‘Feeling The Pinch’ In California
The Record Online has this update from California. “These days are a good time to buy a residence, says Leslie Brewer, who has been shopping for a condominium since March. And she’s content to take her time doing so. ‘I’m hoping that prices will fall more while I’m looking,’ said Brewer, a Stockton renter who commutes to a job in Livermore.”
“Real estate agents and brokers say that those small residential units, which often are rental apartments converted into condos for sale, are just as slow moving these days as pricier single-family homes. ‘There’s very little activity in that market any more,’ said Randy Thomas, a commercial real estate broker specializing in the Northern California apartments market.”
“‘The demand is not there any longer. Prices are starting to fall and people are saying, ‘Why should I buy now when I can wait around and afford to buy a single family house?’ Thomas said.”
From the Times Standard. “Realtor Rochelle Defuentes said that last year Shelter Cove had its biggest real estate sales year ever, with around 60 homes sold and numerous lots. Most of the buyers, she said, were from out of the area and planning to retire or build a vacation home. Now many of those buyers are selling the very homes and lots they just purchased.”
“‘We have around 40 homes for sale right now and 226 lots, basically a big percentage of our entire market is up for sale,’ Defuentes said, adding that so far this year, only 10 homes have sold in Shelter Cove.”
“Along with the sudden flooded housing market, Defuentes said that the average home last year sold for around $500,000 with some fetching as high as $600,000 or $700,000. In contrast, this year many of the homes are selling in the $300,000 range.”
The LA Daily News. “Rising interest rates and a cooling housing market has made it a nail-biting time to be a homeowner. Many Southern Californians who dove into tempting zero- percent-down loans with huge variable-rate risk now realize they may have bitten off more than they can chew.”
“Like many Southern Californians trying to buy homes as prices went through the roof and lenders opened up their wallets, Bianca Garcia secured her loan through a finance company instead of a conventional lender. In 2003, she and her husband paid $173,000 for a four-bedroom, two-bath house with a three-car garage in Palmdale. Two years later and 90 days in default on her loan, Garcia was on the road to foreclosure.”
“‘We just had so much going out at the time,’ said Garcia, who is still living in her house, thanks to an arrangement she made with a mortgage investment firm. The company paid the first and second mortgages on the house, put it in a trust, and began work on repairing Garcia’s credit.”
“Still, there is only so much these firms can do. Foreclosures are on the rise, and the peak is probably still a few years out. Foreclosures in Southern California are up almost 30 percent since January by 56 percent in Riverside County, 10 percent in San Bernardino County and 16 percent in Los Angeles County.”
“‘I started the business two years ago,” said Tingting Zhang. ‘We had 90 people a day in foreclosure. As of today, the number is 295.’”
“Ideally, prospective homeowners should take time to educate themselves a bit before jumping into homeownership. ‘The mentality is, OK, you’re buying a home for, say $650,000. It’s a great price. You’re thinking you’re getting a great deal, but you’re forgetting that you are still going to be paying $5,500 with insurance and interest a month,’ said Fred Lopez, a manager at a credit-repair company in Van Nuys.”
“‘With a good credit report you could get these loans without proving income on it. We just saw someone with a 680 score, but he had a house that went into the foreclosure process. Now he’s being turned down for other houses. We see a lot of people with the monster homes and cars, and they are so in debt it is insane,’ Lopez said.”
‘Most of the buyers, she said, were from out of the area and planning to retire or build a vacation home. Now many of those buyers are selling the very homes and lots they just purchased.’
Seeing this a lot in northern Arizona. Out of state folks that bought so they wouldn’t be ‘priced out’ at retirement suddenly rush to market as the boom goes away. IMO, they were really speculating all along.
More from the Daily News:
‘There’s a ‘quiet if’ riding shotgun with the ‘quiet boom’ that’s forecast to run through Southern California’s economy this year and next. It has to do with real estate. Two reports on June’s residential markets — the San Fernando Valley and Southern California — come out this week and they’ll likely point to a growing economic soft spot.’
‘ The housing boom and strong economy resulted in increased revenue flows (the house as an ATM) for most government agencies. And some could get caught off-guard by an unanticipated slowdown in this revenue stream, Kyser reasoned. ‘Obviously, the housing market in California and Southern California, both new and resale, is a concern,’ he wrote. ‘Is there leveling off, or is there a bubble?’
The boom in Southern California will be the sound of a crash landing, and it will not be quiet.
“IMO, they were really speculating all along.”
they just didn’t realize it.
Of course they knew they were investing. What they didn’t realize was that investment carries risk. No one just looking for the right place to live would rationally buy in Bubbletown anytime after 2003. The bubble gave people who have no other assets an opportunity to build equity. The idjits on the margin squandered that opportunity. I specualated and did okay but I did something that the FBs couldn’t contemplate; I didn’t speculate with the places where my family lives. Didn’t even leverage them. I want the head of the guy who first said it was okay gamble with your milk money in the playground.
“I didn’t speculate with the places where my family lives. Didn’t even leverage them.”
This might just be the moral to the story of the whole housing bubble.
Anyone else here notice that the LA Times hasn’t published it’s little price charts on their featured neighborhood article in the Sunday Real Estate section for the 3rd week in a row. The chart used to show median price in theneighborhood in 90, ‘95, ‘00, and ‘05, now the charts have disappeared. I wonder if this is going to continue and is a conscious choice now that some areas are going down?
Santa F’kng Barbarbara is down a bunch of percent.
This is an interesting proposition. It will hit many counties and the State overall harder than other areas. The counties get a certain takeback on property taxes, and it varies by county. Riverside gets something like 20 cents on the dollar back from the State. This is the lowest rate in the State. So Riverside county government, though it is a very bubbly area, might not be as dependent on that revenue stream as you might think. Of course, they also might be!
Though I still see a lot of “stickiness” in the market, even our realtor friends are admitting now that they expect prices in So Cal to drop substantially, first the mortgage and realtors laughed at us, then they argued with us, then the mortgage guys slowly conceded, now even the realtors are done denying that housing is doomed. They are not happy.
“They are not happy.”
Boo F*king hoo.
Time to liberate these realtor idiots from their “me-too” Lexus suv’s…
Lexus suv’s for everyone!!
paragraph from the Daily news quoted above
“Cities like Pasadena and Long Beach might be more vulnerable to a foreclosure wave, she said, because prices have long been high in those areas, while growth is stagnant because they are mature markets. Areas like Palmdale and Lancaster and other parts of Riverside County offer somewhat of a buffer against widespread foreclosure because they are still relatively affordable and still offer great growth potential.”
I think this is backwards, no money in Palmdale compared to Pasadena, plus a hour commute to work from high desert, anyway last time 1990 palmdale was turned over to HUD as VA loans deflauted like crazy up there. And HUD really changed plamdale moving the poor from LA to high desert to save money.
My bet is old rich areas are more immune to price corrections and new cheaper areas really take the hit.
it seems in california the booms just move the poor into the interior. is that what basically happens?
Went thru Victorville a few times and saw nothing but Welfare/GOv’t subsidized folks out there. Have been thru “Palmcaster” about 50 times: last in 2005. The cALTRANS freeWAY WIDENING PROJECT THRU SOLEDAD CANYON(HAS IT BEEN COMPLETED YET)MUST BE MAKING ALL THOSE HIGH-DESERT RESIDENTS FUMING AS IT CREATES A NIGHTMARISH LOGJAM COMING OUT OF OR GOING BACK INTO pALMCASTER, EVEN BEFORE YOU START YOUR 2-2.5 HR COMMUTE INTO LA.
No wonder that zip shows almost 6000 listings for palmdale/Lancaster region, ratio of 1 listing per 20-30 residents.
All the recent housing developments in Palmdale seem to be spreading eastward, along the pearblossom hwy. This would be the 3 or 4th housing boom or bust cycle for this region of large ample lots with large ranch homes set out in the high desert, and probably boring as hell( unless you are a high-desert loving type.
I remember Palmdale and Lancaster in the 60’s and 70’s. Nice out of the way towns where everyone was tied to the military at Edwards AFB. Then LA moved in on them - and they really did ship a lot of poor folks with their gangbanger kids up there. Ruined the towns.
yes exactly, Phoenix is now a far suburb of LA.
“it seems in california the booms just move the poor into the interior. is that what basically happens?”
Yes, that’s exactly what happens. Until the poor become destitute, at which time they move to Santa Monica and live in caves on the cliffs.
Absolutely. Stick a fork in it, the Inland Empire and Antelope Valley are done. Palmdale 106 degrees. Riverside a balmy 102 degrees. I remember 1990 in “Palmcaster.” Neutron bomb type devastation. Things are different this time. In 1990 I’d take the Pearblossom exit off CA-14 and the high desert was dark and empty. Now it is a sea of red tile and sodium lights for miles. Most are less than 8 years old and stuffed with two income families. There just isn’t anyone to buy these houses. In a declining market with low demand (not the same thing) these are houses of last resort for those of who can and will be buying. I’ll have achoice between a 2500 sf Palmcaster stucco on 4500 sf lot with crime and $350/mo electric bills or an acre in Apple Valley with a well constructed 1900 sf house and barn for the same price and 15 degrees cooler and 30mph less windy for the same price and no crime. Decisions, decisions.
“Palmcaster…Apple Valley”
I also prefer Apple Valley to Palmcaster, but like Palmdale/Lancaster, the whole Victor Valley is being overbuilt. Both areas are in line for a good spanking.
And add Fontana/Bloomington to the overbuilt spanking list. Yech.
I agree. Palmdale in the last downcycle (1990-96) crashed so hard it was not funny. BK of all the marginal buyers left the place full of empty houses and boarded up buildings. It will be worse this time.
“Cities like Pasadena and Long Beach might be more vulnerable to a foreclosure wave, she said, because prices have long been high in those areas, while growth is stagnant because they are mature markets. Areas like Palmdale and Lancaster and other parts of Riverside County offer somewhat of a buffer against widespread foreclosure because they are still relatively affordable and still offer great growth potential.”
This writer is on crack. The only economic activity driving the IE/Riverside county’s emphereal (fake) boom is CONSTRUCTION. As soom as this dissappears the IE RE prices will tank, and foreclosures will shoot up. The affordablility factor argument is becoming moot as IE price differential with LA narrows( spread of $400,000(IE) to 500.000(LA).
I have news:lots of Poor, low-income folk flooding into IE/outlying desert regions. San Bernardino city proper now has gang-related homicide rates equaling SCentral LA. Victorville/Mohave getting lots of welfare folks. Banning has a large dreg population. Ditto Lake elsinore, roubidoux, colton,Fontana, ad nauseum,ect,
For us longtime SoCal residents this was always the big joke. All the families who moved to Palmcaster to escape the urban blight and to keep their kids out of gangs discovered that they brought the gangs and blight with them. Part of the problem isn’t their fault however. The damn planners and municipal greed forced unnecessary high density urban patterns on places that could have comfortably sprawled in pleasant low intensity forms instead. Nothing really wrong with Palmcaster that blowing up exactly every other house on every street wouldn’t solve.
You got that right! Lancaster and Palmdale will be known as “REPO CITY”. They already have 16% of L.A. Counties’ section 8 with only 3% of its population. The average income in the Antelope Valley is low compared to most of SoCal. Plus, the big builders, KB, Lennar, DR Horton are still building like grazy in the A.V. and they show no signs of stopping. They bought the land cheap during the 90’s bust and they can continue to build for half the price and still turn a profit. The masses never learn. These people spend more effort deciding what plasma TV they are going to buy with their HELOC money than thinking about the wisdom of buying in bubbleland. Dumb sheep. Like the man said, “by definition, half the people you meet are below average”. Palmdale and Lancaster unfortunetley have gone the way of Inglewood, once a nice safe communitee in the 50’s that everyone thought they’ed live there forever. In just a few years in the 60’s Inglewood degenerated into a shit hole and still is today. Lancaster will get there first, but Palmdale will be right behind. Let’em Burn!
why doesnt mrs garcia just sell.palmdale 4 bdrm houses are selling for 300k or i should say were selling.must be the heloc.inventoryin palmdale lancaster is at 4700 as of today.a year ago it was 1500 and thats just in the 2 city limits.hi desert will crash and burn at 60% off in a few years.
I am always amazed at the amount of mortgage Californians can (or have been recently) carrying. I know a guy who makes around 130K, and has a mortgage of over 800K. My handyman, who makes about 200 a day if he works two jobs, is making offers on houses in the 400K range. And my tenant, who has no savings and mediocre credit, is negotiating to buy a home in Irvine. These people have a very low margin of error. One expensive car repair, and they’re through.
Yep…I’ve been saying this over and over….People need to live below their means. It’s really not a bad thing…. no financial worries, sleeping very well at night, travel when you want/need to, etc. Those of 2 income families who spend a great deal of it on housing are just asking for trouble. There is absolutely no wiggle room for the “what ifs”, and they invariably happen. As you mentioned, one expensive car repair, one lay off, a death in the family, a necessary plane ticket to an unexpected funeral, a divorce (!). All you need is one of these in a tight budget situation to have a HUGE problem.
BayQT~
Talking with a very good friend of mine yesterday. Her and the hubby HELOC’d the house to remodel last year. Taxes just went up 49% and their van broke down in Las Vegas last week. They had to cancel the vacation and now she is working double shifts. Big time debt and living on credit cards. I am seeing their kids reacting with outburst, whining, aggravation. They just want Mom home more. They really could care less about the remodel.
(“These days are a good time to buy a residence,)
the longer you wait the better it becomes.
“These days are a good time to buy a residence, says Leslie Brewer, who has been shopping for a condominium since March.”
Nope. It is a good time to rent. Take it from the Financial Times.
To be or not to be a buyer — that is the question. And the answer is that it is a new era: renting is prudent, owning is financial suicide.
———————————————————————————————
RENTING SPECIAL
FT House & Home
Saturday July 16 / Sunday July 16 2006
To buy or to rent?
It has always been seen as the poor person’s option but, say FT reporters, high property prices and a global labour market mean renting is coming into its own
Monica Brown is the owner of a London-based restaurant public relations company with clients including The Fat Duck in Bray, recently voted the second best restaurant in the world. Virginia Giordano is a former investment banker who runs a luxury travel company from Berlin. Jerry Weinstein is the head of Manhattan Apartments, one of the largest residential real estate agencies in New York. And Laurie Hippman is a successful veterinarian living in Hong Kong. They have one thing in common: despite being relatively settled in their respective cities, all four have decided to rent their homes instead of buying.
“Everything for me is about quality of life,” says Brown, 40, who pays 600 pounds a month to share a grand Chelsea townhouse with a banker, an accountant, a designer and a doctor, all over 30. “My friends are all grafting away for years to get on the property ladder but I don’t really get the bricks and mortar thing.”
To some, such statements might sound like heresy. In many countries, most notably Britain and the US, home ownership is a powerful symbol of social success, family and stability. Renting, by contrast, is seen as the preserve of the transient, the young and the poor and regarded with condescending pity.
Part of this has to do with basic personal finance. While repaying loans becomes less onerous as they are eroded by inflation, rents continue to rise along with other prices. More importantly, buyers are left with a valuable asset once their mortgages have been paid while renters are not. Few children in the US or UK leave school without a firm conviction that renting is like throwing money down the drain. And the recent boom in property prices around the world has only vindicated the assumption, adding to the smugness of the landed classes.
However, as Brown and others have realised, sharp house price increases can also have the opposite effect too, making renters feel surprisingly sanguine. In many cities, homes are so expensive that monthly mortgage payments, maintenance and taxes can add up to significantly more than it would cost to lease the same property, particularly in areas where local or federal governments artificially suppress rents with stabilisation or controls. Homebuyers might not mind if they are building equity in an asset that is appreciating but if house prices fall, as looks possible in overvalued markets, new owners will find themselves further out of pocket.
“Overall,” concludes Mark Zandi, chief economist at Moody’s Economy.com, the consultancy, “There is now a very compelling rationale to renting rather than buying in most of the global economy, particularly as interest rates rise. This was not the case a decade ago.”
http://www.ft.com/arts/house (the article appears on the right side towards the top of the page)
P.S. Ben — do you have online access to the Financial Times and the Wall Street Journal? If not, I move that bloggers chip in to buy him a subscription. Ben can offer guidance on what would be an appropriate contribution.
Go post that on the SDCIA board and let those farking losers chew on that one. Ya know the ones who “wouldn’t do that [rent] to their family.” No, they’d rather have their family thrown out on the street when all their “investments” start circling the drain as they will as surely as the sun comes up tomorrow.
I don’t give a r@t’s @ss for the SDCIA board readers, and they will sink further if they get hit over on the head with a ton of bricks without warning. Besides that, those bulls who are literate selectively ignore bad news, so the effort of posting there would go to waste anyway.
There is one intelligent poster over at SDCIA, that would be Robert Campbell. I did read his book, good stuff. He was heavy into real estate rentals and sold them off over the last few years. He only drinks the Kool-aid during up cycles….
As Robert reads and is a regular contributor here, there is no need to post at SDCIA on his behalf.
My wife and I rent in New York. You would think we killed somebody. People have been telling us to buy. “If you can’t afford Manhattan, buy in Queens or Brooklyn. They are up and coming.” Great, I can buy some s—hole in Queens for $500,000 that should be priced at $200,000. I can buy a new luxury condo in Brooklyn, down the street from a housing project, that goes for a bargain basement $700,000. No thanks.
We pay $2,500 per month on rent. That’s a lot for our small aparmtment. If we owned this place we would be paying about $6,000 per month in mortgage, taxes and maintenance fees.
People in Manhattan think it is never going down here. They are kidding themselves. You should see all of the building they are doing in Manhattan. Luxury condos everywhere. Are there really that many people that can afford $800,000 + condos? I doubt it but tricky financing makes it seem so. Oh, the stupidity of this whole thing. It is going to get ugly.
“People in Manhattan think it is never going down here. They are kidding themselves.”
Not my friend, who related the stories to me last spring (May 2005) about his friend who works at MacKenzie (big economic consulting firm) and sold in order to rent until the crash plays out, and about his his hairdresser who buys and flips investment properties around Manhattan as a second income source. You know the market is going to land hard when hairdressers and cab drivers are driving the market.
Exactly the same situation I am in. I pay $2700 for a place that would cost $6000 in ITIM.
I can afford the latter but right now it’s getting socked away in a savings account.
From the SFGate:
Today’s agents using new skills to sell homes
http://tinyurl.com/r8wld
Sunday, July 16, 2006
Carol Lloyd
Surreal Estate
“They say agents are salespeople who can’t get a job,” says real estate agent Lori Sacco with a laugh. “And it’s kind of true.”
Real estate has always been a job with a low bar for entry. In California, a high school diploma isn’t required and little formal training is needed beyond passing an exam.
Recently, the president of the California Association of Realtors observed that a real estate agent’s license demands less training than a hairstylist’s. But after a decade of booming real estate, the demographics of the 1.2 million agents represented by the National Association of Realtors seems to be shifting.
…
Redefining the job
All the talk of real estate agents going extinct oversimplifies the issue. No doubt many consumers will skip full-service agents (and their 6 percent commissions) when they can use a discount broker or Craigslist. But there’s another possibility: that smart agents will redefine the job far beyond the sales position to make their work more valuable, more expert and, ultimately, irresistible.
After all, most agents spend 95 percent of their time chasing clients and 5 percent of their time serving them. If agents could spend those resources doing something that adds value — be it in the form of design consulting, permit expediting or other expert work — then they just might transform the profession.
“What’s Happening in the San Luis Obispo Real Estate Market?”
Six months ago, there were 137 SFH and cndos for sale in San Luis Obispo. Today, that number is 242 – an increase of 76%.
Six months ago, the lowest priced home in SLO was $459,000. The lowest priced condo was $329,000. Today, the home figure is $418,000. Surprisingly, the condos went up to $349,000. It is becoming a buyer’s market.”
“The mentality is, OK, you’re buying a home for, say $650,000. It’s a great price. You’re thinking you’re getting a great deal…”
What planet do you live on to say, OK, you’re buying a home for $650K and thinking that it’s a great price all in the same sentence? It’s also probably a tiny POS w/ bars on the windows in a bad neighborhood.
I had a funny conversation with a local realtor a few months ago. She’s all giving me the “if you don’t buy now you’ll never get in” garbage, to which I responded I did not buy 5 years ago and never got in. I went on to tell her of a very nice place in La Jolla sitting on 5 acres of well manicured land on the beach with 18 bedrooms and more bathrooms… It had started at $30 Million and recently had been reduced by a million after not selling for a few months. I told her it made no difference to me if this house was a good deal or not and that it made no difference if a $700K house which I could probably qualify for was a good deal or not, since I could not afford either. When are people going to wake up and simply realize they cannot afford more than they can pay for? I recon the lenders should take as much responsibility as the borrowers since they MUST know some shmuk making $50K per year will not be able to make the payments on a $500K loan, but just figure they can pass off their bad paper on Fanny or Freddy… Also, it is because of the willingness of these lenders to loan such huge amounts that our prices are so absurd today!
I just spoke to a friend of mine who works for a company. The builder is desperate to sell condos and so far this year he has been paid about 50k in Bonus money + Salary, which is more than he was making at his previous job. He is saving because he knows the day will come when the builders have to write it off and declare BK and whent hey do, he will be out of a job.
Garcia is still living in the home she cannot pay for. It sounds as though this mortgage investment firm is bailing her out. How does that work?
It could be a Faustian bail-out. Or, if the mortgage company was playing fast and loose with its mortgage practices, it might be trying to delay the authorities and the loan underwriters from finding out.
Interesting. I wonder how much of that is going on now and when it will snowball.
The article says this is a short term thing. They ‘clean up’ the credit and refinance with a conventional lender.
It’s also the biggest scam. They put folks in jail for that kind of thing out here all the time. Just another example of a reporter not doing his/her due dilligence.
From a local perspective, Shelter Cove has traditionally been known as one of the greater if not greatest real estate scams in the area. All homes are built on quarter acre parcels located on steep (and tectonically unstable) grades with McMansion sensibilities. Even before prices in Humboldt began going through the roof, most people around here swore off all of the Shelter Cove investment as “absolutely asinine.” In fact, the mere example of folks investing in this area shows how ridiculous the market has become.
And nowadays it is Crank Country. Be prepared to have any property very thoroughly inspected and secured. Even live in owners have been encountering crack fallout, and clean up for an area seriously contaminated by meth production can easily run from five into six figures, not to mention providing special memories from contact with the zombie hordes.
I would be laughing if it weren’t so true.
Whatever happened to the Humboldt sensibility that I remember from the ’70s? I always of that area in terms of unemployed loggers and mellow-yellow hippies tending their “gardens”.
I left in the 80s, it was mostly pot then too.
I was just in Humboldt county. I was shocked to see prices as high as here. (Northern Nevada)
At least we have jobs in Nevada (well more jobs than you guys anyway)
I currently live in Humboldt county and little by little, the cracks are beginning to show.
A co-worker who has been among the most bullish in RE admitted to me the other day that his neighbor’s house was the victim of a lowball ($289K from $350K) and they accepted. So much for the bidding wars…at least this well help drop the comps.
But, that being said, there are still plenty of boomer fools out there trying to make up for their lack of saving…and if the recent demise in the stock market is any clue, RE will be a hard thing to give up for people who don’t have time on their side.
BTW, any predictions on how bad the DOW will do tomorrow?
I read somewhere most houses are selling for 85-90% of asking price, in 90-120 days.
I’d love to move back. In fact I might in a year or 2.
Actually this was Humboldt county California
The DJIA will go down another 1-1.5%. And will continue to slide all week. This is being driven by the Israel/Palestine/Lebanon conflict. Don’t expect any diplomatic mission will be abel to rein this in anytime soon. If Iran or Syria gets involved in any overt way, expect the market to do much worse.
In need of new reality TV show called “Dump this POS”
Did you see FLIP THAT HOUSE last night ? Again ,another couple without any experience buys a fixer upper house in Sherman Oaks
and needs to borrower the money to fix it . They spend 56K and in the end still make 47k after all costs in about 3 months time,(house sold for 830K).
The flipper hired a staging company for 3k to bring in furniture to show the house .They sold the first day on the market , so a dressed up house does help ,(the plumbing wasn’t finished yet ).
My impression was that the couple called it close and got top of the market price ,but that’s a dangerous game and it would not work now in this market . At the end the flipper ,(with a new baby),said he would flip a house again .i think this program was filmed earlier this year .
Fixing up houses used to be a marginal way to make money. I fixed up a repo house in the late 80’s, did a very good on it, made waht was a good profit then but when all said and done I think my profit worked out to about $5/hour for the time I had put into it. And that was normal then. Nobody then could make $47K in 3 month and the time has probably come when it will be a long time before anybody can make that much again.
May have been the same one i saw too… however the flipper got caught short with prices dropping. At the end after commission costs, he broke even. LOL!
No that was the other flipper that broke even ,(the young 25 year old guy ). The couple flipper with the new baby ended up with 47K in pocket after everything was paid .
Just wait until stories start circulating about investulators whose cash burn forced them to sell at a loss.
“You ain’t seen nothin yet.
Baby, you just ain’t seen na-, na-,
Nothin yet.
Here’s somethin, here’s somethin,
Here’s somethin you’re
never gonna forget, baby
Baby, baby, baby
You ain’t seen na-, na-, nothin yet.
You ain’t seen nothin yet.”
I saw that episode as well. They conveiniently leave out a lot of cost factors. Not only was the plumbing not complete, but there were some building code inspection issues still pending. The final “profit” figures were based on the offer holding up, not closing figures. The buyer might back out once his home inspection reveals the shoddy work underneath the cosmetic upgrades. Also another biggie…how about the Four Man crew (the brother in-law and gang) that flew across country to do most of the work for the knuckle head flipper. I really DOUBT that they worked for free. To pay the four of them and their costs for the week or two that they were doing the remodel cut into the supposed “profit” even further. The most incredible question I had the whole time was how did this guy even get the loan for the house to start with? Wasn’t he an out of work actor?…similar mystery with the previous episode with the “coffee shop” mgr 25 year old idot doing a flip.
All that it will take to bust the housing bubble is a drying up of liquidity in resales.
Let these FB’s live with the deals they struck and we get a market correction.
The liquidity already dried up. That is why we have a massive inventory correction underway — the gap between what sellers believe their homes are worth (willingness to accept) and what buyers are willing (and able) to pay for them is wider than the Grand Canyon.
“We just saw someone with a 680 score, but he had a house that went into the foreclosure process. Now he’s being turned down for other houses.”
Hopefully, in the not too distant future, such situtations will be greeted with a great big “DUH”.
I’m reminded of an old car commercial:
“Bad Credit?, slow pay?, no pay?, bankrupt? No problem, we understand. Come see us when things get better.”
And Chrysler this morning? Employee pricing plus no interest plusno payments til 2007. Things are different this time.
By 2007 when the payments start all the trim pieces begin falling off Chrysler cars. Soon after mechanical problems start. People won’t want to pay for those POS then…
the pool of future FBs is fast drying up. Demand has cannibalized itself.
“In 2003, she and her husband paid $173,000 for a four-bedroom, two-bath house with a three-car garage in Palmdale. Two years later and 90 days in default on her loan, Garcia was on the road to foreclosure.”
Allow me to state the obvious: The fact that Garcia could not handle $173k in mortgage debt (despite a possible HELOC), shows how ugly this will play out. That same house now goes for $300k, and incomes are flat. Do we expect the next Garcia to handle $300k WITHOUT possible HELOC? Place your bets, gentlemen.
This crash will be of a magnitude not seen in recent times…..
It looks like the paper added to the story:
The company, 2-year-old TerraCotta Group LLC, located in Manhattan Beach, paid the first and second mortgages on the house, put it in a trust, and began work on repairing Garcia’s credit. It plans to refinance the house by the end of this year, and Garcia will then buy it back with a conventional lender.
Garcia will probably be out of her house come December. It sounds like the mortgage company might be giving her one last chance.
“However, as Brown and others have realised, sharp house price increases can also have the opposite effect too, making renters feel surprisingly sanguine.”
After selling our abode in 2004 (lived there for 18yrs) we moved to Monterey Co. and refused to buy at these prices. After a year your psyche stops playing games with reason and you realize that in RE there is a time to buy and a time to rent, and now it that time to rent. Within five years my wife will be retired and we will be free to move around the country at will without having to sell a piece of RE.