HBB Rates The Media: Mid-Atlantic
The HBB continues its look at the media and the housing bubble. This time, the mid-Atlantic states.
The good:
The Morning Call in Pennsylvania, April 2005: “It might be reasonable to suppose that they aren’t individual bubbles but rather one mega-bubble, the totality of the economic and financial world we live in. Some Wall Street veterans say the global bond and mortgage markets may constitute the scariest bubble of all, as investors and lenders have fallen over themselves to extend credit to companies and individuals at generously low rates of interest.”
“But true bubbles on the scale of dot-coms in the late 1990s, or Japanese stocks in 1988-89, or tulip bulbs in 1636-40, are relative rarities.”
“Jeremy Grantham said: The Federal Reserve, by cutting interest rates to generational lows in recent years, inflated a new crop of financial market bubbles by giving investors the wherewithal to aggressively bid up the values of bonds, real estate and (once again) stocks, he said. That’s what easy money will do, and that’s what it did.”
May 2005. “Average local home prices shot up 12 percent in the first three months of the year, proof that the predicted cooling of the real estate market hasn’t arrived. That 12 percent uptick is ahead of the solid growth the region saw in the same period last year, when prices for existing homes rose 9 percent.”
“Housing prices are rising faster than Lehigh Valley residents’ wages, largely because of a steady influx of new homebuyers with higher incomes from costlier areas such as New York and New Jersey. ‘What we see is the local people not being able to make the move,’ said Sam Ruta, of Coldwell Banker. Ruta said he held an open house last fall for a home that ultimately sold for $250,000. Nearly all the people who attended the open house hailed from New York and New Jersey. But one Lehigh Valley man came with his young son. ‘He looked around and said ‘I can’t afford this house and I am from Palmer Township.’”
The Philadelphia Inquirer, March 2005: “For high-rate subprime loans..11.94 percent foreclosed each year..Two of every five mortgages made in Philadelphia by high-interest “subprime” lenders in 1998 and 1999 had resulted in defaults and foreclosures by 2003.”
“Traditionally, the fear of losses kept banks from lending to people with bad credit. Since big banks have cut back on mortgage loans..Wall Street investors have stepped in, there is less risk for loan originators and brokers, because loans are quickly sold to other investors.”
From Philly.com, April 2005: “American Business Financial Services Inc., a leading subprime lender announced, “it was abandoning its bid to resume operations under U.S. Bankruptcy Court protection and would lay off its 820 employees.”
“The company’s demise should bring a speedier resolution for the mostly elderly investors who bought unsecured investment notes from the company through newspaper advertisements. They are now owed $622 million. But note holders are expected to recover only pennies on the dollar.”
From DelmarvaNow, May 2005: “‘A concern has been [that] commercial usages, restaurants and the like , have been replaced with condo projects,’ said Mayor James N. Mathias Jr.”
“Geoffrey Robbins, a dentist would have kept Atlantic Cosmetic and Family Dentistry in Ocean City, but when he was ready to expand, he couldn’t afford to buy additional land for parking. So he moved his practice to West Ocean City in January. ‘You can’t pay a million dollars for a parking lot,’ Robbins said. ‘We were faced with either staying where we were and not doing what we had wanted to do’ or moving out of town.”
“Norman Gilden said, ‘With land and property, what is the worst thing you’ll have to do? You’ll have to sell it, and you’re not going to sell it for a loss.’”
“Most consumers are aware of the record building activity in recent years from Lewes to Fenwick Island. “‘It grew so fast, it just blew up,’ said Kitty Harmon, manager of the Coffee Mill in Rehoboth Beach. ‘Every day, I ride up and down [Del. 1], and if I blink I miss a new condo. Prices are going to come down.’”
The Baltimore Sun, March 2005: “The city has a love-hate relationship with investors, though. Speculation during the real estate boom of the 1980s - particularly from out-of-town buyers who thought anything cheap was a deal - helped push the city into a real estate slump from which it only recently recovered.”
“Low-income residents making their first foray out of renting were victimized. So were other investors, people hoping to be landlords. But Baltimore officials say it’s different now.”
The Washington Post, May 2005: “At issue is the fast-growing market for home equity lending, which rose to $881 billion at the end of 2004 from $492 billion at the end of 2000, up 79 percent. Overall mortgage indebtedness nationwide climbed 57 percent, to $7.54 trillion at the end of 2004 from $4.8 trillion at the end of 2000.”
“Veteran banking consultant Bert Ely said the warning comes at a time when a growing number of industry observers think the real estate price appreciation bubble ‘can’t expand further.’ He added that whenever home prices rise for a long time, ’some lenders go overboard.’”
“Some lenders do not see a looming problem.’As long as the housing bubble doesn’t burst, home equity lines should remain strong and remain safe,’ said Scott Stern, chief executive of Lenders One.”
“The government warning was issued on the same day that the National Association of Realtors called for increased consumer education on the dangers of what the trade group called ‘toxic’ loans with predatory terms that hurt homeowners’. The group said that banking regulators were doing little to protect homeowners. ‘Consumers are also at risk, and the possibility exists that they could lose their homes’ to foreclosure, said JoAnne Poole, president of the Maryland Association of Realtors.”
April 2005: “‘In Real Estate Fever, More Signs of Sickness,’ in the Washington post. “Jennifer Tyler isn’t worried. She just took out a 10-year, interest-only loan to keep the monthly payments affordable. ‘Anything can happen in 10 years, I can move, I can re-finance. Anyway, the house will almost certainly appreciate, too.’”
The bad:
The Loudoun Times Mirror, April 2005: “Three years ago Greg and Jessica Furr paid $230,000 for a single-family home. They recently sold it for $445,000, pocketing a $215,000 profit. The Furrs and their two young children moved into a new, four-bedroom, brick-and-vinyl-sided home. The couple bought the place for the pre-construction price of $380,000.”
“We plan on selling this in two or three years..They say we’ll get $750,000. It’s hard to believe. To make 80 or 100 grand on a house is one thing. To double the value is kind of absolutely mind-boggling.”
“Mr. Furr (is) a 34-year-old general superintendent for a City of Fairfax-based concrete company. Mrs. Furr has since returned to work as a loan officer for a mortgage company. The couple also has a place on the Northern Neck, where they spend most weekends.”
The Washington Post, May 2005: “Tom Regnell has refinanced five times since he bought his house. When he refinanced this last time, he finally took out some cash; enough to buy a piece of property near the Homestead resort and start building a second home.”
“Ileann Jimenez-Sepulveda and her husband bought four years ago. They used their growing equity to buy another house three blocks away and renovate it to sell it. Then they bought a house in South America, and soon they’ll close on a large single-family home in the upscale Crestwood neighborhood. In the meantime, Jimenez-Sepulveda, who had worked in the high-tech industry, quit her job to join her husband in the real estate business; he’s a loan broker, she became an agent. Now they encourage their clients to use the equity in their homes to buy investment properties.”
“‘It’s very easy, it’s very tangible for people to understand because they see their neighbors doing it; taking the money out, buying something else, or investing in starting a restaurant,’ she said. ‘It’s exciting to see people recognizing it and running with it.’ She argues that real estate assets are bound to increase in value over the years.”
“Nick Koufos, an attorney for the SEC, is 36 and has three children. He recently did a cash-out refinance on his Silver Spring home to build a house in Pennsylvania, to which he plans to retire someday. ‘I think it’s better to get it done sooner rather than later,’ he said. ‘I don’t see how I could lose money.’”
“‘Certainly as things retreat, you’ll have some households that find themselves with two sets of loans, one on their equity line and one on their primary residence, as well as their new property investment, and that could be a lot,’ said David A. Lereah of the National Realtors Assoc.. ‘Certainly we’re in a new world today.’”
Other market observers, May 2005: “It feels as if Playboy’s Playmate of the Month for May is speaking for the entire country. Fort Lauderdale native Jamie Westenhiser, 23, told the magazine recently that she is ditching her modeling career to take up real estate investing. In the magazine’s May issue, Westenhiser poses, leaning on a computer desk next to a stack of books with titles including ‘All About Escrow’ and ‘Real Estate Principles.’ In her playmate data sheet, she writes that her ambition in life is to have a ’successful career in real estate.’”
“‘Everybody can’t sell all together,’ economist John Silvia said. ‘Somebody has to be buying. There’s absolutely a chance that a whole bunch of people will try to sell at the same time. The game can change very, very quickly.’”
”I’d want to sell while it’s still a seller’s market,’ said Kitty Bernard, an agent in Reston who has teamed up with several colleagues to invest. ‘I wouldn’t want to wait until it reverted completely to a buyer’s market.’”
“Other market observers, May 2005: “It feels as if Playboy’s Playmate of the Month for May is speaking for the entire country. Fort Lauderdale native Jamie Westenhiser, 23, told the magazine recently that she is ditching her modeling career to take up real estate investing.”
Hey…way to go Jamie!
If a Playmate can’t sell it, nobody can…Real Estate that is !
Her “intelligence” precedes her.
…age
Her “intelligence” precedes her age.
Actually you had it right the first time.
** giggle **
No coffee for that cupcake.
My friend Dave’s wife is one smart gal and a real looker. She says when a some sweet young thing is trying to sell her something, she watches her and what she is trying to sell closely.
Antenna UP !
When a sweet young thing is trying to sell her and Dave something together , she watches her, Dave’s response and the deal…TWICE as close.
Antenna UP and claws At A Ready !
Good luck in Real Estate Jamie !
Mikey:
Beauty always works backwards in the workplace. If you have a great product Roseanne Barr could sell it easily
But if business is bad or they are trying to pull a fast one, you have some knockout selling it.
Not at my company NYC. My company would buy a snow blower in Florida from the right sales person.
or they are trying to pull a fast one, you have some knockout selling it.
Smoke and Mirrors.
Flash and Dazzle.
The Loudoun Times Mirror, April 2005: “Three years ago Greg and Jessica Furr paid $230,000 for a single-family home. They recently sold it for $445,000, pocketing a $215,000 profit. The Furrs and their two young children moved into a new, four-bedroom, brick-and-vinyl-sided home. The couple bought the place for the pre-construction price of $380,000.”
Can’t anyone ever do the math in these articles or TV shows? They probably had closing costs of at least $5,000 on their origional $230,000 purchase, then maintenance and upkeep for 3 years. Then on their $445,000 sale they probably had $30-35,000 of closing costs. So call it $40,000 in real estate costs in both transactions. If they pocketed $150,000 they were probably lucky.
This is my pet peeve too. No one ever takes those costs into consideration when discussing “profit.”
Then it’s not a true economic “profit”, is it now?
If they could pocket $150,000 from a real estate transaction, then yes, it’s profit.
“We plan on selling this in two or three years..They say we’ll get $750,000. It’s hard to believe. To make 80 or 100 grand on a house is one thing. To double the value is kind of absolutely mind-boggling.”
This second quote is beautiful enough to make me cry. And coming from a concrete company employee married to a loan officer. Follow-up piece, please, Loudoun Times-Mirror.
Buuttt..
Loudoun Co Virginia is the richest, mostest-fastest growing County in the whole freakn’ Country don’t ya know!
Suburb of Washington DC, don’t ya know!!!
Everyone & their grand kids wants to live here (in the rat race!)
don’t ya know.
Most “Owners” in Loudoun Co Va can’t give them back to the Bank
’cause all the Owners with their fancy Security Clearance jobs can’t have a Short or Foreclosure on their records.
My heart bleeds for them & the granite-laden Monsters hanging around their necks!
So much for livn’ large in DC - NOT !!
Ok rant off….
Ya know, despite all the bad-mouthin’ here, I know people who live in the DC area who couldn’t be happier.
One fellow’s an attorney with a wife and grown kids. I’m of the impression that he makes money hand over fist — he’s a tax attorney — and that the house was paid for many years ago.
And he’s not the only one who’s loving life around Our Nation’s Capital. I can give you many other examples.
OTOH, wanna go to the Whiners’ Capital of America? I give you Tucson, Arizona. Yeesh. This town absolutely takes the cake. You’d think it was Pittsburgh and we rarely saw the sun.
Yeah Slim, our traffic & quality of life here in DC are swell!
I agree, if you make bookoo bucks & your house is paid for (rare here!) then life is pretty swell !!
At least in Tucson you can be in Cali in a few hours, be in Mexico in a few hours or go ski in a few hours.
How many places can say that?
(Ok I lived in Phoenix in the ’80’s & still have fond memories of youth….)
I have never seen a place where traffic — which in my opinion was worse than Los Angeles — was as much a focus of people’s conversations and daily lives. I got the sense that people in the DC area worked twelve hours a day and spent at least three hours a day commuting, then tried to cram a personal or family life into what was left of the evening before going to bed.
“Nick Koufos, an attorney for the SEC, is 36 and has three children. He recently did a cash-out refinance on his Silver Spring home to build a house in Pennsylvania, to which he plans to retire someday. ‘I think it’s better to get it done sooner rather than later,’ he said. ‘I don’t see how I could lose money.’”
Poor Nick was at the eye of the storm - the SEC - and he couldn’t see it coming.
Yeah, way to go Nick. Now we know how you all glossed over Bernie Madoff, because agency enforcement personnel were gleefully speculating just like nearly everyone else.
Believe it or not, a long time ago, in a galaxy far, far away, I interviewed for a summer internship with the SEC. The agency offered me a job, but I turned it down — in retrospect, clearly the right decision.
Agree. If someone has the foresight to know where he wanted to retire 25 years from now, then he why didn’t he forsee this meltdown?
I also wonder if he had the foresight to build a retirement home with no stairs and wide hallways.
The specuvestors who built here (a community of mostly retirees) were talked into putting up the largest house possible within the confines of the lots and their required setbacks. As a result, many of them are two story plus full basement, and they have nine- or even ten-foot ceilings. Lotsa steps!
And lotsa luck! Almost all those specuvestor homes (about 25 or 30 were built) have gone into foreclosure. Only a very few have sold, either pre- or post-foreclosure.
Bill In Carolina,
What a great observation. Unlike most folks our age, we really, really ‘did’ make an honest attempt to downsize. We had a 2,700 s/f home and even though our youngest was still in HS ( she was very seldom at home )
So we wanted to play it right and be ahead of the curve ( Harry Dent predicted a glut of unwanted oversized homes since the late 90’s ) Well good luck with that! All we were ever shown were homes every bit as big ( if not ‘bigger’ ) only that they were shoe horned onto much smaller lots!
The wife and I kept looking at each other and asking, other than leaving our acreage behind, how is this “downsizing”? No one wanted to build a smaller home. Not w/ the p/p/s/f they were getting?
Bill DinOR:
And then you look at the layouts with the huge energy wasteful 2 story entrance foyer…and realize these behemoths can’t easily be divided into 2 or 3 smaller apartments
So now what? Group homes? ex-con half way houses? Animal frat houses? Or a mehikan family..oops where will they put the 4 commercial trucks when the HOA forbids commercial vehicles on the street?????
There are only so many extended families who really want to live together.
aNYCdj,
Right, the floorplans were like they were laid out so you could run around naked or do a p0rno shoot? Totally freaking impractical.
Uh.. NOW what!
Ooo open foyer. Can’t wait till the day when I’m not cheap anymore and am willing to get a place.
Hmm apartment. Paint peeling off ceiling. Both bathroom fans quit. HVAC messing up again (repaired twice for same problem), elevator always stuck. Going to call it all in, again. Just annoying.
to which he plans to retire someday.
Called a # for a condo locally. Guy lives in MI and wants to rent it to someone good. He is not going to make his nut on the condo montly.
$1000.
The cash-out refinance movement was a basically misunderstood and it was a Great Religious Thing.
Let us Prey.
You just had have to have a lot of Faith… in the next Greater Fool.
Let us Prey.
“Amen..this Service has ended and go your way in Peace…unto your recession.”
“Go your way in pieces, dissolution and distrust…”
LOL good one PB
What irks me is the idea that rising prices for housing are, in and of themselves, a GOOD thing. For every extra dollar one person gets for selling their house, somebody else has to pay an extra dollar to get the house. It is absouloutely and obviously a zero sum game. And people “liberating” equity? Those are LOANS, they have to be repaid. The idea that rising prices is an unqualified good just reminds me of an old Saturday Night Live routine where the president proclaims that “Inflation is our friend….Wouldn’t you like to own a $4,000 suit, and smoke a $75 cigar, drive a $600,000 car? I know I would!”
I had a coworker (with an engineering degree) try to explain to me the other week how credit - such as putting money on your credit card to pay off later - is not like getting in debt because “the bank gave me the credit.” Right… so, I guess they don’t think it has to be paid back?!
Considering that level of brilliance displayed among the educated in this region, the concept of high housing prices being bad and loans have to be repaid are totally foreign ideas.
Lots of idiots.
hgtv- cutting back on my consumption of this deadly drug.
yesterday some guy/wife pg, desperately wanted to buy a ’shortsale’ bungalow in Chicago. And I mean he wanted it so much. Basement had 1′+++ of standing water, ‘but that was fixable to him and his “buddies” while his pg wife is standing on top step’.
What kinds of idiots are there? MOLD, mildew, COST. sheesh.
Thankfully he got rooked into another more expensive property.
That episode was on this weekend!!
He definitely thought he was going to get steal on that property!
He definitely thought he was going to get steal on that property!
Now if he could have gotten if for say 100k lower, but the bank only gave him 9k to fix up the standing water/mold. WTH?
Yep, glad his pg wife prevailed.
“Ileann Jimenez-Sepulveda and her husband bought four years ago. They used their growing equity to buy another house three blocks away and renovate it to sell it. Then they bought a house in South America, and soon they’ll close on a large single-family home in the upscale Crestwood neighborhood. In the meantime, Jimenez-Sepulveda, who had worked in the high-tech industry, quit her job to join her husband in the real estate business; he’s a loan broker, she became an agent. Now they encourage their clients to use the equity in their homes to buy investment properties.”
What do you want to bet the only place they have now is the one in South America, and that’s where they’re living?
That WaPo article is worth reading in its entirity.
In a speech last fall, Federal Reserve Chairman Alan Greenspan painted a relatively sanguine picture of all these cash-out transactions, saying they’ve “likely improved rather than worsened the financial condition of the average homeowner.”
Oh, jeez Louise, where to begin with this one?
This subject is more than a little close for comfort, because Slim is in the process of having some much-needed repair work done here at the Ranch. The painters/mortar and stucco fixers did a beautiful job on the exterior walls, but, like the late-night infomercials, there’s more!
As in, my soffits and fascia look like something that I can’t say on this blog. So, I’m getting estimates. And they’re not exactly bargain basement.
The notion of going cash-out to pay for the repair work has been tempting, but, ya know what? This is Tucson, Arizona. And the HELOC tornado has already blown through here and done quite a bit of damage. So, good luck getting one of those loans, Slim.
I’m toying with the idea of bringing the cost down by seeing if some company would be willing to hire me as a carpenter’s helper on my house repair. That would be kinda fun for Yours Truly, and, what the heck, I may even prove to be helpful.
Stay tuned…
“Some Wall Street veterans say the global bond and mortgage markets may constitute the scariest bubble of all, as investors and lenders have fallen over themselves to extend credit to companies and individuals at generously low rates of interest.”
…
“Jeremy Grantham said: The Federal Reserve, by cutting interest rates to generational lows in recent years, inflated a new crop of financial market bubbles by giving investors the wherewithal to aggressively bid up the values of bonds, real estate and (once again) stocks, he said. That’s what easy money will do, and that’s what it did.”
Jeebus Krikey — isn’t this what the Fed is doing this very minute? Won’t it have exactly the same effect as it had in 2005, 2000, etc etc etc?
OR IS IT DIFFERENT THIS TIME???
Good question.
The can create temporary ups, but the trend is down.
As were American house prices from the late 1800s to the 1920s. Check out a Case-Shiller graph sometime.
Again, ( as noted below ) I’m none too sure how much cheap money was a factor for equity markets at the time? I just don’t recall any kind of fat arbitrage when “high yield” paper was maybe… paying out 6%?
“Traditionally, the fear of losses kept banks from lending to people with bad credit. Since big banks have cut back on mortgage loans..Wall Street investors have stepped in, there is less risk for loan originators and brokers, because loans are quickly sold to other investors.”
What’s even better, as we recently learned, subprime mortgage lending kingpins at too-big-to-fail banks were eligible to get bailed out when the massive mortgage lending fraud scheme went bust.
“Some lenders do not see a looming problem.’As long as the housing bubble doesn’t burst, home equity lines should remain strong and remain safe,’ said Scott Stern, chief executive of Lenders One.”
Shakespeare’s MACBETH:
I pull in resolution, and begin
To doubt the equivocation of the fiend
That lies like truth: ‘Fear not, till Birnam wood
Do come to Dunsinane:’ and now a wood
Comes toward Dunsinane.
PB,
Wasn’t Lender’s One amongst the FIRST casualties!? LOL.
Professor Bear,
Nicely put. But, please finish the stanza
“There is no escape now. I begin to grow weary of the sun.”
great stuff.
“It feels as if Playboy’s Playmate of the Month for May is speaking for the entire country. Fort Lauderdale native Jamie Westenhiser, 23, told the magazine recently that she is ditching her modeling career to take up real estate investing. In the magazine’s May issue, Westenhiser poses, leaning on a computer desk next to a stack of books with titles including ‘All About Escrow’ and ‘Real Estate Principles.’ In her playmate data sheet, she writes that her ambition in life is to have a ’successful career in real estate.’”
Come on, FPSS and NYCB, you can’t let us down on this opening…
Oh come on, even you can come up with a simple reference to thumping melons before you buy them or something.
Why do we have to do all the work around here?
She has a mountain of expectations.
With expectations firmly implanted, her desires were uplifted.
Does that help get you started guys? lol
Does that help get
you started guysa rise ? lolBecause, “Real estate only goes up!”
As Pondering posts later.
yuck yuck ;~>
leaning on a computer desk next to a stack of books with titles
- I had to look closer to read the last word. I was disappointed that I was not titallated by the word though.
TiTles of books, it is all that chlorine in your chlorine bloodshot eyes that made you read it differently - hahaha
“books?” Oh I missed the “k”
Eyedrops, my friend, eyedrops!
lol
You would logically think the Playboy model would be in some sexually suggestive pose lying on shag carpeting with matching drapes.
Forget the erudite books. I didn’t know Playboy Playmate’s had brains. Aren’t they all airheads?
It’s good she was going to be a real estate investor as opposed to a real estate agent. I think it’s safe to say she could never pass the Florida real estate exams to get a license.
Well, maybe? They can’t even count presidential votes down in Florida. None of them folks down there is too bright.
Believe it or not, the 79 or 80 playmates were PHD beauties.
I forget the details but my hs friend was exec and asked me to come along while he and the women did their radio show interviews.
They may be beauties, but most everything is fake.
Well, maybe there’s a difference with a Playboy Playmate and a beauty pagaent contestant.
Let’s face facts: Sarah Palin and Carrie Prejean are lacking a few smarts.
Barbi Benton, a past girlfriend of Hugh Hefner, was very smart but I don’t think she had a PhD degree. As far as I know, Benton must be the most successful of the girls associated with Hefner and the Playboy Mansion.
She ended up in Aspen, Colorado and living in a house with 40,000 or 50,000 square-feet. But that’s before her husband was convicted of fraud or something. He may have gone to jail. I don’t know?
I guess the Aspen mansion is 27, 500 square-feet.
You can add the Washington Times to your mid-Atlantic suck-list.
http://tinyurl.com/y9w8zgx
It’s hard to believe this is STILL going on, but parents are buying housing for their college kids, CONFIDENT that they will sell for a profit later. Why throw money away on rent?
“If you’re paying rent, you know it’s going out the door, all of it, every dollar is out the door,” said Mr. Singleton, who works for DC Living Real Estate.
Yeah, and if you eat in a restaurant, or for that matter buy food to cook at home, every dollar is gone too! See, that’s called paying for something. You get something, and the dollars go bye-bye.
This graf makes me want to projectile vomit:
Student buyers and their parents helped Mr. Godzala achieve unusual success in his first year as a full-time Realtor. He is on pace to sell more than $5 million worth of property this year, and 25 percent of his clients are college students, he said.
One more gem:
“If you’re renting right now and you know you’re going to be here for five years, you should be buying,” said Ivan Katz of Fairfax Realty.
I guess these people don’t watch Real Estate Intervention.
Yeah, and if you eat in a restaurant, or for that matter buy food to cook at home, every dollar is gone too! See, that’s called paying for something. You get something, and the dollars go bye-bye.
SNORT.
Martini straight up nose. I love you!!!
Since the plan they’re usually advocating involves sending more money out the door on interest than the alternative rent, it’s obvious that these guys trying to get people to believe that house prices only go up.
Back in the old days, ‘05, I think it was, the parents of my daughters roommate in Bellingham WA decided that buying a “condo”, (read converted apartment), for the girls to stay in for the remaining three years of college would be a good investment. “Would you like to go halves?” they asked, “then we can split the profit when the girls graduate”. The condo is selling for a measly $150K, or only $175/square foot. “No”, I said, “but I would be happy to rent my daughters half and let you enjoy all of the appreciation”. “Well, ok” they said, but what a fool you are they were thinking, your daughter could live here for her entire college career, and you could pay for it with the appreciation on the unit. I can live with that, I thought.
Today, the place is worth maybe $75K on a good day, less selling expenses. I’m not sure there is a market for it in any sense since I doubt you could get a loan to buy the thing. Pretty expensive temporary housing. I feel bad for them as they are pretty much stuck with a college rental unit that doesn’t bring enough rent to service the mortgage and is terribly suceptable to destruction at the hands of college renters. But, hey, I guess we all learn sometime.
Spokaneman,
Thanks for sharing that it wasn’t just a SF/PDX delusion! You’ve no idea how many people over the last 8 or 10 years told me that ( upon graduation ) they will sell their condo and it will PAY the cost of their children’s education!
Particularly in PDX’s “Pearl District”. How’s ‘that’ working out for ya’?
Where on earth did these people (and by people I mean ‘chumps’) get the idea that a converted apartment occupied by college students for 4 years would appreciate at all, let alone enough to pay for the student’s education?
Because, “Real estate only goes up!”
Except when it doesn’t.
The Realtor told them, who else? Aren’t they the experts?
Bedsides the parents were from Bellevue WA , where housing as appreciated by about a gazillion % a year, forever. Well at least until last year. So they were spring loaded to the believe postion.
This idea did work once upon a time. But that time has passed.
When I was in college at UCSC 1971-1975, a freshman in my dorm named Wilson complained to his dad about dorm life. His dad mailed him a check for $10K and told him “so go buy a house”. Wilson bought a 3/2, presumably with his dad as co-signer, and rented out two of the bedrooms to other students. IIRC they paid about $30K for the house and sold it for $60K when Wilson graduated - Santa Cruz housing prices exploded in the 1970’s.
DennisN,
Right, and guru’s like Charles Givens had been advocating this ’strategy’ for years. In his scenario though I believe he called for hanging on to the property and renting it out long after junior had graduated.
I was going to add, even building up ‘to’ The Bubble this -still- may have worked? Provided the kid was NLTN Class of ‘05. After that? Nothing but sorrow and alligators.
Back in the mid 80’s my SiL and BiL got into flipping houses in the Pasadena area, feeding on the huge influx of asian money making its way to SoCal during that go-go era. They powder puffed three or four Pasadena/Arcadia homes and made nice money, then by the last one, the Japanese money had dried up and the CA. market was in the toilet. Lost all they had made and then some. Just like that. So, this is nothing new, its just a bit bigger scale.
Spokaneman,
Around these parts we like to refer to that as “becoming your OWN greater fool”! Again, I’ve openly wondered how much less painful this whole experience would have been had it not been for the REIC’sters doing exactly that?
Any time we’ve gotten to the bottom of a chain of defaults/abandoned homes/projects/developments/flips, there’s invariably a realtor at the bottom of it. In essence becoming their ‘own’ greater fool.
When I hear the expression “house prices exploded,” I can’t help thinking of that YouTube video of the exploding dead whale. (State of Oregon detonated it. What a smelly mess that was.)
Right across the street sits a monument to the folly of buying a house for one’s student offspring. On my side of the street, it’s known as The Slum. Didn’t look that way when it was sold to Brilliant Student’s Family back in ‘04.
Arizona Slim,
Oh…, that’s an interesting wrinkle we really haven’t discussed as of yet? It’s not like there isn’t -already- a glut of unsold/unwanted condoze so just imagine how many of them were student crash/party pads now largely unoccupied?
Mom & Dad ‘had’ been keeping up the payments but w/ Junior’s student loans now coming due ( you mean we -weren’t- able to sell the condo at a HUGE profit? ) m & p have some hard choices facing them down right about now?
Since this was an ever-popular notion I’ll imagine it’s easily in the tens of thousands of units!
On Euclid Avenue just west of the University of Arizona campus is an apartment complex that went condo a few years ago. I know the guy who owns the ad agency that did the promotions. One of them was centered on the idea of how cool it was to own a place with rooms that you could rent to your buddies.
Well, that was then and this is now.
This past July 4th, I attended the University of Arizona-hosted fireworks viewing party in a parking structure across the street from this complex. While I waited for the day to turn to night, I looked across the street at all the “for sale” signs along Euclid. It was a like a row of “hangman” gallows with signs attached to them.
I don’t think all of the “investors” who bought these places, hoping to make a killing, were counting on so many other people trying to do the same thing at the same time.
“trying to do the same thing at the same time”
!?
And we’ve been through this on virtually every front. Vacation homez, 2nd homez, Gentlemen’s ranches.., etc. etc. With zero barriers to entry ( and I think especially where the condoze were concerned ) it all fed off itself.
The insidious part where “Higher-Ed Flips” were concerned was it held the promise of killing two birds w/ one stone? Makes one wonder how these parents planned on claiming that on their taxes? Out of state, occupied by a minor/dependent… No matter.., Primary Residence!
“You can add the Washington Times to your mid-Atlantic suck-list.
Add? LOL! Like when was it ever off the suck-list. That paper is suck-central.
“Norman Gilden said, ‘With land and property, what is the worst thing you’ll have to do? You’ll have to sell it, and you’re not going to sell it for a loss.’”
I wonder what Brain Surgeon Gilden would have to say now?
ben missed some great columns from Michelle Singletary of the Washington Post, she was warning how dangerous some of these products were,
http://www.washingtonpost.com/wp-dyn/content/article/2007/08/29/AR2007082902207.html
Not sure those ultra-low super sexy int. rates translated as readily in stocks as a lot of people seem to want to make it out to be?
After the Tech Wreck I swore off using Margin, so I really didn’t bother to track Broker Loan Rate. IIRC BLR in 2003 was closer to 8 or 9%? BLR usually tracks Prime pretty closely but I don’t recall any 103% Stock Financing programs/loans.
Even if it ‘were’ true, and cheap money “drove the bus”, why was their a nasty correction in 2000-2002? Wouldn’t all that ‘free’ money sloshing around out there have covered those sins as well?
The Mid-Atlantic is great! There is NO Housing Bubble here?! Houses are just really, really expensive and have doubled (or more) in price, but that’s “the way it should be” according to my Bubble-headed peers. Because, you know, housing is supposed to be absurdly overpriced.
Maryland is perhaps the epicenter of this disaster in the Mid-Atlantic. Never have I seen so many willing to pay so much for so little. Condozes stuck in hard to access development next to gas stations and adult book stores selling for over $300,000. Post-War shoeboxes selling for that or more… Just today I saw a tiny 3/2 “on the water” which means next to some muddy branch of the Bay selling for $750,000?! Okay, that’s the wishing price, but still…
This is a state of 30-something year old professionals who make more than the median HOUSEHOLD income for the area buying old brownstones in Baltimorgue and STILL needing a room-mate to rent to just to afford the mortgage. Yet every one of them will tell you how “cheap” housing is here, where cheap = you might be able to afford the place with help and/or by paying 50% of your gross salary to mortgage payments.
Unreal!
“Maryland is perhaps the epicenter of this disaster in the Mid-Atlantic.”
I think you’re spot on with that. I was working down there during the peak of the frenzy. I’m not sure where the center of radius was but it extended out to the Delaware shores, Ocean City, MD all the way to the Virginia on the tip of the penninsula.
Just a note about the peak frenzy. I was working in mid-town from late 1998- to just after Y2K during the tech frenzy and I must say… the atmosphere then was exactly like my experience in 2005 in the mid-atlantic. It was one big a$$ed party for alot of people…. giddy optimism times 100. Of course I didn’t share that optimism in 2005.
What had me flummoxed during my visit to the DC suburbs in Virginia were the townhouses with no discernable town anywhere. Not only were they grossly overpriced, but they just looked totally wrong in relation to the landscape. I stayed with a friend who was renting one; on a warm and sunny winter afternoon, for sale and for rent signs far outnumbered children playing outside. That’s what happens when you live in a community of investments rather than people.
That’s what happens when you live in a community of investments rather than people.
Looks like we have another one for the HBB Greatest Hits collection.
That’s what happens when you live in a community of investments rather than people.
That is what I am looking at nowadays. Many owners who have these places as “investment” properties, OR can’t afford to keep them empty for when they show up for a holiday.
Have been to several condos for rent, well more than several that start around 1,000.
1- todays 2/2 smallish,+1 car garage -$1095. owner lives in Singapore. Agent was an ass, kept telling me “now is a great time to buy” and when he said, ‘why are you moving from your rental’ I said I would save 300.per mo, he assholey said, ‘that isn’t anything at all you may as well stay, what could you possibly do with $300. mo’. I looked at him- a re agent who is working as a property mgr NOW- and said, “did you really say that, what the heck would YOU do with an extra $300. per mo?” to which he sort of backed down.
Tonights viewing is for the guy in MI who will take a mo loss just to get someone good renting.
Yesterday’s owner pretended she was just a prop mgr, but we looked it up and she was hard working to get the place ready, all by herself = not wealthy enough to hire that done. Drove in from OC.
Seems I am seeing and hearing more rentals and season is just getting started. I don’t foresee these going to fast.
Yeah, but aren’t they mostly Federal and MD. state govt, types, or leaches thereof, with a safe paycheck and a nice govt. benefit package?
Not those of us who provide the money for that.
I go to DC every once in a while, and as I am wandering the streets at noon looking at the legions of federal employees (you can tell by the id badges hanging from their necks), I think to my self “I pay all of these people serious money and benefits to help screw up my life”.
If it weren’t for the great monuments and museums, I wouldn’t set foot in the place, it just pisses me off.
Sort of… while government jobs may be secure (relatively speaking), and perhaps even high paying (in some industries), that still doesn’t explain people happily buying houses at 5x their household income or more. Yet that type of lunacy is very common here. It doesn’t matter if one is assured of making $80,000 a year forever (ignore inflation for this), that still doesn’t let one buy an “affordable” $350,000 townhouse, $450,000 McMansion, etc.
At any rate, I see little to no improvement here. Prices have declines, but most of what is offered is old, worn-out junk that would need a fortune to update. Sorry, but septic systems, well-water (with free gasoline additive added in some parts of the state), oil heat, and 1940’s grade electrical systems are not going to cut it, especially not for hundreds of thousands of dollars. It is unreal - and yet the happy optimism of “affordable housing in Maryland’ goes on. Affordable compared to WHAT, I wonder!?
And traditionally, those with stars in their eyes and an excess of optimisim about their future earning potential are NOT the ones to go into federal service. Yes, there are many feds who can anticipate making an inflation adjusted 80k for the rest of thier lives, but there’s no reason for them to imagine that they will someday make 200k a year. Yes, the security and benefits ARE worth something, but they don’t really help you to make the mortgage.
“It is unreal - and yet the happy optimism of “affordable housing in Maryland’ goes on. Affordable compared to WHAT, I wonder!?”
No one seems able or willing to look at prices pre-bubble. Prices are down off peak now, and they’re “affordable” because the reference never seems to go back as far as the late 90’s. And no one wants to touch the proverbial third rail…bubble gains were based on thin air and crappy lending standards and not much else
From The Washington Times:
Home » News » National
Monday, November 9, 2009
Federal Reserve opposed as big bank savior by odd allies
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Lead push to halt bailouts
By Patrice Hill
An unusual alliance of conservatives and liberals is pushing to break up or downsize banks deemed “too big to fail,” rather than create a new regulatory regime led by the Federal Reserve to try to keep them from getting into trouble again.
Public anger toward bailouts and the central bank’s role in rescuing big institutions like American International Group Inc. and Bank of America Corp. are fueling growing opposition to the Fed-led oversight plan advocated by the Treasury Department and House Financial Services Committee Chairman Barney Frank, Massachusetts Democrat.
In Europe, regulators are moving to break up megabanks like ING Group, KBC and Lloyds that became government wards after last year’s global financial meltdown. An increasing number of legislators, political activists and financial specialists in the U.S. want to move in the same direction for troubled institutions such as Citigroup and Bank of America.
…
More from The Washington Times, on the too-big-to-fail issue:
…
“The financial supermarket concept has been proven a failure,” said Mr. Rosner of Graham Fisher. “There is no longer any evidence that, beyond a cost-of-capital advantage that comes with implied government support, there are sustainable and tangible economies of scale arising from being the largest. … The only ones who benefit are the high-level executives” and the legislators in “Washington’s political class” who benefit from the banks’ largess.
If Congress enacts a regulatory regime that codifies the role of the large banks, “these companies will provide all legislators, regardless of their political affiliation, with a constant stream of lobbying dollars in return for help in stymieing regulators,” he predicted.
Sounds like too-big-to-fail may be too-lucrative-to-kill.
I agree with Sen. Bernie Sanders (I-VT) when he says that too big to fail should mean too big to exist.
Me too, Slim. Yep, Bernie Sanders VT is quite a straight shooter.
The Lehigh Valley(Allentown, Bethlehem, Easton) area had a bubble just like FL, CA etc and the morning call(biggest rag) claimed prices are coming back for years now. At the peak in this area prices were around 245k(2007) in 2000 the average home was around 90k for the lehigh valley. Prices now are around 175k and still falling hard. There are homes that were bought for 230k during the bubble not selling for asking prices of 150k but the morning call (RAG) only publishes articles from the local realtors or the local realtors economists(they are a bigger joke).
Beofre this bubble has deflated the lehigh valley will see the average home value around 85k. They tried telling everyone it’s because of the proximity to NYC well that’s around 2hrs away with normal driving. Prices are falling , foreclosures are up, short sales are sitting and unemployment is rising in the lehigh valley yet all the morning rag keeps telling us is that prices are coming back soon. Maybe if soon is 30 or 40 years???