‘Why The Bad Rap On Equity Locusts?’
Several readers suggested a topic on moving to another part of housing bubble country. “I really liked the thread a couple of weeks ago about what people think about living/working/raising families in other parts of the country, particularly transplanted Californians; and no I don’t mean the despised ‘equity locusts.’”
Another replied, “Why the bad rap on ‘equity locusts’ from California. Born and have lived here my entire life, and yes, I will be leaving California and moving in a couple of years and bringing my equity to Texas (wifes side of the family). I would never leave this place but over the last 20+ years the ‘non-equity locust’ from everywhere else have moved in and screwed it all up. Nobody ever mentions that! Btw sold (10/5) and rent.”
And another, “I can’t speak for all, but when I say ‘equity locust,’ I refer to Californians who liberated equity (that is, borrowed against their primary residence) to buy investment properties elsewhere, on the premise that if the price is lower than for a comparable home in Santa Barbara, then it must be undervalued.”
From Missouri. “Those ‘equity locusts’ have driven up prices EVERYWHERE. In Missouri we have had a mini-boom that is driven by people from CA moving to the hills and overpaying for property, but more power to the landowners and such for all I care. The good thing is that it will never be a huge influx like we see in Texas and Florida.”
From LA. “I feel, myself, that what gave LA its bad reputation is not the Californians who have always been here but the ones who came here from other places to lead an ‘LA lifestyle.’ I’ve met plenty of them.”
“Also, for those who have been pushed out; do people really believe that Californians want to pay higher prices on housing everywhere else? It’s like they think Californians go to Oregon and put a gun to Oregonian house sellers heads telling them ‘Raise the price of your house, Or else!’ People from other states should blame themselves and their greedy neighbors for raising the prices of their own homes because they see a Californian coming.”
A reply, “Difference between micro and macro, baby. Most people (in America) think about themselves first, others (if at all) a distant second.”
“If someone offered me $70,000 for my car (probably worth 10), I’d give it to him today. Someone comes along with 700 grand for my house, which I happen to think is worth 150k, I’d give it to him today.”
Another response, “Regarding ‘non-equity’ locusts from other parts of the country/world coming to CA. Unfair for us (Californians) to be blamed for everyone else’s woes when we’ve been dealing with the steady decline in QOL for decades due to too many moving here (and not enough resources for us to handle it!).”
The Loveland FYI . “Frank Baril works two jobs in this vibrant college town north of Yellowstone National Park but still can’t afford to buy a house. ‘It’s hard to afford anything here,’ said Bari.”
“‘A gold-rush, boomtown mentality has driven up the price of land to the point of outrageousness,’ said City Commissioner Jeff Rupp.”
“The community’s appeal includes a mountain setting, nearby outdoor recreation and the amenities of Montana State University. In the increasingly stylish downtown, high-end boutiques dot Main Street, and even an old cowboy bar got a face lift, but there are drug and hardware stores, as well.”
“Less appealing is the average annual wage. Last year it was $28,897 in Gallatin County, of which Bozeman is the seat. Based on a conventional 30-year mortgage at 6 percent interest, buying a house in Bozeman at the median $268,500 would require an annual income of $77,270.”
I think median incomes will eventually bring house prices down to what the median income can afford in a given area, at the expense of the speculators. The speculators are in effect, subsidising future housing. We’re only in the early stages of the downturn. Theres still years of pain ahead.
It has happened before, and I believe it will happen again. Waiting for this to occur is admittedly rather frustrating, and about as exciting to witness as watching paint dry.
I have exactly the opposite view regarding your last sentence.
Watching the bubble deflate, as we are now and will see for a number of years, is much less frustrating than watching the bubble inflate.
Not exciting? Are you joking?
This is real life. You can’t pay for this kind of “entertainment.”
I disagree. For those of us who recognized the absurdity all along, we just want to get on with our lives. I’d like to buy another house and fix it up. And I’ve always wanted to be a landlord; it’s one of the best ways to secure your retirement. I can’t do either until the fat lady has well and truly sung.
Others have different dreams, but we’re all just stuck here looking at our watches until clues are distributed in 2008.
Hear hear! “Watching paint dry”? Au contraire. Each day brings new affirmation that the Ponzi scheme is collapsing under its own weight. Who stands to benefit? I do! Plus, watching the NAR truth-makers squirm like insects on pins, or hearing the lamentations of FBs, is sheer entertainment. You’d have to have a heart of stone not to laugh at them.
Insects on pins. Ouchh! That must be painful? Try this with a cockroach. You can cut the head of the insect, decapitate it completely. And the thing can live up to a whole month without its head. Sacre bleu! I think real estate investor are maybe headless cockroaches. Anyways they have just another month like that.
That was a good one
I also seem to think zombies… except these zombies walk right into and through the gauntlet of razor blades of this housing bubble… with visions of dollar sign hallucinations guiding them to their demise.
You are all wrtong. This is a case of watching paint PEEL.
Dark, but funny. I think that Robert is this blog’s Jack Nicholson.
Is that the “bacon lettuce and tomato” Nicholson or the “did you ever dance with the devil” Nicholson?
More like the “you have no idea” Jeremy Irons.
What does that make me?
Harley Quinn? Dennis Hopper? Kevin Bacon (”You can’t handle the truth!”)? Ahh we jus’ funnin’.
I don’t know if that will be true. The homebuilders have said that they are going to start doing “dense houses.” The “poorer folks” will be buying condoes for $100,000 to $150,000 and that will be just fine for the cities since they’ll have a bigger tax base and if developers put the $100,000 in the bank, at 5%, for 30 years, that comes to $432,000 or $1200 a month without having to fix anything. in general, I don’t think it’s that hard to do “low income housing” like this if there really was a need for it. “the pain” can be ameliorated quickly.
just look at Europe: the equity locusts (most of all those buying EXTRA properties abroad) are one of the major factors that has kept the EU housing bubble expanding (now more than 15 years old in some countries and still growing). After the extremely loose monetary policy of the banks (ECB + lenders) this is IMO the most important factor in keeping the bubble alive.
This keeps the prices in the severely overpriced bubble regions (like Netherlands) afloat and home prices in the periphery of Europe expanding at record speed. Just today I read a story about how even well-paid people near the coast in some Balkan countries are ‘totally priced out’ because of foreigners (from Germany, UK, Netherlands, Italy) buying ‘investment properties’ on a massive scale.
And it’s not the speculators who are subsidising future housing, because most of them are not playing with their own money.
It’s the people who rent and the taxpayers who are subsidizing tis Ponzi scheme.
Oh yes, a few days ago the evening news here (more or less the PR officie for the government) explained that the latest rate increase from the ECB does not mean higher mortgage rates at all - just like with the previous three 0.25% rate increases. Government and banks will make sure that any idiot can bid up the price of housing into the sky by keeping mortgage rates artificially low.
Yes, there are MANY years of pain ahead. And I don’t believe for a minute that there will be severe price cuts in the US while the EU housing bubble keeps expanding at a healthy rate. Credit markets are international, there will be more credit than ever for the FB’s before the end of the year.
I think the resentment is mostly against the extreme debtors who snap up multiple properties with little or nothing down in an effort to drive up prices. If it weren’t for people like this there would be no bubble in Phoenix. This mania is not just the Calis though, it is people from the northeast and all over driving speculation and over-building in Florida, etc. I don’t know of anyone who resents anyone for buying a house to live in or buying multiple houses with their own money. When this credit bubble crashes it won’t be the flippers who get hurt, it will be everyone else. It is easier to live in this counrty as an illegal alien than as a middle class play by the rules chump. I swear to bejesus man, the next credit bubble that comes down the pike I am going to leverage myself so heavily it won’t even be funny, I’ll gamble a friggin’ billion dollars if they’ll let me. Let everyone else pay for my speculation. Scr
> When this credit bubble crashes it won’t be the flippers who get hurt,
… only if they got out in time. Why do you think the flippers would spared?
There is a de facto assumption that flippers are smart, and already left the market before prices tanked. But I believe this is largely a myth; sure, some flippers got out ahead of the crash, but that does not mean that lots of other investers are not going to learn the hard way that real estate downturns typically last upwards of four years, with repeated dashing of hopes and dreams of riches on the downside of a boom.
Flippers are alive and well in LA. BUYING up house after house…fixing and back on market. In North Hollywood…they just bought 5 more! Somebody stop these @ssholes!
Yes, my MIL lives in Sherman Oaks and there are new McMansions being built by specuvestors on every street. In some cases, they are scraping a single house and putting up four new McMansions with “patio” yards. Neighbors are just loving that!
Every house in my neighborhood that has sold in the past year has come back on the market!
Sometimes I think no-one buys in Atwater to live here.
The flippers will be spared because many of them have little or no money of their own invested in this Ponzi. Some of the builders who secured loans for some of these people have a very high rate of default and a higher than average rate of loans secured where the first payment wasn’t even made. Doesn’t matter, they got their 450k anyway. These no money down speculators either gain a great deal or walk away unscathed. How many of these creeps do you think bought houses with no intention of paying off the loans and no ability to pay off the loans if they don’t sell at a profit. These people went into the deal knowing full well that they could only afford the first two or three years payments and after that if they did not sell for profit they were toast, and they didn’t care because they have little or nothing to lose. That is the way you must be to get ahead in this country anymore. Recklessly gamble OPM, and if that doesn’t work, try it again.
Yeah!
Tell ‘em, Mort.
You have said what I wanted to say. only you have said it better than I could have.
The “Blank
with the speculators and their OPM.
That is the way you must be to get ahead in this country anymore. Recklessly gamble OPM, and if that doesn’t work, try it again.
Isn’t that the dot-com boom in a nutshell? How many stories did we all read drooling over hot, young entrepreneurs who went through five rounds of venture financing before walking away from a business that never made a dime?
Builders made money.
Bankers made money.
Realtors, title companies, appraisers, contractors made money.
Flippers made money.
Chinese lose some profit, in exchange for US business and technical know how.
It’s a wonderful world.
The credit police are comming.
exactly, same problem in my country (NL). Many of the people who buy in the later stages of the bubble are those who have nothing to loose because they play with other people’s money, either through massive government subsidies, forged mortgage document or other popular tricks of the housing trade. Most RE agents and mortgage shops here will be happy to explain how you can buy that expensive house even when you have no money.
“I think the resentment is mostly against the extreme debtors who snap up multiple properties with little or nothing down in an effort to drive up prices.”
It is irritating to watch fools making lots of money as a result of obvious, if not outright stupid, decisions. Conversely, it will be very satisfying to see them crash and burn when they ultimately lose this game of musical chairs.
a california “investor” bought my house for 285,900 in aug ‘05 in phoenix (ahwatukee). 1401 sf 3/2, strip mall behind it. He put 10% down, so carrying a mortgage of 257k or so. With a standard fixed 30yr at that time he would be paying 1500 to 1600 just for p and i. Taxes were 1400/yr and ins is about 50. He finally rented it for 1100/mo after sitting empty for 5 months. So you would have to call this guy a flipper….there is no way he would ever make any money on the house by renting it even with an option arm. So you would also have to agree he was not to bright and will probably be up for some kind of a$$ pounding….or am i missing something?
He will take his a$$ pounding like a man only if he is honorable. Most likely he will only lose his deposit and just walk away. Not too many honorable people left playing this game.
“It is irritating to watch fools making lots of money as a result of obvious, if not outright stupid, decisions.”
If you think it’s irritating now with housing - you should have lived in San Francisco circa ‘97 to ‘00.
When this credit bubble crashes it won’t be the flippers who get hurt, it will be everyone else.
Oh please. Considering something like 1 in 4 houses sold in 2005 were purchased by flippers, legions of whom are now upside down on their loans, flippers and their ilk (i.e. HELOC retards) are facing a well-deserved, DELIVERANCE-style reaming. A great number are foolishly opting to rent what they couldn’t sell, in the mistaken belief that the mythical NAR-pimped “return to normalcy” will soon give way to the inevitiable double-digit increases their greed and gullability led them to believe was their birthright. Much like a bug inches from an oncoming windshield, these fools have a dim perception that “something wicked this way comes” but lack the intelligence to grasp the full magnitude of the splattering in store for them.
Oh, and by the way, it won’t be “everyone else” who gets hurt. The smart money (admittedly, a minority) saw through this Ponzi scheme and refused to play the game — so explain how I’ll be “hurt” to pick up some FB’s house for a song (relatively speaking) when sanity reimposes itself on the market. Most people who have lived in their homes for years, but were too prudent to play the HELOC game, will come through unscathed, though the insane “valuations” of their homes will fall back to reasonable, vice insane, levels — not a bad thing in my book.
Too many of your “middle class play by the rules chumps” are pathetic herd creatures who bought into the RE Ponzi scheme out of greed, stupidity, or good old all-American willful ignorance. A poorer but wiser populace wouldn’t be such a bad thing, if you ask me.
The FB lemmings will wail that they only did what “everyone else was doing,” just as the NAR “economists” (snicker) like Leslie Appleton-Young will claim — erroneously — that “we all got it wrong” — as if that excuses their individual culpability. All in all, people are going to get exactly what they have coming to them — the only ones I feel sorry for are the responsible people who will have to bail out or take care of their FB family members and relatives.
Much truth in what you say. I differ in that when the foreclosures and bank failures come the government will be forced to further devalue the currency with an FDIC, ginnie, fannie, freddie, pension fund, hedge funds, bailout of epic proportions. This will hurt everyone.
In the broad sense, I agree. There will be a lot of shared consequences, that’s for sure. Personally, though, I think that more than just the RE bubble is coming down — the gigantic debt and credit bubble our “prosperity” since about 1971 has been floating on, is going to collapse like the house of cards it always was. As such, the government won’t have the resources or will to rescue everyone. I think the consumerist, entitlement, me!-me!-me! mentality so ingrained in our national psyche is going to be brutally cleansed from generation X and the subsequent generation — the Baby Boomers, of course, are a lost cause. So while it will be grim, economically, I think it will ultimately force us, as Americans, to straighten out our thinking and get our priorities in order — and maybe our communities will actually regain a sense of community again.
I assume you mean 1981, not 1971.
Couldn’t agree more, Sammy.
I want to hear FBs squealing like pigs.
Much like a bug inches from an oncoming windshield, these fools have a dim perception that “something wicked this way comes” but lack the intelligence to grasp the full magnitude of the splattering in store for them.
Well said!
Well said is an understatement to your comment. Brutally honest is more like it.
Here here, Mort!
This credit bubble has made me feel like the stereotypical “nice guy”. After actually WORKING for and SAVING my money, I feel like I played the game entirely wrong. Just like the nice guy in high school who never gets the girl… Next time, I’ll be a loose-spending jerk. A Hummer on credit and a hummer to go with it!
I live and work in the OC. One year ago a coworker was looking at buying a property in the Florida Keys as an investment/retirement home. He had lined up a company which would rent it out now and then and pay him some of the rental money. He went and looked at properties in Key West and Big Pine Key and came back and thought about it. There was one waterfront property he was eyeing which was $600k. He talked about this idea a lot; it had really piqued his interest. He was going to take a loan out against his OC house which he bought several years ago to finance this enterprise.
I told him I wasn’t sure it was such a good idea, and though I couldn’t predict the future I thought there was a lot of risk in the investment/retirement homes market, and the time to buy is when everybody stops talking about it. Besides, there’s always taxes, high insurance costs (especially in the Keys), etc.
He eventually decided against it, and today he is very satisfied and relieved with his decision to stay out. Now I can tell him had he gone for it I would be calling him a “California Equity Locust”.
Home_a_Loan — that is one potential locust who wouldn’t have made squat. Only “whales” (the Vegas definition) should even think about buying in the Keys, now or in the future. If you can’t afford to watch it disappear, you can’t afford to buy there. IT should feel more like buying Kobe beef than buying a property, wallet -wise.
Way OT! Sorry to be so far off topic, I need help from Vegas residents. I am relocating from SoCal to Las Vegas for a job transfer and of course I want to rent for the next 2 years or so(I think 2008 will be the real bust year for RE). 2 questions-1)What is considered a good area of town to live in?-Vegas neighborhoods are a friggin mystery to me. 2)I would like to rent a 3BR/2BA house-what monthly rent should I be looking for? All help is appreciated.
Look in Green Valley, a neighborhood that crosses city lines between Vegas and Henderson. Summerlin is a comparable option but the traffic coming into town on 95 is a bear (relatively speaking, nothing like the 405 where you’re from). 3/2 sfr rents for 1200-1500 typically and there are more than a few with pools in that range.
I agree with LV Renter that Henderson (Green Valley especially) is nice. I also rented in SW Vegas (Southern Highlands), and I liked that area too. I bet there are tons of nice houses for rent in either place these days. I also bet rents are all over the map. Pick the desperate landlords
The most popular this year for value is Zip 89031 is North Las Vegas in the Golden Triangle. 1900 sq ft
house built after 2000 on a 6000 sq ft lot for $1200 a month. Builders like Pulte and Signature have energy effecient homes, that will reduce your AC bill big time in the summer. Single story also saves on heat and ac
Sunday Reveiw journal has tons of rentals. Can get the rentals from realtor.com. Type in Zip 89031 for SFR…you won’t pay any more rent for 1900 sq ft vs 1400 sq ft.
It’s not just the economic impact, it’s also the attitude many Californians bring with them.
I lived in Salt Lake City, Utah during the mid 90s. Lots of California refugees arrived during that period. Upon settling in, they started whining about the place: to conservative, too boring, too many Mormons, etc, etc. Needless to say, this didn’t endear them to the locals.
My advice to California transplants: keep your mouths shut, and don’t try to remake your new home into California. If it was so great, then why did you leave?
Lots of California transplants I know who are moving to Utah *are* Mormons…
If it was so great, then why did you leave?
The number one cause of native Californians leaving was, is and will be the influx of people into the state, both legal and non-legal.
My advice to California transplants: keep your mouths shut, and don’t try to remake your new home into California.
Probably not Native. Ever been to a sporting event in CA? The out of town teams have more, louder, and more obnoxious fans. That is the problem.
Desmo makes and interesting point.
I endured a RE bull waxing rhapsodic about the joys of CA at length.
She ended her comments with as soon as I can retire I am outta here.
I nearly fell over, if it is so great why leave when you retire?
LOL! Im in Silicon Valley…. we have more from NY and Boston then ever before in my life time. Many also from Ireland and other Northern Europeans.
As for the the view that California is Liberal… Thats a far stretch. We had so many well known Republicans from the state past and present in office.
This is so true…They bring their liberal steal your money to give
to someone else attitude…They wreck the native culture.
Eff off…the only stealing going on is done by conservatives these days.
Why arent you defending our culture in Iraq??? They raised the enlistment age to 42 AND you could always work for Halliburton defending your conservative values.
I’m one of those soon to be transplanted Californians (currently stuck in South Florida for another year). I’ve discussed this at length with my wife, even to the point that I do not want our California license plates on our cars when we get to the new location where we are going to buy our next home (currently replacing them with Florida plates, though that probably isn’t much better). I don’t want to be stereotyped as a “California locust” or anything like that when I get to my new neighborhood. I truly love SoCal, but I think I can do more for my family financially somewhere else (my “secret” place that I’m not divulging because I want to keep the rest of those transplant Californians out!). What I think we have to our advantage is really thinking over this move for a long time (3 years), visiting the location several times, and truly understanding the difference in culture that a move to this new state is going to bring. Too many people move to a new state simply because they think they are getting a good deal on a house. The diversity in our country is starting to be such that a move from one state to another can almost be as extreme (culturally, socio-economicaly, politically, etc) as a European moving from one country to another.
Um….
Why would you use the term “locust” to describe someone who buys a speculative property elsewhere, but doesn’t move? “Locust” would seem to be a perjorative used to describe a group of people migrating from one area to another. I always interpreted the phrase to mean someone who sold at a big profit in California and moved to someplace cheaper.
Equity locust behave like real locust . They come in and destroy the local prices like locust destroy crops and move on .All that is left after they are gone is a destroyed local economy ,like destroyed crops . The equity locust is looking for the green stuff just like the real locust is.
Agreed, Housing Wizard.
Equity can be borrowed from one’s house so easily anymore that it isn’t necessarily just people bailing out and selling who are causing the migration of money and escalating housing prices. My definition would include this type of speculator as well, although they never sold and moved. The money is still being moved into cheaper areas. Demand and prices are still driven up.
Wiz be rite.
A lot of resentment comes from how quickly and dramatically “equity locusts” and flippers drive up prices in a market at the expense of the local population- especially first-time buyers.
Markets such as Boise were perceived to be bargains and “great buys” to investors from larger metro areas. Compared to California, Boise home prices were a “bargain”; but in the context of local wages, land supply, and demand, home prices were just right.
Flippers and equity locusts created somewhat artificial demand as homes were being purchased because they were “cheap”, not because people needed to live in them. A lot of long time residents are bitter because prices are too high compared to wages. People I know have only been able to buy house through the use of creative financing (IO, 80/20, etc.). The only other people I know who have bought homes lately are refugees from Cali.
My neighbor moved from Nevada to Boise. I know what he paid for his house here, what it sold for and what he paid for his house in Boise. If he didn’t do something stupid like a refi, he very well could have paid cash for his house. They had been wanting to move to someplace like Boise for a long time. I think they saw a good thing and grabed it.
So who’s selling these locusts their houses for ever higher prices? Your friends and neighbors? HBs? Local pols? No one is forcing anyone to sell. Feel bad for those locked out? Sell them your house for a price lower than the market. Say, what it was before the locusts blew into town.
it’s not the average citizen who is selling; it’s usually the RE brokers, well-connected businessmen, local politicians and their kin who buy on the cheap from their neighbours and make the big bucks by selling to foreigners. Locals who don’t want to move elsewhere cannot gain anything from the higher prices; but those who have multiple properties or who can ‘trade’ do.
In my area of NL the locusts were the primary factor in pushing prices ever higher over the last five years (current home appreciation more than 1000% in +/- 15 years, with local wages up maybe 50%). If you don’t have loads of money or qualify for some stupid government subsidy, you have zero chance of buying a home (not even the real POS stuff). In Eastern Europe, the Balkan countries etc. it’s probably even worse. Especially for young people who want to work in their own area this is a disaster that is destroying all their plans.
Equity Locusts (whether from CA or elsewhere) are the idiots always in search of greener pastures in geographic or town planning terms and happen to have gotten lucky along the way with an equity windfall.
However, the problems they bemoan are internal to themselves so wherever they go their problems follow them.
High housing prices, generally they pay the asking price for RE since it is so apparently cheap and that is how they drive up RE prices.
Ill-behaved children
Poor paying jobs
Traffic
Bad schools
Crime-gangs
Basically, any one of the laundry list of complaints about a metro area inevitably follow the equity locusts around the land.
Rather than affirm, where home truly is and working to make it livable and enjoyable they move onto greener pastures and devour the landscape along the way leaving communities denuded, ruined and poorer because of it.
That is why the term equity locusts fit and is an apt perjorative term for these types of people.
Kinda like moving to SLC, UT and complaining about the Mormons. If they wanted fewer Mormons don’t move to the Intermountain West.
It sounds like your describing Compton - Riverside - Palmdale etc.
I wasn’t specifically describing those areas but you make an interesting point.
I kind of think of Riverside, Victorville, Palmdale as phase 1 of equity locusts. Those places are one of the locations on their itinerary.
I have family that went from Bellflower to Victorville to Cour’d Alene, ID.
Now many family members are moving to Idaho’s panhandle.
Yes, they are all equity locusts.
Actually, one family inherited a free and clear nice house in Fallbrook, CA. They plan on living there for 2 years to get the capital gains exclusion, selling and moving to Cour’d Alene, ID.
The worst kind of equity locust, the total windfall equity locust.
I like it - species of locust.
Who knew having equity means you also have ill behaved children and are in a gang?
Whoo, boy. You asked, so here goes. The “equity locust” does not simply bid at foreclosure sales for bargains. Oh, no. The day after (sometimes the day of) a publication of a foreclosure sale in the newspaper, the unfortunate homeowner is literally bombarded with visitors, express packages, telephone calls and pretty much any device anyone can think of to get their attention. All manner of “deals” are offered by equity locusts, all of which entail signing the title of the property over to the locust. The locusts will promise to rent the property back, to let the borrower repurchase the property once they “get back on their feet” make a “cash for equity” offer, which gives a little cash and a moving truck while the locust gets the bulk of the equity, and pretty much say anything to bamboozle the homeowner out of their title. They point out that if there is a “quick sale” to the locust, the property won’t be shown as “foreclosed” in their credit report and say they are doing a “big favor” for the homeowner. Some of them promise to “share” the equity from any resale down the line with the homeowner.
You would be absolutely shocked how many times the homeowner actually goes for these “deals.” Of course, what they don’t know is that the Statute of Frauds makes any verbal offer of sale of real estate void. That’s right, bucko. Even if the locust “promised” to sell you the property back in 12 months, if that promise isn’t in writing, it is 100% unenforceable. Ditto for equity “sharing.” I can’t tell you how many telephone calls I have received from former homeowners who have transferred their title to a locust and are shocked - shocked! - that they are being evicted. Courts are remarkably unsympathetic in these situations as well.
This problem is so bad that Maryland passed a law last summer which (as I have been told, haven’t seen it myself) requires any person who purchased a home under distressed circumstances (i.e. foreclosure or bankruptcy) to give 80% of the equity from such a sale to the former owner if the house is sold (”flipped”) within a year thereafter.
The locusts promptly abandoned Maryland and fled to Virginia where they are a plague upon the land.
If I had to say a few words to the FB’s out there they would be these: If there is any equity in your property which you want to salvage, spend $200.00 or so and have a competent attorney review any “deal” before jumping in. The cost of a review is a tiny fraction of the cost of losing the title and any remaining equity for your home.
You are talking about these vultures:
http://www.consumerlaw.org/news/ForeclosureReportFinal.pdf
Warning, it’s a big file and loading pretty slow tonight.
Great post, KIA.
Sounds more like piranas or sharks, imo.
You describe Property Vultures (equity rapist troglodytes). PVerts are not EELs. Good job.
I believe the “locust” label is apropos since Californians visit, fall for the rural charm, then buy. They drive up the prices but that is not the worst. They then proceed to make over the area so that it is just as horrible and over-developed as where they left. They immediately call their developer friends to put up a strip mall at every crossroads with the same Starbucks and Jamba Juice in every one. They get on the local commission and turn every country lane it a 7 lane highway with the mountain stream confined to a concrete drainage “river.”
I can’t think of a more horrible place to live than silicon valley. Miles and miles of tract houses broken up by office parks and fronted by strip malls.
Yep, you are on the same track as am I above in the post on the problems following them wherever they go.
Wow, Californians do all that. Hhmmm. We certainly have a lot of power don’t we? Who knew…………Can we move mountains or turn the sky purple too? Just checking.
I am not bashing Californians.
I am a native Californian and it is home for me. I will fight for it which is why my immigration proposal is to limit domestic and foreign immigration into CA.
Limit immigration - how are you going to do that? By making everything ridiculously expensive?
I know you jest, but the cruel irony of the bubble is that it hasn’t even made a dent in illegal immigration here in CA, even while driving house prices up to even MORE obscene heights (things were already expensive here vs. incomes pre-2000).
In fact, sky-high housing prices have had the perverse effect of driving out mostly middle and working-class citizens, while providing no real dis-incentive to illegals. After all, illegals rarely buy (though some banks are actively seeking ot change this) and don’t mind living 10 to a room. Easy to pay high rents on low wages when you pool your money w/10-20 people, pay no income tax, and get all your healthcare, education & foodstamps free-of-charge from Mr. taxpayer. Oh, and you might even qualify for Section-8 housing (the cherry on top of your welfare sundae).
So who mows your yard?
You do realize that if all the middle-class are driven out, that would only increase the demand for illegals right? When all the working class have to leave because of lack of affordability, someone has to mow the McMansions’ lawns, someone has to pick up the trash from your patio party over the weekend, someone has to clean your pool. So what you get is a Mexico City created by the rich. A small part of the city where the rich live, right next to the poor part of the city of all the people that work for them.
Hypocrisy in CA conservatives is so rampant (to be fair, liberals are no better).
Yes, Silicon Vally is a horrible place to live as is the rest of California. Tell everyone you can not to move there.
Call up their developer friends? I thought most of these equity locusts had “bad jobs” as someone above said and were only able to move by liquidating inflated equity. How are they that well connected into the development business? No, I think its that rural communities try to entice people to move there to bring investment, when they do all the big corporate retailers want to cash in on the population growth, of course these small rural towns would never enforce any kind of planning (thats downright Communist!) so developers basically can do whatever the heck they want.
This couldn’t be more true. I’m watching it happen where we live right now.
Umm… in reviewing other posts which popped up while I was typing, it occurs to me that we should probably define the term a little more clearly. In the connotation with which I am most familiar, an “equity locust” is a professional investor who is acquiring properties which already have available equity using any means possible, then selling them and living off of the equity. This is the sense which I used for my post above. I suppose other, less problematic locusts might be speculators who are buying and flipping and living off of the equity in that sense, or selling high and buying low elsewhere, then moving on, but they are paying then-current market price and living off of appreciation and capital gain rather than equity. I do not consider the latter to be a locust, but a simple speculator. When the music stops, some of them will win, some will lose. That’s just the speculative frenzy right now.
The reason I find “equity locust” so apt and a properly perjorative term in the former sense is because nobody in their right mind would sign over hundreds of thousands of dollars of equity to these people without fair value, yet the locust has no intention of, and does not, give fair value. Otherwise, how would they live? They are taking advantage of the pain, suffering, and outright ignorance of people, and I find it to be a vile and deceptive practice. Obviously homeowners have a duty to educate themselves about the finances associated with their “investment” but anyone can be lied to and cheated, and this is why “equity locusts” are held in bad esteem by those who understand what is going on.
Equity locusts are kind of like 1st world tourists. They mean well and seems quite harmless individually, but collectively they can pose major threats on the native community where they visit. If the locals step in and take good control of the situation, the invaded area may one day develop into Monaco or Barbados. If not, it could end up more like Aspen or Thailand.
Astrid — Thailand did not fare that poorly, outside of Phuket and Pattaya. The Thai are very good at absorbing equity-locusts and any other incoming nuisance and calming them and keeping them happy all the while. There’s a good reason that Thailand is the only nation in the region never to be subjugated by another.
Well put, that rationale is the same rationale for localism in exotic surf locales.
Regulate tour-on (think moron) behavior.
Hawaii being probably the most famous.
“Equity locusts are kind of like 1st world tourists. They mean well and seems quite harmless individually, but collectively they can pose major threats on the native community where they visit.”
Oh, I got it now. So what all of you from outside of Cali are saying is that if I am in your area - I should not feed or pet any of you because you are all wild and I might domesticate you and make you civil. Well OK then.
Huh?
Definitely don’t pet Astrid.
Don’t give money to foreign child beggers.
Don’t feed the housing bubble.
Don’t pet your fellow bloggers
I wasn’t thinking of petting behavior. I’m mainly thinking of the inflationary effects of outside money and the corrupting influences.
In tourism, the inflation leads to locals abandoning their old lifestyle, selling their homes (and uglifying the landscape with hotels) and becoming dependent on tourist dollars. The bad habits include drug use, prostitution, begging, and gangs.
In housing, the inflation leads to abandoning their old lifestyle, selling their homes (and uglifying the landscape with McMansions) and becoming dependent on EL dollars. The vices include locals flipping RE, living beyond their means, and maybe prostitution/begging when the bubble bursts to make ends meet.
There are different types of “equity locust “, but they are all after easy money equity ,they are in it for the short term ,and they move on with no intentions to reside in the areas they buy in ,or not for long .
Some of the locust are .
(1) Fixer -upper flippers - Person who buys a fixer property, a little under market ,and than puts cheap cosmetic improvements in and expects 500% on those improvements within 12 weeks by selling .
(2) New home flippers - These are locusts that travel around to new home developments and buy 25 to 40% of the inventory with intent to sell the new home offerings at a 20 to 30% profit within months . Some sell their pre-construction contract to other locust before the property is even completed avoiding even owning the property .
(3) Cheap town flipper/locust - These are the locust that just look for towns that aren’t in a bubble and buy because its cheap ,thus creating a false demand and raise the prices ,(and than they sell and leave) . This sort of flipper/locust always run in swarms .
(4) Equity Locust - These are people that buy property to live in and than take out countless loans to live off the equity build up yearly .This sort of locust cannot live the lifestyle they want /pay their bills unless they take out the equity pursuant to equity loans . This sort of locust usually remains in one home until there is no equity left and are forced to sell .
(5) First time buyer locust - These are people who cannot afford to buy a home ,but get in on no money down adjustables with intend to sell within a few years ,(rather than be priced out of the market ). These people are looking for appreciation /equity and do not really care for home ownership .
So the above are just some examples of some of the equity locusts . All locust share one thing in common ,they view a house as a investment to get equity, but never a place to live in long term .
The locust also believe that real estate never goes down and a greater fool will always come along and give them the equity they are looking for .
To those who’ve seen it all before:
Of the equity locust species described above, are there any that are new to this bubble? Or, like cockroaches, have they been with us since the dawn of time?
Not to mix metaphors but oh well…
I don’t mind cockroaches, they do their thing and try to disappear quickly when the lights turn on.
On the other hand equity locusts tend to be flashier and flaunt whateve they’ve got or believe.
If they behaved like cockroaches and did their business quietly and tried to blend in they would be much less objectionable.
The locust is different because there are so many of them . The locust has the power to create a mania and change the price of homes beyond fundamentals. The locust even buys property sight unseen off the internet. The locust moves quickly .
Person who buys a fixer property, a little under market ,and than puts cheap cosmetic improvements in and expects 500% on those improvements within 12 weeks by selling .
- WRONG!!!! 6 WEEKS MAX.
Yea ,your right .
As someone living in Bozeman, and depending on my job in Bozeman to live… whatever you want to call the Californians, East Coasters, Midwestern semi-retired doctors, “trust-a-farians” etc… These folks make it impossible for a “normal” person to live in Bozeman. An I make more than double the median income.
HOwever, things have a way of correcting:
1) There is virtually no zoning in the Gallatin Valley so builders have been furiously throwing up homes and condos–so that now we have an explosion of inventory. Prices are already starting to drop.
2) People who don’t want to live in a wealthy vagabond community (I use the word loosely) can leave. I just accepted a job in Eastern Washington (Pullman) with a 25% pay raise and significantly more affordable housing. It isn’t as if there are any high paying jobs in Bozeman holding people to the valley.
Amen- same problem around Idaho. Prices are jacked up around Idaho due for the same reasons. I make a decent wage and could have properly qualified for a home in Boise at pre-bubble prices; now prices are out of wack compared to wages. If the bubble does not correct, I won’t hesitate to move somewhere else for higher wages and more affordable housing.
That is interesting in that I will be leaving Florida for more or less the same reason, and I’m a life-long Floridian and an old fart. I think that all this points out the continued mobility of much of the U.S. populace — we are willing to move under the right conditions. Hard to imagine many Germans willing to move to France because of the same stimulus.
Know how to get a German to go to France? Easy - give him a gun.
LOL.
wrong example … Germany is about the only EU country without a housing bubble (and you could say that former Eastern Germany has an inverted house price bubble; but even with home prices at just a few % of those in France, I don’t think the French will move to former Eastern Germany)
But I can assure you that in general it works in Europe as well because the financial stimulus is often huge. The major factor for the current big emigration numbers from the Netherlands (highest in 50 years) is home prices; a significant number of people has moved to cheaper EU countries like Belgium, France, Spain and Germany over the last 10 years.
Hey Groundhog,
Did you see the New West article about Bozeman “inclusionary housing”? I posted it in the bit bucket thread. The author of the editorial seemed to think “it’s different there” and that Bozeman has always been unaffordable. Read her responses in the comments. Any truth to what she says?
Bozeman Inclusionary Housing
That article interests me because of the concept of deprivation involved. In most of the U.S., the definition of unaffordable housing might generally be framed around the alternative: housing that ix “x” minutes away, commuting. Any worker can successfully work in virtually any city so long as he/she is willing to drive the time and distance required and to pay the automobile and parking expenses associated therewith. In Bozeman, at least with gas under $4/gallon, one would think that vehicle expenses are not that much an issue, regarding the proposed city ordinance. If that is agreed, then the problem distills down to some pretty basic remaining issues: (1) Where do emergency-response people live, so that they can respond on time (OR is there another solution to that); (2) if the worker-bees live way outside of town — it being difficult to imagine more than a 20-minute commute into Bozeman except when snow is on the highway — how can the town keep them happy way out there? To address the latter, most would probably see the need for adequate snow-removal, fire, police and ambulance service, and water and cable TV. That should be do-able.
In recent years, creative city governments, such as here in central Florida, devised ways to annex slivers of land that extended the “reach” of annexation much farther into the hinterlands than previously imagined possible. While I’m totally sympathetic to the plight of people who want to live in town while watching the prices of housing there dim their chances, in places like Bozeman, with so much acreage around, isn’t there a lot of opportunity for creative solutions that do not involve government artificially creating affordable housing close in?
ever been to bozeman when its 20 below zero
Yep, at 15 below your nose hairs freeze on even the shortest walk. Nothing like a good winter to get a lot of Californians to decide that Montana might not be the best state for them.
I have serious doubts that municipality-financed “inclusionary” housing will ever have much of an impact. Simply too many people that can’t afford to live in Bozeman. Now, if the university wanted to develop residential units on their land it might be a different story. And the university is facing serious problems in recruiting and retained qualified staff. In my dept., we have a revolving door for the classified staff positions as they just don’t pay enough given the cost of living.
Yes, a lot of people commute, but then you have high gas prices, traffic problems, parking problems, etc… In the end, quality of life declines and you have to ask yourself–”And I moved here for the quality of life?” Moreover, the outlying towns are also getting expensive forcing staff to commute greater and greater distances.
Until 10 years ago, when Bozeman as “discovered”, the town was very affordable. Most the faculty hired 10 years ago have great houses, usually with a bit of land and views of the mountains. Missoula was the “sexy” town in Montana and Bozeman was a cow town. So things have changed dramatically in a very short amount of time.
In the end, I have more confidence in market forces than government action. Unlike Boulder or Santa Barbara (tight zoning), there is virtually an unlimited supply of buildable land in the Gallatin Valley. As more and more houses are built: (1) supply will eventually excede demand–remember, no jobs in Bozeman; and (2) the quality of life will decline–traffic, lack of community, crowds on the ski slopes and trails.
People have very short memories and have forgotten the Bozeman real estate collapse in the late 1980’s and early 1990’s. In fact the whole economy collapsed and many real estate investors went bankrupt. Bozeman was just a nice a place to live back then, probably nicer.
Problem is the process you just decribed gets repeated over a couple of decades and there aren’t any livable places anymore.
It is easier just to leave for seemingly greener pastures.
Equity locusts haven’t learned the maxim: don’t sh!t where you eat.
My idea of astereotypical equity locust goes like this. They heloc their socal house to the hilt to buy flipper properties and sell them to people with no godly way they are ever going to afford the payments. Then they sell and buy in Seattle with 10% down. Then they heloc the Seattle house for 125% LTV and but ten more houses all over the country with little or nothing down and then they borrow 125% LTV against all those houses, selling a few if they’re lucky and on and on. ad infinitum. Your average Joe never can buy a decent house at a decent price because these a$$holes all control fourteen properties with little or nothing down, jacking up the prices as they go. Since when can some shmuck who makes 65k a year borrow enough money to buy fourteen houses with nothing down? Read the book, this is what they’re doing and pi$$e$ me off a little, sorry. The builders deserve what they get, crime, punishment, it goes together, working with the speculators to jack up the prices at the expense of poor Sall Sixpack who is too stupid to know what is going on. I hope they all end up in jail. The end. (rant off)
You hit it right on the nail Mort . Keep on ranting , I like your rants .These jerks you speak of created a false demand Nationwide to the likes that I have never seen before . Greed at its worst . I will always say that the lenders should of stopped them , but it’s to late now . I hope they can’t get a bail out because of all the fraud on the loan applications . I hope the clown crooks that are teaching these people how to get all these properties get busted .
(rant back on) And you know the worst part of the whole thing? Our own government made all this grift possible with their easy money and the endless loan guarantees and total lack of oversight, ven over their own agencies! I hope all those stupid, lazy, incompetent, greedy, crooked, a44bite politians end up in h.e. double hockey sticks with the speculators and loan sharks and every other crooked facet of this whole terrible mess.(rant back off)
agree with all you are saying, but don’t think it’s any better in Europe …
Many of these locusts from my country started with close to nothing and are RE multimillionaires now. Whenever the bubble explodes, they are not the ones who will be harmed because their equity gains are protected withint trusts, special investment vehicles etc. Same story for the brokers, lawyers, appraisers, big developers etc: their company will go bust but who cares, they have already pocketed their x00.000 euro yearly paychecks and will probably retire early in a safe place for their kind like the Bahamas or Cayman Islands (guess it will get very expensive there when the bubble explodes …).
Wait a minute. If the “locals” hate the locusts so much why do they sell to them? Some locals are clearly happy as clams…I don’t think they are posting on this blog though.
You are right locals will tolerate equity locusts long enough to take their money.
Then things get downright frigid and ugly.
Doesn’t matter if it is in Boise, ID, Cabo San Lucas, Mexico or Tamarindo, Costa Rica the same mechanism is at play.
Local to locust buyer before the sale is complete: “This is a great area. People are really friendly. Your family will enjoy this house and the community. Welcome.”
Local to a local friend (about buyer) after the sale: ” I wish they would get the F out of my town. I hate these people.” Local drives off in shiny new car.
Funny! And so true. Unfortunately, it is always easier to see how “out of town people” are responsible for a towns problems.
Wait a minute, I just thought of something. If a “local” sells to a locust and makes some profit and moves on, have they then become a locust themselves?
Equity Locus - No problem they will go bankrupt. Their EGO wrote checks their financial health could not back up. They will be asking for goverment assistant. FED has already said… No dice !
Median prices in Humboldt County, CA are down 7.2% YOY in June, and down 11.5% after adjusting for inflation. At the same time, sales are down 12.4%.
That is great news for the locals.
Currently living in the Eureka area, I will admit that prices have likely dropped 5-10% in the last year, but I still see a surprisingly large number of people buying. I keep close watch on both the San Joaquin Valley (Modesto-Fresno-Visalia-Bakersfield) and Humboldt county. The declining market is FAR more apparent in the Central Valley. But, I keep hoping all the equity locusts from Santa Rosa stop moving to the North Coast.
The best thing that people in high prices areas can do is to move to low priced areas. That will help to equalize the prices. This bubble was brought on by lax lending standards on a national level. The flyover states can’t blame migrants from the coasts. I’m surprised MORE people aren’t moving.
That is the mechanism that pisses me off.
The 2nd movers (equity locusts) will follow people to where they move to and foul everything that they touch.
I believe the phenomenon can be related to the concept of Nature abhorring a gradient.
Quite possibly kinda like the American standard of living sliding to meet the Chinese and Indian standard of living.
I bet you would like that. (not)
Comment by CrazyintheOC
2006-08-06 14:52:20
Way OT! Sorry to be so far off topic, I need help from Vegas residents. I am relocating from SoCal to Las Vegas for a job transfer and of course I want to rent for the next 2 years or so(I think 2008 will be the real bust year for RE). 2 questions-1)What is considered a good area of town to live in?-Vegas neighborhoods are a friggin mystery to me. 2)I would like to rent a 3BR/2BA house-what monthly rent should I be looking for? All help is appreciated.
I live in Las Vegas. I’ll make it easy on you…don’t rent anything in central Las Vegas, within walking distance of the Strip. To simplify things even more, rent on the west side of the Vegas valley…west, southwest, and northwest are all decent areas. The east side of the Vegas valley is really spotty in areas…and for the love of gawd, do not move anywhere near “Nellis Airforce Base” (unless you actually live and work on the base, outside the base is horrible).
Go to a property management company for a home rental. You can get decent homes for cheap…I rent a 1200 sq ft. 3 bed/2 bath newer home in the northwest of vegas for $900 a month (yeah, its a f***ked flipper). You can go more upscale and pay more, or you can go cheap and pay less and live in the ghetto.
As a local, I can tell you home prices need to drop a minimum of 40% for the working population to afford one. So prepare to wait a few years for that to happen to get a decently priced home.
Comment by Desmo
2006-08-06 15:51:02
If it was so great, then why did you leave?
The number one cause of native Californians leaving was, is and will be the influx of people into the state, both legal and non-legal.
I was born and raised in southern California, and lived there for over 20 years. This is one of the major reason me and my husband left California…it was just getting too damn crowded. Commuting from places that took maybe 20 minutes when were in college now take hours, because of traffic choked freeways. The areas we grew up in, which were once small neighborhoods surrounded by farmland and fruit orchards are now paved over into malls and high density housing developments teeming with people (and alot of them illegal immigrants who refuse to speak english). Neither one of us like living somewhere people are almost literally crawling all over each other.
My proposal is to limit all forms of immigration into CA.
That would be nice - I hereby promise never to leave California if they all promise never to move here!
I think what all of the people writing these posts don’t realize is that we Californians are talking about THEIR future when we talk about the problems we face here is Cali. World population is rising expodentially and the immigrant population (especially south of the border) are no longer confining themselves to Cali and Arizona. Now that more and more people are spreading out around the US - people from what were once insulated states are, in the next several decades, going to have to deal with the type of problems that Southern Californians have been dealing with since I was a teenager. The slow rise of population along with the slow decline of standard of living. We’ll see how they handle it and how long it takes them to realize, hey, it’s not just the Californians.
A couple of decades from now and I’ll be rolling around, laughing my dead A$$ off in the grave at the stupid yeast culture known as the human race.
Then you can call yourself “Already Mort” He he!
I agree with you that most of the US population will see a decline in its standard of living over the next few decades. Already happening I think. I also agree CA does appear to be on the leading edge of what is to come for the US.
Went to college in CA in ‘74 and lived there until ‘90 when the defense industry crashed. Saw the writing on the wall and figured that many were going to be laid-off where I worked and left. Turned out I was right. Thought it was fine while I was there - expensive even then though. I have to admit, I’ve never really seriously thought of going back. I always figured CA would be one of the first to feel the effects of crowding, illegal immigration, disparities in wealth, high cost of living, fiscal problems, resource issues, etc. Some great universities though.
so which is it, exponential population increases or a slow rise? malthus lives…
Sorry, I meant exponential (or fast) rise in population along with slow realization that things aren’t what they used to be.
Thanks for the catch.
They do indeed get a “bad rap” and here is why:
1) In bidding wars they can always outbid the locals because they are bringing the most to the table. Last summer a friend (who has lived her all her life) went to make an offer on a house for 375K. The house finally sold for 450K and guess who won? A CA EL. The locals cannot compete with all the money they bring to the game. And they are very willing to get into escalative bidding wars to get what they want. So they are a direct cause of price runup and price out the local population.
2) They are notorious for moving into an “average” neighborhood of say 50 year old homes and instead of rennovating the home to make it a bit nicer, they have it knocked down and put in its place a gaudy “mansion” that is architecturally out of character with the rest of the neighborhood. When the mansion sells it drives up the comps and everyone who just wants to live there suddenly has instant appreciation and the associated TAX INCREASE. This is a real hardship, especially for people on fixed incomes.
3) They are pompous. They have exotic landscaping put in, drive “luxury” cars, SUVs, Hummers, etc. They seem to have the “he who dies with the most toys wins” thing down to a “T”. I kid you not, there is a new CA EL home in kirkland where the master bath is 1000 Ft2!!
So in summary.
1) They drive up the price of homes and price out the locals
2) They create architectural imbalances
3) They drive up property taxes due to 1) and 2)
4) They are pompous
5) By consuming just large quantities of building materials, the drive up prices of building materials which drive up new home costs
And how did they earn this money? President of the comany or foreign ambassador? Nope these are just ordinary folks (clerks, teachers, etc.) who “earned” their money just sitting on their butts.
So what happens when you take a pauper and make him a prince…..you get the loveable species “Californicus Equus Loci”.
“Don’t hate us because we have more than you…we EARNED it.”
So why didn’t the owner sell it to your friend, a lifelong local?
I think implosion, BW and waiting to pounce are all the same realt-whore stealth troll.
They all tend to show up at the same time and make generally the same insipid realt-whore comments.
Good points SeattleMoose
Okay, I think I see the different species here. We have:
1) Equity nomads - wander about from home to home, pausing only long enough for this mad market to jack the price up, then they sell, take the equity and move on. No involvemet in the community, no intention of growing roots.
2) Equity emperors - build leveraged kingdoms of multiple, over-valued, completely leveraged houses to look like millionaires on paper, but are actually thousandaires, if that.
3) Equity Nobles - tap the equity ATM to live a lifestyle of conspicuous consumption and “better than thou” image.
4) Equity thieves. The report posted by Mort does a much better job of explaining the scope of the problem than I did. Thanks, Mort!
What is the taxonomy of the Californian who stumbled across this blog, sold his/her house for a huge tax-free profit and is renting until he/she can plow that profit into a truly stunning pennies-on-the-dollar, post-bubble-burst home or an empire or rental properties? Equity vulture?
Smart cookie.
The problem with the locust is they create a false demand ,and drive up prices ,and they buy at inflated prices . The so-called vultures that buy when property goes down buy when the economy supports the price . The vultures are not a loan risk and they can afford the payments . Vultures don’t pose a risk to me ,but the locust does .
Buying the low-down properties - isn’t that “bottom feeding”? I remember that term in my youth as the SoCal bubble of the late 80s/early 90s was crashing. I believe it referred to people who made low-ball offers on the off chance someone would bite (which they frequently did).
It frightens me that equity locusts might descend on the colorado town where I grew up and raise the prices to the point where I could never afford to buy. I was priced out of DC home ownership by this bubble, I wasn’t ready to buy yet being so recently out of college and now I have no hope of buying in DC. Someday I want to go home to Colorado. If equity locusts ruin the market there it will be a personal tragedy. I fear and despise equity locusts, they are a threat to my future plans.
exactly mort,but these equity locusts are going to going to lose big,i live in pismo beach ,38% of homes are second homes all fueled from los angeles and san francisco,but this week i have finally seen the desperation in the air,the realtors are so desperate,the inventory is growing,and yes folks,there will be blood on the streets in california beach paradise….mmmmm it smells good
There were for sale signs all over Studio City…more than I’ve ever seen.
While I tend to label all Californians who relocate to Colorado as Equity Locusts or Californicators, that is, in fact, a generalization. There are at least two distinct varieties:
1. Decent, long-suffering middle and working class people, especially those with young children, who see no future in California, and quite sensibly opt to go somewhere where the quality of life is better, and make an effort to fit in and be good neighbors. To these people, I would say, “welcome!” even if they pay cash for their houses and pay the seller’s asking price.
2. However, to the materialistic, self-absorbed, opportunistic types who deface our once-pristine mountains with their 7500-sq ft montrosities, tear up our mesas and canyons with their ATVs, careen around on icy roads in their Expeditions and Sequoias, cell phone firmly pressed to ear and brain disengaged, and bring their shaken-not-stirred jacuzzi lifestyle and spoiled, ruined feral offspring — these are a blight upon the land, and I’d love to slap a “return to sender” stamp on them.
Well said
I don’t think of #1 as equity locusts if the attempt to fit in to the new places culture.
I have no problem with #1. “Fitting in” pretty much sums it up.
#1 are always welcome.
From the posted artcle: “There’s a reason economists watch every gyration of U.S. house sales. Real estate makes up about 8 percent of the Texas economy, said D’Ann Petersen, an associate economist in the research department of the Federal Reserve Bank of Dallas. Title companies, real estate agencies, mortgage lenders and homebuilders create jobs.
Interesting comment from the Dallas Fed. I wonder how many jobs 8% of the Texas economy is, and how many will be lost will be lost?
People who bought property prior to 2000 were a different breed of investor . First -they would buy property that rents would pencil out and hold them for a long time .Second -They provided a service of providing rentals for people who didn’t want to buy or couldn’t .
Fixer upper investors have been around for a long time in real estate ,but they didn’t drive up property values and they would actually improve eyesores in neighborhoods .
In both cases these type of investors were in it for the investment , but they would fit in to the overall economy .ALSO THERE WASN’T SO MANY OF THEM THAT IT CREATED A FALSE DEMAND FACTOR .
Because of the real estate hype ,no lending standards ,and programs like Flip that house /Property ladder etc., the investors started buying up properties ,creating a shortage /excess demand . Than the realtor group starting spining the shortage bullshxx as well as the “get in now real estate always goes up ” . Than you got the housing mania .
We can all see now by the housing inventory glut that there was never a shortage of property or land .Again ,lenders letting people into property that they really can’t afford creates a false demand for homes and drives up property prices .
I believe the shortage of properties up until the last quarter of 2005 was driven by these factors which created a demand of 60% more than the real demand should of been .
SAN FRANCISCO (MarketWatch) — BP Plc. is shutting down its Prudhoe Bay oil field in Alaska, taking some 400,000 barrels a day of crude oil off the world market, following discovery of a corroded pipeline and small leak, according to a media report Sunday.
The shutdown by the British energy giant (BP : bp plc sponsored adr
News , chart, profile, more
Last: 72.54+0.54+0.75%
12:06am 08/07/2006
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
BP72.54, +0.54, +0.8%) , one of the three major operators in the North Slope, was disclosed Sunday night and is expected to take several days to complete, The Wall Street Journal reported in its online edition. See Wall Street Journal story. (Subscription required.)
The reduction represents almost half the total daily production from the North Slope, and about 8% of daily U.S. output.
Anyone else see the California faux energy crisis being played out again? Maybe in 5 years we can witness layer after layer of lame excuse about how it was the other guy’s fault.
We have already had the CA energy crisis #2.
All of the way too expensive power contracts signed by Gray Davis at $90-120/MWh are now decent prices and in the money contracts.
Energy crisis #3 is probably on the other side of this housing bust.
Hopefully, merchant generators and the Utilities keep building power plants during the downturn.
There seems to be at least one thread on the weekend these days that careens towards the edge. This seems to be the one this weekend.
Yes, its human nature to find a group to blame to allow us to feel better because we did not cause this problem. Having traveled this great land of ours and the world, I can tell you that pompous Nuevo-riche with devil children is not a California thing, it seems to be fairly wide spread. Somehow things like manners, working hard and delayed gratification were set aside allover this country. True, California has refined the art to their own distinct brand (that you can spot from across the room), but it is by no means the only brand on the market.
There is the false aristocrat east coastal, the “I was the prom queen” southern bombaster, and countless other horrid and ugly variations.
My suggestion to some of the posters here is to put aside the hate, it isn’t helping you at all.
The equity locusts are dying out, just like real locust swarms. Once they deplete the edible vegetation of the region, and there is not enough for them to move on, they die. Or in the case of the Mormons they get eaten by a flock of really excited seagulls.
This chapter in American mis-behavior is drawing to a close. As my 68 year old mom put it “Everyone makes money by screwing each other over these days”. Once again my mom nails it. Oh yeah, she lives in Central Illinois, not California and she says that.
Well said, I keep hoping this is not the wave of the future. There is a lot of unrest in the world - we need to get back to basic honesty and decency, whether we are Californians, New Yorkers, Londoners, Saudis, Israelis, Chinese, Mexicans, Republicans, Democrats, Catholics, Muslims, young, old and everything in between. The world has never been so well fed, clothed and entertained and yet we find reasons to want more and fight amongst ourselves for what? An even bigger piece of the pie?
SOLID!
Some ambitious flippers are out there. Here’s a property:
Location: 991 Modjeska Cir., Costa Mesa, CA 92627
From Zillow:
Sale History & Tax Info Sale History
12/15/2005: $670,000
07/06/1988: $177,000
No other sale data is available
2005 Property Tax $2,920
Total assessed value: = $238,285
Of course, it’s now for sale. From ziprealty.com:
Bedrooms: 3
Full Baths: 2
Partial Baths: 1
Square Feet: 1,796
Lot Size: N/A
Year Built: 1977
Listing Date: 03/27/06
On Market: 132 days
Type: SFR
Status: ACTIVE
MLS #: P502825
Description
Reduced reduced..Beautiful model perfect home close to the beach. This culdesac home has it all, new kitchen w/ granite counter tops, new appliances,new windows & travertine floors. Custom baseboards, paint and carpet. New bathrooms with extensive travertine, new electrical with can lighting thru out.Large back yard with covered patio and lots of grass for the kids.Garage door and opener, newer roof..Large master with lots of closet space.Award winning schools.. Bring in an offer..Motivated
ZipRealty Price Track:
Price Reduced: 04/10/06 — $869,900 to $829,000
Price Reduced: 04/20/06 — $829,000 to $799,900
Price Reduced: 05/13/06 — $799,900 to $799,000
Price Increased: 06/13/06 — $794,900 to $799,900
Price Reduced: 07/07/06 — $799,900 to $779,900
Price Reduced: 07/18/06 — $779,900 to $759,000
Flipper Alert!
I would like to thank the Californians for exporting and redistributing their wealth throughout the country. So many left behind in that state will be left holding the empty bag. California will be like it’s own bankrupt country.
redistributing their wealth - or redistributing their debt maybe?
I’m sure most of the people in the areas where the CA locusts went to are now worse off than before the housing bubble.
MHO: there are three distinct states in a housing market, characterized by who’s competing with who:
1) Buyer vs. Buyer
2) Buyer vs. Seller
3) Seller vs. Seller
I believe we’ve seen several years of state #1. That’s what bidding wars are all about.
However, we’ve recently transitioned to state #2, Buyer vs. Seller. This is when a struggle ensues between buyers and sellers over what the buyer will pay and what the seller will get. I cite as anecdotal evidence the “give and take” frequently referred to between “buyers and sellers”, although to be sure this is realtor-speak and therefore suspicious. Nonetheless, some people still are buying houses, and volumes have only declined ~20-50% in the bubble markets (10-15% nationwide). Distress sales have increased, but not to dramatic levels, *yet*. Sales prices are still strongly influenced by sellers, so it’s not a true “buyer’s market” yet.
Some time, maybe soon maybe later, we will enter the final phase of the cycle, #3, the “Seller vs. Seller” phase. This is when sellers, under true pressure to sell their real estate, meet the prices required by buyers to generate sales. A hint that we’ve entered this phase will be a flattening out of the inventory numbers, and an increase in volumes. Currently, volumes are still declining and inventories are increasing with no indication of a letup, so there’s no chance we are in this phase yet.
This phase #3 will be fully recognized by the slashing of wrists on the part of sellers. The blood spilled will then attract sharks which will act to increase the bloodletting. This will be the true buyer’s market.
I like the way you put that.
THIS is what we mean by “equity locust”:
For a time, observers were seeing primary bubble markets (San Diego, Los Angels, Las Vegas, Florida, etc.) inflate. These areas tend to be ‘popular’ , and have always commanded a price premium over other markets.
However, after a time, a strange thing happened…the previously less ‘popular’ markets (The ‘Inland Empire’ of California, Pheonix, etc.) started to inflate too, and at a very rapid rate.
And still later, even less popular markets that don’t normally see rapid house price inflation (Boise? Texas?) started inflating.
It is thought that a lot of the run-up in these seconday, tertiary, etc. markets is based on people in the primary markets using their newly inflated ‘equity’ to purchase properties in these more ‘affordable’ areas.
However, this new influx of capital starts to inflate the target market prices, soon making them less ‘affordable’. So, investors/speculators from the primary market, along with *new* investors/speculators from the secondary market (emboldened by their newly inflated ‘equity’) target a new ‘affordable’ tertiary market. And so on, and so on, and so on.
So, to describe this seeming migration of investors/speculators hopping from one region to another on wings of ‘equity’, the term ‘equity locust’ was coined.
After each level of locust migration, some of the initial locusts can no longer fly as they are fully engorged with held property. However, as each market sees a run-up, new locusts (investors and speculators) are created from the equity increases created by the house price runup caused by the prevoius invasion. These new locusts then join the migration and invest/speculate in new areas as well.
So, for instance, as we initially saw Los Angeles house prices go way up, people realized that they now had more ‘equity’ in their houses. Many of them decided to use that equity increase to invest in real estate (prices always go up, right?) However, real estate in Los Angeles was looking too expensive; why buy one house in Los Angeles when you could buy two in the Inland Empire for the same price? So these investors bought in the Inland Empire, driving up prices, making the area less affordable, and causing the Los Angeles locusts to look for a new ‘affordable’ target. Interestingly, with the run-up in prices in the Inland Empire, existing IE homeowners now saw newly created ‘equity’ in their existing houses. “What to *do* with that equity?”, they asked themselves. Why not invest in real estate?!! So they joined the remaining Los Angeles equity locusts and start devouring the next target. And so on. And so on.
Meanwhile, the local population of the target areas can no longer afford homes in the area; however, they see the rapid run-up in prices, and say to themselves “gee, I’d better get into real estate before I’m priced out forever”. They then buy real estate using “exotic” (i.e. SCARY) loan products so that they don’t miss the real estate train…and this pushes prices up even more.
Very well written. Throw easy leverage into the equation and you have what we have been witnessing for the last five years.
To me, an important aspect of “equity locust” involves the TYPE of relationship between the equity holder and the place in which they’re buying.
To further elucidate, I will introduce a new term. “equity bee”. which denotes a different sort of relationship.
Locusts are beings that go from place to place, TAKING TAKING TAKING. They return nothing. When they leave the area, they have only taken. And the area is left decimated.
Bees also go from place to place. But they give as well as take. they take sucrose from the land, but also give by aiding pollenation. Thus, the relationship is mutually beneficial. When the bee leaves, the area flourishes.
Moving on to “equity locusts”. To me, equity locusts are people who take their equity from place to place (in various ways, many delineated above), and use their equity in a new place, but do so in a TAKING manner. Like using equity from Boston and buying 10 properties to flip in Miami. They give nothing. Or like taking equity from Seattle and buying in Eugene and trying to turn it into “mini-Seattle”.
An equity bee would be a person who takes their equity to a new place, but gives as well as takes. Such as a family who sells in LA and moves and sets down roots in Coeur d’Alene.
Be a bee. Not a locust.
clouseau.
reality is, that most of these people use their equity gains to either drive up house prices (because they can afford more than the locals, and often becausae they start speculating in RE in their new locale as wel), and/or the general price level (for government taxes and services, any service jobs related to home maintenance and ‘lifestyle’).
I agree with you that there can be bees - if they spend most of their equity gains in the local shops, start a new company that offers jobs or maybe just use all their free time and knowledge to help the community. But judging from what I have seen in my country over the last 10 years, you have to search very well to find any equity bees while the locusts (parasites) are everywhere.
And even if they are giving, they will likely replace some local people that are now priced out and forced to move elsewhere, so the plague can spread even further.
The locust is leaving ,but the high prices remain ,as well as the foreclosures coming .
I see many Californians moving to other states by the boatload. They are tired of bad schools crowded neighborhoods etc. Remember what happened to Moreno Valley? Also cities like Huntington Park, Bell Cudahy are being taken over by the Mexican drug cartels. Look for more cities to go that way in Ca. Would last American please turn out the lights?