‘People Have Forgotten Houses Are Not A Liquid Asset’
The Arizona Republic has this update on Phoenix. “The business of buying and selling houses provokes extreme emotional outbursts. People yell, they lose sleep, they cry, they’re stricken with buyer’s and seller’s remorse. That’s especially true these days in metropolitan Phoenix’s post-boom housing market, where nearly everything has reversed since last year’s frenzy.”
“The number of homes for sale on the Arizona Regional Multiple Listing Service increased nearly four times from June 2005 to last month, when it hit a level nearly double what experts consider healthy. Many homeowners had their assumptions of what a house is worth and how quickly it should sell recalibrated by the buying craze.”
“Real estate agent Neil Brooks was getting the feeling that his client was about to completely lose it. He’d seen it before. He had just broken some bad news about her house deal, and she wasn’t taking it well. ‘I was thinking, ‘OK, here we go,’ said Brooks. ‘Something’s going to happen. Something’s going to blow.’”
“He was right. The client whirled suddenly and whipped the phone at him. But he was ready. He ducked, and the phone shattered against the wall behind him. The client stormed out of the house.”
“Home prices have become a touchy subject. Builders are discounting speculative homes, and resale prices are flat, or down, in a lot of neighborhoods. Buyers are submitting lowball offers. Even some sellers and their agents are having trouble agreeing how much similar homes in the same neighborhood are worth.”
“Two houses on the same north Valley street, similar in size and age, are for sale. One lists for $749,000 and the other for $775,000. A third house came on the market on the same street a few doors from the other two. The new listing was similar to the others in size and age but priced at $659,000.”
“‘The neighbors were really mad,’ said (realtor) Thomas Stornelli in Scottsdale. ‘They knocked on the door and asked, ‘What are you thinking?’ For a lot of people, their home equity is their bank. It’s like taking money out of someone’s bank, their retirement account. People (future buyers) are going to use that house as a comp, even if it doesn’t have the same upgrades. It’s going to leave a mark.’”
“The owners of the least expensive home were equally upset. They were in the midst of a corporate relocation and wanted to sell quickly. Suddenly, angry neighbors were confronting them. One night, someone tore down their for-sale sign.”
“The market has proven everyone wrong. None of the houses had sold as of the third week of this month.”
“A woman walked into Barry’s Realty Executives office about nine weeks ago, sat down and began crying. She said she bought two houses last year, fixed them up and quickly sold them, making a $50,000 profit on each. She took her profits, threw in some extra money and bought five more houses. She spent money fixing them up, but when she put the houses on the market, she realized she had bought at the peak, Barry said.”
“‘Her eyes just started to well up, and she just started bawling,’ Barry said. ‘She said she couldn’t sell them for what she bought them for. She said her monthly payments were about $20,000.’”
“Barry suggested turning them into rentals. She told him she couldn’t get enough rent to make it worthwhile. ‘She was expecting to flip them,’ he said. ‘The market flipped her. She was devastated. People have forgotten that houses are not a liquid asset. They never were meant to be.’”
The Republic has been quiet lately. Here is another report from Arizona:
‘Some in Tucson look at the $27 million Land Baron Investments laid down for the 289-acre Painted Hills property as a nest-egg for the Dallas Police and Firefighters Pension System and wonder why. ‘I don’t know how this guy’s going to make money off this,’ said Keith Bagwell, executive assistant to Pima County Supervisor Richard Elias. ‘These guys may have a sharper pencil than I have, but it’s going to be difficult.’
Holy Sh*t, Is this a pension fund putting pensions at risk by playing the “RE only goes up” game? I thought these guys were smart? I guess they are just dolts like the rest of the sheeple heading off the cliff. How did they get their jobs? Amazing.
Don’t be too suprised at this. In Sacramento, CALPERS invest 100-200 Million in a downtown highrise condo do to be completed in 2008. I think you are going to see a lot of pension fund struggling in the coming years, either from direct RE investment or MBS failures.
Yup……
RMB;…Are you in Sac ???
Great to hear that my Calpers is being invested so wisely!! NOT.
CALPERS also unloaded a bunch of RE in 2005 because there was limited upside left and the risks were too great. Ben blogged about it here.
CALPERS is huge! Sometimes the right hand and left hand don’t talk to each other.
There was an article about CalPers investing in a huge development in India… The quoted person in India said they are building so much ,and there already is a glut ,and bubble there..I don’t see the link as yet…but yes I think there is going to be some pension reductions after this unwinds…As Buffet said: ” you don’t know whos’ been swimming naked until the tide goes out”
CALPERS has $207 billion under management. their real estate holdings are 5% of their assets. I bet there are people here who have more tied up in their house than that.
CalPERS Invests $100 Million in John Saca’s The Towers
I looked at a lot of houses this week in arizona.The new builders are slashing prices with incentives while the resale market is totally overpriced and not selling. New home builders have to keep the homes selling so they no that lowering the price brings in a new pool of buyers. I would not even waste my time looking at resale until they come out of fantasy land and lower thier prices.
At least when those guys retire, they’ll have the option of living Arizona. After all, the pension fund already bought them the houses. They just won’t have any pension fund to live off of.
They can still sell their house for a loss and live in…Quartzite! Ha! In one of those trailers!!!! Thank goodness I learned from my real estate loss in 1996 and saved a lot of money since then. Am I going to buy an overpriced home and finance a boomer’s retirement (and be the greater fool)? NO!
What made you thing these guys were smarter than the avg dolt? These are the avg dolts!
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Long-Term Capital Management (LTCM) was a hedge fund founded in 1994 by John Meriwether (the former vice-chairman and head of Bond trading at Salomon Brothers). On its board of directors were Myron Scholes and Robert Carhart Merton, who shared the 1997 Nobel Memorial Prize in Economics. Initially amazingly successful, it folded in 1998, losing $4.6 billion in less than four months.
If the Nobel economics prize is anything like the Nobel peace prize which is handed out to the likes of Jimmy Carter and Yasser Arafat, then I would say that and $3.00 will get you a cup of coffee.
You forgot Mssrs. Begin and Kissinger . . . .
And what kind of vacation did the pension fund manager go on this year? Nothing like a little “kickback” to sharpen the pencil to justify this kind of investment.
Oh my gosh. Do the police and firefighters that are covered by this pension fund have any recourse? Arent there any rules about pension directors funneling money to friends and associates for half-baked “investment opportunities”? You know I may be living on the margins, but at least I KNOW I have almost nothing pity these poor people who thought they DID.
“The market flipped her”
How true,how true.
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will we soon see magazines with covers like “Flipped Off” to describe this debacle?
Let this bawling idiot go down in flames along with her earlier booty of 100k. LMFAO!! You talk about greed! 5 more houses? Holy Schnike! We all have been expecting/waiting for these type of stories. I can assure you this genius is not alone. Pucker up sister.
Do we feel sorry for the guy sitting at the black-jack table who continues to throw all his winnings back into the pot instead of pocketing his initial bet (investment) so he at least breaks even if it all goes to hell? What ever happened to the common sense of saying to yourself “you know, I shopuld set some of my winnings aside and only play with what I can afford to lose? Greed is the answer here.
Great analogy! Real estate “investing/speculating” in the past few years has been nothing more than gambling (I mean, c’mon - the writing was on the wall if anyone chose to read it). Sometimes you win, oftentimes the “house” does! Ha!
Yup. If you bet big, you might win big…but you can lose big too. These flippers never thought they would lose…
At the end of the day, nobody really cares about, “I was up $5000!”stories. All that matters is what you came home with. Most of these flippers just “Let it ride” until they’re bankrupt.
I love that comment. The “market” flipped her. When she made money she probably suffered a rotator cuff injury patting herself on the back. When it went into the toilet it was the market’s fault. She will get what she deserves, the stupid greedy ________ .
“the stupid greedy ________ ”
bitch?
“Jane, you ignorant ________.”
the stupid greedy ________
SLUT??
Life’s a _________, isn’t it?
Jane Greedy Doe, or John, “what was I thinking?” swinging in the wind.
Blank filled.
ummm. she flipped herself! The “Market” simply pushed back against her own greed.
Boo hoo hoo! I just hope us honest taxpayers don’t end up footing the bill for her mistakes (if she BKs, etc.)
“Barry suggested turning them into rentals. She told him she couldn’t get enough rent to make it worthwhile. ‘She was expecting to flip them,’ he said. ‘The market flipped her. She was devastated. People have forgotten that houses are not a liquid asset. They never were meant to be.’”
Looks like the “sword of leverage” bounced off that deal and caught her in the face. Now she knows that it cuts both ways. Could have learned it from a book had she cared to research it. Oh well, she can always spend the next couple of decades getting boned by the bankers while she pays down the debt I suppose.
The Republic is doing a bit of a dance here. These people wouldn’t be in a bind if they could at least break even on the rent/mortgage matter. Why didn’t the paper look at that more closely last year when these deals were being made?
Do they take real estate advertising?
Like i said in a post yesterday, now credibility is at stake. Now that the bubble bursting has become glaringly obvious, any reporting to the contrary will expose the media for what they were last year- a bunch of rah-rah idiots for the RE industry. They have now been forced against their will to report the truth.
Agree. How many times can a weatherman keep saying it’s sunny outside when it’s been pouring for days?
Not only do the rental numbers not work ,look at the greed with buying 5 homes . Im sure all the loan applications say she was going to owner occupy.
I’m sorry but that women can cry all she wants .I just shutter at how many of those flippers were sucessful on one flip and turned around and bought 5-7-10-more houses .Real estate can turn on a dime as we can all see now .
Damm It…I had to go back and read it again Wizard;…I missed the part where she bought “5″ more…She was clearly speculating when I was wanting to think she was in the busniess of fixing, thereby adding value and making a profit…..MY BAD…….
And where is the real estate agent that helped her into these 5 houses. The next upside down investor in Arizona might be a John Wayne type who is looking for a liitle revenge, instead of balling. I would recommend tighter security for all real estate agents. People who lose lots of money always find someone to blame, and its never themselves
VERY TRUE. Back in 1999, a daytrader in Atlanta shot and killed 9 people at his brokers office before killing himself, back in the daytrading mania days. Can a similar scenario involving real estate be too far off?
If you’re looking at the sheer volume of money involved, I would imagine that the real estate bubble collapse would dwarf that of NASDAQ. Virtually everyone participates, in one way or another, with real estate - only a relatively small percentage with the high tech stocks that roost on NASDAQ, even at the height of the dot-com mania.
How can you be so sure she was going owner occupancy?
Real Estate does not turn on a dime, it takes months to see the trend if you know what you are looking for…..
I would say it was a rookie investor that had no idea what she was doing.
Im sure all the loan applications say she was going to owner occupy.
That’s an interesting point. Inthe U.S, of course, you can’t put debtors in jail, but you can put defrauders!
I hope the banks (and the IRS) scrutinize these transactions and prosecute fraudsters!
When I was in the mtg/real estate biz (89-2003)– it was fairly common for lenders to do “post-audits” a few weeks/month after closing. Do you STILL work at ABC, Inc?, do you STILL live in the house?, etc. Those days went bye-bye, I guess.
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these people didnt care about cash flow. they just cared about appreciation. they counted on quick appreciation to take care of everything.
I could rant for an hour on that one. I’ll try to distill my feelings on this:
TOUGH SHIT, LADY. GROW UP. SHIT HAPPENS. YOU GOT TAKEN.
I agree. One of the greater fools who got too greedy.
I disagree, slightly. she’s a greater fool, but she’s actually sort of smart and won’t be the GREATEST fool. somewhere someone like her is putting deals together, trying to rent the place out and waiting for the market to bounce. compared to other floppers, this lady is smart. she’ll probably get out early.
I agree. I have close friends and family who within the last six months bought homes with the intention to flip in a year or two.
Unfortunately, I risk undermining these relationships by trying to convince my friends and family that it is not a good time to buy.
One person even mentioned that there is a speculator owned foreclosure in her investment property’s neighborhood which has been on the market since Jan and that it is rapidly decreasing in value; incredibly however, her speculative investment property had increased in value during the same period. What’s more, she and her husband were contemplating making a low ball offer on said foreclosed property!
When your friends and family reason like this you know there is no hope trying to explain monetary policy, hard asset bubbles, mortgage back securities, Marketing theories, and factors affecting market behavior. You just change the subject and keep on blogging.
Through extreme frugalness, we managed to do pretty well in terms of savings and no debt.
We live very modestly, drive 10-year-old economy cars, and nobody really would think that we’re “well off”.
So I’ve learned NEVER to repspond or give advice to anyone when they start talking about money, investing, or Real Estate. I just smile and say “is that so?” otherwise they’ll think I’m either jealous or stupid or both for questioning them.
Let them think they’re zillionaires with their car payments on the Lexus, their 100% financed interest-only mortgages and the HELOCs on top of that, and let me live quitely with several million in conservative investments and zero debt.
You can’t reason with stupid people, and they’ll always question your motives if you challenge them on their plan to buy condos in Vegas (like my twice-bankrupt mother in law just did 4 months ago!)
The highlight of Robert’s post is:
“You can’t reason with stupid people”
Frame it and put it up on the wall.
Correct me if I’m wrong here TX (I believe you are an atty). But I don’t believe that fraud is dischargeable in BK. Hence if she claimed “owner-occupant” on any of these flips then she is in some serious jeopardy.
Or lied on the liar loan applications.
Section 523a of the Bankruptcy Code.
If she did lie, what is the probable outcome?
Lender can bring an adversary proceeding to render the debt non-dischargeable. And will win.
Aside from possible criminal prosecution, if she ends up $800,000 in the hole she will be unable to discharge it, ever.
Think about that for a bit. Little Dorrit comes to mind.
wow… looks like a lifetime of indentured servitude awaits.
I love the smell of burnt flipper in the morning.
Although as somebody pointed out, If she has no real assets (likely) and is insolvent, it’s probably not worth paying the lawyers for a judicial foreclosure.
Hmm, I would be interested in hearing from one of the posters advocating compassion for people like this lady.
My position is cry me a river, but I would be interested in hearing the other side of why this person should be coddled with compassion.
She made a mistake. We don’t know why she invested in five more houses, but given her early success, she must have been really fired up. We also don’t know her financial situation. I don’t fault her for trying to make money, as long as she was honest about it. We don’t know that she wasn’t.
Making 50k on a house one has fixed up isn’t so outlandish.
Keep in mind that Carlton Sheets and a zillion others like him encourage people to do this. They tell them they are taking charge of their lives, and potentially changing them for the better. It’s one thing to buy a junky condo sight unseen and double the price in one week; another to buy a house, fix it up, and sell it for a reasonable profit. And, of course, the definition of “reasonable” will differ from person to person.
I feel sorry for the lady and wish her well. There is nothing in the article to indicate that she is bad, selfish, mean, dishonest, or anything else other than in a bind. To wish her harm or poverty or jail is ridiculous. Is all this bubble talk really just a cover for envy, anger, and a desire for revenge for imagined slights?
I’ve noticed a lot of nasty letters on the bubble blogs wishing devastation on others, crowing about a potential great depression, and bragging about the the writers are going to snatch up cheap properties once everything crashes. The vicious, judgemental comments about people with money, or people living beyond their means, are appalling. I believe the Universe has its own unique remedy for this kind of nasty thinking, and that it isn’t hiting the jackpot or anything close in this or any approximate future life.
You didn’t answer the question.
Why should she be coddled with compassion?
I am committed to people experiencing the FULL consequences of their actions. Nothing more and nothing less.
Do you really think she would be crying to her realtor if her balance sheet was prepared for her current situation?
The woman could be too young to have experienced the last bubble in real estate (1980s, early 1990s). That is the one in which I sold for a loss and paid the rest of the principle (in cash I scrimped and saved over 5 years). Or the lady could be a foreigner. In either case, the lady has no excuse. If you buy something you do not understand, you are gambling. If you do not have the money to cover your losses, tough luck. I did not get treated with kid gloves in 1996 when I had a loss. I paid it off. Back in the late 80s there were real estate hucksters pushing houses as the way to become a millionaire. Why should people these days be treated with kid gloves? If it’s too good to be true, it’s not true.
Incredulous, I agree. These people just want something for themselves. There are some speculators that are greedy and distasteful and then there are others who are just trying to get a leg up. Heck, I am trying to get a leg up with investing in penny stocks and other ventures. When retirement looms, it’s hard to blame someone like her.
You know there are much, much worse industries to make a profit from. Industries that cause pain and suffering and lower society. The meat industry is number one. Unspeakably animal suffering, environmental degradation and waste, and terrible exploitive work conditions. Those who own these types of businesses, IMO, have something really to be ashamed about. Other industries…the pesticide industry, the porn industry, the junk food industry….all of the people who are involved in pushing these things deserve much more shame than flippers.
Of course, I am not saying it’s really honorable to flip, I can just think of much worse things.
Everyone here who is so hard on her…maybe you need to look in the mirror.
I look in the mirror. Here’s what I see. a hard working college educated 31 year old software engineer who has made good solid financial decisions his whole life. Not just as an adult, but my whole life.
So far my reward has been to have a serious chunck of my hard earned, yet invested money drained away in the stock bubble of the late 90’s, then to be slapped in the face again by not being able to afford a shack by the river.
Yes there is anger, yes there is some jealousy, I am sure there is a little bit of all the panoply of nasty emotions lurking in my soul. Dammit I work hard, I pay my taxes and neither lie cheat nor steal. Others however have not hewn to the same path. In the short term they were grossly rewarded for their ignorance, though that is ending.
I have had to endure years of people telling me RE only goes up, not a year or two, years. Even my father the former RE broker in San Diego in the 80’s suggested I buy in 2003 because prices weren’t coming down.
It would be hypocritical in the extreme if I didn’t wish people like the flipper in this story to not suffer. Thats just crap. It is exactly by her suffering that I will be able to achieve what I have worked hard for. A home of my own in a decent area of San Diego without the spectre of endless debt around my shoulders.
Judgement is a two way steet.
Josh
To Josh (barnaby33). Take heart. When I was 31 (and I’ve been software engineering since 1985), I bought a house at the peak. That was 1990. Now I’m 47, have been renting for ten years. I turbocharged my career by becoming an independent consultant in the year 2000. Immediately doubled my income. Look up con-w2 or con-1099 positions on monster.com or dice.com. My income immediately doubled in the Fall of 2000. Hourly rates on software engineering are usually $50. Per Diem makes renting easily more lucrative than buying. Downside is you have a portable lifestyle. In tight years (such as 2002 in Phoenix), you have to be able and willing to move (within 3 weeks or so) to an unfamiliar part of the U.S. for another software gig if there are no jobs with good money in your area. But when you notice on your Quicken or other money managment software that your net worth is gaining by leaps and bounds, you start to think that you may like consulting after all. When you are earning easily the 6 figures, you do not have to gamble with your money to get ahead. So instead of R.E. I buy T-bills, savings bonds, municipal bonds, value stocks, and regularly gold bullion (no more than 10% of my net worth).
I think the bankers have their own problems on this deal. Like who the f**k approved this lady to buy the 2nd thru 5th homes? You’re so fired!
Yeah, and who bought those loans? You’re fired too.
And who rated those MBSs? I think this is where we will see much of the legal entanglements in the coming years.
“Luuucy! Gonna have some ’splaining to do!” The real estate market lately hasn’t been noticbly less screwball than Lucy’s schemes. Of course in reality, Lucile Ball had the reputation of being quite the shrewd businesswoman.
“The number of homes for sale on the Arizona Regional Multiple Listing Service increased nearly four times from June 2005 to last month…”
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If you start at March, 2005 when the listings were 3,400, the enormity of the increase is clearer. From 3,400 to over 50.000 in less than 18 months. Wow…
It blows your mind to look at those Phoenix numbers!
The AZ Repugnant doesn’t even post the total number of listings, unbelievable!!
I only have inventory numbers from 7/05 at 11,0000 when phucktheflippers started tracking Phoenix. The 3,400 listings in March ‘05 just make the 52,700 listings currently available that much more dramatic.
dawnal, do you have a source for the 3,400 number? would love to put that on my blog. thanks
Bubble Markets Inventory Tracking
Dawnal, where are you located? Phoenix Metro?
OM…Freaking…God…!!! This is the type of article that I have been waiting for. No more “soft-landing”, no more “normal healthy market”. This is real pain. This is real worry. This is desperation pure and simple. This keeps you up at night. This is the type of situation that makes people do stupid, stupid things (like torching their house for insurance money).
I commend the paper for printing this, it should start others searching for the pain of recent FB’s. This will hasten what we have known has been happening for a long while. Curb the need to feel sorry for people, they got into this mess because of their greed, remember that!
Amen to that. Remember that she was one of the reasons that prices went higher than they should have. She is learning a hard lesson, but the government should not bail these people out.
Exactly! How many other would be real estate “moguls” are out there that bought multiple houses because that is what the “system” or “seminar” that they went to said to do. There is going to be real palpable financial ruin, I even predict the suicide rate goes up because of this.
Natural selection. The weak die.
If the weak are coddled and brought along with the rest of the herd, they weaken the whole herd and expose the whole herd to greater risks to the whole population.
That is why the weak must feel the FULL consequences of their actions up to and including being a Darwin award winner by removing any possibility for their genes to replicate into the next generation.
We are reading about the folks who will be immortalized in financial books for the next century. Not unlike those stories we heard about when the stock market crashed in 29′. These are classics and you read them here first in real time. Great stuff!
She i ot the only reason.
How did she get the loans? When the bank takes over and gets 40 cents on the dollar, who is insuring the deposits? And who is insuring the pension plan holding the paper that may have have to be bailed out by the PBGC? And if the Chinese are holding the paper, what does this scenario times 10,000 do to our currency value?
We are all bagholders on this one.
“How did she get the loans?”
All it takes is the right loan officer, who by now is probably long gone.
The PBGC does not insure and will not bail out CALPERS (ERISA exempts governmental pension plans from the defined benefit pension insurance scheme). State and local governmental plans were exempted from PBGC coverage because those plans were expected to use the taxing power of the state to bail themselves out, if that ever became necessary. So, indeed, the taxpayers of the great state of California would be the bagholders if CALPERS were to need a bailout . Either that, or the state legislature could (as some states have tried to do) attempt to unilaterally change the benefits to which defined-benefit plan retirees are entitled on a going-forward basis.
I don’t want to start a big fight here, but are state employees in California enrolled in social security? Just curious.
State employees is a pretty broad brush. There are many different flavors.
In the instances I am familiar with State employees pay SS taxes.
Don’t get me wrong Dukes;….I completly agree that many (partucularly out-of-stater’s) deserve to pay a severe price for their greed….I am likely wrong but, I took away from this storey that this woman thought she was approching this more like a job..(ie fixing up houses for resale)…naivet’e maybe more than greed ?? If so, I take no plesure in reading about her delima…
You may be right scdave, but I look at it completely different than you. People need to realize that “buying real estate” as a job is for professionals who do the research. Not wannabe Donald Trumps who literally DESTROYED this market for many people across the U.S.
I feel NO sympathy for her, or for the phone throwing woman, they will get what they deserve, and many more out there will get it as well.
Unfortunatly we are not even close to feeling the pain of the market decrease that will only be elevated due to wannabe investors. Wait until the investors have to start dealing with their IO loans resetting. In my estimation it will be another straw to break the……
A lot of people like this woman got sucked in with the greed for easy money. The only reason she got into this “job” was to get quickly to easy street. I have to disagree with you. It was greed for easy money. We Americans have become so lazy, that all we want is everything “easy” and don’t want to work for anything that takes effort.
I think we’ll find that well over half these f–ked flippers are women. They see what they think are no-brainers and aren’t afraid to leverage their lives to the hilt. Just like their friggin credit cards.
These people usually have nothing to lose. They started with nothing, they’ll end with nothing. The lenders however will take it up the a–!!
Early on in Ben’s blog, this was a common topic.
The Dot.bomb bubble was generally the men’s folly.
The housing bubble was generally the women’s folly.
The real lesson is humans are herd animals in general and one must resist the herd when groupthink takes over.
Maybe it’s from watching all those hours of HGTV.
These ladies brainwash themselves into thinking they are designers/ decorators. They think they can paint, tile and create home interiors, with zero experience.
One thing that has also happened: a ton of really ugly “rennovated” homes are out there, with big inflated price tags. Ugh, red walls with crooked peach tile.
How many people view the lottery as their only way to accumulate wealth? That’s all the housing craze was. It was just another lottery that every greedy, lazy person thought would make them rich.
For those of us that believe in hard work and responsibility we know there is another way. But our way is not popular because it’s not easy.
Define greed?
As for the weak dragging down the rest of herd, we are not cattle, and we’re supposed to care for the weak. I’ve spent my life rescuing sick and injured animals, and nothing has made me happier.
Should we be throwing our handicapped into rivers now? Every person condemning this woman might benefit from asking himself/herself what stupid things he or she had done in the past. Are we all living perfect, more, greedless, blameless lives? Are we all better than real estate investors? I doubt it.
I reiterate my previous comments. There is something profoundly wrong about wishing harm on others, gloating over their suffering, and claiming they need to take responsibility and learn the hard way. Maybe those saying this should accept responsibility for not buying real estate when it was affordable. The holier-than-thou bit is becoming truly obnoxious.
I wouldn’t say they should be thrown in to rivers, but I think anything much more than Tiny Tim Cratchit is a waste of scarce resources. The American with Disabilities Act is a tremendous disgrace (mainly the fault of stupid judges), as well as the amount of money California schools spend on special education.
Stupid flippers, however, are not the weak in the herd, per se. They have been sacrificed by the leaders of the herd. The question is whether it was the right choice.
She gambled and lost! Yes, I feel sorry for her and hope she learned a good lesson! Maybe she will be a stronger person as a result. I feel sorry for the guy who becomes a compulsive gambler too. Plain bad luck! Not their fault they took the risk. You know they were just trying to get ahead! So you win $50,000 at the roulette wheel by putting down $25,000. Next time you’ll win $250,000 by putting down $125,000. Oh, but guess what, it’s not really your money you’ll be putting down so it’s not that much of a risk.
Give me a break! She gambled, she lost! No tears here! We’re talking FIVE houses! $20K a month in payments! We’re talking about STUPID, GREEDY, LAZY people. Not folks who were born blind, deaf, or without legs! I’ll take care of those that suffer, but I’m not going to feel sorry for GREED and STUPIDITY! They’ll get my pity by wearing the clothes I donate to goodwill and eating the food I donate to the food pantry………
Incredulous,
I wish the lady luck in so far that she won’t be stuck with her debts forever but will be able to start again from zero. If she was honest in her credit applications that doesn’t seem a remote chance at all. I agree also with your previous assessment:
> I’ve noticed a lot of nasty letters on the bubble blogs wishing devastation on others, crowing about a potential great depression
I am feeling appalled by these comments, too. That said I think that you are too soft on this flipper. Gambling is stupid, but putting more money on the gambling table than you can afford to loose is not a mere mistake, it’s playing with financial suicide. You ask us:
> Every person condemning this woman might benefit from asking himself/herself what stupid things he or she had done in the past. Are we all living perfect, more, greedless, blameless lives? Are we all better than real estate investors?
No, and Yes. We are not perfect, but those of us who earn their own living by honest work are better than real estate speculators without feeling for risk. Big rewards come with big risks! “There is no free lunch!” should by now have become commonplace among speculators, even those with the most one-sided information.
> There is something profoundly wrong about wishing harm on others, gloating over their suffering,
I agree.
> and claiming they need to take responsibility and learn the hard way.
Taking responsibility and learning are two things I wish every speculator, even if it is learning how to speculate better next time. If the learning doesn’t happen voluntarily, it better happens “the hard way” than no way.
> Maybe those saying this should accept responsibility for not buying real estate when it was affordable.
Now you are definitely going too far - suggesting that envy is the driving force of the negative comments to this flipper would make you a pharisee who thinks himself holier than us and bring shame on you. You should give the negative commenters the same benefit of the doubt that you gave the flipper.
Regards,
Peter
Incredulous, all I can say is BOO-FRICKIN-HOO for these people. I don’t wish this lady anything bad, but if you expect me to feel sorry for her because she has to experience the consequences of her stupid-ass, greedy actions, sorry.
I’ll save my compassion for those in Third World countries whose lives are infinitely worse off than Suzy flipper’s probably ever will be, and not only that, they didn’t do anything wrong other than get born into the wrong situation.
What makes you think her actions were stupid-ass and greedy? Millions of people have done the same thing over the past few years, encouraged by our own government. By the same token, how do you know the people born into miserable Third World conditions didn’t choose them for their own spiritual evolution? This is certainly the teaching of several of the world’s major religions.
You are assuming facts not in evidence, and passing judgement based on one miserable little article. Don’t worry about saving your compassion, because I seriously doubt you have any concept of the word.
Incredulous,
You are either having lots of fun stirring the pot or you are plain and simple a freak! For your sake I hope you’re stirring the pot!
> What makes you think her actions were stupid-ass and greedy? Millions of people have done the same thing over the past few years, encouraged by our own government.
People, eat shit - million flies cannot err. What makes you think that actions are not stupid-ass and greedy, because million others did it? There is political power in being with the crowd, but no moral one; you should know this as a preacher.
here’s your answer: Yes, I am better than real estate investors. No, none of the stupid things I have done in the past carried the risk of destroying my life. Yes, I am living a more blameless and more greedless life.
Gee Incredulous, judging me when you don’t even know me, if you’re Mother Teresa, I say stop wasting your time saving animals and start saving these flippers. Devote your life to the cause! Just don’t use any of my tax dollars please.
And how do I know that her actions are stupid and greedy? Well, basically investments carry risk. If you can’t assume the risk and carry the loss, well that’s called stupid. Greedy? I would call buying 5 houses when it is out of your means (which it obviously is in her case) greedy.
Don’t preach to me about how this may not be her fault, millions are doing it, blah, blah, blah. The psychology of victimhood that you are so fond of avoids the notion of personal responsibility. And that’s why it is a little hard for me to understand why you belittle true victims in the Third World, most of whom have very little control over their circumstances.
As Lizziebeth said, you are either stirring the pot or you are truly a freak, or perhaps option #3 you need to get a thicker tin foil hat.
And just for the record about my concept of compassion, it’s not something I brag about, but since you attacked me without any justification, I would say my concept is doing what I already do, which is travelling to Cuba, India, Mexico, Venezuela, Colombia and other places to make documentaries of the very thing I was speaking about, the plight of poor people in other countries. You should try it some time. Spend a week in some sh@thole, and tell me if your heart still bleeds for the guy who’s getting his Hummer repo’d.
When I read the article in the republic this morning I was wondering when you will start seeing people torch their homes for insurance money. I like the “The market flipped her” OH well tooooooooo bad!!!!!
First , people that fix up houses for a living usually buy one house at a time ,they usually buy under market ,and they get the house back on the market immediately.
This women who bought 5 houses at once lied on the loan applications ,IMHO had no intentions of doing any fix up ,and she was just gambling that the market would appreciate her to riches in 3 months without doing anything .
Real estate is serious business and it is a risk . Lenders use to check for borrowers buying more than one house at the same time ,(there is a way of doing it that I won’t mention ).The lenders should of stopped this greedy jerk.
You don’t know that she lied on anything. Someone above just made the suggestion and already you are repeating it as fact. This is the essence of rumormongering.
She either lied, used a corrupt mortgage company or is independently wealthy. Since she’s in tears over the whole ordeal it’s either door number one or door number 2.
You don’t know that; you are leaping to conclusions. I hope nobody does this if you make a mistake. I sincerely hope you aren’t a prosecutor.
The fact remains that the emotional venom expressed toward this woman is irrational and outrageous. Who is she to you? What gives you the right to judge and condemn her? The longer this blog has been running, the nastier and more hateful the posters have become.
Those of you who think it’s great she’s in trouble, and who delight in her misfortune will, I have no doubt, one day be on the other side of the fence hoping for more compassion that you ever gave out in this life.
If I am leaping to conclusions, then please explain to how she was able to finance 5 homes? If she is wealthy enough, she wouldn’t be in tears. I have good credit, high income and when I purchased investment homes(yes, I am an investor) I had to go through hoops with my mortgage company. Pay a higher rate for the rental homes if they were less than 50 miles from my home…. I highly doubt my mortgage company would finance 5 homes all at once for me, even with good credit and good income.
Lizziebeth-
There are lenders in az who will finance non-owner 100% I get their flyer all the time. The way it’s setup you could buy a 100 and not be lying. Assuming someone lied in the current lending enviroment particularly az is the wrong assumption
This lady is just the start of many to come. Almost all of these condo coversions are investors and this hasn’t even hit yet. We are in the phas ewith these now where they are just sitting. I know an investment group that bought two apartment complexes about seven nine months ago at about $180,000 a door. Today they have sold about 50 out of about 240. They have realized that now they are trying to minimize their losses but they still aren’t selling. The lawsuits that are going to come out of this condo conversion craze will be incredible. The workmanship put into these for the most part was terrible. I know of several where there was some serious mold problems, but no problems to the flipper though. I look for the investor that bought the condo to be the one that flops soon.
I love how they put it on the bottom of the front page below the fold. As if you could hide such dismal RE news so easily…
Why are we supposed to feel sorry for that lady? This was an investment choice! Those pention holders, on the other hand, deserve a lot of sympathy. Welcome to the world of Enron!
Great point! I have said many times to people that real estate is the “worst” investment in a flat, down market because of its illiquidity, I was met with vacuous stares. You said it perfectly, it was her CHOICE, which was clouded by greed.
The poor bastards in pension funds ARE the ones to feel sorry for because they will be hurt through no fault of their own. Good post.
Did anyone cry for me when I lost tens of thousands of dollars on Worldcom, Cisco, etc? No, and I didn’t expect them too either. So F(*&(* these idiots, and I for one will enjoy watching them go down in flames.
No, sadly, I didn’t cry for you back then. I laughed, actually. I loved raking in cash from shorting Bubble.com bagholders. They were classic fools who deserved to lose their asses. But for what its worth, thanks for your generous contributions to the Sammy Schadenfruede Early Retirement Fund.
Generous contributions? Sure you made a fortune shorting the stock market. Which explains why you rent in Colorado Springs, where you expect the median to drop from 250K to what, 220 before you buy?
The “Fixer” business has been around for a long time in good times and bad…They provide a excellent service in that they turn neighborhood “trash Cans” into productive housing, hopefully “Owner Occupied”…In my time in the business, I have seen entire neighborhoods redefined because of “Fixer’s”…My point is that, “IF” this woman was approaching this from a standpoint of a job (career) and she got caught in a speculative bubble, then I get no satisfaction in seeing her pain…But, if you need a pound of flesh, then, enjoy….
I doubt this lady had any ability to “fix” these properties by herself. Usually these flippers just hire the lipstick application by contractors and attempt to turn them over as quickly as possible. I’ve turned over several of these fixer-uppers myself by using the tried and time tested method-hard work. However, the big money is made by application of lipstick. If you’re truly interested in improving the property by upgrading the plumbing, electrical and insulation…. those things that most people will never notice, you’ll rarely get your money back.
I corrected my position below Wizard’s post above……..
I saw that scdave . I know you would agree this women went to far . I’m just afraid that there are thousands of these kind of people out there .
I 100% agree. A good “fixer” is a wonderfull asset for a community. Everyone, please do not put them into the same category as a flipper. A fixer adds value, a flipper is nothing but a greedy parasite.
Remember: A fixer makes it so that a neighborhood goes up in value by taking away blight. This is a good thing. A flipper… has pretty much driven out the middle class from 50% of America.
Neil
No, the Immigration Act of 1965 and The Civil Rights Act drove the middle class out of 50% of America.
ooh! Politically incorrect, but right on target.
Explain
I can finally move my nice, next-door “flipper” into the acceptable category of sweat-equity involved “fixer.”
The motivation was thhe same: $$$
The greed was different. Many shades of greed.
Regardless of whether she was a true fixer or just a flipper, she bit off more than she could chew because of her greed.
I lived through Enron (laid off the day after BK). Now 5 years later, I am finally back to the same nominal compensation.
No one bailed me out and no one should bail this FB out!
People make unhappy choice all the time. Stop being a twit. Tell me you life story, and let me decide you fate. How’s that for justice?
Incredulous,
I think you are misguided by many of the posts here. I am not one of the “mean” posters, and feel sorry for families who bought their primary home in recent years because of the myth that “RE only goes up / you’ll be priced out forever.”
But you must admit, this lady voluntarily took risks, and then doubled-down again. She was GAMBLING, nothing more, nothing less. When one gambles, they should KNOW that they are taking risks and might walk away a loser.
I trade options (high risk), last week, my holdings lost $10K in value. Are you crying for me, yet? I don’t expect any sympathy, whatsoever. I bet, I win, I lose. I KNOW the risks, and takes those risks voluntarily. No bailout is expected or even desired.
BTW, those of us who predict a recession/depression are not “crowing” about it. We just see the obvious and make logical conclusions regarding the consequences of past actions. Hopefully, we can avoid a financial meltdown…but there is a very good chance we will see very hard times ahead. Not gloating. Not crowing. Just stating the obvious.
Hope that helps explain the attitude here.
Bankrupcy IS the sympathy that we should give her. At the end of they day, that is what we give people who are unlucky (or in her case stupid) enough to end up so deeply in debt that they’ll never get out. It also serves as a punishment for those who continue lending money to those who are irreprably insolvent.
Agree 100%!
“Two houses on the same north Valley street, similar in size and age, are for sale. One lists for $749,000 and the other for $775,000. A third house came on the market on the same street a few doors from the other two. The new listing was similar to the others in size and age but priced at $659,000.”
It sounds like this couple tried a big drop and it didn’t work as their house didn’t sell at that price. Perhaps builders are undercutting even that amount by quite a bit. I assume that they’ve been there for a while and have a pretty good cushion of equity and have no problem eating through it to get out of there.
One thing about trading stocks. In general, you don’t get to see the person on the other side of the trade. Or the people bidding or trying to sell the same position that you have. So that when you take a gain or a loss, there’s noone across the street that you can yell at. You can yell at your computer screen or your brokerage but ultimately, you will realize that you’re responsible for your own trade. If you’re way underwater, you get that feeling of desperation. But at least you can just hit sell at market (for liquid stocks). With a house, this button doesn’t exist.
Exactly! No “sell” button to hit, and these people know it. They are sensing the danger, it happens once a month as they whip out the check book and think to themselves…”holy shit”, I can’t keep writing checks for this thing. Then it hits them with full force the actual stupidity of what they have done.
They start to wonder what to do, where to turn, what about their nest egg, how can they retire, they will be wiped out, they have kids, what about college…the list goes on and on and they are financially ruined.
WHY THIS WILL GET UGLY FAST
This lady with the 100k in gains and probably 300k in unrealized losses is in for a tax shock. If she sold in 2005 she ownes $ to the IRS since the story states she rolled her 100k back into 5 more houses. On the other hand, if she sold in 2006, she has 100k she needs to offset ASAP by dumping enuf RE to trigger the losses to avoid tax on the profit. If others find themselves in the current year tax situation you will see people dumping long before 12/31/06 to avoid being naked on these 2006 gains.
As far as the 2005 gainers, I suspect greed got the better of them and they(like this idiot) rolled over all the cash from their profits into new housing and did not cut in their partner(Uncle SAM) figuring they would flip in early 2006 and pay off then. This is the worst case scenario since they can not take the losses on their current holdings even if realized and carry them back to 2005 unless they claim they were in the business of flipping houses.
My main point: people will be unloading houses before year end just to cover their 2006 gains. Others will be selling to trigger losses to carry back to previous years because their accountant told them to since they will claim it was a business. The IRS will fight many of these claims and say it was an investment loss subject to capital loss limitations(no carryback). In any event, we will see an enormous amount of property selling just to have a realized event for tax purposes and creating a huge and sudden drop in RE prices by year end.
“If she sold in 2005 she ownes $ to the IRS since the story states she rolled her 100k back into 5 more houses.”
Well, actually, she probably owes no tax on the gain. She probably did a 1031 exchange.
This will be the case with most of the flippers, I suspect. The IRS won’t be a concern, at least not from the perspective of capital gain taxes.
It will be when the bank forgives the loan and that has to be recognized as income.
I am waiting for the July sales figures to be released middle of August, then. the real estate dot.com crash and panic will take hold. I belive Ben’s blog months ago predicted Phoenix as ground zero. With temperatures over 110 degrees and 50,000 plus listings, what buyer is going to give up a day at the lake or the mountains with their family to visit another overpriced listing with a used-car house sales man. Prices will tumble middle of August.
…and all of the CAlifornians that flocked to Phoenix to invest, and probably pulled out equity in their homes to cover the payments will be in just as much trouble.
I’d be curious to how much these houses cost in the 1st place and how much of that is equity they think they are entitled to. Also, you don’t “need” a sign on your lawn to sell a house so why make yourself a target ?
I agree that you don’t need a sign. And most look tacky anyways. I think the signs are really for the Real Estate Agent in them getting advertising for their company.
The signs are helping to fuel the housing bubble burst by informing the Average Joe that more houses are on the market and are taking longer to sell. Signs are good.
Yes, I like the view of many signs. They tell again and again to buyers not to hurry and to sellers that they have a lot of competition.
This is hilarious! The two completely unrealistic FS’s excoriate the one who needs to sell quickly for pricing too low realtive to what they believe their homes to be worth, and it turns out that all three are so far above market value that no offers are forthcoming. I suggest all three pay a bit more attention to the six-figure-value of the discounts their rivals in the homebuilding industry are offering to move inventory off the new home lot…
Yeah, I think the perfect answer would be “I’m SELLING my house, you’re LISTING yours.” Although as ther article pointed out none of them have sold.
This a full scale meltdown for prices in Pheonix developing. As the costs to carry mount, arms reset and foreclosures start rolling in, prices could actually revert to below the mean, over the next couple years.
The people of Pheonix will be thanking all those out of state flippers for subsidizing all the cheap new housing thats going to be availible in a couple years. Debt and foreclosure for the flippers, new homes for the people of Pheonix.
Exactly, prices will overcorrect. When sellers finally capitulate and panic selling starts in earnest is when I’ll step in with my severe lowball offers. Then you’ll really see some phones hitting walls.
Gonna be dealing with the bank by then Bfisher;…The real deals at that point will be the “BULK” purchases from REO’s….
I just can’t understand how people can be so stupid. I live in northren wisconsin, a second home area for many chicago people. When I look at a property to buy, the first thing I asked the realto is, what are the property taxes and what is the total tax rate per thousand. Then, my next question is what is the assessed valuation.
Local townships here, are ususally behind in their assessments, so if they are assessing at .85 % of market value, I add 20% to come up wit a 105% assessment value. Sellers here, obviously flippers, are asking twice the assessed valuations, by my figures. Everytime I see this going on, I run my formula for the realtor and tell them ” my momma didn’t raise no fool “.
They never call me back. At present, we have over 1,800 lake homes for sale at totaly obscene prices. Over 3/4 of these homes are over 400k. That would mean , that we need 1200 millionares to buy properties here….ain’t going to happen. Sales last week were for 4 properties over 400k. Good luck FIBS
I think that the statistic is that one in one hundred households have at least a million in net assets. So there are lots of millionaires around. But I’d guess that most of them became millionaires by doing smart things. Not dumb things. $400K brings in $20K per year in interest income a year. I think that you’d be pretty lucky to clear $20K profit renting out those $400K properties in a year.
The smartest thing I ever did was follow Roger Gibson’s Asset Allocation: Balancing Financial Risk (2nd Edition). It advocates dividing your portfolio into a range of investments. For an average 9% gain (over 70 years), this portfolio recommends 65% equities and 35% bonds. There are a number of further subdivisions in these two categories; two of the more interesting in the equity portion is a 12% investment in REITS and 6% in gold (commodities).
One critical feature of this approach is that you need to periodically rebalance your portfolio, to return the %’s to the original numbers. For example, if there is a big run-up in any one category, then you should be sellling it off, and conversely with depressed assets, you should be buying more. This forces you to buy low and sell high, something that is easy to say, much harder to do.
For the past several years, I have been routinely selling REITS to return them to their original percentages. This has been one way to participate in the real estate bubble, without feeling the massive burn which will await speculators, flippers etc.
I once asked my Merrill Lynch broker whether any of his other clients followed the Gibson strategy. He said none of them. Too boring I guess.
Can someone enlighten me on the assessed value of a home? When I get listing sheets from my realtor, the so-called assessed value of the home is often less than 50% of the asking price. What does it mean? How can it help me figure out fair market value?
Assessed value is based on land plus improvements. Depending on the area, like CA or FLA, the reassessment can be limited. Special assessments can, and always will be added. Limits on the rise depend on the state, and they are usually limited to two residences, maximum. Whether anyone responsible (usually the county) checks to see if you are claiming owner-occupied is doubtful at best. An area that could be subject to major scrutiny in the future, if my wishes and hopes bear fruit.
All of that said, unsold R/E is based on original cost plus improvements plus permitted additions. New R/E is simply based on the selling price, whether incentives are given, or not. Better to buy at the reduced price vs. incentives because the higher tax base lives with you forever.
It can’t help you in any way figure out fair market value other than giving you insight into how long the owners have lived there and how much they have to gain or lose. Look at recent COMPS (Comparable Values).
Hope this helps!
What is tragic here is that I believe we’ve only seen the tip of the iceberg when it comes to people losing it, as we see in this story. The thing is that so many have EVERYTHING at stake in this fools game they’re playing. Remember what happened in the wake of Katrina? There is going to be some nationwide ugliness going down. It might be good for most of us here to remain anonymous. We might be the ones these crazed idiots come looking for to hang from the highest tree.
Let them rot.
Ah, the beauty of the blog…
Sad, but true. What’s worse about this is it’s more than just their money at stake: it’s their reputation and their personality. These people felt so good about themselves when the market was carrying them up. They felt smarter than everybody else, and they weren’t afraid to say so. Now that it’s biting them in the a$$, there’s no fallback position. I predict an uptick in suicides, arsons and divorce.
Any buy recommendations for psychology firms?
Remember all the people that jumped out of 10 story buildings after the stock market crash of 1929? Some people killed themselves after the KEATING INVESTMENT SCANDAL .
I believe that some people will flip out .
I kind of doubt it. Housing busts have happened before, look at the early 90s. People lose out, the economy sucks for a while, but people generally dont kill themselves, its not that big of a catastrophe. Part of the mania around the 1929 crash was that it happened in ONE day. Maybe if theres some day of extreme devaluation or where everyone realizes “Holy patootie, I just lost a bunkload of money”, then maybe people will flip, otherwise its just gonna be a few miserable years.
Security companies. The decline in RE will hit local government revenues, including policing. At the same time, the general economic slowdown will cause a rise in crime.
Some of the ‘gentrified’ neighborhoods in DC and NYC may slide back toward the less-liveable condition they were in the 80s.
This is what happened in South Africa after apartheid collapsed. Private security companies were one of the few big winners for a number of years.
Exactly.
Ah yes. The good ole days of apartheid. *rolls eyes*
I suppose you could invest in pharmaceutical companies that market anti-depressants, but those are as much of a scam as the bubble. However, maybe we’ll see some some commercials featuring FBs, standing in front of a collapsing house, smiling at the camera, talking about about how the housing bust caused them severe depression, but Prozac or Xanax or whatever their drug of choice happens to be, lifted them out of that depression. Sure, the house is falling apart, the bank is foreclosing and they can’t feed their kids, but what the heck, they FEEL BETTER!
How about Drug companies that produce anti-anxiety and anti-depressant drugs.
This reminds me that during the dot com bubble, there were lots of investors who considered themselves geniuses because they were riding the stock bubble. I remember a story about some teenage boy, 14 or so, who was doing very well picking stocks and the media were fawning over how brilliant an investor he was. And of course you had your day traders who thought they’d found a new career where all they had to do was buy and sell the daily blips. Turns out it doesn’t work so well unless the market only goes up up up. Now we’ve seen housing “investors” gloating about what financial geniuses they were because they’d been riding the bubble up. Unfortunately the Bubbleator has already reached the top and is on its way down, full of flippers and speculators screaming and pounding on the clear walls.
Don’t forget the Beardstown ladies - that formidable group of middleage women who would dispense investment advice, along with their recipes for tasty home cooking.
The bubbleheads at CNBC and the now defunct CNNfn would tout their advice as soundly beating the market, until it was found that their investment gains erroneously included the new contributions that they were making to their fund.
Don’t underestimate the psychological power of devastation in the wake of total financial ruin and all that goes with it. I’m not happy to say it, but I think there will be plenty of stories of arson, some exhaust fume garage naps and possibly a postal type rampage or two aimed at fill in the blank.
It’s interesting to read the replies to that article. Most of them sound like folks here though they have more local anecdotal comments. I think that an article like this a year ago would have been dominated by real estate bulls and not bears.
Comments on this blog have NEVER been dominated by RE perma-bulls.
We have had a couple of moderate bulls that have chosen to go strangely silent as the tsunami of bad RE news builds.
Trouble is, bulls that posted here always freely offered their stupid opinions, without bothering to back them up with any basis in facts. Nowadays they are strangely silent… sort of a blog conundrum I guess.
Are there archives of this blog somewhere? It’s playing out just as we predicted, to the letter. I suggest we wrap up some of our posts from early last year and send them off to the AZ Repugnant editors. Newspapers are so passe….
i think it’s playing out as we predicted, just a little faster than most of us thought. the only thing that has been slow to develop is the wholesale exit from the market by the lenders, there’s still stupid money out there.
I agree, it is playing out exactly as I predicted (the reason I sold out in mid 2004, even though I had a 30 yr fixed at 5 3/8% and fairly low taxes locked in). Prices had risen to insane levels. Only I thought the bubble would explode sooner than this and predicted interest rates to skyrocket after the elections at the end of 04…the current scenario is happening about a year slower than I personally thought, but it is still just as sweet.
I had exactly the same thoughts as you. We sold in mid-2004, and I also expected interest rates to skyrocket after elections. Perhaps because we are in SD (boulderbo is in CO), we saw it sooner. This is actually moving more slowly than I had expected. Also about a year behind. Also thought lenders would be withdrawing credit by now…and expected much bigger meltdown w/Fannie & Freddie. That news looked like the end of the bubble by late 2004.
I wrote a letter to my local paper and told her several months back this was her last chance to warn the locals and let them get out the way of this freight train. She wrote two fluff pieces the next week and then nothing! I will forward this story to her!!!
I nominate these greedy pigs from the article as Official Poster Children for the Bagholder Army. Are we supposed to feel sorry for them because nobody will give them a 300% profit in ONE YEAR on their crummy upgrades?
Holly and Aaron Mueller have gotten a taste of both sides of the market, along with some extreme swings of emotion. They went from the elation of a big windfall profit and financial security to the non-stop stress of a house in another state that won’t sell, two mortgages and forced changes in their lifestyle and employment.
The couple paid $218,000 for their northeast Valley home in 2002 and sold it for $399,000 - $10,000 over asking price - last year. That was a profit of $181,000.
They moved to a $373,000 house on an acre in the north Valley. The Minnesota natives spent $60,000 for things like a block wall surrounding the property, shutters and landscaping, mistakenly figuring the rising housing market would more than reward them when they sold. “We thought we were doing pretty well,” said Aaron, a Honeywell electrical engineer. “We wanted to move back to Minnesota. My wife was pregnant. We wanted to be near family.”
His job transfer came this spring. With the help of a credit line on the Phoenix house, they bought a $495,000 house in a Minneapolis suburb. They put the Phoenix house on the market for $760,000 in March. Three price reductions later, it still hasn’t sold at $650,000, which is $60,000 below its appraised value. The couple pays about $5,000 a month for their four mortgages - a first and second on each house. Holly, a nutritionist, wanted to stay home after having the baby but is looking for a job. Money is tight, and stress is high.
Asked what he was going to do, Aaron said, “Pray.”
The financial pressure is wearing. The new house needs landscaping but that would be an extravagance. So the dog tracks in mud. And the Phoenix house needs maintenance, and it’s racking up utility bills.
“It’s on your mind every day,” Aaron said. “Every time the phone rings, you hope it’s the Realtor saying, ‘Your house sold.’ As far as doing things like vacations, we can’t spend the money. We’ll be fine. We talk a lot. We have a good relationship. It’s just stressful.”
Wait a minute. They pay 5K per month on four mortagages for over $1M worth of houses? WTF? How is that possible?
$1M x 6% = $60K
$60k/12 months = $5000
I wondered about that too. As if they don’t have to pay property taxes/insurance.
Property taxes/insurance/utility bills/gardener/trash. Hope the insurance company doesn’t find out the house is vacant. They do not insure vacant homes.
Oh they do, they just charge alot more.
If they listed the house for 400k (27k profit over 4 years) it would sell in a week.
Why don’t they do a story on me, I have some google stock I bought at $100/share and I want to sell at $1000/share, but no one is buying it, poor me.
The missing part of the story could be that they HELOCed and spent the money?
They could come down significantly on the price on the price of their Pheonix house and still come out ahead. The story is a bunch of BS. Their creating their own stress because of their stuborness. The appraisal is meaningless if no one is willing to pay the price.
Sell when you can not when you have to. Then move on.
Thanks for pointing that out. Not that I had any sympathy for them but now I actually feel derision. F*ckem, hope they lose their ass for being so greedy.
You know what the deal is. They “need” the 200K in hand because that’s what they got from the first place. I’m sure the plan is that’s how wifey stays home while they have an even more expensive place.
Tough tough shit.
‘Asked what he was going to do, Aaron said, “Pray.”’
How about “lower the price”
Useless tit.
I checked the Maricopa county records. Aaron and Holly Mueller made a $181,000 profit on their old house and put down only $1000 as down-payment towards the purchase of their next home in the North valley which they purchased on 6/20/2005 for $394,000.
First, I am not sure why the AZ republic article says they purchased the home for $373,000. Second, what happened to the $180,000 profit? After all, the move to MN probably didn’t come until this spring when the job transfer came through.
They haven’t felt enough stress yet!
“Second, what happened to the $180,000 profit? Let’s see, a Hummer H2 for her, a BMW 330i for him, new bedroom and living room furniture for the tract Castle. It could get used up pretty fast.
Let’s send them a link to this blog. Reading here should raise any FBs stress level by 2 standard deviations.
When that phone rings it will be God telling them “he’s got bigger problems than their F#cking house in Phoenix”. Nothing I hate more than all of these greedy bastards acting like God had any part in their stupidity.
LOL!
Lessee, $373,000 purchase price, $60,000 on ‘improvements’ and they’re whining that it won’t sell for $650k after a year or two? I’d hate to see what kind of work this guy does as an electrical engineer if he’s such a delusional dumbass about finances. Probably one of those glad-handling corporate twits who’s good at politiciking and paper-shuffling but not much else.
They could just move to a smaller place in Minnesota. $495k is still way above the average house in that part of the country.
Cry me a river, you greedy bastards. I’m sure their newborn would much prefer to have his mother staying a home, caring for him, than to be living in an overpriced, oversized suburban McMansion while his idiot father relies on “prayer” instead of sound financial management.
I sincerely hope this couple ends up getting their heads handed to them, since nothing else will make them wise up and get their priorities in order.
I paid ~279K for my 3000sf Chandler AZ home in late 2002. Similar houses in my neighborhood are on the market for $600K. That’s more that double what I paid!! I’m rich $$$$$ No wait…I bought this house to live in
Lest anyone feels too sorry for these flippers, here is the ‘flip side’ of the boom in Texas:
‘After they paid their utility bills, their health insurance premiums and the costs of raising three young children, Sandra and Wayne Harris didn’t have a lot left. But the longtime Central Texas residents still had a dream: to buy their first home. The couple knew it wouldn’t be easy. They were preapproved for a $125,000 mortgage last year — just as housing prices began to take off, dramatically reducing their options for finding a place close to their jobs in Central Austin.’
Ben: Texas will be as bad as Arizona, Florida and California, if not worse.
Arizona is the worst bubble market in the country. There is no shortage of land here, and they keep building. There are so many investment properties on the market it’s truly unbelievable. Take a look on realtor.com and you’ll see most of the houses don’t even have furniture in them, they were bought with the sole intent of flipping them. This is all fine and dandy until you run out of idiots willing to pay 20% more than you did for the same house a month ago. We’ve offcially run out of idiots in Phoenix, now the flipper pain begins.
C$L, I agree with you on this. I took a bike ride a couple of miles from my NW Phoenix area rental and came across a new subdivision being started by H R Horton. There are I am estimating 200 homes from the framing stage to nearly completed. About that many slabs have also been pored. The streets are not completed. There are an enormous number of resales in the area and they are all way overpriced for the new home competition. I have heard from neighbors that the builders purchased the land 5 or 6 years ago and are in a position to sell at 2003 or 2004 prices if necessary.
My neighborhood has experienced a $50-$75K reduction in price on $300-$350K homes ( now $240-$320K). It is populated by mostly 25-28 year old families with a number of retirees also in the mix. Flipper properties have of course run the market to the level where the young families have trouble qualifying. I have seen the cities master plan and as it progresses the area looks like it wiil be a great place to live and raise a family. Once the prices hit bottom there will probably be unbelievable growth in the area. With three kids in college I am trying to be optimistic about the future.
Ben, I had no intent on defending her…I missed the part where she bought “5 more”…She was clearly speculating and her greed did her in….Hopefully, this market is going to correct from the gross speculation that has occured and this family in Texas will finally get a home they can afford….
Yeah, it’s the part baout the 5 more that makes her culpable for the proverbial “pounding”.
That’s just it . The flippers drove up the prices by this false short term demand ,so the nice young couple can’t get into a house to live in close to work.
Screw the flippers. They can all go chapter 7 and pay cash for everything the next 10 years.
The can’t go to Chptr 7 (liquidation) if they make more than their county’s median income.
Thank the new BK laws.
Chapter 7 wasn’t designed for idiots who get in over their heads. It was designed for people who have unexpected medical bills, job loss, etc.
I’m glad it’s more difficult to file bankruptcy now.
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>“The number of homes for sale on the Arizona Regional Multiple Listing Service increased nearly four times from June 2005 to last month, when it hit a level nearly double what experts consider healthy.
Inventory increased FOUR times??? so now 2 x 4 = 8x unhealthy???
>It’s going to leave a mark.’”
Yeah - you it’s going to leave a mark alright. On someone’s ass.
>”She took her profits, threw in some extra money and bought five more houses. She spent money fixing them up, but when she put the houses on the market, she realized she had bought at the peak,”
“Success is a lousy teacher. It seduces smart people into thinking they can’t lose.” - Bill Gates
I love that quote. I had not heard that before, but it rings so very true. The only way that I have learned in investing in the past is through my mistakes, not my successes. Luckily, I had already read about “cutting losses”, although sometimes I felt I didn’t do it quick enough.
I think it was Jesse Livermore, legendary stock speculator, who summed it up with something like: “you always need to have a stake, you can never lose it all - you need something, seed money, to get back in the game.” FB’s have nothing left, when you leverage yourself 100% and more, there is nothing to fall back on…
If you want to be a fixer-upper, buy one house, fix it up, sell it and move on to the next. If you can’t sell it, live in it.
These are the fixers who benefit neighborhoods. Buy one place, live in it (if possible) while fixing it up yourself, leave the place better than you found it when you move on.
My parents used to buy fixers, back in the ’70s. One house they bought cheap, the previous owner had something like 40 cats, none of which had been fixed. The house STUNK to high heavens. They ripped everything out to put in all new — but we had to live there in the meantime. Fixers actually work for their money!
“Experience runs an expensive school, but fools will learn in no other”
- Ben Franklin
I propose this for the bubble motto.
I second that, especially since the quote has such distinguished pedigree.
Ben, why don’t you have a quotes page, part of it could be like the above, there’ve been a few good ones from Warren Buffet on the blog, the rest could be ridiculous quotes from RE agents, flippers, economists etc. If you put them in cronological order it would be very amusing to see how they change as reality begins to set in.
Who here speculated in the Dot Com run up & bust ?? If so, some balance needs to be taken into consideration, in calling the “Kettle Black”…Just as many people were hurt in that Dot Com bubble that will be hurt in this one…..
Yes there were a lot of people hurt. But should I feel sorry for the day trader of Enron or the 401K employee of Enron?
Bottom line: Investments have risk. Otherwise, there would be no incentive and no profit to be had.
Also, we live in the USA, not Iraq. There are no debtors prisons here. Declare bankruptcy and start over. You tried, you failed. That’s life.
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The lesson here is stay diversified and don’t overleverage. If you speculate, only speculate with money you can afford to lose.
p.s.
BK ain’t so easy anymore.
p.p.s.
I’m all for debtors prisons.
I speculated in it big time. My average holding period was 2 hours to 10 days maximum. I took a few whacks just like everyone else when the market abruptly turned from bull to bear in April of 2000 but held onto ~90% of what I made prior to that. The key is to understand when the character of your market has changed and exit if you can’t handle it or adapt to the changes.
Major trend breaks are a pretty obvious indicator. There was plenty
of time to get out of the market in 2000. Same deal with the current real estate bubble.
The difference is, you know what you are doing and have had years of experience and understand your field. And even then, there’s still some risk and you understand that.
However, the latter part of the boom became amateur hour for all the wannabes who never invested the time, training and hard knocks. Maybe they went to a couple of seminars and that’s about it.
Yup. Just like all the engineers and other daytrader wannabes thought they could just walk away from their cubicle farm, sit down, and take money away from professional stock traders.
They learned. Rather quickly
I don’t know what percentage of people owned stocks, but about 70% of US population owns houses and they will all be affected.
The only people that won’t be hurt are the ones that bought 4-5 years ago and didn’t use their house as an ATM.
Everyone will be effected if theres a huge bust. Jobs will be cut. ALL home prices will go down somewhat. This isnt confined at all. Thats why Im wary when people bask in the financial fires burning up people like the woman in this post. We are ALL going to feel it in America, and likely in Europe and Asia as well. This isnt gonna be fun at all.
No one ever said it would be fun. But people like that woman (and the banks who loaned her the money) are the reason we’re in this mess! Every one of the five houses she bought could have been bought by a real family with real, productive jobs. Instead, they were outbid by foolish flippers betting with the banks’ money.
Nah, we’ll just create a new bubble which will bail everyone out. Oil or gold?
Total BS. In the dot com era I was speculating with money that I had already earned. When it was over, I had less money than I started with. Not the case with the currently leveraged flippers.
Many used margin or took out loans on their homes to play the dot.com bubble. I have 4 times cash buying power in one of my trading accounts. I don’t use it though. It comes along with the “pattern day trader” label.
I have 100x. Imagine the trouble you could get into with that.
Unfortunately some people do. This was a few years ago but our kids’ music teacher told me that the father of one of her students lost her college education money in the market. Imagine family dinner time at that household.
“Who here speculated in the Dot Com run up & bust ??”
I started selling picks and shovels to the dot.commers in 1994.
My “financial” investments were conservative all through the second half of the 90s, as I though I saw a bubble coming in 1995 when the pick&shovels business took off. I did lose some money on Maxtor in the early 90s around the time that one of the disk drive companies went BK, and their “inventory” turned out to be boxes full of bricks.
Even if I had had time to *also* be a day trader, it would have been dumb to invest in dot.bomb stocks at the same time that I was running a business that depended on the Internet becoming a success.
I realized that the game was soon to be up in about 1998, when I started getting “opportunities” presented to me that required my company to front the picks&shovels to starry-eyed startups run by 22 year old kids, in exchange for participation.
We’re still selling the p&s, but only to real companies, as always.
I was mostly into the S & P 500 in my retirement plan. In the summer of 2005 I inherited $58,000 that I did not anticipate. I put that into tech stocks (Dell, Rational, Micrel Semiconductors, Cisco, and JDS Uniphase). I lost half by the time I sold the last of it in 2003. The key thing is that it was not my money and I shed no tear. Didn’t give a glimpse of thought of jumping out of a window. Besides, I did not think that investment would make me a millionaire in 5 years, unlike the R.E. speculators of this bubble. Today my net worth is about 60% higher than my net worth in January of 2000. I’m a more conservative investor and these days I pay attention to the fundamentals (price of oil, the federal funds rate, and so on). I shed no tears for the FBs and FS’s.
“In the summer of 2005 …”
oops! In the summer of 2000, it should have read.
I managed to lose a lot more money than most people do — but not over the tech bubble. I lost mine with 9/11.
I had a 401K with all my money in one fund. On 9/10, I told them to pull all my money out of the fund — which they did but they didn’t do the transaction until the end of trading on 9/11 (per their rules). Anyway, I ended up pulling out at the absolute bottom of the market. And I wasn’t able to get back in for several days because of their rules.
Ouch.
“Stornelli is the listing agent for one of the higher-priced homes. His approach is to try for the higher prices, which he believes are justified in Scottsdale.”
I like this guy, ignore the facts and slap on the high price anyway. “Ostrich” Realtors anyone ?
Scottsdale is *different*, it’s not in the middle of the desert and doesn’t swelter in 119 degree heat in the summer. HAHAHAHA Theres an open house down the street from me and the only car I’ve seen there all day in the realtor’s Mercedes.. Chandler AZ
(posted 5/27/2006 2:55 pm)
House of Pain
RE agents/brokers should not be allowed to “pump-and-dump” their RE holdings with impunity. They should be bound to the same restrictions as stock brokers/bankers do. Chaps like David Lareah should be required to make disclosure of their RE holdings every time they blitz the media with their distorted “expert” comments. RE agents/brokers/speculators have been getting away with this predatory vocation for a long time.
The hoarding of houses by leveraged RE agents/speculators has forced many first-time home buyers to pay a painfully stiff entry fee to acquire their American dream. But that how unregulated free market works, but since tax payers will likely be called upon to clean up the mess, there has to be some regulatory stature to restrain the opportunistic predators out there. But as I mention before on this board, the market gives and the market takes with great fury. That hoarding of houses has become a titanic load of angst. RE agents/speculators are suffocating on the immense inventory of houses for sale on the market. They are crowding at the exit. The fear of financial carnage is there, but it has not been confirmed by national/public price statistic yet. For now, this suffocating crowd is just amassing at the exit. It can turn into a stampede for the exit over night as spring fades into the still heat of the summer and into the chilly air of autumn. Many of them will be wiped out. The smart RE investors I know, all of them got out 2-3 years early. But that’s the nature of manias. If you got out at the top, you are the fortunate few.
“A woman walked into Barry’s Realty Executives office about nine weeks ago, sat down and began crying. She said she bought two houses last year, fixed them up and quickly sold them, making a $50,000 profit on each. She took her profits, threw in some extra money and bought five more houses. She spent money fixing them up, but when she put the houses on the market, she realized she had bought at the peak, Barry said.”
I’m sure this woman was bragging to all her friends after making $100k profit, and now she’s losing $20k a month.
I doubt any of them have sympathy for her now..
-X
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Dude is lucky that the woman didn’t REALLY crack - like this guy -
—
Shooter lost $105,000 in month, but motive still a mystery
July 30, 1999
ATLANTA (CNN) — The man who allegedly shot to death nine people at two brokerage houses in Atlanta lost about $105,000 in his last month of day trading — and on his last trading day he ended on a down note.
http://www.cnn.com/US/9907/30/atlanta.shooting.08/
exactly. she sure didn’t cry when she priced-out young families starting out looking for their first home.
Amen.
For gods sake ! She god what she deserved. As do all the flippers. Having a home isn’t a market, it’s where we live. When you start buying up homes to flip you are screwing with peoples lives. How is a god damn young couple ever going to afford a 700,000 home ?!!!! I want to see each and every one of them pay for ruining peoples lives.
My home is right next to one of those homes lady was thinking she wanted to rent out.
I went over and told her right to her face “I don’t want no Stinking Rentors living next to me”. I ‘m a homeowner.
PS. I don’t really live in Arizona just thinking who wants to live next door to a renter.
Is this comment tounge-in-cheek? I’d like to live next door to a renter right now because they seem to be the only people with half-a-brain left right now. I would not want to live next door to a recent homebuyer in this market since they likely have no idea what they are doing.
I’m a “stinking renter.” I’m pretty sure the neighbors on either side of us greatly prefer us to the homeowners who live on either side of them, as we do a much better job of keeping our place up, don’t let our kids run wild, and are far more considerate, not to mention presentable, as neighbors than many of the current owners.
Yup…I’m a current renter and the neighbors love us. The owner (who moved out) was a nut and we keep the property up much nicer than she did. We also have a higher income than most in our neighborhood etc. Renters might not be good to have in a low income neighborhood, but don’t try and sterotype me being a renter as something bad. I’m on my 2-3 year current job assignment in one of the biggest bubble areas in the country, South Florida. The LAST thing I would do right now around here is buy a home. I’m just saving my money and waiting to leave this place.
I’m a “stinking renter” too. I always paid my rent on time. I hate rap “music,” I am very considerate of whether I make noise that my neighbor could hear and I hope the same from them. I am a professional engineer. Nice to be thought well of as a renter. Perhaps the homeowner is very envious of renters’ freedoms in the face of a big real estate collapse.
Well I own my house in Gilbert and I have had renters around me. I’m telling you that its isn’t good. I actually had to go to the one guy who is also a realtor and call him a slumlord right to his face. I asked the dude why are you renting your house to criminals. How would you like it if I owned a house by you and rented it to criminals. After his renter broke into two of the neighbors homes I had seen enough. What finally got rid of them was the renter went to prison for three years. The people there now aren’t much better. The how was trashed when they finally moved. Same can be said about a couple of other ones by me, and this is a nice ten year old neighborhood.
I am a renter, I like rap music, I dont play it loud enough to be heard outisde my walls. Cant say the same for the people who play country “music” and own the house 4 over from mine.
I am also a proffessional engineer.
What is your point, or is the point at the top of the pillow case you wear on top of your head.
The last 4 months are the first time in 30 years that we have been renters. Although we will probably buy a home someday I feel the freedom of not having the responsibility that goes with maintaning a home you own. Renters as a group are often much more interesting people that home owners.
Amen to that.
Hey, at least the flippers who bought the house next to mine live locally, so they keep the lawn mowed.
I have to kind of feel sorry for these people, even the flippers. The VAST, VAST majority of people are oblivious to blogs such as this or alternative media sources. The mainsteam media and Realtors associations keep on saying (to this very day) “everything is FINE, there is NO bubble, prices will keep going up”. When EVERY SINGLE media source around you says it, and derides contrarians as “conspiracy theorists”, you begin to think it must be true. The majority of these people are probably average Joes and Janes who said “hot dog, everyone else is making big bucks off this boom, why not ME?” and invested every dollar they had into something that everyone told them was SUREFIRE. Of course, we are finding it isnt…The real people here who have acted completely immorally and bordering on criminally are the realtors, the predatory lenders who lend to people knowing they’ll collect on the foreclosure, and the eternal optimists who dismiss reality. Those people should be ashamed of themselves. While we cant expect businesses to “protect people from themselves”, we can expect them and the media sources meant to check them not to completely lie to people and fool them into financial ruin. Oh, and can someone explain to me what the RE term “comps” means?
“comps” are properties comparable in value to yours.
let me modify that slightly: “comps” are properties comparable in value to yours as indicated by their recent sale price.
bw,”comps” are comparable sales.
“comps” or comparable sales are the recent sales in your area that the Appraiser uses to justify the number he is told to hit by the mortgage broker.
Oh please, BW. You surely don’t expect us to feel PITY for the sheep and lemmings who got “fooled into financial ruin”? There’s an obsolete notion called PERSONAL RESPONSIBILITY AND ACCOUNTABILITY that means PEOPLE ARE RESPONSIBLE FOR THEIR OWN DECISIONS, and have no one to blame but themselves for the outcomes. Most of the poor pitiable bagholders you feel sorry for were clearly too stupid and lazy to perform even a cursury “due dilligence” to consider the risks and pitfalls of what they were getting themselves into, and the vast majority, I’m guessing, bought into the notion that “housing only goes up” and there was easy money to be made.
Since Biblical times, fools and their money have been parted. This latest batch gets no sympathy from me.
Even in college I was blown away by the hordes that would do anything to avoid doing a fairly difficult research paper or study for mid-terms and finals. Pure lazy entitlement mentality that results in vacuous character…These greed-driven folks probably paid minimal more attention to researching their RE decisions through than they do skimming channels with the remote. It would be a HUGE dis-service and a real swift kick to the groin to the fiscally responsible to have to bail these folks out without allowing them to LEARN from their mistakes.
DOC
Your pseudonym says it all. I bet Karma has no sympathy for you, either.
“The business of buying and selling houses provokes extreme emotional outbursts. People yell, they lose sleep, they cry, they’re stricken with buyer’s and seller’s remorse. That’s especially true these days in metropolitan Phoenix’s post-boom housing market, where nearly everything has reversed since last year’s frenzy.”
Metropolitan Phoenix’s post-boom housing market sounds like Hell on Earth!
Exactly, these people put themselves in a self-imposed HELL! I don’t care what anyone says “BW” above included, if it seems too good to be true, it almost always is.
They had a saying for this many years ago: “There is NO Free Lunch!” Old timers know this, an entire new generation will find it out as well.
I wasn’t saying people were faultless. Obviously people should do some research before taking on investments and should be responsible for them. Heck, I haven’t been able to buy a home near my work yet because of the insanely high prices brought on by these flippers. I’m just saying that I can see how in the mania, with every media source cheering them on, brought this upon themselves. I’m just not revelling in their financial destruction as much *shrug*. It will feel GREAT when we return to SANE prices though.
I will feel GREAT when prices hit INSANELY LOW levels!
“‘Her eyes just started to well up, and she just started bawling,’ Barry said. ‘She said she couldn’t sell them for what she bought them for. She said her monthly payments were about $20,000.’”
You’d have to have a heart of stone not to laugh at her.
keep ‘em comin, Sammy!! lmao!
LMAO
Before BW or others jump on me.
If I did something stupid, I would analyze it, laugh at myself and move on.
According to Zillow, Phoenix prices are still going up while the line for Arizona as a state is sort of fluctuating.
Must be right at the top of the roller coaster and about ready (Sept?) to plunge. I guess the buyer/seller “standoff” is still happening in Phoenix.
Regardless, in the end it boils down to the fact that there is almost nothing that forces people to buy, but there are lots of reasons that force people to sell.
I want flippers to feel pain as they have artificially reduced supply while driving prices up, enabled hordes of CA equity locusts to take wing, and priced hard-working fiscally conservative people out of the market.
I wonder how many properties the “average flipper” owns? I suspect the average is higher than one. And I suspect RE activity over the last 3 years has been anywhere from 30% to 60% speculation.
This time truly will be “different”.
“and priced hard-working fiscally conservative people out of the market.” We hard working fiscal conservatives who have been priced out have been renting for several years. There are many of us who will be able to buy for cash the entire purchase price of a reasonable quality home by the time this real estate cycle is at the low point.
We have renters two doors down and they are the only ones (besides us) who take their trash out in the morning, rather than the night before pick-up. And their yard is gorgeous.
I feel sorry for the people in the first article who are just trying to sell their house and move, and have neighbors coming after them with pitchforks. Rather uncomfortable IMO. I guess they weren’t invited to many neighborhood BBQs this summer.
And those people wanting to move back to MN can kiss my ass. Where did their 180k go? A 500k house in Minnesota is just ridiculous. I think that baby might be better off in daycare than home with such an idiotic mother. Plus I hate it when women feel entitled to stay home.
Yeah that whole story really got on my last nerve. I hated the same things you did about it. Why on earth do people buy these ever more expensive houses and then leave after two years. Why do they keep having kids at the same time they leverage themselves up like this and then whine when they can’t stay home with them. People like that just make me sick.
Good comment that got me thinking. I saved and my wife worked for 6 years before we had our first child. The whole point of my labored savings was to allow my wife to not have to work after our baby was born. I was also a renter the whole time. It wasn’t until we were married for 10 years that we bought our first house, full 20% down etc. I was 39. During the bubble it amazed me that 20 somethings all felt like they deserved immediate gratification of home ownership, without having to suffer a little bit and save up for years for the 20% down payment. Loose lending allowed them to do it. Maybe the pain will be felt now, instead of earlier when they should have been saving up.
If you’re too busy to raise your own kids, don’t have them.
Agree, but some people HAVE to work (which is different than working to buy a McMansion, BTW). Other than that, I agree with you.
It’s not that people feel “entitled” to stay home. They simply believe in raising their own children. Besides, it’s rarely very profitable to have both parents working. When one considers taxes (second income is taxed at highest rate), daycare (can easily run $700-$1200/mo per child), car maintenance, replacement, gas, food and clothing…most women are lucky to come out $300 ahead per month. IMO, many are actually losing money by working outside the home and don’t even know it.
I pity the poor newborn. He didn’t pick the cretins who spawned him, but will have to deal with the consequences of their greed and stupidity. I bet he ends up practically being raised by the parents of these Poster Children for the housing bubble, while his mom and dad spend a lifetime working off their debt servitude — if they even stay together given the financial pressure cooker they brought on themselves.
Children are almost always better off being raised by their mothers instead of some minium-wage kiddy kennel employee. Even dumb mothers can be caring nurturers to their offspring.
That last comment was uncalled for. These so called “minimum-wage kiddy kennel employees” work harder for their crappy paycheck than many well-paid people do. My son is in daycare (single mom, have no choice) and is very well cared for. Not to mention taught - a LOT. Daycare is the reason why most stay-at-home kids now have to go to nursery school/pre-K rather than just starting kindergarten at age 5.
I feel sorry for mothers, especially single moms, who HAVE to put their kids in day-care. And I don’t doubt that a lot of the day-care staff are caring, hard-working people, though I think NOBODY will take care of your child as well as its biological parents.
My wife quit work (a professional position) a month before my first child was born, and I’ve seen firsthand how much care and attention children need, and deserve. Will they get that from day-care? Possibly, but I doubt it. For moms who don’t have a choice, I understand and sympathize, but for greedy yuppie harpies who just HAVE to have that McMansion and new Lexus SUV every other year, and are too selfish to do the hard work of raising and parenting their own children, I have nothing but contempt.
Nursery school has been around for decades! I went to nursery school in the 60’s and my children went to nursery school(preschool). Not because Daycare kids are better prepared for kindergarten, but to give Mom a few hours a week to go to doctors appointments, grocery store, tune ups………… For socialization…… I know several children who didn’t go to Pre school and are doing quite well in school. Not for or against working and or daycares, but just stating facts. I do agree with you that daycare workers do work harder in one day than most do in a week.
I didn’t say nursery school was new - I said it’s now almost mandatory (yes, it was around when I was a kid, no I didn’t attend). I’m merely repeating what my stay-at-home mom friends tell me - that they feel pressure to put their kids into nursery/pre-K (oftentimes on school district’s urging) to ensure all kids are at the same level when starting kindergarten. Then they mutter under their breath “…damn daycares…” because they don’t want to pay for the pre-K schools.
I’ve lived in 6 different states, my children have attended different preschools, I have NEVER heard a stay at home mom say “damn daycares” because they have to pay for preschools. I’ve never heard a school district urge parents to send them to preschool either! By the way, I’m a second grade teacher. Most educated stay at home moms work with their children on their abc’s…… And it isn’t mandatory now, although here in Florida, the state is now offering public PreK. Not because of daycares, but to give children a head start. As a teacher, I can say we can spot many daycare children and it’s not because they are so advanced!
I’m not making this up - it’s been said to my face. And your last insinuation is just plain rude.
lizziebeth,
I used to teach 1st (and some K). Agree with you. The kids with educated/concerned SAHPs do better than daycare kids. The daycare/preschool kids tend to be more “worldly” than their SAH peers. As a teacher, I would NOT recommend parents send their kids to preschool. It’s better if they just read, write, do projects, expose them to different things, etc.
That does not mean I’m against working parents who HAVE to work. I also understand why some WANT to work instead (to have a life of their own & maintain financial independence).
The couple probably moved to Edina. F#ck those cake-eaters.
The parents might be in financial trouble, but they are not poor. As engineer at Honeywell, Aaron’s family has good health insurance, and he should earn much more than median income. He might have to spend a large part of it to service his debts, but this is no catastrophe.
To daycare: We want our children, at least some time of the week, to play with other children. In other times, they might have played with neighbour kids and with cousins, but our current living isn’t made for that. We love our daycare.
Meshell, shame on you! It’s a woman’s entitlement as the mother of a child to take care of and raise the child she gave birth! Until you have given birth you won’t understand that It’s the natural thing to do. It’s been done that way since the beginning. Fortunately, women have a choice to work or stay home. Unfortunately, sometimes greed or necessity take away that choice!
> It’s a woman’s entitlement as the mother of a child to take care of and raise the child she gave birth!
Against whom should the mother have this entitlement? The state? Not in the constitution. The father? I would strongly disagree. Mother and father have the rights and duties of parents together, and they have the same right to make choices about who works, who stays at home and what happens to the child. They must decide together and should better do so without preconceived patriarchal notions about the “natural” things. And now, back to housing bubble and housing bust …
Peter,
sorry I should have included the father in my statement. However, I had to respond to Meshells comment about women feeling entitled to stay at home with their child. As I said, mothers have a choice(as do fathers). Unfortunately, greed or necessity takes away from this choice. Unless you are talking about welfare, I have no idea what you mean about the state????? It is a mothers (or fathers) right to chose whether or not to stay home and raise their child! They are entitled as the child’s parents to make that decision. And yes, back to the housing bubble……………
Yes, I was thinking about welfare, and Yes, we seem to agree on most of the points. Back to …
Not sure if it’s an “entitlement” for a Mom to stay home and raise her offspring, but clearly, it’s nature’s way. I can’t even imagine letting someone else, other than their mother and I, raising our kids. We brought them into this world, and the responsibility for raising them is ours and ours alone.
When I was a kid most of the moms in the neighborhood stayed home. They generally knew what we were up to and kept an eye on things. Not so with the latchkey generation. My Mom & Dad raised five kids in a 1300-sq ft house, built in the 20s, and I don’t recall feeling deprived because our station wagon was ten years old, or we didn’t have a McMansion on an acre lot.
My neighbor in Irvine just purchased a home and is trying to rent out his condo. He is asking $3,000 per mo. rent on a 1500 sq. ft place. he says he nees this to make his new house payments. What a way to set your rental rate……. WOW!
uh… I was paying just $2000/month for a same sized condo in Turtle Ridge a year ago.
He can certainly put that out there, be negative $3000 for the next 6 months while he wait for a renter, then lower to $2400 (which is much more realistic but still pricey) and maybe find a renter at that time. (in the process be $18000 in the hole and $600 down every month).
sounds like he need to learn this lesson the hard way.
Going rental rate in Irvine is about $1.50-$1.60/square foot, which suggests a rate of $2250-$2400. The guy is going to get zero inquiries at $3000.
I can announce now that I’m a “bitter poor renter” in Irvine - NOT. More about that later …
I’m just enjoying this blog more and more…it’s starting to be my main source of pleasure
I’m sure fwd’ing a lot of emails lately…:) & can’t wait for the future pleasures that’s peeking around the corner w/the soft landing and all…
As this RE mess unfolds, I’ll end up feeling the same mix of scorn and empathy for those who are burned. As indicated above, there is so much ability to educate oneself on so many issues–home prices, politics, politics, um, politics … Do people even look past the USA Today? Not too many. So they get screwed by those who prey on easy little fish. As long as housing prices up, not my pension that gets trashed, not my local pol who has his/her hand in the cookie jar, they continue in their little Disney world of fast food and reality TV. But in the end it is pretty sad.
When I first moved to FL. in 2000 we were looking to rent while we did our house hunting. Instead we stuck our heads into a condo open house and figured that buying the condo while looking for a house would be cheeper than renting and a whole lot nicer. (it’s hard to believe that not too long ago that was the case) We ended up selling the condo after we bought our house and got 50K more than we paid for it. One year later the guy who bought from us sold it for 100K more than we sold it for. My friednds told me I was crazy to sell and now I must feel bad.
I told them that I lived for free for a year and half and put 25K in my pocket after all expenses and I sold at a very fair price at the time. Quite frankly if all my bright ideas turned out that good I’d be one very happy guy.
Anyway, to continue the story, I met a friend of a friend later that told me he tried to buy the condo (at the inflated price) but got out bid. I said if he was so interested in the condo Why didn’t buy from me for 100K less one year prior (he knew it was for sale then). I just got a blank stare from him.
I always like to say, it easy to sell a house worth 500k for 1Mil if the buyer thinks it will be 1.3Mil mext year, but it is very hard to sell a 1mil house for 500K if the buyer thinks it will be 400K next year.
It’s all about perception.
As for the lady that is getting a lesson in gravity, she is going to feel the collective pain of all the retirees and first time home buyer that were priced out of the market due to her greed.
“As for the lady that is getting a lesson in gravity, she is going to feel the collective pain of all the retirees and first time home buyer that were priced out of the market due to her greed. ”
Well said.
If prices were at 2000′ levels + REALISTIC yearly increase over the past 5 years, I (and many many others) could readily and comfortably afford to buy. But like many others here, I’ll have to wait and save, and pray the fallout from this mania doesn’t hurt us all.
DOC
“If prices were at 2000′ levels + REALISTIC yearly increase over the past 5 years, I (and many many others) could readily and comfortably afford to buy”
In other words, you want to blame THEM for your unhappiness, and you wish harm on THEM to make you happy. You have proved my point. You are pissed because you can’t buy a house at a comfortable price you like.
People who buy properties can sell them for anything they want, whether you like it or not. I may not like it either, but it’s THEIRS, not mine.
Some day if you own a house and decide to sell it, how will you feel if a bunch of envious cranks start screaming because you don’t set the price to suit them?
For some of us, it’s we REFUSE to buy a home at the prices the bubble has caused. Some of us know that we can rent the same home for less than the mortgage. Some of us won’t risk our hard earned money on a bunch of day traders (oops I meant flippers) ruining the real estate market.
Incredulous,
Dr. Strangelove hasn’t written that he is unhappy, therefore, he hasn’t blamed anyone for it either yet. He wishes to buy at a price that is comfortable to him (e.g. has a reasonable ratio to his annual income), and that seems a rather normal wish. I wish him luck.
To the economics: Sellers can ASK for any price they want, they might, however, not get it. This seems to happen more and more. You asked for sympathy with the flipper, but now you emphasize that the house is theirs and not mine and they can set the price - if they are so powerful, why do they need our sympathy? If I own a house and want to sell it, and some people scream that my asking price is too high, I try to sell to others, of course. If I can’t sell, however, the screamers might have a point.
Good for you, OutofSanDiego. I post on a baby-centric family finances board (and seriously, some of the posts would blow your mind: e.g., family of 6 with a stay at home mom and a father working for minimum wage asking “how can we make ends meet”!) and the Number One problem people have over there is that the wife quits her job post-baby but the couple continues to live like they are bringing in the pre-baby income.
MeShell,
If even 3 of those kids are in daycare, the mother’s after-tax income would likely not cover just that cost, much less transportation, clothing, food expenses, etc. IMHO, a mother has to be making a **minimum** of $60K, with a fairly reasonable commute, to be making any money. You’d be amazed how much money is saved by having a SAHP (that’s “stay-at-home-parent, for those not into family blogs/sites).
“A woman walked into Barry’s Realty Executives office about nine weeks ago, sat down and began crying. She said she bought two houses last year, fixed them up and quickly sold them, making a $50,000 profit on each. She took her profits, threw in some extra money and bought five more houses. She spent money fixing them up, but when she put the houses on the market, she realized she had bought at the peak, Barry said.”
“‘Her eyes just started to well up, and she just started bawling,’ Barry said. ‘She said she couldn’t sell them for what she bought them for. She said her monthly payments were about $20,000.’”
Cry me a river.
the lady with 5 houses can solve her problem easily. Just hire skydivers, the buyers will see those and be making multiple bids!
OT, right thread. What if FB Specuvestors start renting their overpriced POSs they can’t move to two or three families? Regardless of HOA or community standards. I fear it is coming!!
Do you???
This is probably going to be a big “danger” in college towns or Florida. If they can’t sell their Condo in Daytona, Tampa, or Orlando, or rent it, it’ll be rented out to large groups of kids for spring break, etc!
Who cares about the HOA “rules” when you need to eat?!
“Oh no, honey! It looks like a bunch of KIDS are renting out that apartment across the street! Quick, close all the shutters, lock the doors! Hurry! They might come over here and play some of their new-fangled music, or start using foul language! How can they let a DANGER like this exist near us?”
I listen to the police scanner as “entertainment” as I work. Today I heard an interesting one. A “real estate” sign in front of a SFR was on fire!
I wonder if some neighbor, angry about the low price, set it….