A Lot Of People Have Been Greedy In California
The Ventura County Star reports from California. “Brian Hill jokes about his uncanny timing. He finely calibrated the moment in the spring of 2006 at which he bought his $630,000 home on Thames River Drive at RiverPark in Oxnard. ‘I think the value started dropping right after we put in the down payment,’ Hill said. ‘Right when I signed. Probably right when I removed the pen from the paper it started to tank.’”
“Hill knows exactly what his home is valued at now because houses with the same floor plan are being built and sold a few blocks away for $440,000. ‘We’re way, way upside down,’ he said.”
“The Hills aren’t alone. In Ventura County, 40 percent of the homes bought in the past five years are worth less than the purchase price, according to Zillow. For those who bought in 2006, seven out of 10 are now in negative territory, according to Zillow’s most recent figures.”
“Those statistics might actually underestimate the problem because Zillow’s home estimator does not look at properties from which homeowners drew out equity, said Zillow’s Katie Curnutte. Bob Davis, branch manager of First Mortgage Corp. in Ventura, thought the estimates were conservative because of how many people have ‘used their homes as ATMs.’”
“It’s one of the biggest differences with previous downturns in the housing market. ‘It’s significant in the fact that if you go back to, oh, 1998, a consumer who had negative equity position at that time hadn’t counted on the equity in their home to buy their next TV or car or any number of things,’ Davis said.”
“Many of the home equity loans taken out from 2002 to 2006 fueled consumer purchases, he said. ‘You put candy on a plate and people are going to eat it until their belly aches, and I think that’s what happened with some consumers,’ Davis said.”
“It could be 10 years before the home’s value rises to the original purchase price, but no one’s offering a bailout, a lower interest rate or reduction in principal, Hill said. ‘My impression is that those who continue to make payments and are in good standing are the ones who’ll get screwed,’ he said.”
From The Signal. “Streets in Stevenson Ranch will be darker and bleaker this Christmas. No Christmas lights are being strung on scores of darkened foreclosed homes that now pepper this affluent community. ‘This is a really terrible situation,’ said Dickens Court resident Jeck Narciso, who nodded to an empty house across the street.”
“One day he has a neighbor, the next day he’s looking at an empty house, he said. No goodbye. No discussion. A woman who lives two doors from Narciso stands on the sidewalk and points to homes recently vacated. ‘That house, that one, the one on the other side of that truck - all foreclosed,’ she said. ‘It’s terrible to say, but I feel these people did it to themselves,’ said the woman, who declined to have her name published. ‘They bought houses they couldn’t afford. It was just keeping up with the Jones’. I have little sympathy.’”
“‘There are so many foreclosures, it’s unbelievable,’ said Rhonda Chobanian, a real estate agent who has been selling homes in the Santa Clarita Valley for 23 years. Her toughest battle is playing out on Wilde Avenue. She is trying to sell a home there - a house that boasts a big pool and a beautiful view - but appraisers are dropping its value by the thousands of dollars because of foreclosed homes down the street.”
“‘I’m locked in a battle with the appraiser,’ Chobanian said. ‘I have an offer on it. I’m trying to get what it’s worth but the appraiser comes in far lower than we can go. He looks at the foreclosed home down the street and then lowers the value. When the only things for sale out there are foreclosed homes, it really affects Mr. and Mrs. Homeowner.’”
The LA Times. “Over the last three months, Father John Lasseigne and other community leaders have come up with an unusual response: They have organized more than 500 Latino immigrant families who are behind on their payments into teams that will seek to negotiate with banks as a group. Community leaders say the story of the Hernandez family is sadly typical of what happened to many in the northeast San Fernando Valley.”
“Hernandez’s parents, immigrants from El Salvador, bought their house for $488,000 in 2005. Although they both had low-paying jobs at a local dry cleaner, they were approved for a loan. And they were able to put $100,000 down, mostly from the proceeds of a small town house they had sold.”
“Hernandez said his mother had wanted a fixed rate but was instead steered toward a negative amortizing loan, in which the family was allowed to make less than a standard principal and interest payment each month, and so the total principal slowly increased. Today they owe more than $500,000. At the same time, the value of their house has plummeted and might now be worth less than $300,000.”
“Looking back, Hernandez said he can’t believe he was foolish enough to let his mother get into a loan under such terms, but a broker he trusted assured him he would be able to refinance. Recently, the terms of the loan changed so that the family must now start paying back their principal, meaning their monthly payment has shot up to $4,000 from $2,300.”
“‘This is our home. We don’t want to lose it, but at the same time, there is no way we can do a $4,000 payment,’ he said.”
The Tribune. “Whether it’s action at the federal or state level, some say that it may take some time before there’s anything more concrete to aid troubled homeowners. The state Legislature in November called a special session to discuss a proposal by Gov. Arnold Schwarzenegger that would have created a 90-day moratorium on foreclosures, said Tom Pool, spokesman for the California Department of Real Estate.”
“‘But that didn’t go anywhere,’ he said, noting that there are many proposals on the table that ‘never get any traction.’ The governor plans to reintroduce the 90-day delay as part of a broader mortgage reform proposal, Pool said.”
“In the meantime, those in the trenches like Patty Guertler, spokeswoman for Consumer Credit Counseling Services, which services San Luis Obispo County, say they’ll look for more lender participation and educate the growing list of distressed homeowners, many of whom signed on to mortgages that were well beyond their ability to pay. ‘It’s a tough lesson that we are all learning,’ she said. ‘Consumers who have lost their homes should know that this could be a break for them to start fresh. This is not the end.’”
From KTUV. “Another well-known company with a strong presence in the Bay Area went public about pending significant layoffs Monday as Dow Chemical representatives announced that thousands of employees are set to lose their jobs. What would cause such a worldwide downturn for dow? Much of what the company makes is used in industries that are in serious trouble right now.”
“‘We make the things other people turn into products,’ explained Dow spokesman Fischback. ‘So, Dow globally is very invested in the automotive industry with things like plastics and urethanes that go into those. The housing industry, we’re very big into that.’”
“This news prompted one contractor to philosophically place blame for the entire economic fiasco. ‘It’s a lot of people that have been greedy over the years. And all this has added up. Their greed has brought a lot of grief across the nation,’ said Dow Chemical contractor Glenn Beier.”
The Press Enterprise. “A proposed organization partnering Inland county and city governments with private investors to purchase and resell foreclosed homes has drawn the interest of state housing officials, who were briefed on the plan Monday. The Inland Empire Economic Recovery Corp. still is in development with many questions and no members or budget.”
“Paul Biane, chairman of the San Bernardino County Board of Supervisors, has spearheaded the effort and hosted the meeting. ‘This is an effort at restoring and retaining the value of our local real estate,’ Biane said.”
The LA Daily News. “Despite skyrocketing unemployment rates this year, California will face a potential shortage of college-educated workers over the next two decades, researchers say in a study released today. The high cost of housing is driving job-seekers away from California, causing the gap to widen between educated workers and employers, according to the Public Policy Institute of California.”
“Economist Deborah Reed, author of the PPIC study, looked at recent Census figures and labor statistics to make the study’s conclusions. ‘California has historically imported workers, but what we have seen is that college-educated workers are leaving the state,’ she said.”
“Sunshine and the West Coast lifestyle used to lure more college-educated workers from the Midwest and East Coast. No more, Reed said. California now exports workers. ‘Part of it is high housing costs,’ she said. ‘Even if we had high migration like in the 1980s, we still would not reach the levels we need.’”
The Voice of San Diego. “These days, at a downtown condo project, window-washers come biannually instead of every three months. Painters touch up the halls once a year, half as frequently as they once did. Security guards work fewer hours. Renovation plans for the sparsely furnished lobby are on indefinite hold. Homeowners fund those services and save for future expenses by paying monthly dues. But one of five homeowners at Gaslamp CitySquare, a 200-plus unit project in downtown, is in some stage of delinquency in paying homeowners association dues.”
“The lion’s share of those delinquencies comes from units in foreclosures or short sales…One owner in the building owns six units and recently went into bankruptcy on his business, leaving the dues on his units in limbo.”
“‘The lobby in our building is like a mausoleum — no furniture and no art on the walls,’ said Mark Mills, real estate agent who owns a unit in the building. ‘If you want to meet people there you pretty much have to sit on the floor.’”
“In addition to dragging down values as banks slash prices to unload distressed properties, foreclosures in communities with homeowners associations whack neighbors again, leaving them to make up the difference in monthly dues. Gregg Neuman, homeowners association board president at Gaslamp CitySquare said he’s filing personal judgments against the former homeowners who left the building’s association high and dry when they defaulted on their units. If they buy anything in San Diego County or sell another property, the HOA has a right to be repaid.”
“Such a judgment costs $500 to file, a cost many boards don’t want to undertake, Neuman said. ‘But if a guy owes $5,000 you may as well throw $500 after it,’ he said.”
