to sell their homes.

While Houston home prices have not experienced wild increases, the drop-off in subprime loans has already begun affecting home sales, as buyers with bad credit or little money for a down payment can't get loans.

On a positive note, the company said there's still liquidity in the commercial market and there are investors who will pick up the slack.

full article

The quote about National City is not correct. In fact the Chronicle has removed it from their online article.

[segovia]

Based on what I have seen in my area, new homes are selling quickly. All of these homes range in the 400K to 650K. I wonder if the renovated "iCityCondo Units" off Heights Blvd & 15th Street have been affected by these mortgage issues (development idle several months).

[TheNiche]

Based on what I have seen in my area, new homes are selling quickly. All of these homes range in the 400K to 650K. I wonder if the renovated "iCityCondo Units" off Heights Blvd & 15th Street have been affected by these mortgage issues (development idle several months).

The Heights is now the high end, and you're right that it's still pretty tight. The townhome market isn't what I'd call tight, but it could be worse. Not sure about condos just at the moment.

[segovia]

I drove around this past weekend west of durham (intersection of 14th with Nashua & Prince). I was surprised with the construction development in this area. Builders such as Tricon, Bastian, SSH, Choice Builders, Harry James and Allegro have been pretty active in the Heights area. I have yet to see a slow down.

[spiderman]

I heard a realtor make a comment last week that the number of homes on the market under $175,000 on HAR.com has doubled in the past year, from a 4 month supply to an 8 month supply, due to the number of potential buyers that have been taken out of the market due to tighter credit. We may start seeing price declines in this segment of the market.

[Parrothead]

I think everyone is going to see some changes here very soon. We are not immune to the issues going on in the mortgage banking industry. If I were a home flipper I'd start getting a little more selective and perhaps work on plan "B".

[musicman]

they just had a story on live at 5 concerning apartment availability. the crux of the story was that since the mortgage industry is making loans harder to obtain, apartment prices will be rising as less will be available.

[Guest danax]

they just had a story on live at 5 concerning apartment availability. the crux of the story was that since the mortgage industry is making loans harder to obtain, apartment prices will be rising as less will be available.

And since the lower-income buyers looking for max financing are the ones mainly being excluded from the mortgages, I guess we can expect more lower-end apartment complexes going up to meet the demand, and fewer of them will get torn down. .

Plus, a lot of the foreclosures will get bought by investors and will become rentals which will offset some of the increased demand for apartments.

[TheNiche]

they just had a story on live at 5 concerning apartment availability. the crux of the story was that since the mortgage industry is making loans harder to obtain, apartment prices will be rising as less will be available.

Actually, Houston's multifamily market has had a remarkable bit of luck in the past couple years. We got bailed out from a period of overbuilding and easy money by Katrina/Rita tenants, and then as they started to leave, employment gains created household growth that offset their loss in a very big way. Now, as another cycle of overbuilding appears to be upon us, the easy money has dried up, possibly stabilizing the impact.

The jury is still out, but I'd suspect that as building supplies mfg. firms get desperate to sell off excess inventories, material costs will decline somewhat, and if that happens, then price declines could be expected in all categories as the market adjusts...but as a greater percentage of the cost of multifamily housing units is linked to the improvements, the adverse price/rent pressure would be somewhat greater in multifamily housing relative to single-family.

[HeightsGuy]

Hi all, it's been a while since I was around, been a little busy the past few months......

I don't think there will be any inner-loop slowdown. People getting hit by this are the ones with bad credit and people who opt for riskier loans to get more house than they could get with a standard mortgage. I could be wrong, but those aren't the people looking at $250,000+ housing in the Heights area. I drive down 14th every day, and every one of those homes being built has sold before they are finished.

[gto250us]

This whole problem with subprime can only help the economy by flushing out those who never should have been given credit in the first place. Reducing overall risk in the market is good. What chaps my fanny is that many of those who made the decisions to extend lousy credit are already out of it and the rest of us will end up paying for it.

[jm1fd]

I don't think there will be any inner-loop slowdown. People getting hit by this are the ones with bad credit and people who opt for riskier loans to get more house than they could get with a standard mortgage. I could be wrong, but those aren't the people looking at $250,000+ housing in the Heights area. I drive down 14th every day, and every one of those homes being built has sold before they are finished.

I'm inclined to think that your logic might be a bit misguided. It could be those trendy more expensive areas that are hardest hit for several reasons:

1. Its trendy....people just have GOT to live there no matter what because its the in thing

2. Its expensive...people (driven by #1 above) are driven to do whatever it takes to live there

3. There's no shortage of people with high incomes who have bad credit and just generally poor financial health

[Guest danax]

Merged with, "Mortgage problems hit Houston market-How will this affect the Heights Area?". Same topic really, and all areas can be discussed.

[TheNiche]

I'm inclined to think that your logic might be a bit misguided. It could be those trendy more expensive areas that are hardest hit for several reasons:

1. Its trendy....people just have GOT to live there no matter what because its the in thing

2. Its expensive...people (driven by #1 above) are driven to do whatever it takes to live there

3. There's no shortage of people with high incomes who have bad credit and just generally poor financial health

While it is true that there are plenty of people with high incomes and poor finances, those people have a strong tendency to have connections among other wealthy people (i.e. parents) that can be tapped when need be. A lot of them also used such an approach to come up with a down payment. This is a big factor that is often overlooked.

Additionally, when folks with higher incomes tend to have more disposable income and can more easily and quickly cut back on expenditures related to eating out, drinks, entertainment, luxury goods, etc. And as long as they haven't yet started missing payments, they can usually just apply for a higher credit card limit if need be. Less affluent folks tend to have less disposable income, and are more likely to straddle the razor's edge from month to month, without even the choice to cut back on expenditures or necessarily the ability to up their credit card limit if something comes up.

I'll grant you that some high-income households just don't even begin to grasp these things, but they are certainly fewer in number than those that make less money. Add to that that home buyers at the high end tend to be older, having accumulated some equity in a starter home, and at least having learned the tricks to living in a constant state of financial distress, it is intuitive that the higher end of the housing market is going to fare better.

[musicman]

Single-family home sales rebounded last month in the Houston area after two consecutive declines, but prices dropped for the first time since 2004.

That's a bit better than the national report released today, which showed declines in total existing home sales and the median price in April, May and June

Realtors sold 6,856 homes in July in the area, a 1.6 percent increase from the same month last year, according to the Houston Association of Realtors. The sales were of primarily existing homes, but some were new.

Median single-family home prices declined slightly, dropping to $155,100 in July. The median is a market price where half the homes sold for more and half for less.

Sales of Houston-area homes priced between $80,000 and $150,000 continued to show weakness during the month.

And year-to-date sales were down less than one percent. If the decline continues throughout the year, 2007 would be the first time in more than a decade with an overall yearly drop.

Sales of townhomes and condominiums are also hurting, falling for the third month in a row. In the Houston area, 660 units sold in July. That's a 3.1 percent drop from July 2006.

full article

[KatieDidIt]

I think in these little dips the high income homes do just fine. People tend to forget just how much "family money" is in Houston. Its made a few lists as being one of the cities with the most multi-millionaires. Generations make family loans to each other at family interest rates.

Its the burbs that take the hit the strongest. Property values are low and the native wealth is almost non-existant. We finally unloaded our Woodlands house. Our closing was the day after many mortgage companies went belly up. It took three tries for it to fund that day. The people were financing about 90% of the purchase.

The big oil bust was really the only hiccup in the higher income market in Houston that I can remember. We swooped in, in the early 90's and picked up a house for a song. Well, for us it was a major stretch but it paid off in the end. The property value alone on that little house is now almost 3 times what we paid for the whole thing. Even with that dip though, the houses came roaring back for those that "sat it out." Trendy high income areas are mostly about location and location always rebounds.

[westguy76]

I think in these little dips the high income homes do just fine. People tend to forget just how much "family money" is in Houston. Its made a few lists as being one of the cities with the most multi-millionaires. Generations make family loans to each other at family interest rates.

Its the burbs that take the hit the strongest. Property values are low and the native wealth is almost non-existant. We finally unloaded our Woodlands house. Our closing was the day after many mortgage companies went belly up. It took three tries for it to fund that day. The people were financing about 90% of the purchase.

The big oil bust was really the only hiccup in the higher income market in Houston that I can remember. We swooped in, in the early 90's and picked up a house for a song. Well, for us it was a major stretch but it paid off in the end. The property value alone on that little house is now almost 3 times what we paid for the whole thing. Even with that dip though, the houses came roaring back for those that "sat it out." Trendy high income areas are mostly about location and location always rebounds.

I guess I live in a trendy area in suburbia as my values have risen well the last 2 years. I have very little cash equity in my mortgage, It's just the way I choose to move in because I plan to be here 20 years. I do plan to refinance my loans and I wonder how these mortgage industry problems will affect me doing that and when it will be best to do it. Do they expect the interest rate to rise steadily for a while? Does anyone know how this is affecting the prime refinance rate or market?

[Scharpe St Guy]

Here is a very interesting read for us Realtors and all of us really. A little long but well worth the time.

http://finworthmortgageblog.com/

All the best,

Scharpe St Guy

[nmainguy]

I guess I live in a trendy area in suburbia as my values have risen well the last 2 years. I have very little cash equity in my mortgage, It's just the way I choose to move in because I plan to be here 20 years. I do plan to refinance my loans and I wonder how these mortgage industry problems will affect me doing that and when it will be best to do it. Do they expect the interest rate to rise steadily for a while? Does anyone know how this is affecting the prime refinance rate or market?

Lenders are apt to take a harder line on refinancing. You are going to have to have an impeccable credit history and desirable property for starters. It looks like the fast-and-loose days are behind us-thank God. I'd suggest patience until more responsible people inhabit the Fed. I'd bet that in the next 20 years you'll have plenty of opportunity to re-finance under a more responsible Fed and administration.

[MidtownCoog]

Oh hell, the Fed (Greenspan) crossed Administrations. Don't let your Dem loving ways fool you.

[longcat]

I can't see how the high end of the Houston market won't take a hit now that the credit crunch has hit 'jumbo' mortgages. Tough to buy much in the inner loop without a mortgage over $417k...

http://www.ocregister.com/money/loans-jumb...12-loan-lenders

[ricco67]

Lenders are apt to take a harder line on refinancing. You are going to have to have an impeccable credit history and desirable property for starters. It looks like the fast-and-loose days are behind us-thank God. I'd suggest patience until more responsible people inhabit the Fed. I'd bet that in the next 20 years you'll have plenty of opportunity to re-finance under a more responsible Fed and administration.

Oh hell, the Fed (Greenspan) crossed Administrations. Don't let your Dem loving ways fool you.

Quite right. Greenspan did just fine under the Reagan Administration and Clinton was smart enough to hold onto him and the same goes with Bush. The thing is that we're just going through what we went through in the late 80's and early 90's. The home values will dip a bit, but things should hold together just fine.

I can't see how the high end of the Houston market won't take a hit now that the credit crunch has hit 'jumbo' mortgages. Tough to buy much in the inner loop without a mortgage over $417k...

It's not the "high end" but rather "ULTRA" high end that will do fine. As it was mentioned, it is those with ridiculous amounts of cash and old money that have no problems in purchasing money. If they HAVE to borrow money, believe me, they can always call up a friend with favorable loans or are on such good terms with their banks that it won't be a problem.

I knew one guy back in the 80's that was hit hard. You know what his reaction was? "I think I'll ONLY get a 80foot boat instead of the 120footer."

People on that level of the economy work on a totally different level.

[TheNiche]

I can't see how the high end of the Houston market won't take a hit now that the credit crunch has hit 'jumbo' mortgages. Tough to buy much in the inner loop without a mortgage over $417k...

http://www.ocregister.com/money/loans-jumb...12-loan-lenders

We've got some advantages over other markets, though. First and foremost, housing prices haven't been a rollercoaster like in other parts of the country. Fewer people are upside down on their note. Our employment growth is still very strong. Also, people taking out jumbo mortgages tend not to be buying starter homes; they usually have equity built up in their current home that will carry over into their new home.

I'm not saying that this isn't bad news, just that it could be much worse.

[TAK]

sub-prime mortgages are not, simply, about people with bad credit or low incomes. read up a bit more. i have A+ credit, good income, and a sub-prime mortgage... i'm not at risk of default by any stretch (barring a medical disaster that caused me not to work, but even then, i could get out of the house.) My mortgage is sub-prime for a reason, and will be paid off well before 30 years, or even before the 15 year balloon on the 2nd... (closer to 12 years for the whole mortgage, six or so (ie, next year) on the 2nd).

if you don't think there is a bunch of sub-prime inside the loop, think again. there are plenty of people who bought as much house as they could afford at the time, on little to nothing down, on some type of ARM that is going to adjust them into a "motivated seller"... or, if not the ARM, then perhaps the taxes are going to become too much (like the family that bought my previous house 5 years ago and now wants to sell because the taxes are just stupid.) people live above their means in all parts of the U.S., including the inner loop of Houston. Yes, builders in the burbs will get hit first, but the urbs are gonna feel it a bit, too.

the sub-primes that are causing the most problem are the ones in which the mortgage, adjusting rate, and taxes make the note too much to handle. a person with "bad credit" and "low income" on a sub-prime mortgage with a relatively high (9%) but fixed rate, isn't as much of a problem. California is a problem. Inside the loop is close to being a problem. There are probably as many inner-loopers buying homes with equity from their last homes are there are inner-loopers buying with no equity in anything.

all areas of houston will get hit because there will be a glut of homes (overbuilding) and strict credit. i've already had a talk with my broker about how my loans for investment property will change... there will be investors with funds ready to jump when the blood hits the streets, because all of these people will still need places to live, and apartments tend to suck (i have lots of experience with living in them.)

[jm1fd]

So...anybody have any idea when the problems will hit the inner loop area full swing? The HAR.com site was displaying a FORECLOSURE field on listings for a few days, and I was surprised by the number of listings that said YES.

I'm thinking about picking up a property at a discount and renting my current house out when it all starts to go pear shaped.

[musicman]

So...anybody have any idea when the problems will hit the inner loop area full swing? The HAR.com site was displaying a FORECLOSURE field on listings for a few days, and I was surprised by the number of listings that said YES.

there was an article earlier this month citing Montrose as an area that has seen a dramatic increase in foreclosures most likely due to the number of speculators in the area.

[jm1fd]

there was an article earlier this month citing Montrose as an area that has seen a dramatic increase in foreclosures most likely due to the number of speculators in the area.

I did read that article. I just figured that folks on the board might have detailed info when and where the riskiest mortgages were taken out. Like for example...there were a plethora of 3/1 ARMs taken out for properties in 77007 2.5 years ago. I just made that up...but that's the sort of info I'm looking for. I'm trying to get an idea of when and where the deals might be the best.

[musicman]

I did read that article. I just figured that folks on the board might have detailed info when and where the riskiest mortgages were taken out. Like for example...there were a plethora of 3/1 ARMs taken out for properties in 77007 2.5 years ago. I just made that up...but that's the sort of info I'm looking for. I'm trying to get an idea of when and where the deals might be the best.

gotcha....sounds like that might require some time on their part, particularly if you want a detailed analysis.