Blinded By The Allure Of Appreciation In California
The Voice of San Diego reports from California. “Lela Mazzeo rested an arm on a doorframe in the first home she ever owned and sighed. The two-story house on a large lot in Casa de Oro has been listed for sale for three months. The Mazzeos haven’t lived in it since 2003, when they bought and moved into a home in Imperial Beach. They kept the Casa de Oro house, renting it at first to friends and then to long-term tenants.”
“The last tenants moved out in December 2006, leaving the Mazzeos to 11 months and at least $75,000 of cleanup and renovating before they deemed it sellable. But even when they had tenants, the rent the house garnered — $2,000 to $2,100 — fell far short of the nearly $4,000 the Mazzeos paid each month on its mortgage and upkeep.”
“And since listing it for sale in November for $575,000, they’ve dropped the bottom of the asking price range to $499,000, less than they owe. They bought this house in 2001 and have accumulated four more properties, including the house in La Mesa where they live now.”
“‘It’s just a matter of how many we lose before we get to a place where we’re sound financially,’ James Mazzeo said as he waited for his appointment with a lender rep at a foreclosure clinic. ‘It’s been like a really long rollercoaster — just down. Just falling, falling, falling.’”
“While the Mazzeos say they’re not in danger of losing the home they live in with their two toddlers, they’re not sure how long they can hold onto this home in Casa de Oro, the two homes they own in Imperial Beach, and the condo in Oceanside. They admit they were blinded by the allure of appreciation. They speak frankly about their part in signing up for loans that were quite contingent on the market boom.”
“Even though the $500,000-range asking price is more than $200,000 more than they paid for it in 2001, selling it for that much wouldn’t let them break even, because of the repairs they’ve made and because they owe about $500,000 on it.”
“‘I don’t want to rent it back out and have it be a huge struggle for three or four years and get it back in bad shape again,’ she said. ‘We don’t want to throw good money after bad. When do you make the decision to say we have to cut our losses? Whatever we’re going to do, we want to do it now so we can just start digging ourselves back out.’”
The LA Daily News. “Foreclosures more than tripled last month in the San Fernando Valley, with the subprime loan crisis creeping into higher-priced neighborhoods, a research center said Wednesday.”
“‘It’s basically people who took out mortgages where they used a partial-pay option and now they are getting (interest rate) resets and can’t afford the new price,’ said Daniel Blake, the San Fernando Valley Economic Research Center at California State University, Northridge director.”
“Jim Link, executive VP of the Southland Regional Association of Realtors, said its records show January sales of previously owned houses and condominiums fell 40 percent last month to 751 units, and the median price dropped 28 percent to $465,000.”
“The Realtor numbers include transactions from Toluca Lake to Calabasas. ‘I hate to say it: It’s the same old story. Nobody is doing anything,’ Link said.”
The Antelope Valley Press. “Sheriff’s deputies on Wednesday ousted a family of alleged ’squatters’ from a house in the community. Property owner Michele Hill said a woman and seven children broke in, changed the locks and set up house in a residence she was trying to sell.”
“‘We’re in a mess over here,’ Hill said. ‘I’m just sick about it.’”
“The house, reportedly valued at $800,000, went on the market in November, she said. Further inspection revealed that the ‘For Sale’ sign had been taken down and meters for water, power and gas had been manually overridden, she said.”
“‘They took the whole lock off (including the real estate agent’s lock box) and replaced it with another lock,’ Hill said. ‘These people are pros at this. … We can’t even think of things like this, and these people (apparently) do it all the time.’”
“‘The last time this happened we had a lot of complaints,’ said Sgt. Steve Sylvies of the Lancaster Sheriff Station’s Community Appreciation Project team, referring to a real estate downturn in the 1990s.”
“Bob Schack, president of the Greater Antelope Valley Association of Realtors, said in homes without utilities, squatters can be especially destructive. ‘They don’t have water. The don’t have electricity, so they don’t have toilets, and you can imagine …,’ he said.”
The Fresno Bee. “The Fresno Association of Realtors sampled 350 of the more than 600 cases in which lenders obtained houses through foreclosure in the fourth quarter of 2007. In 51% of those cases, homeowners had refinanced their loans, sometimes multiple times, or borrowed up to $250,000 against their equity, or both.”
“The findings are significant because they show that many families used their house as an ATM, said Don Scordino, association president. The average family refinanced or took cash out twice before losing the house, the study found.”
“‘A new kind of currency was created’ during the boom years, Scordino said. ‘People spent a lot of money they didn’t earn.’”
“Higher-income households often used the extra money for vacations, cars and real estate, and lower-income families used it to stay afloat, sometimes trying to save the very house they were borrowing against, said David Mendoza, executive director of a nonprofit counseling service for home buyers.”
“‘The low-income are scrambling to keep the house. The moderate-income homeowners are refinancing, letting the house go into foreclosure and getting toys out of it,’ Mendoza said.”
“‘We’re a country of consumers,’ said Michael Gilmore, owner of The Mortgage Professionals, a brokerage in Fresno.”
The Contra Costa Times. “Jo Schliesman logged 30 years in the escrow business before the real estate slump took its toll. Laid off last January, the Brentwood resident found another post in June — only to have her entire office close in November.”
“‘I don’t know where everybody went, if they have jobs or not,’ she said. ‘There’s no severance, nothing. They come in, and it’s ‘Bye, see you.’”
“Now looking to switch careers, Schliesman finds most places she applies are overwhelmed with applicants. ‘I have been basically living on my 401(k),’ she said.”
“‘They were people who never saw this happening,’ said Dee Dee Rayfield, a life and job skills coach who runs Job Club in Contra Costa. By the time they arrived in Job Club, some were in danger of losing their homes and cars, Rayfield said. ‘Even though they needed money, they don’t want to start at the bottom; so it was a real challenge to keep their spirits up. They were looking at the jobs out there and saying, ‘I can’t live on this.’”
The San Francisco Chronicle. “More than 100 laid-off workers from the mortgage industry packed into a Pleasant Hill classroom on Wednesday to hear advice about finding new jobs. In many cases, that may mean switching to new professions.”
“‘You are all here because your jobs are no longer there,’ said Marian Woodward, one of half a dozen speakers offering tips and inspiration at the free workshop.”
“‘It’s a shock when it happens to you,’ said Debra Miles of Oakley, who worked as a mortgage customer relationship specialist. She was laid off two times in 2007 - first from Wells Fargo’s subprime lending division, then a few months later from a Concord firm that went out of business.”
“Despite the long hours and high stress, she misses the field, Miles said. Her career goals now are simple: a full-time position with benefits. ‘When you apply for a job, you find 400 other applicants,’ she said.”
“Tracey Brown-Carter, business and economic development coordinator for the Workforce Development Board of Contra Costa County, said that between 1,000 and 1,600 East Bay mortgage workers were axed in 2007, accounting for about 85 percent of local layoffs.”
“One big challenge faced by laid-off mortgage workers is salary cuts, Brown-Carter said. The workers had positions such as loan processor, closer, funder and pricing specialist, averaging about $25 an hour, she said. Loan officers, who received commissions, often pulled in six-figure salaries.”
“Making that kind of money is no longer feasible for many, she said. ‘They’re used to living a certain lifestyle, collecting a certain wage; now they have to make that shift to the income they can command,’ Brown-Carter said.”
“‘I saw a lot of young people get into the business because they heard there was money to be made there,’ said Peggy Green of Oakland, who was laid off in November from First California Mortgage of Petaluma, for which she conducted training seminars for mortgage brokers. Those people were there to make money at all costs. Unfortunately, some of them were the bad ones we hear so much about now.’”
“After 15 years in the industry, Green said, now she is leaning toward job hunting in a different area. ‘It’s so negative in the mortgage industry now,’ she said. ‘It’s like ‘who went out of business today?’ If I could stand on my feet that long, I would become a grocery store cashier.’”
The LA Times. “When Little Tokyo Lofts opened in downtown a few years ago, they were billed as the antidote to suburban living. Press materials lured buyers by promising luxury lofts in an about-to-be-gentrified ‘vibrant neighborhood’ — which just happened to be at the edge of skid row.”
“And buyers bought the condos, near the corner of 5th and San Pedro streets, hoping that the upscale amenities that had surfaced in other parts of town would follow them there.”
“So when residents of Little Tokyo Lofts noticed a few months ago that a tenant would be moving into the long-vacant, ground-floor retail space of their building, they got excited and started wondering who it would be. A new restaurant or coffee shop? A dry cleaner?”
“Then they learned that the space was to be filled by a mental health service provider.”
“The new neighbor has met with protests from some loft dwellers, who argue that their neighborhood has more than enough social services centers aimed at the homeless population and that what they need is more stores and eateries.”
“‘I know where we live,’ said resident Matthew Heller, who was the first person to buy a unit when the building went condo. ‘I know the homeless people, and some are friends with me. I understand the neighborhood I’m not saying not in my backyard. I am saying my backyard is already so full.’”
“Inside the six-story building, units that sell for $400,000 to $1.2 million each boast ceilings that are 12, sometimes 30 feet high, original steel casement windows and designer kitchens outfitted with stainless steel appliances and granite counter tops.”
“Outside, the street life reflects the neighborhoods that the building abuts. A green podlike toilet, installed for the use of homeless people who linger nearby, sits at the corner of 5th and San Pedro. A number of homeless service providers are on the block to the south, including the Union Rescue Mission.”
“Steve Lee, landlord of Little Tokyo Lofts’ retail space, wasn’t surprised by the residents’ reaction. ‘If I was living upstairs, maybe I wouldn’t like it myself,’ he said. But he noted that the residents ‘have chosen a very, very challenging place to live.’”
“Lee said that in the current economic environment, places where there are not a critical mass of housing, such as the area around Little Tokyo Lofts, would suffer because they do not have a built-in infrastructure to support the residents.”
“‘Hopefully, it will get better before it gets worse,’ Lee said. ‘But I don’t think it’s going to be pretty, particularly at this location.’”
The County Sun. “Those densely packed townhomes at the northwest edge of Victoria Gardens are a notch down from ‘urban.’ But if 30 more years turns Rancho Cucamonga into the urban magnet experts are predicting it’ll be, the neighborhood will fit right in with West L.A. and Long Beach.”
“24-Seven and Three-65 - two adjacent townhome/flat projects by Shea Homes - crowd Cultural Center Drive and offer a downtown Pasadena-type lifestyle without the busy street traffic and noise.”
“Much of the project is yet to be built. In a busted housing market, only time will tell how fast these multi-family dwellings sell out and how long the builder takes to finish the projects.”
“Phil Apodaca, his wife and child moved into a 1,740-square-foot townhome in the Three-65 community for $485,000 in November. ‘My fiancee (at the time) really liked how close it is to the mall,’ he said.”
“Of course, Apodaca has his own reasons too. ‘The fact that you can walk to the restaurants, get drunk and not worry about getting a DUI,’ he said, chuckling. ‘I’m going over to (Victoria Gardens) more often than I would if I hadn’t bought here.’”
“You’ll find BMWs, Cadillac Escalades, and Mustangs parked on the street next to outside patios filled with brand new furniture.”
“Apodaca isn’t sure where his neighbors are from. ‘If they’re from L.A. and Orange County, but they can’t afford those prices, then this is the closest thing,’ he said. ‘I’ll probably live here two years and then use it as a rental property. If I get some good renters, I’ll keep it.’”
“Mike Diaz, senior planner with the city, said Shea Homes isn’t building the rest of the townhomes as fast as originally anticipated. ‘It seems to me they’ve slowed up a little bit,’ he said.”
“Apodaca said he knew his home’s value would only go south, given a bum housing market. Talk about a major drop. Shea Homes is now selling his same floorplan for about $415,000 - a 15 percent plunge for him.”
“With the market for homes sagging, prices might drop even more. Nineteen foreclosures lie within a half-mile radius of 24-Seven and Three-65 townhomes - but outside the townhome project - according to RealtyTrac.”
“Besides those houses, another five are up for auction, and 23 neighbors are defaulting on their mortgage payments.”
“‘I knew it would drop, but I didn’t know it’d drop that much, especially when the sales manager said they wouldn’t lower the prices,’ Apodaca said.”