Throwing Money Away In California
The Marin Independent Journal reports from California. “In the nine-county Bay Area, default notices rose to 12,092 in the third quarter, up 22.2 percent from the previous quarter; in California, they rose 25.9 percent over the same period to 71,275. Loan modifications…can take months or years filled with uncertainty, said Dianne Levy, who fell on her house payments three years ago and eventually obtained a loan modification. ‘It’s a horrible, horrible process,’ said Levy. Levy, who paid about $700,000 for a house in Santa Venetia that is now worth less than $400,000, will likely never see any financial upside from keeping her house, but as a retiree she could not afford to walk away and rent an apartment instead, she said.”
“‘If I were younger, I would have walked away,’ said Levy, 68. ‘It’s that difficult to get a modification.’”
The Desert Sun. “‘I expect to see an uptick in foreclosure activity and inventory over the coming months,’ said Bret Cohn, senior VP of Franklin Loan Center in Palm Desert. One reason is because loan modifications offered by many banks merely lowered the interest rate for five years, with delinquent payments applied to the back end of the loan, Cohn said. ‘This does not help a homeowner when it will take 20-plus years to get back to the value which they owe,’ Cohn said. ‘Most people who accepted loan modifications realized within a few months that it was not in their best long-term financial interest to continue on this path, and they have already stopped making their modified payments.’”
The Press Enterprise. “Chris and Jacque Ford stride joyously through the sales model of the house in Ontario that they plan to buy. Foreclosure was the lever that improved the Ford family’s economic prospects and lifestyle. Known in modern parlance as ’strategic defaulters,’ people like the Fords who could afford to stay current on their mortgage payments are deciding to ‘walk away,’ letting their lenders foreclose. They are relieved to dump houses that as a result of a real estate crash are worth far less than the mortgages on them.”
“The couple said In March of 2006, when they bought an 1,100-square-foot house in Calimesa for $285,000, they expected it would serve as a stepping stone. They planned to stay in that house about five years to accumulate enough equity so when they sold it they could put a down payment on something larger. Calimesa home prices immediately tumbled.”
“In 2009, the Fords said they tried to sell their home and received offers in the $80,000 to $120,000 price range, which terrified them. ‘We started talking to financial advisors and every one of them said we needed to get out of that house right away,’ Chris said. ‘They said you are literally throwing your money away every time you make your mortgage payment.’”
The San Francisco Examiner. “As of July 20, county banks own more than 10,000 homes foreclosed since 2007, and this giant pool of distressed properties is still growing. The average delay between when a homeowner receives a notice of default and when the bank ultimately resells the property has increased from about 325 days in late 2008 to roughly 600 days in mid-2011. ‘Banks are sitting on a lot of properties and they’re not releasing them,’ said Becky Irwin, legislative aide for county Supervisor Rose Gibson, whose staff helped assemble the report.”
“Many observers believe banks are hoarding distressed properties to prevent a continued decline in property values. ‘The market can’t absorb all that inventory,’ said Donald Kung, broker with Remax Investments, which sells repossessed properties for banks. ‘The overall price will decline.’”
“While the bulk of foreclosures have occurred among midpriced homes in the $500,000 to $600,000 range, houses worth over a million dollars have a much higher rate of foreclosure, said Irwin. ‘Most of the high-end homes were bought with stated income, or liar loans,’ said Kung. ‘Today’s lenders don’t provide those kinds of loans anymore so how is a homeowner going to refinance their home? They really can’t.’”
From NPR. “In East Los Angeles, Realtor Felipe Acuna works in a once-glamorous neighborhood that is trying to make a comeback. In 2004 investors began snatching up City Terrace properties left and right. Houses in awful condition sold for up to $500,000. Today many of those same homes go for just over $100,000. The City Terrace housing bubble burst in 2007, and Acuna says he saw it coming.”
“‘Even though you were like a gardener or a housekeeper and suddenly you were able to buy a half-million-dollar home that two, three years earlier was only worth $250,000,’ he says. ‘Unfortunately I tell people I probably could have increased my business two- to threefold if I would have took in those people and put them into something they couldn’t afford and not worry about it, but I like to sleep at night.’”
The San Gabriel Valley Tribune. “‘We are dramatically undersupplied for housing,’ said Steve Johnson, who oversees the Southern California office of Metrostudy. The 2000 Census showed that California had 1.7 million overcrowded households. Ten years later, the 2010 Census showed no significant sign of improvement. Johnson doesn’t dispute that.”
“‘It’s a tough time out there,’ he said. ‘Many people have doubled up or moved in with friends or family. We’re on the road quite bit on the weekends and you see a lot of cars parked in and around neighborhood houses. I saw about eight cars parked at one home. Everyone likes to think that this is a socioeconomic thing and that it just happens with poor people. But I’ve seen the same thing happening in gated communities.’”
The Daily Journal. “The Foster City Council voted last night to negotiate exclusively with a consortium of builders to construct affordable senior housing at the vacant 15-acre site adjacent to City Hall. Community Partners will sell townhomes in the $400,000 to $750,000 range. The Sares Regis proposal listed its housing prices between $800,000 and $1 million.”
“‘I’m not sure the average Foster City resident could afford that,’ Councilwoman Pam Frisella said about the Sares Regis proposal.”
The Telegraph. “Since 2008 the value of an average home has dropped by about $90,000 and about three per cent of mortgages are in foreclosure. Inland Californian towns like Stockton, Merced and Modesto, regularly feature on lists of places where Americans are most likely to lose their homes. In Stockton homes once worth $500,000 have sold for less than $200,000.”
“At Rev Bales’ shelter 100 families who have had their homes foreclosed are now taking refuge. Perhaps the starkest example of how far some people have fallen in the economic downturn is a man in his 50s, who once earned a six figure salary as a producer on television studio sitcoms and small budget Hollywood movies.”
“A few years ago he lived in a three-bedroom house with two cars in the drive and occasionally mixed with A-list stars. Now, he lives with his wife and two children in one room at the Union Rescue Mission. The producer, who asked not to be identified because he is still applying for work in the film industry, said: ‘There was this concept that the economy would grow and grow, so don’t worry about it, and people didn’t hold on to their money.’”
“‘Things spiralled downward for me. It got very rough and ugly. We lost our home, then stayed in a hotel for a while, and then we came here. I can’t tell people in Hollywood I’m living in a shelter. It’s an unforgiving town. There’s a lot of reasons you find yourself among the disenfranchised and the dregs of society, and a lot of them are not your own doing. The economic squeeze was across the board. People in $5 million homes in Beverly Hills had to move into high end apartments.’”
