‘It’s Like The Market Just Collapsed’
The New York Times has this report titled, ‘The Houses That Wouldn’t Move.’ “Lynn and Frank Balducci’s house in Bethpage, N.Y., should be a real estate agent’s dream. The Balduccis put their 1951 colonial on the market in early May. They held seven open houses, but they still had not gotten a single offer as of early August, even after they dropped their asking price to $539,000 from $589,000.”
“‘It’s very depressing,’ Ms. Balducci said, adding that at least seven houses in her neighborhood had been on the market for at least as long as theirs. ‘It’s a little scary for us, too, because we very shortly may be in a position where we have to carry two mortgages.’”
“The Balduccis’ agent, Peggy Chugkowski in Massapequa, tells a story that is becoming increasingly familiar around the region. ‘A year ago, this house would have sold within two weeks maximum, and they would have easily gotten close to $600,000,’ she said. ‘This really shows you what’s going on right now. It’s like the market just collapsed.’”
“The inventory of available houses in New York, New Jersey and Connecticut has soared. Some houses in the $1 million range and higher have dropped in price by more than $200,000, while lower-priced homes have had smaller percentage decreases.”
“In many cases, buyers and sellers have reached a wary stalemate. ‘We’re at a point where sellers don’t want to lower their prices and buyers don’t want to raise their bids,’ said Roberta Baldwin, a broker in Upper Montclair, N.J. ‘Buyers are now saying, ‘Wait a second, the market is stabilizing, so why should I pay $20,000 more when I could pay less?’”
“Thomas Gallagher, a broker who owns eight Century 21 offices on Long Island, called it a buyer’s market. ‘I’ve never seen as many open houses as I see now,’ he said.”
“Mr. Gallagher said that real estate agents have been pushing harder in recent months to convince sellers that they cannot expect the kind of price increases they saw in recent years. ‘People are finally starting to understand that even if they could have gotten more for their house last year, it’s not last year.’”
“Another clear sign that home sales are undergoing a market correction is the growth in inventories. In Nassau County, the inventory of homes for sale was up by 75 percent in June 2006 over the previous year, to 9,934 from 5,662. Inventory in Suffolk County went up by 65 percent to 13,724 homes in June, compared with 8,318 in 2005.”
“In Westchester County, inventory was up by 38 percent over the previous year, to 6,585 residential units.”
“Richard Gross, an investor from New York City who bought a three-bedroom house in New Rochelle in February 2005, hoping to resell it at a profit after making renovations, said he had had trouble getting the price he wanted. He bought the house for $315,000 and put in more than $100,000 in repairs and renovations, he said. Now, despite having had the house appraised at $555,000 and putting it on the market three months ago, he has yet to receive an offer that exceeds $500,000.”
“‘It seems like the boom kind of ended with everybody’s talk of the bubble bursting,’ he said. ‘I think all the talk actually made it happen.’”
‘I think all the talk actually made it happen.’
Aaaarrrrgh! The stupidity — it burns!!
The stupidity also lies in the fact that the Balduccis said they are selling to move up. IT WAS A FOUR BEDROOM HOUSE. The have ONE little girl.
with a large new EIK, formal LR, family room…
Tough noodles.
Hummer houses are soon to go out of fashion. The irrational exuberance brought on by outsized home equity wealth increases for owners of supersized houses during a period of record home price inflation is currently undergoing tranformation into the morning-after realities of flat or negative appreciation coupled with relatively higher interest payments, taxes, insurance, cooling, heating, and maintenance costs which come with owning them.
Now that I think about it, I guess all the talk sunk the NASDAQ in 2000. Those dirty rotten bastards! How dare they say negative things about RE! I’m outraged!
Was out at a local watering hole last thursday. A broker I know said to me that he wishes that the bloggers and newspapers would quit putting out negative news. I said back that most of it is factual and truthful. He didn’t care as he is trying to flip some property. To hell with the dummies, his supposed clients, he said. Keep it up Ben and bloggers.
“To hell with the dummies, his supposed clients, he said.”
To hell with the flippers, who believe in the possibility of a bottomless supply of greater fools and Central Bankers who never stop spiking the punchbowl.
Tulkinghorn’s comment is my nominee for the comment of the day!
Oh, yeah, the “talk” made it happen. Nothing at all to do with the crazy free money being thrown around. Or unsustainable “growth.” Or greedy investors. No, no, if it weren’t for the “talk” things would just keep humming along…..
what a steaming load.
Oh, yeah, the “talk” made it happen.
That’s right, and we should be ashamed of ourselves for causing the talk.
Now then, what should we talk about next? Just think of the possibilities…
How about World Peace and an end to poverty.
And be sure not to mention Global Warming.
Think I’ll head for some open houses this weekend and talk up the Bubble.
Sammy Schadenfreude, yur my heeero.
Hey. The realawhores will be appreciative of having someone to talk to. I understand they’ve been feeling like the Maytag repairmen at open houses lately….
Let’s talk about improving home affordability!
I saw a TV show on how Japan builds houses, that maybe the future after this terrible vaulted ceiling giant house bubble goes away. They are factory homes assembled on site , quite well made. I still hate the fact that in Cali you have to spend 700K on a 40 year old home with a concrete slab with buried water pipes that will leak forcing you to repipe in the attic. Or better some re-piping in the attic some still in the slab. yuck.
Underslab plumbing in earthquake country — how clever!
And it was before the days of PVC. I’m showing my age here…before PVC, what did they use? Copper?
When we had to redo our septic, we found the pipes to it were some wierd kind of paper stuff. This house was built in 65.
Wierd paper stuff may have been asbestos. Seriously.
It is probably orangeberg which is layers of tar paper. It was used to make pipes primarily from 1949-1950 at the start of the suburban post war housing boom because metals were still scarce. Just talking loud nearby is enough to rupture it. With luck it lasts around fifty years, so where I am many people are having to redo their sewer outlets.
Thank you Mole Man. What a resource this blog is.
“‘It’s a little scary for us, too, because we very shortly may be in a position where we have to carry two mortgages.’”
A classic line for the history books.
Nobdoy has to carry 2 mortgages. Sounds like somebody was stupid and went out and bought another house before selling the old one.
Why is it that many people will spend more time researching buying a TV or a toaster than buying and selling a house?
stupid … or simply greedy. If they would ask a fair price for the old house they wouldn’t need two mortgages. But of course, every homeowner is entitled to win the lottery so a fair asking price is out of the question.
It is a bit more complicated than just “asking a fair price.” How do you know what this is when nothing is selling? The difficulty is that when housing market liquidity has frozen solid, there is a great deal of uncertainty about the market value (in fact, this is pretty close to the modern definition of “illiquid” — the price is uncertain, and hence buying and selling is very risky for both sides of the transaction).
I have suggested sale by Dutch auction many times, and I have actually seen this formally implemented on ZipRealty (e.g. posted plan to drop the price by $1000/week until the home sells). This is a sensible way to proceed in a falling price environment, provided your personal price reductions are large and frequent enough to outpace the receding wave of home price deflation, but if you spent all your home equity on toys and vacations, then this strategy is unlikely to result in enough excess cash from the sale proceeds to fund the downpayment on the next home. In the latter case, I recommend enjoying your mental state of denial while keeping your home on the market forever at a price where it will not sell.
At $1K per week it will take a year to reduce $50K, They’ll never catch up with the market at that rate.
(At $1K per week…)
Right — you pointed out a further problem with trying to sell in a falling price environment, which is that even if you cleverly employ a Dutch auction strategy, there is still the vexing uncertainty of where to set your initial asking price (likely in the vicinity of any recent comps, provided any are available) and at what increment and frequencyto lower the price in order to hone in on market value quickly enough to avoid losing money to the downtrend… This does not sound like a trivial problem to me, given the uncertainty involved. And most sellers don’t even have a clue that prices are falling…
“And most sellers don’t even have a clue that prices are falling…”
So true. I live in N. VA and just this past week I overheard a discussion in a local fitness center. Two 30-something women were on adjacent treadmills, and one was going about how she and hubby had just purchased a house for “half a mil.” We was really fond of that phrase, and peppered her conversation with it. Then, she said something that floored me: “it’s a good feeling knowing that I can turn around and put the house on the market and make a profit.”
Well, I suppose someone has to be the last to know.
THAT is a hilarious story, George!
I can relate, as my neighborhood’s inventory of unsold homes has been steadiliy rising since last winter (now at 10). More homes have gone into “lis pendens” than have sold since then.
One that did sell was just across the street, for about $80K more than its worth. Who bought it? A recently divorced mother of 3, who talks like she’s on serious medication - I think the divorce settlement covered the place. Hope she doesn’t want to sell anytime within the next 5 years! (but then again, if the house is “free”, she can sell for a loss and still make money)
They probably felt like 99% of the rest of the population that they had better buy their SUV home “now” otherwise it will only go up and the appreciation will be more than the first home. Therefore, they reasoned that they were being “smart” in signing on the new construction (probably a new construction since she is talking about the future obligation), locking in the price, and then waiting to sell their first home. Trouble is, their reasoning rests entirely on invalid assumptions. Now they have overpaid for an SUV home and their first home is worth at least $100K less than they had thought.
This story is becoming very common. But soon instead of being 15% off in expectations, FBs will be 25%, 30%, and perhaps has much as 50% off in their valuations needed to make a deal work. They’ll be trapped. And they will bring new meaning to the term “indentured servitude.”
“It seems like the boom kind of ended with everybody’s talk of the bubble bursting,’ he said. ‘I think all the talk actually made it happen.”
Maybe there should be a test like drivers have to have before you can hold any money or be able to borrow money so that you know what this thing money is all about
There used to be one. It was called having a job and a good credit history.
“Maybe there should be a test…”
Back in the olden days, lenders used to have such a test, referred to as “underwriting standards.”
Haaa!! Best line of the day, GS!!!
Only if it is as hard for my wife as parallel parking!!! hehehehe
“Richard Gross, an investor from New York City who bought a three-bedroom house in New Rochelle in February 2005, hoping to resell it at a profit after making renovations, said he had had trouble getting the price he wanted. He bought the house for $315,000 and put in more than $100,000 in repairs and renovations, he said. Now, despite having had the house appraised at $555,000 and putting it on the market three months ago, he has yet to receive an offer that exceeds $500,000.”
Richard, drop the price to $450,000 and get out quick. The pyamid is collapsing. In a couple years it’ll be worth $350,000. Move on!
“Sell when you can, not when you have to!”
$315,000 plus $100,000 in “repairs and renovations.” Well duh, that’s part of home ownership. This is probably why the previous owner sold. Renovations are typically worth half what they cost. The recent market where they posted immediate gains was an abberation. So this place is worth $355,000 and he wonders why in this market it won’t sell for more than $500,000?
he’ll be regretting not taking that 500k offer…if he’s not already.
Robert’s post is important.
Renovations don’t pay except for during a mania.
Renovations do pay - if you otherwise couldn’t sell the house. Fix everything a housing inspector would flagg, and leave to the buyer the rest, like beautification.
I don’t consider anything a house inspector would flag as a renovation.
Those are repairs and maintenance.
I work in a large outfit that has to draw these distinctions.
Your distinctions makes sense to me - I wasn’t used to them. We seem to agree on the facts.
here’s another gem:
“There are some buyers who feel they want to wait for the bottom, but you never know when the bottom’s going to come,” “And if I had to guess, I’d say we’re not so far from the bottom right now.” –Phyllis Bixon, regional vice president for Weichert Realtors in northeastern New Jersey.
Her second sentence is contrary to her first. Like a good comedy show, Realtors(R) rely on the concept of “immediate contradiction” for a laugh, apparently.
Should be more like “If I had to guess, I’d say the bottom is wherever it needs to be to make you want to buy a house from me right this minute.”
Mmm, Realtor(R) cereal slop. Pass the 6% milk.
Good point. But realtors, most of which are just like any other sales person (anything, and i mean anything for a buck) may just turn out to be an ally of ours.
They need to eat, so they need sales. Would they like a sale on a 400K house more than on a 300K house? Sure, but they NEED to move inventory because they are probably hocked up to their eyeballs too. Not a pretty situation.
There’s a sales person living in my neighborhood. I noticed she went from driving an Excursion to one of those small mini vans. I wonder how the trade in value was?
I like watching all this for the same reason that THESE people like watching Jerry Springer. Seeing someone even more stupider than yourself makes you feel good - about you.
“More stupider” is a double superlative, and “stupider” is not a legitimate word. But if you read websites of realtors and posts on the SDCIA, your grammar still beats theirs! (Except Tx Chicks posts on SDCIA - gotta love ‘em! -
)
Bwaaahhhhaaaa, I enjoyed reading that. Really I did
mrincomestream,
LOL!! I bet you did.
Realtors need to simultaneously convince sellers that they need to reduce their reservation prices to levels where their homes will sell, and to convince buyers that falling prices will end the very moment they sign the papers on their purchase contracts. This is a difficult pair of objectives to achieve.
“but they NEED to move inventory because they are probably hocked up to their eyeballs too. Not a pretty situation. ”
Who do you think comprises the largest element of this flipper crowd?
My uncle (aunt’s new mid-life crisis husband) is a RE and almost got us into a $500,000 house this past May. We’re first homebuyers so didn’t know alot about real estate cycles, etc. and ALMOST fell for his “appreciation is just going to slow to 8% in 2006 nonsense”. My husband kept saying over and over, don’t trust him, real estate agents are like racoons in winter in Yosemite right now. If you’ve never been to Yosemite in winter, these huge fat bloated racoons that have been gorging on campers leftovers all summer start snarling and fighting over scraps as soon as winter hits and the tourists dry up. I just about died laughing because its so true! We walked from the house and are happily renting a much bigger place for half the cost waiting for the bottom with all of you fine people.
Yosemite racoons is the new slightly more polite version of realt-whores.
Oh yeah Phyllis, a ten year run-up followed by a ten month slump, that makes sense.
It seems like the bubble kind of started with everybody’s talk of the outrageous appreciation,’ Mort said. ‘I think all the talk actually made it happen.’”
It only makes sense if the Fed is firmly committed to making the housing price inflation continue, and has the means to do so. (This is, unfortunately, not out of the question, IMO
)
‘It’s very depressing,’ Ms. Balducci said.
No, it is just the very start of recessing. Let us hope this nationwide epidemic of Clue Deficit Disorder runs its course before it actually becomes depressing. Remember also the difference between the two economic conditions; in a recession people lose their jobs in a depression you lose your job.
We very shortly may be in a position where we have to carry two mortgages.
Did these people not play musical chairs as children?
It’s like the market just collapsed.
No, the market has collapsed. In a slow market houses stop selling. In a collapse your house stops selling.
‘I’ve never seen as many open houses as I see now.’
Until next weekend at least.
‘It seems like the boom kind of ended with everybody’s talk of the bubble bursting,’ he said. ‘I think all the talk actually made it happen.’
Ohhhh, it was a boom. It only became a bubble when people started to talk about it. A boom is when you don’t sell on the way up, a bubble is when you can’t sell on the way down.
In case anyone has missed the theme of this morning’s commentary it’s this: The difference “between” them and “us” is the difference between those who read the sign and those who just have to touch the wet paint. I hereby nominate the SOBs (Stuck Owners + Buyers, those carrying two mortgages) for 2006 Darwin Awards.
. [bold off] I hope.
nationwide epidemic of Clue Deficit Disorder…
I’ve noticed that.
LOL… CDD is a terrible disease to behold…
I was hoping “SO+Bs” would catch on.
/b>
</b>
But…but…but…I’ve been told by everyone here in the NYC area, as my wife and I wait out the bubble, that real estate never,ever, ever goes down in New York.
b there, fixed.
Ed– does anyone you talk to even faintly remember NY in the early 90s, or in the early 80s, or in the 70s? What sort of mass amnesia is this?
Never mind the massive stock bubble they got blasted from.
NYC 5 years up,5 years down, 5 years flat then 5 years up (never goes down?????????????? ha ha ha )
I think when people say “real estate always goes up” they really mean that it always trends upward. At least, I hope that’s what they mean. OK, yeah, true: over the long haul, it trends upward. But they conveniently forget about the times when the market takes a downturn.
Ignorance is bliss.
Of course NYC real estate never goes down, because everyone wants to live there — just ask anyone who lives or has ever lived in NYC if you don’t believe me
I do mention that areas in NYC fell by as much as 40% in the early 90’s. But the their eyes sort of wax over.
I think they just don’t want to accept that all that supposed wealth they have in their homes can go away.
A friend bought a 1,500 sq ft loft 1BR in the low teens off 5th in the late 80s for ~$225,000. Sold in 1994 for $180,000. Priced at current MV per sq ft = $1.5million.
Currently NY realtors and owners would have a heart attack if RE values dropped 25%. That means only a price drop to $1.1million for the above property. That still is $700 a sq ft.
All bubbles in the history of the world collapse to values at the start of the bubble.
post bubble symmetry
I really don’t understand how people can blindly accept 200-1000% run-ups; but completely reject the idea of price collapses for the same amount?
nice link there. I liked the google map from Detroit–it reminded of when you screw up in SimCity and your neighborhoods start to depopulate and the houses and businesses just go ‘poof’ from the screen, leaving you with a dispersed, depopulated mess.
Because of the Co-op boards it takes much longer for selling prices to go down in NYC. I know of sales which did not get board approval recently, probably( the boards do not give their reasons for turndowns) because any lower price instantly lowers the comps. This combined with no rental clauses in the co-op rules means extended pain for those struggling.
I’ve written before about losing my shirt in a “Classic 6″ room co-op on W 71st St a block from CPW bought in ‘89 and literally unable to sell in ‘94. The financial hurdles of having at least 25% down payment plus additional assets only make NYC co-ops that much harder to sell. It only protects value in the sense that it’s an even more ill-liquid investment than a regular house.
“even after they dropped their asking price to $539,000 from $589,000.”
- OK, you dropped 8.5%……now drop another 11.5% for starters
‘People are finally starting to understand that even if they could have gotten more for their house last year, it’s not last year.’”
- DENIAL!
- Where is ‘Bubbles the Clown?’
there are 9633 homes in 90274 zip code Palos Verdes Peninsula, CA. It’s that mountain you see viewed from pilot side of plane as you fly into LAX from East. Roughly between LAX and Long Beach harbor.
Below is Melissa data report for sales last week.
From 7/25/2006 to 8/1/2006, there were 1 homes sold in ZIP code 90274 for an average price of $1,285,000.
1) $1,285,000 on Via Rivera
not a lot going on in 90274 zip code.
Let’s see if I remember how to do arithmetic: Putting together:
1) 9633 homes for sale, and
2) 1 home sold per week, means
3) 9633 weeks to sell current inventory, which equates to
4) 185.25 years to sell current inventory.
So you’re great great great great grandkids are going to have one helluva part once the million dollar (in today $$) house sells.
- “part”
+ “party”
9633 homes. not 9633 homes for sale.
No 9633 homes total. Only 169 for sale from $925k to $14m.
much more sensible.
Still works out to 3+ years of inventory though…
I live in 90277, just on the North side of PV in Redondo . My neighbor across the street is a RE agent, so I have a unique barometer for inventory levels - the “open house” signs he has picked up and delivered on the weekends. He used to just have them in the trunk of his car and I hardly noticed. For the past few months he has them picked up by someone in a small pickup truck in the morning who returns them at night. I guess there’s a lot of inventory when the agents have these signs picked up and delivered because they can’t fit them all in their car.
This illustrates a point I made above about price uncertainty when liquidity siezes up. Buyers can easily catch a falling knife by overestimating market value against a backdrop of falling prices and no recent comps.
One further thought which just occurred to me. Charts I saw from the last LA bust (in Cagan’s “Has the Fire Burned Out” presentation — available here (Nov 2004): http://www.firstamres.com/article?page=articleList ) suggest that the high priced coastal areas were the first to tank. This makes economic sense when you think about the relative advantage of owning when the risks of home price changes are on the upside (as they were for the past eight years) versus on the downside.
In a period of rapid home price inflation, one would do best by owning the largest, most expensive home possible, as the home equity wealth gains are thereby maximized. If prices are falling, the same homes at the high end become albatrosses which rapidly sink the household net worth of anyone foolish enough to buy. So there is no surprise that homes in Palos Verdes currently have a prospective time on the market in the 9000-week+ range
.
Sorry — just saw Cote’s correction. So let’s drop the prospective time on the market to only 169 weeks, give or take a large statistical error.
They are seeing some huge price decreases and inventory increases in that zip and 90275. You are also starting to see a large increase in homes priced under a million bucks. History is repeating itself there. During the last downturn they were hit very hard. It’s coming there again.
So…let’s say it’s the only house that ells in July, and the median sales price in June was like…just over $1 million, then MEDIAN home prices increased @ 20% month to month in Palos Verdes. Every news media will report the RE boom is on again!
real estate goes down in NY. Look what happened to the World Trade Center.
Ummmm, a little below the belt…
Tragedy aside the WTC was one of the biggest real estate white elephants in US history.
I read that alot of people in New York didn’t really like the WTC building .
The transit authority that built and owned it lost we taxpayers tens of billions. It wasn’t a financial success.
It was UGLY. I didn’t regret the building going down, but about the people in it on 9/11 I don’t want to make (or read) jokes.
The WTC wasn’t a big, prestigious office building. You’d think it was, based on the grandelloquent name, but its tenants were mostly government agencies and one-person import/export firms. There were a couple of investment banks and law firms on the very highest floors, but probably 80% of the tenants were things like the transit authority payroll department, secretarial services, Joe’s Korean Imports, etc. Like Robert says, it really was a white elephant.
WTC was an awesome spectacle of modern engineering if nothing else, but modern buildings are environmental and sustainable and green and anything that catastrophically huge with a floor plate beyond anything else in scale will never be an efficient, power generating structure. We are entering a totally new era of building where structures like that which require massive service just to function are considered too primitive to bother with. Just note all the platinum level green building going on in NYC. The market has changed totally such that the WTC as it was has no place in NYC anymore.
The Empire State Building was also a white elephant, at lease initially. It took nearly 20 years before it became profitable.
We’re at a point where sellers don’t want to lower their prices and buyers don’t want to raise their bids,’
Umm, guess who is going to have to move. LOL
Simmssasys….just go visit
http://www.americaninventorspot.com
‘Buyers are now saying, ‘Wait a second, the market is stabilizing, so why should I pay $20,000 more when I could pay less?’”
What Mr Baldwin meant to say was,
‘Buyers are now saying, ‘Wait a second, the market is crashing, so why should I pay $100,000 more when I could pay less?’”
A few days ago we gave the realtor definition of “balance”. Now we need a realtor definition of “stabilizing”.
Realtors’ paychecks have been “stabilizing” as well.
None of this surprises me. It’s funny how they focus a lot of attention on Long Island. This madness has happened in all of the boroughs. I have faced ridicule at stating that it was not worth the cost to live in Brooklyn and Queens that people are now paying. Junky old row houses are going for $500,000. They look like a good wind could knock them over. “But they’re so close to Manhattan,” everybody says. So all of these people living in Brooklyn or Queens can take the subway into Manhattan and make $8 per hour. That justifies every junky house being worth hundreds of thousands of dollars. Is the sky made out of cream cheese?
I got a great lesson three weeks ago. Living in Manhattan it’s almost impossible to really know what’s going on in the real world. For those of you unfamiliar with Manhattan, it’s not the real world. I walked through Queens. The “for sale” signs are in bloom. That is a little scary. What’s more frightening is the next development. Everywhere you look you see construction. People have taken their little houses and torn them down. In their wake they are constructing monstrous 2 or 3 family houses. It is happening everywhere. All of the owners have dreams of “bubble dollars” in their eyes. I asked my friend, “don’t they realize that they are doubling the inventory in the area?” Silence. I also said, “so much for the thought of there being no land to build in.”
The homes being built are ghastly. They take up every inch of the lot. They destroy the view of the sky neighbors might have had. I expect an epidemic of dying gardens in the near future. The greedy owners are also adding extra families to the area which will surely increase traffic and reduce the quality of life. These neighborhoods will be “post boom” nightmares. These neighborhoods are doomed forever to bear the scars of greed and real estate madness. I can’t wait until the NY Times starts writing that “all of you who bough in Brooklyn, with dreams of great riches, are F#cked”. That will be a day to celebrate.
Amen, brother!
I’ve been saying this forever in NYC, but everyone has “visions of sugar plums dancing in their heads”.
But in the interim, the knocking down of the old houses cuts the inventory way down, and makes it look like there’s a shortage.
you don’t have to leave Manhattan to see how vulnerable the market is. There are new condo towers going up everywhere in Manhattan. Meanwhile, a lot of co-ops seem to be sitting on the market (sorry no data cuz there’s no MLS in New York City).
If these sort of stories are hitting the MSM now, and we are just getting the trainwreck going, imagine what it will be like in 1 year?
Ouch!
I look forward to the day when the bubble bloggers are no longer the voices of one (a few) crying in the wilderness…
“The Balduccis put their 1951 colonial on the market in”
That thing is a colonial? Maybe 1951 modern. Maybe I’m biased being in New England but that looks like an poor imitation of a Colonial. I want to make some other points on this article but I see that they’ve all already been made.
I think “colonial” in realtor-speak has come to mean “you walk in the front door to a small hallway, and the living room is on the left and the dining room is on the right.”
Or at least that seems to be the working definition around here, AFAICT. (And here where we actually have REAL colonials. My last house was built in 1725.)
Strange what realtor-speak has done to the english language.
“They held seven open houses, but they still had not gotten a single offer as of early August, even after they dropped their asking price to $539,000 from $589,000.”
Only seven? Some residences in SD hold open houses every weekend on a quasi-permanent basis. Sort of reminds one of the quasi-permanent plateau their owners seem to believe prices here have reached. It must really suck to be the Realtor (TM) who has to waste so much time talking stupid sellers out of their dreams of striking gold by selling their domiciles…
“The inventory of available houses in New York, New Jersey and Connecticut has soared. Some houses in the $1 million range and higher have dropped in price by more than $200,000, while lower-priced homes have had smaller percentage decreases.”
There is Cote’s 20% reduction again in print. I am starting to think his prediction may have been on target, if not conservative
I uses to think the 30, 40 and 50% reduction estimates were a bit extreme. Now I’m not so sure. If we’re already seeing these situations unfold in ‘06, what will ‘07 and ‘08 bring as more than a trillion $ in ARMs reset in a slowing economy? If some areas were to fall back to ‘01/’02 price levels I wouldn’t be surprised.
At least 50-60% in the most superheated bubble areas–count on it!
Agreed. Here in San Diego, I hear so many people saying real estate has “doubled” in price during this bubble. Not so from my view. Here’s some non-scientific observations on my part: It’s more like 3x just since 1999. If you go through the sales transaction history on a typical new home here in SD that was built in, say, 1998-99, you’ll see the tripling effect in price to 2005. Example: One typical new home I lived in - 4br, 2.5ba, 1700 sq ft. - bought in 1998 -$182k….sold in 2005 - $575k. I’ve seen similar examples in condos. Some posters on other boards view the bubble as starting in 2001. Ummm….no….I was saying bubble back in 2001 prior to 9/11, so I think one needs to go back to 1996-7 to find a pre-bubble price floor for this runup (adjusted for inflation). With that in mind, a 50 - 60% correction sounds closer to what we may see. But that’s just my 2 cents.
renter,
You are absolutely correct. Our house, bought in 1998 for under $120,000 sold for $400,000 in 2004. The market in that particular ‘hood kept going up, and the house would have easily sold for around $475,000 at peak price (2005). That’s more than 4 times 1998 price (which was not the very, very bottom). 2001 prices were indeed too high, and would have started falling, IMHO, if not for the credit bubble. I think we’ll see 1999 prices (or lower, if there’s a depression), before this is played out. Of course, we could have hyperinflation which would prove me wrong!
I’m patient. I just bumble along waiting for people to agree with me. I am running out of time however. I was predicting a fully realized haircut of 20% for Summer ‘06 (from the peak) and there’s only 2 months left. After that I predicted what to some sounded like an orderly retreat of 7% per year but I will add it won’t be orderly. Different fits and stops all over the place. A symptom of a siezed market. Normal curve fitting statistical techniques break down under these conditions. My -7% was just a smoothed trend line.
The trend will only be clear through the rear view mirror. I guess this is why the Fed only tries to mop up bubbles after they blow up, instead of exercising prudent foresight.
20% drop last week in August. By Labor Day, panic will begin. By December, 2006…major crash. Reminds me of the 2000 dot.com crash. The numbers were there, but the goof balls are CNBC and Ken Lay kept telling everyone how everything was just great.
I told my 92 year old mother-in-law, who needed the income to live on, that investing in dot.com was not good. And she watched CNBC, and believed everything they said over facts that I presented to her. 6 months later, she was only down 50%, and when she sold, she didn’t remember one word of what I had said.
Trust me, you won’t get any credit for being right about this, so don’t waste your time with facts. Real Estate agents know everything
“Trust me, you won’t get any credit for being right about this, so don’t waste your time with facts.”
The only credit which may be earned comes in the form of making judicious private decisions. As the poster suggests, those in denial will not change, no matter how many facts emerge to contradict their assumptions.
“Richard Gross, an investor from New York City who bought a three-bedroom house in New Rochelle in February 2005, hoping to resell it at a profit after making renovations, said he had had trouble getting the price he wanted. He bought the house for $315,000 and put in more than $100,000 in repairs and renovations, he said. Now, despite having had the house appraised at $555,000 and putting it on the market three months ago, he has yet to receive an offer that exceeds $500,000.”
“‘It seems like the boom kind of ended with everybody’s talk of the bubble bursting,’ he said. ‘I think all the talk actually made it happen.’”
I think all the dumbsh!ts like this guy who bought houses they did not really need in order to make a quick buck actually made it happen.
This guy actually appears to have or had a real profit in hand. I’m amazed that he didn’t take the $50K after Realtor expenses.
It seems there were many more bubble investors out there than I thought. In Cali investing in RE is a way of life for many but it seems to have spread over the whole country. Texas is were many investors are heading now needing to do the 1031 exchange. I would just pay the taxs. They are going to get stuck out in the boonies. We are watching the creation and destruction of wealth play out in real time. I hope this RE crash doesn’t cause too much colateral damage. And now we have a inverted yeild curve as the FED tries too late to stop the train wreck, Ugh.
What’s going to be funny is reading about all the angst when these idiots who came to TX and sank all their ill-gotten bubble wealth into some overinflated shitbox they will NEVER be able to sell start to see the Calfornia prices coming down and can’t do anything about it. Why? Because of their own arrogance, they priced the locals out in whatever hell hole they decided to infect.
Some of us remaining here in California prefer to think of this as our sharing our “best and brightest” with the rest of the country. Heck if Mexico can export their dysfunctions to SoCal the least we can do is follow their example. But don’t think it is a one way street. California would be a much better place wer e it not for those consumerist locusts from Bentonville, AK for instance.
To be honest, we are just sending the Texans back to y’all. I can’t tell me how many Texas license plates I saw in San Diego county from 2000 to 2004.
Ben Jones back to Texas?
You mean all the evil doesn’t flow out of SoCal(and here i had already bought my cape and horns!) I love how people have used what is a GLOBAL credit glut to basically demonize Ca. It shows the ingrained prejudices aren’t housing related. As if the “equity locusts” all came from here to whatever podunk town to deliberately do harm.
Mostly they only left SoCal when they themselves were priced out as speculative buyers. I’m not excusing speculative stupidity, but I would say be very careful not to give it a geographic home, its everywhere.
The motivation to demonize California comes from the same emotion that drives a lot of our glee at this imploding bubble.
Envy.
California is a perfect habitat for hairless apes. The ones that don’t want to pay the entry fee (just like those of us that don’t want to pay the one for housing) still WANT what they deny themselves. Seeing others enjoying it puts salt on the wound.
It makes sense that people that like to bash California would gravitate here…as this blog draws us all here for that ‘biting-down-on-a-sore-tooth” kind of feeling.
Wheels within wheels…
Robert Cote got it right.
Californians have been putting up with dumbasses from elsewhere destroying what is great about CA.
They live here for 10 years, and hopefully leave and go off and pollute someplace else.
amazingrus - you should read the blog a bit more before making sweeping generalizations. your silly statement that “this blog draws us all here for that biting-down-on-a-sore-tooth kind of feeling” fails to give credit to the insightful minds here who saw all this coming WAY before just about anyone else on earth. certainly, my motivation for reading this blog has nothing to do with “california envy”, and I feel I can speak as such for many others who lurk and post here. in fact, I’m forced to once again roll my eyes at the foolishness inherent in many californians and thank my good fortune that I will never live there (and will avoid visiting whenever possible). I could go into detail as to what the bubble means to me “personally”, but it would just be lost on you. but please, do enjoy your nice weather.
I forget where I had heard it (financialsense.com?), that Greenspan would inflate other asset bubbles to ease the pain from the stock market burst. I knew something was coming 4 years ago. However, this blog helps to remind one of the power of interest rate drops, and lead and lag effects thereof. Unfortunately, I wasn’t in a position to profit this last time, but maybe next time I will be. $675rent/month + $1500savings/month = $big downpayment when I’m ready, and the market is ready, for me to upsize.
That example of the New Rochelle “investor” is a perfect indicator of the denial.
Richard Gross bought a home for $315K in Feb 2005—near the top I’m guessing. He added $100K in repair/renovation for a total nominal investment of $415K. I’m not factoring in his time or interest costs.
Now he’s moaning that he can’t get more than $500K.
Let’s see…if he’s takes the $500K, it represents an $85K gross profit in 18 months or a 20% gain. In less greed-stricken times, a 20% profit in 18 months, especially when you bought at the wrong time, would seem to be pretty darn good.
But no, he wants $555K or a 33% profit in 18 months. He won’t settle for less because, I guess, he “deserves” it.
Someone who is angry because the market will only allow him to make 20% in 18 months “deserves” to lose his ass, to tell you the truth.
Still way too many complacent, greedy folks out there who are convinced that they “deserve” at least 20% gains a year on their RE “investments” no matter what the market environment is and no matter when they bought.
This was a really dumb move on this guys part. We recently left the area three towns to the north (Rye Brook) which is a better area. Sold in Sept 2005…had to cut the price from a ridiculous $750K my wife and realtor insisted on to do it my way at $689K…3 months at $750K no offers….2 weeks at $689K 2 offers and under contract at $670K. It appraised for the tax records in 2004 for $546K (which was publicly available info.) and not too far below what it was really worth in 2004, BTW.
This guy needs to cut to $449K and pray…now, and catch any early Fall echo market before it ices over at the end of Oct.
Army No Va.
Making 20% in 18 months is ok. You pay 500 k with 100 k down. You sell and make 20k after costs ,that’s 20% using correct math, not the math os flippers.
I’ve always been in the 30-50% camp.
I think we are taking a little too much glee in seeing the FB’s and the SO+B’s suffer. Did they cause their own suffering….sure they did but they were trying to make a profit.
Did anyone here ever NOT lose money in the stock market? Should someone call you greedy because you bought a stock that you thought was going to go up(and went down) and would be financially beneficial for you and your family?
I personally am thrilled that the prices are coming down like they should. I am not happy about people being in pain, nor am I sad. Pain of investing loss is part of life. Life isn’t suppose to be all wonderful. We learn from pain. We don’t too much from our successes, as someone quoted Bill Gates the other day.
I’m somewhat of a hypocrite though. I sometimes laugh out loud reading you that folks making fun of the BS that people say about the real estate market so please continue.
Are these people suffering? Not really. They haven’t lost their jobs (yet) they just made business deals that didn’t work out the way they had hoped. The guy who bought at $315k spent another $100k and is unwilling to accept $500k is probably not missing too many meals. Heck, he can still make a fat profit! He’s just whining about the rate of return!
This is capitalism. Sympathy for market participants is not required. In fact, sympathy just distorts pricing. How much extra should I pay to relieve the seller’s suffering?
So, yep: I’m going to keep on laughing.
When I lose money in the markets I’m not betting the home where my kids sleep or their luch money. Not even their college funds. I certainly don’t buy futures on 5% margin and I don’t buy my next contract before closing out the previous one. SO+Bs are rats leaving a sinking ship for a boat dock that’s on fire.
From the LA Times today:Rancho Santa Margarita resident Bill Kirkendale, 69, is dreading his next bill from Edison. His last one — which didn’t include electricity use during the recent hot spell — was more than $700, up more than 40% from last year.
He has four children at home, including a 5-year-old with cerebral palsy and a compromised immune system who needed to stay cool despite the 100-degree-plus temperatures that blanketed the state last week.
“My air conditioning was on every single minute of the day during that heat wave. It had to be on,” said Kirkendale, a mortgage broker. “I can’t imagine what my bill’s going to be this month.”
Ok I will give this guy a break.
But is it necessary to cool ALL rooms of the house?
“I think we are taking a little too much glee in seeing the FB’s and the SO+B’s suffer.”
I used to think that, but then I remembered that so many people boasted about how smart they were, how they were going to become bazillionaires by doing nothing more than buying and selling houses to each other with no money down. I think that a little schadenfreude is in order.
Again, this harkens back to the days I was working in the computer industry in SillyCon Valley, during the big tech. stock run-up. People were actually laughing at me for being an index fund kind of guy, saying that I should invest in tech/internet stocks like they were, as they were making bazillions just trading the stocks to each other. And these were people who worked in the tech industry; they should have known better. The crazyness got so bad that I ended up bailing from stocks COMPLETELY. Friends laughed even more at this!
Eventually, the inevitable happened…the stock market tanked, and tech cratered. Needless to say, there was a little schadenfreude moment there as well.
When it comes down to it, it’s not taking pleasure in someone else’s misfortune, and it’s not jealousy. It’s more along the lines of the very American phrase:
“Payback’s a bitch”
Add to the fact that people that have been making risky economic moves (HELOCs, huge houses, ‘exotic’ loans) have been effectively saying “nya nya nya-nya nya” to those of us with more conservative economic leanings. They get the Hummer H2s, the boats, the jetskis, the ATVs, the trips to Bali, the boob jobs, the expensive dinners. Saving is actually discouraged. Now things are changing, so forgive a little schadenfreude as well.
Lastly, there is a whole segment of first time buyers that want to use a conservative 20%, fixed rate mortgage to buy a house, but are priced out, because they have to compete with people able to use no-doc/no money down/low teaser rate loans. Would love to see they day when fiscally responsible people can again afford a house.
It’s much harder to see the bubble when you’re in the midst of it. I used to work Nortel… and was blindsided. My $120 shares are now $2.40… I’m just waiting to realize the capital loss at a convenient time.
However, I should be okay this time, provided my job doesn’t disappear.
sd renter - these people could have been investing their capital in far better ways. instead, we have languished in our infrastructure, technological progress, education, etc, etc for the better part of a decade, and concurrently have had our butts kicked by many other countries, all due to silly people with $$$s in their eyes and not a neuron in their heads. their net productivity was virtually zero - all they did was ride the tiger and now it will eat them.
meanwhile, prices have become unaffordable for new buyers and other victims, many of whom stretched anyway and will now be screwed. so yes, people who have treated their houses like a bank/brokerage account will be the objects of my mirth.
that said, there are certainly stories out there calling out for sympathy and even assistance. I would not mind it if my tax dollars helped bail out Mr. Kirkendales electric bill, but I hope the “investors” are left to their own devices.
I did NOT LOSE money in the stock market.
I was a “realist”. It is simple mathematical modeling.
When you see an asymptotic curve, you know it CANNOT exist in the market. SELL.
I sold out in Sept. 1999. I was being laughed at by many people as the market continued to “climb” UNTIL MARCH 2000.
The slide started and by SEPT. 2000, I was considered “LUCKY” to have gotten out of the way.
I was wanting to buy a house in 2002 and began shopping for one. I did not know the “BID WARS” had started but soon assertained the “MARKET PSYCOLOGY”. I have been sitting on the sidelines since.
I personally hope all those bastards that drove this mania go straight into bankruptcy. I have absolutely NO SYMPATHY for greed and stupidity.
have a nice day!
Diogenes.
Sorry … left out a word…(we don’t LEARN too much from our successes) from the Bill Gates quote.
If Gates is corrrect, we got a whole lot of learnin to do!
Unfortunately, I believe many people will NOT learn from this bubble bursting….just like many didn’t from the Nasdaq meltdown. They’ll just be on to the next bubble. I’ve noticed lots of talk about commodities and precious metals right now in the financial world, and how they’re a “can’t miss” investment. Hmm….I remember similar talk on CNBC by some guests back in 96-97….about real estate investing as the next big thing for “smart money” that was leaving the stock market. I don’t remember back prior to the stock market run up…was it there, too? Probably. One’s mind boggles at interpretations of this “coincidence.” Yes, I’m a contrarian…or just contrary, period.
I thought the high end was immune from price drops?
I’m getting visions of “Escape From LA” in my mind. I see these roving bands of unruly thugs with baseball bats looking for some fun. Looks like the sequel might play out in real life.
(There is Cote’s 20% reduction again in print. I am starting to think his prediction may have been on target, if not conservative.)
You have two waves moving outward in New York. The first is like the one elsewhere in the country, with housing being pass down to less well off people when it hits 50 years old. Brooklyn became poor in the 1950s and 1960s, per capita fell in Queens in the 1980s and 1990s. Now the suburban towns outside the city are hitting 50. That’s where these people are.
The second is a wave of gentrification spreading out from Manhattan. That swept past my neighborhood in the late 1990s.
Houses in my neigborhood in Brooklyn would have to fall by 40% from the peak in real dollars to get down to what I think of as fair value.
This assumes that what had been a middle class neighborhood (cop, fireman, small shop owner, school teacher) will not be an affluent neighborhood.
Out in Nassau County, on the less ritzy south shore? Look out below!
http://www.websitetoolbox.com/tool/mb/sdcia
I have just finished a very long and tortured look at a RE investors plan on this message board. Its a investor speculator called Jeff and the title is “SLC, Boy do I need help with L/O”
I would not have beleived it if I didn’t read it , it sounds like a real story. I blame the FED for this terrible lending being allowed.
If this is common we are in far worse shape than I suspected, this Jeff better hope for contiuned inflation or he is done. I pray for deflation myself, this has got to end.
Meaning the linked message board, a real esate investors board which acually has some sensible people on it. Its a crazy read once you get by the first few pages. A look into the dark side of speculation.
Yeah, my god. A former Taco Bell night manager (hasn’t worked in SIX years) owing on 11 houses (7 fixed, 4 ARMs). The strategy on refinancing works if 6% appreciation and low interests happens, but I don’t know what would happen if rates go to like 10%. I guess that depends though on whether the US is looking at hyper-inflation or deflation? And if I knew that, I sure wouldn’t need to read or post on blogs!!! =)
That guy Jeff is going to take it in the shorts and it’s going to be a slow and painful process. His strategy is not unfamiliar to me as it is the many folks who say it’s a bad idea. It was popular in the 70’s early 80’s his spreadsheets are going to fail him miserably. He did his research but he didn’t do it in the right areas he missed a very major cog. His margins are way too low for what he is doing. People who are telling him to sell now are giving him good advice they just don’t have the data or ancedotes to back up what they are saying. Which contributes to his smugness. I have the info but as sadistic as it sounds I rather watch him get squeezed from afar. I enjoy watching people with his attitude get squashed.
Please share with us so that we can educate ourselves. Interest rates and appreciation are major factors; what are we missing? Please, any sites or books on the subject?
This works because our diversified RE investments will go up faster than our negitive cash flow. And we refinance this RE to pay the neg cash flow and buy more neg cash flow RE. Uh huh, OK….. after a wild run up RE will just go back to trend say 6% a year appreciation. While the FED is raising interest rates ….
what can I say, I sold my Townhome in June and rent now because of stupid s@#t like this…
Your sentiments warm my heart.
Stupidity needs to be punished harshly.
Saw this on today San Jose Mercury News
Companies that help rescue homeowners from foreclosure
HOW OWNERS CAN PROTECT THEIR BIGGEST INVESTMENT
By Barbara Correa
Los Angeles Daily News
LOS ANGELES - Rising interest rates and a cooling housing market have made it a nail-biting time to be a homeowner.
Many Southern Californians who dove into tempting zero-percent-down loans with huge variable-rate risk now realize they may have bitten off more than they can chew.
The changing times are forcing some into foreclosure, but others are making use of their options and managing to hold on to their homes.
Take Bianca Garcia, a manufacturing production coordinator in Palmdale. Like many Southern Californians trying to buy homes as prices went through the roof and lenders opened up their wallets, Garcia secured her loan through a finance company instead of a conventional lender.
It’s an option to which many consumers with questionable credit turn on their first step into the housing market.
In 2003, she and her husband paid $173,000 for a four-bedroom, two-bath house with a three-car garage in Palmdale. Two years later and 90 days in default on her loan, Garcia was on the road to foreclosure.
“We just had so much going out at the time,” said Garcia, who is still living in her house, thanks to an arrangement she made with a mortgage investment firm.
The company, 2-year-old TerraCotta Group in Manhattan Beach, paid the first and second mortgages on the house, put it in a trust, and began work on repairing Garcia’s credit. It plans to refinance the house by the end of this year, and Garcia will then buy it back with a conventional lender.
Indeed, if there is some good news for homeowners who took out variable-rate loans or loans they really couldn’t afford in recent years, it’s that a new industry has risen to help bail them out.
Still, there is only so much these firms can do. Foreclosures are on the rise, and the peak is probably still a few years out. Foreclosures in Southern California are up almost 30 percent since January — by 56 percent in Riverside County, 10 percent in San Bernardino County and 16 percent in Los Angeles County, according to foreclosure tracking firm Default Research.
“I started the business two years ago,” said Tingting Zhang, president of TerraCotta Group. “We had 90 people a day in foreclosure. As of today, the number is 295.”
She expects foreclosures to peak between 2008 and 2010 as the California real estate market continues to cool. “It’s no longer appreciating 20 to 40 percent a year.”
Zhang blames part of the increase on the creative loans and more liberal lending environment of recent years and the subsequent climb in interest rates. But there is more to the story, she said.
One factor is the changing real estate market. “We don’t have a white-hot listing market anymore. . . . If people (once in default) are going to sell their house to pay off the lender, they really need to do it in a month, and they can’t do that now.”
Cities like Pasadena and Long Beach might be more vulnerable to a foreclosure wave, she said, because prices have long been high in those areas, while growth is stagnant because they are mature markets. Areas like Palmdale, Lancaster and parts of Riverside County offer somewhat of a buffer against widespread foreclosure because they are still relatively affordable and still offer great growth potential.
“Because it has depreciated so fast, (that market) will slow down, but on the other hand it’s still desirable and trying to attract white-collar workers.”
Aside from the loan environment, the cooling market and people taking on more debt than they could handle, Zhang attributes much of the increase in foreclosures to old-fashioned causes, like illness and job loss.
Joyce Maloney, senior counselor for mortgages and debt counseling at Consumer Credit Counseling Service of Santa Clara and Ventura counties, with headquarters in Camarillo, said job insecurity comes up frequently in her sessions with consumers facing foreclosure.
“Jobs are just not secure anymore, and incomes are not secure anymore,” she said. “You see 50 to 75 percent of their income is going to housing.”
Maloney said half the increase in foreclosures is because consumers did not understand their loans or took out loans inappropriate for their income levels.
But she blames the other half on job loss, pay cuts and general indebtedness.
So what’s a broke homeowner to do?
Act now
No. 1 is to get help as early as possible, preferably before going into default at all.
Some consumers make the mistake of thinking about mortgage payments in the same way they think of a credit card payment.
“Bankruptcy is no longer as threatening to lenders,” said Zhang.
“Foreclosure is very different. If you’re late on your credit card, it’s acceptable even though it affects your score. But if you’re late on your mortgage, it’s a very serious matter.”
If you’re already in default, it still pays to intervene as early as possible. There’s a big difference, from the bank’s point of view, between being 30 days late and being 120 days late.
And these days, foreclosure notices seem to be starting sooner, Maloney said. “It used to be three or four missed payments. Now it’s as quickly as the second missed payment,” she said.
Even in the 11th hour, there’s a lot that can be done to keep a house. One couple came to TerraCotta’s office the day before their home was to be sold by the lender, Countrywide Financial. Countrywide agreed to postpone the sale while the house was bought by TerraCotta and put into a trust to repair the credit.
Deciding whom to call is not that straightforward. TerraCotta Group markets itself as a one-stop shop that can offer all the options available by traditional means.
“A Realtor can sell it, a lawyer can file for bankruptcy protection, and a mortgage broker can refinance,” said marketing manager Cynthia Hogle, but a company like hers can assist with all of these.
Refinancing
Still, there may be situations where homeowners in default need to hire an attorney or a Realtor for other reasons. And a homeowner could certainly refinance with a mortgage broker.
But if homeowners are already in default, those loans will probably be harder to get approved. So homeowners who decide to try to refinance with a broker should choose one with specific experience in distressed situations. The bottom line is that consumers facing foreclosure need to do a lot of homework and obviously look out for scam artists, notorious for preying on desperate homeowners facing eviction.
Get educated
Ideally, prospective homeowners should take time to educate themselves a bit before jumping into home ownership. Fresh Start Financial, a credit-repair company in Van Nuys that has seen foreclosures increase in the past six months, plans to start holding seminars on responsible use of credit.
“The mentality is, OK, you’re buying a home for, say $650,000. It’s a great price. . . . You’re thinking you’re getting a great deal, but you’re forgetting that you are still going to be paying $5,500 with insurance and interest a month,” said Fred Lopez, a manager at Fresh Start.
“With a good credit report you could get these loans without proving income on it. We just saw someone with a 680 score, but he had a house that went into the foreclosure process. Now he’s being turned down for other houses. We see a lot of people with the monster homes and cars, and they are so in debt it is insane. If you understand money, you’re not going to go buy a car for $110,000. You’re going to buy a 2-year-old car where most of the loss will already be gone from it.”
Using the same logic, Joyce Maloney said the rise in foreclosures reflects the fact that many people who bought houses in recent years probably should not have.
“The government has said everyone should be a homeowner,” she said. “Well, not everybody should be a homeowner. Some are not secure enough in job opportunities to even think about it. The sad part is when someone goes through foreclosure, they usually will not buy another house. They’ve been burned once and don’t want to be burned again.”
“In 2003, she and her husband paid $173,000 for a four-bedroom, two-bath house with a three-car garage in Palmdale. Two years later and 90 days in default on her loan, Garcia was on the road to foreclosure.
“We just had so much going out at the time,’’ said Garcia, who is still living in her house, thanks to an arrangement she made with a mortgage investment firm.”
How much could they have had “going out” that would prevent them from putting together a mortgage payment for 3 months? Had they bought 3 cars to fill up the garage?
“Maloney said half the increase in foreclosures is because consumers did not understand their loans or took out loans inappropriate for their income levels.
But she blames the other half on job loss, pay cuts and general indebtedness.”
Wouldn’t your “general indebtedness” be something you take into account when factoring your income level?
If Frank Balducci does lose his shirt due to Long Island housing woes, let us hope it is that awful pink T that he chose to wear for the NY Times photographer.
Darn boldface…