‘This Idea That Prices Don’t Go Down Is Nonsense’
The Daily News reports from California. “The inventory of homes for sale in the San Fernando Valley has more than doubled since August 2005, according to figures released Monday. ‘This isn’t a bursting bubble or sky falling,’ said John Karevoll of DataQuick. ‘It’s just the end of a real-estate cycle.”
“The stockpile of Valley homes reached 6,832 properties, compared with 3,167 this time last year. In the Santa Clarita Valley, the number of homes on the market ballooned from 1,400 to 3,600 from August 2005 to last month, said Jim Link, Southland Association of Realtors spokesman.”
“‘People are confused,’ regional economist John Husing said. ‘People feel that prices may go down, so they wait,’ Husing said. That was even more true locally, where sales in the Riverside-San Bernardino area were off 31.4 percent year-over-year.”
The Orange County Register. “O.C. broker/economist Gary ‘Up 15% in ‘06′ Watts strongly hints that the current market slowdown is largely a product of negative media coverage. ‘Newspapers are losing subscribers and television is losing viewers. Consultants have advised them that if they want to hold their viewers’ or readers’ attention, they have no alternative but to portray fearful impending events and instill anxiety in their audiences! This raw emotion will help to keep people tuning in, thus possibly preserving precious advertising dollars.’”
The Contra Costa Times. “Most Bay Area home values stagnated or dropped in August, housing analysts reported. Some say that East Contra Costa builders are artificially propping up prices with incentives.”
“‘All those incentives they’re giving away are keeping the prices up,’ said Rhene Montiel, broker in Walnut Creek. ‘With all those Mercedes, pools and cash back, they will get their asking price.’”
“Brian is a Bay Area mortgage broker. ‘Michael’ is his client. The payment on Michael’s new home is $4,200 a month, but he only earns about $4,000 a month. He was only able to get the loan because his broker used ’stated income’ to inflate his paycheck.”
“Brian (the broker) said, ‘I put on the application that he made $13,000 a month, which was unverified … That’s the definition of a stated income loan. You state the income.’”
“One broker, ‘Dennis,’ works for a mortgage company where he says a whopping 85 percent of loans are stated income. He says out of that 85 percent, they all have inflated numbers. ‘All of them, because that’s why you’re going stated.’ Dennis added.”
“But if it leads to getting their piece of the American dream, homebuyers must be happy, right? Not according to Beverly and Dwayne, two Bay Area homeowners. ‘Right now I’m living from paycheck to paycheck. I’m struggling with putting gas in my car just to get to work,’ Beverly said.”
“Their broker assured them they could afford the half-a-million-dollar price tag based on Beverly’s income as a social worker. She makes $2,750 a month. To make the deal work, the broker boosted Dwayne’s salary to an impressive $8,000 a month.”
“In truth, Dwayne is out of work and only gets a small disability check. Nevertheless, based on their inflated income, they qualified for a mortgage of $3,700 a month. That’s almost $1,000 more than Beverly’s entire paycheck. ‘I didn’t find out until the signing,’ Beverly said. ‘And I said ‘I can’t afford to pay that,’ and the realtor said, ‘Don’t worry about it, we’re gonna immediately refinance it.’”
The Marin Independent Journal. “Peter Nielsen, a Realtor (in) Southern Marin, listed a two-bedroom condo in San Rafael for sale at $469,000. The condo stayed on the market for two and a half months without an offer. After four price reductions totaling $43,000, escrow closed Sept. 11 at $426,000.”
“This is an example of sellers insisting on a price based on what they want to get from a property, rather than what the market data indicates would be an appropriate price,’ Nielsen said. “The seller had totally remodeled and wanted to realize the full value of those investments.”
“But the real estate market has shifted. With prices leveling or dropping, and the number of homes for sale climbing, buyers have more selection and better bargaining power. Some classified advertisements in the Independent Journal tell part of the story: ‘Just Reduced.’ ‘Price Reduced!’ ‘Huge Price Reduction.’ ‘New Price.’ ‘Reduced.’”
“‘The fact is that Realtors do not set price and, in the end, the sellers do not set the price, either,’ Nielsen said. ‘Buyers do, and often it takes time for sellers to accept that reality.’”
“For Nielsen, trying to sell the San Rafael condo as three others were on the market required creative marketing efforts. ‘When you turned into the entrance of the development, it was sprouting four real estate signs, which might scare people off,’ Nielsen said. ‘Where we would have eight or 10 people come through a year ago, now we had one or two on a given Sunday open house.’”
“Marin’s median condominium price fell 5 percent from last year to $546,000. Median price for all homes fell 2.3 percent. ‘It is definitely a buyer’s market, no two ways about it,’ said Jim Wilson, an analyst with JMP Securities in San Francisco. ‘This idea that prices don’t go down is nonsense.’”
(‘This isn’t a bursting bubble or sky falling,’ said John Karevoll of DataQuick. ‘It’s just the end of a real-estate cycle.”)
added to my list of quotes.
Someone should bitch-slap Gary Watts. stop crying like a baby and live up the reality. the media works both ways, you idiot watts. just because your prediction was just nonsense does not mean the media was responsible. it’s you and your idiotic prediction that’s the problem. slapppppppp. wake up.
Gary Watts sure loves exclamation points!
An editor I know says that we are given one exclamation point to use in our lifetime, so choose wisely.
“Where did Scars and the Bird Flu . . . fly to?”
Hey Gary, where did ’scars’ fly off to….?
‘This isn’t a bursting bubble or sky falling,’ said John Karevoll of DataQuick. ‘It’s just the end of a real-estate cycle.
No, pin head, it’s the end of your career as a expert. Put this guy up there with David Learah and Gary Watts in the real estate “Hall of Shame” Anybody want to add their favorite “expert” to the list. Leslie Appleton-Young..
Come on, help me out!!!
Suzanne.
All the shills from Prudential, Coldwell Banker, Century 21, Keller Williams, ReMaxx, etc etc, including all the little guys and their brethren agents. Anyone quoted in any news source that contributed to this mania.
CNBC, FOX, CNN, Mortgage companies, Carlton Sheets and the rest of the “no money down” TV clowns.
Robert Kiyosaki of “Rich Dad” fame.
Oh gawd! Kiyosaki is the king of the RE shills. He did an about face one year ago, which is honest. What was dishonest, however, was his bestsellers encouraging everyone to get heavy into real estate and become instant landlords, as a key to wealth. I cannot forgive him for that. He does, however, like precious metals now. He ruined a great many people by giving them the greed mentality and then he walked away, with more money from his best sellers than from his real estate holdings. Shame on him!
If Kiyosaki is touting gold, it must be time to lighten up
“He ruined a great many people by giving them the greed mentality and then he walked away, with more money from his best sellers than from his real estate holdings.”
Now, the Star-Belly Sneetches had bellies with stars.
The Plain-Belly Sneetches had none upon thars…
LOL. Great line which truly embodies the whole RE speculative “I got mine” mentality.
Even PBS. I was reallly disappointed a couple of nights ago when “Nightly Business Report” had three “experts” and the most bearish one said we would continue to have trouble for a year. He forgot to say, a year of Sundays.
The cupcake lady is back in the news:
‘Just outside Los Angeles, Cindy Schwanke’s family is waging an all-out battle to sell its three-bedroom home. ‘We never really thought we’d have a problem selling,’ she said. After seven months and three real estate agents, there was still no sale.’
‘So Schwanke quit her job as a pastry chef to focus all her efforts on selling her house. ‘I just didn’t have enough time to clean the house and stage it properly for Realtors to come in, and I felt very uncomfortable,’ she said.’
‘To make her home more appealing, she spent $25,000 improving it, and she dropped her asking price by a whopping $100,000. Schwanke says her only option is making the sale of her home a personal investment.’
‘I try to bring people in. I bake cupcakes for them. I … offer them water, and I do whatever I can to make it a pleasant experience for them,’ she said.’
So far, her cupcakes haven’t done the trick.
I do whatever I can
___________________________________________________
???? Is this legal in Ca?
massage therapy is legal
Stupid, stupid, stupid. Get the heck outta the house and strip every vestige of any aspect that you wouldn’t find in a hotel room. They don’t want to buy YOUR home they want to buy THEIR home. [When Robert agrees with RE agents it must be gospel.]
Where does she live? I could go for a “cupcake” right now!
She’s in Castaic, waiting for you and your big offer.
So far, her cupcakes haven’t done the trick.
maybe she should try giving away a can of beans, like the builder in NC is doing.
I hate when people scoff at original ideas that might address the very serious problem of rising inventories and falling real estate prices. The frankly brilliant device of plying prospective buyers with cup cakes may be the eureka idea that gets the market moving again. Why the cup cake stratagem may be the salvation of the US economy, get baking.
lucky they are not in florida. the insurances rates would kill them. guess what? prices drop!
Hey I hear that house down the street has Little Debbie snack cakes ! Let buy it !
I bake for my engineers every Friday.
Does wonders for their willingness to think my suggestions were their ideas all along. ;-D
More likely it gives them a way to let you think that they’re adopting your ideas as their own. Engineers aren’t idiots.
Neither am I
I’m going to buy BETTY CROCKER stock now! It’s a sure thing!
They are not yet giving away free food at the open houses in my area. We are getting gypped!
So that is the solution!!!! Eureka!! I have signed up for Chef school.
How about cakes in the shape of Saint Joseph?
Hilarious.
Maybe she should try flooding her home with different food scents (the latest trick in marketing homes in America!) and one of them might work.
Jas Jain
I got a hold of Cindy’s cupcake recipe.
2 cups flour
1 cup desperation
½ cup greed
3 tbs ignorance
2 tbs fairy dust sprinkles
Mix flour and desperation in bowl.
Stir in greed and ignorance.
Turn on oven.
Throw ingredients away.
Stick head in oven.
Die.
Sounds delicious.
Lol . Interesting but on realtors open house day they would chart the houses they would see together by the food being offered . The builder Pulte was offering hot fudge sundays to get people to come to his tracts as well as lunches with a band . A cupcake just doesn’t make it easiers to pay 100k more than a house is worth .
Hey, I have my daughter circle the houses with the foodstuffs when we go openhouse trolling… that’s how we plan the route of the day.
So much food…. so few hours in the day on Sundays!
Athena, Can you add your hot food spots to the blog?
That would save me some time…Thank you for your support!
I am not surprised this is happening. About 2, really 2, months ago on a Saturday while driving to work an open house sign had catered by Italian restaurant on it. This is in Rancho Santa Margarita. I almost called the wife and kids for a free lunch and tour of an overpriced home. Also, I have been seeing more and more catered by Outback steakhouse, one is really close to the housing tract I work in. When do the free 7-course meals start with the Filet Mignon, then I am really going to start going to these open houses. Maybe have some nice wine too.
OCDan:
I live by you. Where is this? I love Outback.
Dang we are getting gypped! In my area they don’t even give away free hot dogs! doh!
A banana split might tempt me to pay $200,000 more for a house.
Maybe ALCOHOL would be a better idea!
There is a whole body of law relating to contracts signed while under the influence of alcohol. Basically, when folks sober up, they can usually get out of those contracts.
But I like the creative approach!
Comment by the_economist
2006-09-26 17:52:05
Athena, Can you add your hot food spots to the blog?
That would save me some time…Thank you for your support!
OMG!!! LOL…. that is a great idea!!! will do!!!
KB Home had hamburgers and barbeque catered to a new tract of homes in the DC suburb of Accokeek, MD recently. Mmmmm……..
Rainman — very good — LOL.
RFLMAO! Oh, man, I hate to admit it, but I am REALLY laughing hard at this!
You forgot this classic:
http://tinyurl.com/fhlhq
mmmmm…yummy!
Ewwww!
LMAO!!
These are not just Betty Crocker Cupcakes:
http://www.appcluster09.com/app/homepage.cfm?moduleid=3651&appname=100513&campaignid=11776&iUserCampaignID=31158618
I would raise the price backup $100k
629k in Castaic unbelievable. Now 525k in Castaic again unbelievable. If she drops it another 150k she could probably sell it.
This is where is all the magic happens:
http://www.paulmorad.com/Valencia_listings.shtml
It is the 8th house down on Muledeer:
IMMACULATE N.Bluffs home w/oversized driveway & gated RV access, custom brick patio, valtd ceilings, marble entry, 2-tone paint, cutom Italian style tile, spacious upstrs bthrm, wd shtters in mstr, sunkin tub,walkin closet, ceiling fans in all bdrms. Kitchn window 2 bckyrd
Plus free cupcakes
Cindy and her cupcakes:
http://www.the-signal.com/?module=displaystory&story_id=32837&format=html
posted “Cindy and her cupcakes”
How come I knew she looked like that?
What a shame — Cindy looks like a nice, fun kid. But with this worldwide notoriety, “cupcakes” might tickle the memory almost as much as “squirrels.” I suppose a squirrel cupcake more rightly should be called “shepherd’s pie,” but it’s close enough.
I must admit, those are great looking cupcakes! (And, yes, I’m really looking at her cupcakes and nothing else.)
Looks like a nice little place. Might be worth $250K if it were located someplace other than Castaic. Out there, it’s probably worth no more than $175K.
Cindy would probably have better luck if she hosted an open bar. At least that way maybe someone will get intoxicated enough to make a stupid decision like all the others who bought houses in the last couple of years.
Margaritas on the house!
(of course most of the visitors she will likely see will be weeping real estate agents)
She should switch to ding dongs instead of cupcakes. It will probably work more effectively. Call it ding dongs for ding-a-lings!
LOL!!!!
Enough with the cupcakes and incentives already! What a sham, do RE hacks think this is really a clever tactic? Are they that high on their own supplies?
Only a sucker would buy right now - thinking he or she got a “deal”. These RE theives are fighting for their lives every step of the way and they’ll have their seller schmucks throw a Mercedes at every uniformed buyer along the way.
This is so very far from bottoming. The real suckers didn’t buy last year - they are the ones buying right now - thinking they’ve got it so good because their RE agent got them “incentives”. Its just like one big mouse trap.
The real suckers didn’t buy last year - they are the ones buying right now
Well, actually, no. The ones who bought last year really are the greatest fools. The ones who are buying now are giant fools as well, just slightly less foolish than the complete ‘tards who preceded them.
As Robert Cote is fond of saying, we NEED these fools to keep buying –all the way to the bottom. If all sales completely ground to a halt, there would be no comps –i.e., no FALLING comps by which to prove that prices are, indeed, falling.
From another thread.
The perp walks and convictions have started for RE scamsters.
http://www.latimes.com/news/local/la-me-houchen26sep26,0,3522853.story?coll=la-home-local
Good!
Line them up - there are thousands of others just like her!
I wouldn’t go that far.
Then don’t.
I’m happy to see that story. Those people deserve the sentences they got and I hope it will serve as a warning to other potential real estate criminals and crooked politicians.
Posted “The perp walks and convictions have started for RE scamsters.”
Greedy pigs. Let them break rock in the toughest joints we have. Take all of thier money then break them on the wheel.
Yeah, maybe Ben can spearhead the Arizon extradition of our Californian criminals.
The ex-mayor asked for home arrest so that she could help her husband raise their 3 daughters & was denied. I feel bad for those children; they get to visit Mommy in jail for the next 3 years.
She should have thought of that before she stole from people. The kids will remember this forever and I doubt they’ll grow up to be scamsters like dear old Mom.
Maybe they’ll learn something.
Yea right
I am always amazed at people who will sacrifice their kids for their own greed. She is a walking excuse for why fertility drugs are a bad thing.
Come on people, let us be more creative.
The real Crooks behind 95% of fraud in America are Bankrupters and Fraudsters of New York City (BFNYC) aided by the Fraudulent Reserve System.
Most efficient way to get rid of financial fraud is to do speedy military-style trials of BFNYC and crucify the guilty in different Zip Codes of the victims and televize all the crucifixons live. Mass Entertainment and justice at the same time!
Fear of God has to be drilled into the minds and hearts of America’s Crooks. Right now, Crime Pays big in America.
Jas Jain
Jas, you are way too soft on these scumbags.
Funny, what she did was really not much worse than when GW Bush used his political connections to have land declared blighted so he and his buddies could build a taxpayer-funded baseball stadium on it. He walked away with millions, this lady gets 3 years in jail.
I guess the lesson is: if you’re going to rip people off, make sure you come from money and your connections are deep.
HHH posts Funny, what she did was really not much worse than when GW Bush used his political connections to have land declared blighted so he and his buddies could build a taxpayer-funded baseball stadium on it. He walked away with millions,
You are Bang on, my friend! I think the big Pol Conn was his Papa. GW was lent his share…. when they sold out he netted over 25 million…….. then he bought the Ranch…. and put 10 Million in T-bills…. Not bad.
Although I find the behaviour reprehensible. This is done all around the country under the guise of government by and for the people, santioned by the Courts.
The “SPORTS AUTHORITIES”, have equal weight to “PORT AUTHORITIES” and any other government santioned body that is allowed to acquire land by PUBLIC TAKING OF PRIVATE PROPERTY.
While I believe this is highly unconstitutional, and is an abuse of the eminent domain clauses, the Courts have allowed this.
So, it’s not really the same thing. One is technically “legal” and the other is “criminal”. Although I understand how you fail to see a difference. Sports Teams are private business enterprises and should not be allowed to be subsidized by the General Public. However, Americans are a brainwashed lot that will do anything for their entertainment (bread and circuses), the Constitution be damned.
SunsetBeachGuy — thanks for the post. It’s too bad that Ben could not possibly have the time to track these. Maybe one of the other talented bloggers here can — a “Perp Walk” that tracks all of the major, and some of the minor, prosecutions and convictions that will result from the fraud perpetrated during the housing bubble.
Well, don’t neglect to mention Whitewater and the Xlintons, then.
And how Xillary turned 10K into 100K overnight in the commodities scandles. Or some such thing.
Clinton = Bush = Clinton = Bush.
Diet Coke or Diet Pepsi - take your pick. Either way, we lose. And they work as a team to try to convince the sheeple that there is a difference.
The taxpayers were billed over 80 million to investigate, and in the end the Clintons were cleared.
http://tinyurl.com/lrosb
Clinton was a screw-up in a thousand ways, but this one is a false equivalency. The real crime was the circus which did nothing for our country except waste time and resources on a frivolous witch hunt.
Isn’t it warped when one attempts to hold the current leadership accountable, they begin yapping about someone who hasn’t held office in 6 years?
You’d think the loyalists would employ some thought and wit when bringing a defense to the undefendable.
I agree with HHH that the investigation of the Clintons was ridiculous, and I can say this with a little bit of credibility, because I am a Republican who voted for our present President. The libertarian rags I subscribe to all say Bush is much worse than Clinton.
What you mentioned is here: http://www.mortgagefraudblog.com/
OK, Gary Watts is officially insane.
exactly. does he realize the newspapers reported that when earlier they reported extensively on the boom with little thought of if there was a bubble? it’s not a coincidence that negative stories came out when affordability was near zero and inventory started to climb.
Aside from that, how is his 15% in ‘06 prediction holding up so far? In particular, is he acknowledging the YOY price decline just reported for The OC, or does he claim this is some kind of media fiction designed to increase advertising revenues? And is he predicting a big turnaround by next January to pull his 15% gain prediction out of the fire?
this year is inverted, remember.
Oh, *that* kind of inverted. The kind where 15% up means down.
I think that’s what Gary meant all along.
That’s why he’s talking crazy - he had to come up with some tinfoil conspiracy to justify how the +15% went negative and why seasonal sales surprisingly didn’t ‘invert’ after all. Crazy as a sh*thouse rat, but he’s preaching to constituants who base their investment decisions on magical thinking, so no doubt it’ll make sense to them.
Inverted. LOL. Gary’s watched Top Gun too many times.
Think Gary’s speaking engagement fees might take a pounding? He might need to invest in raingear and a flack jacket, since he’s likely to be a target on the stage as the furious investors and realtors that listened to him see their equity vanish daily. They should have been reading the board and selling SELL SELL FASTER PUSSYCAT style as everyone here has been suggesting.
What blows me away is all the chumps searching for reasons why prices are not continuing to go up. The GFs are all used up and incomes only support prices at 50% of today’s levels. It’s that simple.
posted “OK, Gary Watts is officially insane.”
Well only by 15%….. Well come to think about it by the end of the year it could be a NEG- 15% in the bag!
hey Gary, your crystal ball is broken:
http://www.ocregister.com/ocr/2005/05/15/sections/news/news/article_520497.php
posted “hey Gary, your crystal ball is broken”
Not only are his balls broken so his his bag!
-
Never trust a guy dumb enough to get married THREE times.
That is funny.
I have a 2 time loser rule for character.
Which is about the same as getting married 3 times.
“…they have no alternative but to portray fearful impending events and instill anxiety in their audiences! This raw emotion will help to keep people tuning in, thus possibly preserving precious advertising dollars.’”
Funny how the previous anxiety from RE run up is shoved so quickly under the rug. I seem to remember a great deal of media hyped FEAR of being forever priced out of EVER owning a house. Several years of it. Didn’t seem to bother Mr. Watts at the time. It’s only been several months of RE reality starting to hit the media and he’s already crying foul.
Gotta hate it when you’re no longer a RE rock star and your groupies are starting to look for the next big thing, eh Gary?
If the media doesn’t stop printing all of these negative stories, then
the terrorists will win!the real estate market will keep going down!Gary’s just another one of those “blame the media” idiots that seem to be so prevalent these days. We can only cross our fingers and hope that some day the grownups will take over.
If Gary is smart and educated enough to determine the cause and effect of news reporting on the populous, then he should have been able to factor that into his predictions. It’s not as if newspapers were just invented. He never saw this coming to this degree and since he can’t be wrong, he’s just pointing anywhere his fat finger will go.
I have this image of a chubby 8 year old Gary getting caught by his angry mom with chocolate cake smeared all over his face and him pointing at the dog, the cat, his brother, anyone but him.
Man up Gary and bear the burden of your own doing..
He is smart enough to know what’s going on, but he’s in sales and so he’s simply lying through his teeth. Pure and simple.
Hey! We did it!!!! Acording to Gary, we have stopped the bubble by talking about it! It’s our fault for talking sense into people’s head! Way to go Ben, your a hero!!!
I posted something similar.
If the fundamentals are so strong in housing, just some talk could have no affect whatsoever.
If the housing market is in a bubble, then look out below.
I guess that is why the perma-bulls get so upset, deep down they knew it was a bubble.
“‘People are confused,’ regional economist John Husing said. ‘People feel that prices may go down, so they wait,”
No, people are not “confused”, but rather finally enlightened. I guess not wanting to pay twice what a home is actually worth makes a person “confused”.
“confused”? hahahahaha… You are absolutely right I am enlightened!!!
The confused people are the ones buying right now.
Brian is a Bay Area mortgage broker. ‘Michael’ is his client. The payment on Michael’s new home is $4,200 a month, but he only earns about $4,000 a month. He was only able to get the loan because his broker used ’stated income’ to inflate his paycheck.”
“Brian (the broker) said, ‘I put on the application that he made $13,000 a month, which was unverified … That’s the definition of a stated income loan. You state the income.’”
_______________________________________________
Nevermind. We were all wrong this BOOM was built on strong FUNDAMENTALS!
“That’s the definition of a stated income loan. You state the income.’”
Yep (heavy sigh) that pretty much sums up the state of the mortgage business.
ummm…how does he pay his mortgage?
By paying the 2% minimum on his option ARM and letting the other 4% accrue to principal. Simple as pie.
he is probably using his credit cards,and no joke,the AICPA had a bulletin about it earlier this year.and don’t you just love these loan brokers admitting to felony fraud?i’m a loan broker,these loans are for the self employed/small businessperson.i hope these idiots enjoy earning candybars the hard way.
I was going to say! Isn’t this “Brian” dude about as dumb as ole Casey admitting to crimes in public?
Yea, that was real bright on his part. Any day now we should see windbreakers with FBI stenciled on them walking out the front door.
ummm…how does he pay his mortgage?
With a “stated payment”.
ummmm…did he think about how he was going to pay the mortgage? Maybe he was “confused”. Maybe he went to an openhouse with a bar?
How does he pay his mortgage?? Probably got cash back from the seller under the table because he paid over full price and is using that money.
My apologies if this is a double post.
“Brian is a Bay Area mortgage broker. ‘Michael’ is his client. The payment on Michael’s new home is $4,200 a month, but he only earns about $4,000 a month. He was only able to get the loan because his broker used ’stated income’ to inflate his paycheck.”
“Brian (the broker) said, ‘I put on the application that he made $13,000 a month, which was unverified … That’s the definition of a stated income loan. You state the income.’”
“One broker, ‘Dennis,’ works for a mortgage company where he says a whopping 85 percent of loans are stated income. He says out of that 85 percent, they all have inflated numbers. ‘All of them, because that’s why you’re going stated.’ Dennis added.”
“But if it leads to getting their piece of the American dream, homebuyers must be happy, right? Not according to Beverly and Dwayne, two Bay Area homeowners. ‘Right now I’m living from paycheck to paycheck. I’m struggling with putting gas in my car just to get to work,’ Beverly said.”
“Their broker assured them they could afford the half-a-million-dollar price tag based on Beverly’s income as a social worker. She makes $2,750 a month. To make the deal work, the broker boosted Dwayne’s salary to an impressive $8,000 a month.”
“In truth, Dwayne is out of work and only gets a small disability check. Nevertheless, based on their inflated income, they qualified for a mortgage of $3,700 a month. That’s almost $1,000 more than Beverly’s entire paycheck. ‘I didn’t find out until the signing,’ Beverly said. ‘And I said ‘I can’t afford to pay that,’ and the realtor said, ‘Don’t worry about it, we’re gonna immediately refinance it.’”
Reading this made my blood boil. This is PRECISELY why the bubble got so out of hand. These sorts of liar loans enabled any Tom, Dick, or Harry to get into any home they wanted regardless of their financial condition. Without them, there would NEVER have been the rampant speculation which impregnated virtually every city and town in the country. I cannot convey the contempt and loathing I have for this filth. The solution is an easy in my mind. Put a chokehold on lending standards with heavy fines and long prison terms for the Brian’s and Dennis’ of the world, and mandatory sterilization for the Bevelies, Dwaynes, and Michaels.
You got it, bro. You just stated my position pretty succinctly.
He’s way too lenient.
Actually, I think that the karma police are on the job. Consider: if Dwayne and Beverly had bought within their means, they would have a house and some extra income to enjoy some of life’s pleasures. Since they did not, they will inevitably face foreclosure or bankruptcy or both, will have no money left over, ruined credit, and no place to live. In addition, once the witch-hunts start, their mortgage fraud may be discovered, and they could be prosecuted. This may provide them with a place to live, but it won’t be one of their choosing.
They have outsmarted themselves, and their lives will be far poorer for it. Cause and effect, action and consequence. Do they really require further punishment?
I also agree with you banteringbear . They can all go to jail for all I care at this point . How about the nice realtor that was the set up person ,(who probably got a kickback from the mortgage broker ),who slammed this women into a 500k home that was way beyond her affordability.
The women making $2.700.00 per month could afford under 100K loan .Oh ,but I guess they dont have any homes or condos that cheap in California ,so ,just put her in some nice home that the payment is 1k over her gross income .Maybe the disabled hubby was thinking of going back to work someday .
This is just a outrage .
In spite of this women being a social worker ,she apparently didn’t understand that the loans doc. say your signing under penalty of perjury that your statements are true and the notary repeats this .
A realtors doesn’t have any business showing a peson homes that are 5x’s higher than they can afford . Realtors are suppose to screen for qualifying and not waste the markets time with buyers that can’t qualify .They are all a bunch of crooks and the buyer is either greedy or stupid or couldn’t face their social position of being one that got priced out of the market .
This is going to be a ugly mess .
Wiz — minor correction. Notaries attest that you are who you say you are and that you signed whatever document it was without apparent duress. They have no opinion whatsoever about what you were signing; it is possible for you to cover the text above your signature, if you are paranoid.
True, Chip. Even still, very few closing docs are notarized “by the books”. Lots of closing officers are notaries, but few of them actually notarize the docs at closing, and none of them work the file after closing, meaning the docs are notarized by folks who never met the buyer and seller.
In spite of this women being a social worker ,she apparently didn’t understand that the loans doc. say your signing under penalty of perjury that your statements are true and the notary repeats this .It’s not “Inspite of”, it’s BECAUSE OF! Get with the program!
I been hearing lots of advertisements about REALTORS ™ lately. It’s very important you use a Realtor because they have a CODE OF ETHICS, which means they are careful to look after your interests………
HAHAHAHAHHAHH>>>>>>>>
“I cannot convey the contempt and loathing I have for this filth.”
I agree wholeheartedly. It sickens me.
Where is the “office of the housing oversight”?
What happened to CA Department of Real Estate?
Where is law enforcement?
Fundamentals my rear. Michael earns 4,000/month, but the broker put $13,000/month on the app. What the heck was this guy buying, Buckingham Palace? This whole bubble has been propped up by FIFTHY GREED and FLAT OUT FRAUD! These clowns should be put into the newest industry the will come out of this bubble…building maximum security prisons that will then become their new homes.
But be sure there are granite countertops in the prison kitchen so they remember why they’re there!
I have been trying to think of a use for recycled granite recently. It seems there might be quite a glut in a few years.
Oliver
It can be busted up into little pieces, inside a large courtyard surrounded by walls, barbed wire, and guard towers.
I was just thinking that last night. I really like the information on green homes that folks post here from time to time, and I was thinking how great it will be (once the Old Navy condos collapse) to salvage granite countertops and use the stone for radiant heating floors or something truly useful.
…and brand new kitchen cabinets. You can’t forget the brand new kitchen cabinets.
Damned media negativity…if it wasn’t for them, “Michael” could afford this house that costs $200 a month more than his entire take-home pay. Watts might be on to something.
As much as it pains me to say this technically he is on too something. Just like the media played a big part in running it up they are going to play an even bigger part in tearing it down. They do pain way better than they do pleasure. For Watts to whine about it now that he is on the other side of the coin is insanity. LOL theres a price for fame. There’ll be no spinning out of this on his part. His good times have ended. After watching a spot on the bubble today on CNN I actually think the media is going to push this market into a overcorrection faster than anybody imagined. Schiller’s boyish coy grin, the camera work of showing Lierah’s nervous smile and framing him with the blurry background like he was as an Enron exec with a target on his back and the map that showed the areas that were going to be hardest hit nationwide was par for the course.
Yea the media is going to do it’s part that’s for sure.
“like he was as an Enron exec with a target on his back”
Not the best example since Fastow was only sentenced to 6 years at “club Fed” and the judge said that he had “suffered enough”. The “Smartest Guys In The Room” destroyed thousands of retirements, gouged millions of CA consumers, and all they get is 6 years, probably reduced to 3.
This sends a very strong message that white collar crime does not pay…….ad nauseum.
After this expecting anybody involved with fraud in the bubble to go down is just a pipe dream.
Nobody is accountable for anything anymore…
Sure you are…if you are black and sell a $5 rock of crack.
The way the justice system works is if you turncoat on the scalps the administration really wants you’ll get a slap on the wrist.
Also every retirement that was destroyed was due to greed on the part of the retiree. The first rule of 401k planning is don’t put your retirement into your company’s stock. Had they been in any sort of index the worst that would have happened was they might have lost 5-10% due to company matches that potentially weren’t sellable (and accrued during the lockdown) and about 1% of the index due to the bankruptcy. Putting all your retirement eggs in the same basket as your employment is stupid and greedy.
KennyBabes,
Actually your are wrong. The cops don’t go after the dealer as much as the users. Crack dealers should be EXECUTED IMMEDIATELY. Period.
I’m not sure why you would say the cops go after the users more than the dealers. Not in any city that I’ve lived in. Actually, I’ve always thought that the problem was with the users, not the dealers. If there is no demand, there would be no supply.
Reading lots of investment books lately, and one point I’ve seen reiterated is that people experience much greater pain when losing money than pleasure when making it.
Maybe “Big Pharma” is the next big market play.
‘Newspapers are losing subscribers and television is losing viewers. Consultants have advised them that if they want to hold their viewers’ or readers’ attention, they have no alternative but to portray fearful impending events and instill anxiety in their audiences! This raw emotion will help to keep people tuning in, thus possibly preserving precious advertising dollars.’”
What in the heck?…………WOW!
he’s in denial.
Agree. Wow. Blame everyone else…
Talk about a ridiculously mind blowing, wild, flailing shot in the dark, nothing on the line, Hail Mary toss from the back court heave of an excuse!! Gary, you’ve completely lost it brother.
I have stopped watching TV and reading newspapers for one reason: They are totally useless. They give me nothing but distraction and disinformation. Ain’t going back either.
Well I gave up the newspapers, but I have given the TV a second chance. It’s purdy good for watchiong classic movies on TCM (commercial free) and also NY Yankees games on espn
Garry is now a mental patient. There can be no other explanation for his comment.
I’d love to read nnv’s comments on the Bay area article … wow.
My friend, what can I say other than FUBAR.
FUBAR?
Acronym = f-ed up beyond all recognition
Financially Undocumentd Borrower Accepts Reaming
Brilliant!
LOL speak of the … broker.
I’ve often said that it’s the lending industry that provided the ways and means to let this mess to get out of control……..I guess you could say the FED/Govt turned a blind eye as well. This bubble would have ended 2 years or more ago if it had not been for extremely loose lending.
nnvmtgbrkr,
You’re definitely closer to this than I am (you being a lender and all).
Weren’t the standards loosened back in 2001/2002? I distinctly remember some of my neighbors bragging about this new kind of loan where they got to choose their payments. And, if you can believe this, they actually thought the minimum (neg-am) payment did not cause their principal to rise (I tried to warn them that it didn’t sound right, and assumed this to be the case; only to have their mtg broker actually yell at me and tell my friends that I had no idea what I was talking about).
I knew something was wrong because they made substantially less than we did, but were refinancing for amounts we would have been terrified to take on.
“‘People are confused,’ regional economist John Husing said. ‘People feel that prices may go down, so they wait,’ Husing said. That was even more true locally, where sales in the Riverside-San Bernardino area were off 31.4 percent year-over-year.”
People are confused, so they buy, even though prices are already falling and the slowdown has only just begun. If this time is not different, then we have four+ more years of falling prices ahead of us. The only folks who are not confused are those would-be buyers who decided instead to sit on the sidelines, watch and wait.
There is very little difference between Inland Empire - Palm_Caster and Bakerspatch.
Put a fork in them, they are done.
There are a few fools out there still. I just got off the phone with my wife and see stated a friend just got back from looking at houses and that she couldn’t believe all the free things they were “giving away”!! My wife said see was almost frothing at the mouth she was so excited. She was going to get her husband and try to talk him into buying one. The problem is they have no money and the only way they could get a loan would be a toxic mortgage that would financially ruin them. I have forwarded articles to them to try to have them see the light but it doesn’t help when the only light they see is free stainless, free washer and dryer, free closet upgrade, no closing costs. I am sick to my stomach thinking that they are going to be catching this falling knife without a clue or a care for what they are potentially going to get themselves into!! Excuse me while I throw up!!
replace see with she, I was so woosie that I couldn’t see straight
The party’s not over until the last sheep is shorn.
At least the MSM is finally starting to pick up on and report the rampant fraud. Too late for Joe6, though. At this point, the government would have to put an emergency freeze on all mortgage lending to stop the next chapter from unfolding - which will be the unloading of remaining builder inventory by any means necessary. The new lending regulations will issue right around the time the large builders are 95% sold out.
Right after that, the foreclosure wave hits the beach.
My bet is the the secondary mortgage market is going to collapse before the government makes any moves, putting the final nail in the coffin. 100% financing in a tanking market?
“‘All those incentives they’re giving away are keeping the prices up,’ said Rhene Montiel, broker in Walnut Creek. ‘With all those Mercedes, pools and cash back, they will get their asking price.’”
Can anyone foresee what will lead the builders to stop papering over falling prices with incentives, and just throw in the towel on this deception?
Builders need to make the balance sheet work, so they may be more likely to drop prices than current owners … you would also need to factor in the carrying costs of unsold inventory.
Owners, on the other hand, won’t capitulate until the monthly nut chews through all savings (include monies gained from cash out refis and HELOCs in this metric) and perhaps other assets as well. We may have the odd situation of new homes priced far below older homes for some time, at least until the foreclosure/bankruptcy wave crashes.
Builders need to make the balance sheet lie…
I disagree with this assessment. Builders might lie, but the risk is high these days. I think Builders want to do three things.
1) Maintain prices, so people don’t get used to seeing lower prices just in case things turn around.
2) Prevent pissing off local politicians and to some extent previous buyers. If they can keep property taxes up the development committee is more likely to green light their next project.
3) Differentiate there product. Granite and stainless only get you so far. Throw in something emotional and maybe you clinch the deal. After all it is FREE!
Oliver
Oliver,
“It” (new cars, $100K in incentives, whatever) most decidedly is not FREE, and what I meant by “making the balance sheet lie” is that I am guessing the builders are overstating the actual value of deals to the buyer. A better estimate of the market value of homes sold through incentives would be adjusted downwards for the freebies, but that would make those inventory valuations decrease, right?
GetStucco,
Absolutely agree. You want to offer the most bling for the buck, and yes the value of the sales have to be reduced, and public builders they need to do this. At the very least they would need to record it as a cost of sales, but technically they should take it off the top line anyway.
So yes i agree with you, I am just saying builders are not fooling investors they fooling the public.
OIiver
It seems to me that the NYSE builders want to “transfer” future potentially putrid accounting entries from their balance sheets to those of the lenders. Thus, they want to continue to unload unsold inventory and inventory in the pipeline any way possible, with more toxic loans; more 125+% financing (which is what these giveaways and rebates are essentially); and more “there are no falling knives” rhetoric. The NYSE builders will not start getting religion until they are satisfied with their inventory levels. So look for more of this predatory lending for some time…
Anyone who accepts an incentive in lieu of a price reduction is an idiot. Not only do you pay mortgage interest on the price of the incentive but you pay property tax on it as well. Forever. Seriously, anyone who does this should not be allowed to vote, drive a car, or reproduce.
…or breathe.
I’ll take an incentive. I’m a monthly thinker.
Gimma a Plasma or new little Benz for $30K. Property taxes are
Rats. 2nd try. Property tax on a $30K incentive is only
At some yet to be determined, unsold stock and the construction loan interest payments that they generate will overwhelm the builders ability to hold that stock. The smaller guys are getting close, I would guess, but when sales remain flat next spring - it’s fie sale time. May 1st, 2007
“Can anyone foresee what will lead the builders to stop papering over falling prices with incentives, and just throw in the towel on this deception?”
Depends on the builder.
Outfits like Lennar are taking the approach of “screw our margins, we’ll make up for it with volume”. So, Lennar will probably continue to rely heavily on incentives to move product.
Toll Brothers, on the other hand, are reluctant to drop prices. They’ve decided to cut back on production, and are attempting to keep margins high.
Guys like Toll will probably lead the market down, when they find themselves unable to move inventory, unable to show cash flow, and unable to generate a profit. They’ve held out to keep margins up, so they’ll need to slash prices quite a bit to get anything moving.
I was wondering why I hadn’t heard from Gary (”I’ve got to pull another prediction out of my ass”) Watts lately! The sad part of this is that a lot of clueless Realtors are going to be quoting Gary’s latest economic wisdom; “It’s the media’s fault!”.
Well, if the Realtors@ have any sense they will immediately FIRE Gary for this comment. You don’t tug on Superman’s cape, you don’t spit into the wind, you don’t call the media shills or sensationalists if you ever want your side of the story ever printed again.
Yep, I am sure that there will be some blowback from that one.
I love the internet particularly their caching.
“That’s almost $1,000 more than Beverly’s entire paycheck. ‘I didn’t find out until the signing,’ Beverly said. ‘And I said ‘I can’t afford to pay that,’ and the realtor said, ‘Don’t worry about it, we’re gonna immediately refinance it.’”
See, this is the point where she should have slammed on the brakes and said…”uh….hell no, I will not sign this”….if she were smart enough to figure out (and it shouldn’t take much smarts) that she couldn’t afford the payment, she should have been smart enough to figure out even if she COULD refinance, it would at a minimum cost her thousands in fees. Instead, like a lemming, she signs just so now she can join the rank and file of the infamous FB.
Seriously. How can you sign a piece of paper saying that you agree to pay each month a sum that’s more than you takehome pay? It boggles my mind.
And that realtor is … well, I can’t find words fit for him. “We’re” going to refinance it? Um, no, I don’t see his name on that piece of paper. I see hers.
Reminds me of the time I signed up for a $40 real estate course (before the bubble and before I knew better). I got a follow-up call a week later asking whether I wanted “coaching” from their team of experts. Still, I was smart enough to ask how many properties the person I was speaking with had with solid, positive cash flow. “uh.. me? Well, I’ve got my primary and one other property” Rented? “uh..no. I’m thinking about selling”. So you want to be my coach? What qualifications do you have? “Well, I’m backed by the entire team of experts…yada yada, blah blah” Do they all have your level of “expertise?” (tongue-in-cheek). So, I ask how much would I have to pay for the priviledge of making him my “mentor”. He replies $8,000 (but we can show you how to put it on a 0% credit card we can help you get!) I scoff of course and he keeps saying, “but it’s 0% interest!” So I respond and suggest that we can put it on a credit card in HIS name if it’s such a great thing. CLICK.
That’s funny…
“…Seriously, how can you sign a piece of paper saying that you agree to pay each month a sum that’s more than you take-home pay? It boggles my mind…..”
That’s because you are responsible, and actually feel the borrowed sum will be your burden to pay back one day. Beverly and hubby were among the millions allured by greed. Why worry when the house will be worth 100K, 200K or more next year. Now that they are the bag holders at the end of the Ponzi ‘high stakes’ poker game, they want the shady dealer with the cheesy visor (broker) to share in the blame for their “debt to the House”.
Maybe we should let these unpaid debts be handled “1960’s Las Vegas Style”. So perfect since many will be locals.
And…you have to wonder at the sanity of someone who doesn’t read anything as financially expensive as a mortgage contract line by line.
…”didn’t find out until the signing”….so what on earth were you doing in the previous 3 days, picking your nose?
OK, I take it back, and I was being mean.
I just watched the TV piece and she had tears in her eyes as she was talking about it.
Still, never let anyone fill out your financial details on a form, without going over it with a fine-tooth comb.
I don’t believe her with the crying and everything . The plan didn’t work out and now she is crying the blues . True the realtors and mortgage broker belong in jail , but this person knew she was getting a loan 4 or 5 x’s what she could afford . Her husband is disabled , she makes a low income,they were priced out of the market , and they wanted to get rich quick and get ahead in life .
To bad wages have been so low, and people got priced out of real estate that people felt that fraud was the only way they could get ahead .It’s no excuse .
Spot on Wiz spot on.
In the entire exchange here about this woman, I didn’t see “renting” mentioned once.
She stated that she knew she couldn’t afford it before she signed the papers. I don’t so much think that she wanted to get rich quick - she probably just felt entitled. So she signed whatever she had to sign to get the house.
The scary thing is, she’s just the latest poster child in what will be a very long string of credit bubble casualties. Expect to hear the same story over and over and over again.
But yet I get blasted a few posts back for saying Caveat Emptor. How can this couple and the other gentlemen mentioned in the article or anyone like them for that matter (there are many) blame anyone but themselves. I mean really when I was selling homes if someone came to me saying that they wanted to buy a 500k house on disability and 30k a year there’s no way in hell I would have wasted my time with that. Market or no Market, Stated or no Stated, Option Arm or No Option Arm I would have been scared sh@tless that they weren”t going to be able to make their first 3 mo’s payments which meant it was coming back too me. I don’t do handcuffs well. I would have laughed their dumb@sses right out of the office. The brokers had to be real fresh to take a risk like that.
Oh the poor buyers they didn’t understand what they were signing, the documents are confusing, they didn’t speak english, they didn’t see it untill the closing. Those evil realwhores and mortgage brokers tricked them. They should be more regulated, there should be more legislation, they are screwing them to make those big commissions.
Oh horsesh@t gimme a break. The more I think about it the more it pisses me off. A lot of these FB @ssholes walked in the door asking for the very crap they are crying about.
Now they want to play the victim and drag every one down with them another prime example of this is that 24 yr old who’s in foreclosure for 2+ mill and I see they are recruiting their fair share of sympathetic enablers. Who’s really getting conned?? Has the country gone so far off it’s axis that no one is responsible for their actions. No matter how stupid it might be. If the retarded can get convicted for murder why can’t a dumb@ss FB be held soley responsible for his actions in this mess. No, it’s everyone’s fault except for the dumb b@stard that signed the docs. Say what you will I call Bullsh@t on that!!!
rant off
What ever happened to having your attorney review the closing docs before you sign on the dotted line? You are signing legal documents in what is probably the most complicated and expensive transaction you will ever face…
I can believe the average buyer not understanding the transaction or the documents being signed, but that doesn’t excuse these fools for not hiring an attorney to make sure aren’t getting screwed by signing their life away.
Where is their sense of financial self preservation? I’ve purchased two properties so far and each time I was scared to hell when I got to closing that I was making a mistake… and that was after analyzing the hell out of the details/mechanics/emotions involved in the decision to buy.
I have no sympathy or empathy. I hate to be Darwinian about this, but the emotionally weak and financially foolish will get wiped out and the rest will be stronger for it.
YoY prices down 20% in Douglas County, Nevada.
Hold on to yer butt!
http://www.recordcourier.com/article/20060723/News/107230016
WOW!
That is a KO punch to the FB’s and flippers.
STL - wow - that is the biggest yoy % price drop I’ve seen.
Having grown up in Northern NV, this decline does not surprise me one bit. What was surprising, was the absurd spike in housing to begin with. NONE of these economies support prices even remotely close to where they are right now. Reno, Carson City, Minden, Gardnerville, Fernley, Fallon, looks like it is time to start paying the piper. Get used to the double digit declines as the market is absolutely tanking right now as I type this. FB’s and flippers are getting ROASTED. No pity here. Bring on the pain.
Now we’re talking seriously “upside down”, and the music stopped just a few months ago!
I lived in Northern Nevada for a time, but couldn’t find work there. There aren’t a lot of high paying jobs. Tourism/gambling produces lots of low-paying jobs. Without continuous equity nomads from California, house prices in Northern Nevada will collapse like a paper bag.
““Their broker assured them they could afford the half-a-million-dollar price tag based on Beverly’s income as a social worker. She makes $2,750 a month. To make the deal work, the broker boosted Dwayne’s salary to an impressive $8,000 a month.”
I hate it when this happens.
Well, if you factor in 30%-100% housing gains per year as income, it’s easy.
$2750.00 x 10,000 peso = $8000.00
It’s Calif math.
Or is it Calif meth?
Actually, I’d LOVE it if it really happened. Maybe I’ll go in to my boss tomorrow and “state” the new income I’d like to earn. She’ll gladly sign the papers, and I can go become a real estate speculator with all my new “wealth.” Isn’t America grand?
Do you think that’s pronouced “Duh, wayne”?
Either the Broker and the Realestate agent flunked out of high school or they just sold this gal out. Our little home (investor)owners got fleeced but those “Professionals” should also go to prison. They got the deal inked, and drove off in there new leased Escalade to Starbucks for a $6 Late, and that new gucci purse or Rolex! Cause gosh darn it that was a tough sale to close. Best part is the brokers already has a re-fi lined up already for next month because he is a producer! (Sounds a bit like churning to me.)
This whole industry has just illustrated it can not police itself and needs to have some serious regulations, oversights, and professional licensure.
“One broker, ‘Dennis,’ works for a mortgage company where he says a whopping 85 percent of loans are stated income. He says out of that 85 percent, they all have inflated numbers. ‘All of them, because that’s why you’re going stated.’ Dennis added.”
And people think home “owners” won’t need to sell?!?
Again, I predict September is going to be the last month where we *can* have strong sales. After that? A gloomy winter and I’m not expecting much of a “spring bounce.” (Ok, if winter sales really are *that* slow, a “spring bounce” to poor sales, but no bounce to circa 2001 through 2006 sales.)
Neil
Neil — I pretty much agree, though where the fairly strong Sept sales could come from, eludes me. I see a creaky Fall, buoyed by miraculous gas price declines that don’t fool buyers into buying many new guzzlers.
A lame Christmas selling season, bolstered by conscience-twinging ads that cause JSP to use the last of his CC credit to buy another one for the kid.
A long winter of mostly silent discontent.
By next Spring, flowers will be the only things blooming and we should be headlong into the Great Price Collapse of ‘07.
“By next Spring, flowers will be the only things blooming”
…and foreclosures…due to ARMs resetting.
Chip,
I’m not promising strong September sales, but if they happen I see enough of the mania left to believe it. September is probably going to be a so-so month for home sales. But it a rabbit is pulled out of the hat… so be it.
After September there just won’t be any strong sales. Oh, there will be some homes selling, but not enough.
I agree with your assesment of ‘07.
Neil
Here is a big stat from San Diego today:
“But notices of default in the county — notices sent to property owners who’ve missed at least one mortgage payment — have increased 250 percent since last August, according to the County Records Service.”
http://tinyurl.com/maj6m
“But if it leads to getting their piece of the American dream, homebuyers must be happy, right? Not according to Beverly and Dwayne, two Bay Area homeowners. ‘Right now I’m living from paycheck to paycheck. I’m struggling with putting gas in my car just to get to work,’ Beverly said.”
“Their broker assured them they could afford the half-a-million-dollar price tag based on Beverly’s income as a social worker. She makes $2,750 a month. To make the deal work, the broker boosted Dwayne’s salary to an impressive $8,000 a month.”
“In truth, Dwayne is out of work and only gets a small disability check. Nevertheless, based on their inflated income, they qualified for a mortgage of $3,700 a month. That’s almost $1,000 more than Beverly’s entire paycheck. ‘I didn’t find out until the signing,’ Beverly said. ‘And I said ‘I can’t afford to pay that,’ and the realtor said, ‘Don’t worry about it, we’re gonna immediately refinance it.’”
American Dream??? Try out the new moniker: ‘Nightmare on Main Street.’
Just in time for Halloween - upcoming movies:
Nightmare on Main Street
Freddy Mac’s Revenge
Dawn of the Debt (double feature with)
Night of the Living Debt - It Just Won’t Die!
Chucky and His Cupcake Capers
THEM! - Giant realtors that grew larger on fat commissions
The 50 foot woman - Giant realtor women that grew taller on fat commission
Exorcist - How to get rid of the overpriced POS you are stuck with
More like a reality (realty?) TV series: “Housing Exorcist, CSI”. In each episode, another difficult FB exorcism (eviction) with dramatic tantrums, tearful confessions, and forced relocations of FBs and furniture.
“Their broker assured them they could afford the half-million price tage based on Beverly’s income as a social worker .”
Don’t BS me , how could anyone assure someone that they can afford a loan that the payments are 1k more than gross income .
That women knew she could only afford about a 100k loan . The devil made her do it and she couldn’t say no . Now I don’t know if they promised her that she could sell in a year and make 100K and the payment wouldn’t be a issue or what they promised her .
Months ago I mentioned that alot of bagholders were caught when the market turned abruptly .
they told this lady whatever they had to say to close the sale. And she, having been badgered by friends and relatives to buy now because real estate never goes down, took the bait. She trusted the slimeball realtor /loan broker whatever white collar guy it was.
I really do feel bad for her.
I know that I have been made to feel uncomfortable when I insist on reading every last line on a mortgage doc before I sign…but my attitude is screw you it’s my money. I’ll take all the time I need.
the woman probably felt intimidated too.
Beverly: “I’m struggling…”.
I guess that beats being a “bitter renter”.
Hhmmm…. Well I have never been a bitter renter. I have always been a happy renter. Been more than happy all of these years to let the other guy “appreciate” his aging wood and plasterboard rental while he takes on all of the risks of home ownership
(And also enjoyed having them subsidize my housing too :-))
“Brian is a Bay Area mortgage broker. ‘Michael’ is his client. The payment on Michael’s new home is $4,200 a month, but he only earns about $4,000 a month. He was only able to get the loan because his broker used ’stated income’ to inflate his paycheck.”
“Brian (the broker) said, ‘I put on the application that he made $13,000 a month, which was unverified … That’s the definition of a stated income loan. You state the income.’”
“One broker, ‘Dennis,’ works for a mortgage company where he says a whopping 85 percent of loans are stated income. He says out of that 85 percent, they all have inflated numbers. ‘All of them, because that’s why you’re going stated.’ Dennis added.”
“But if it leads to getting their piece of the American dream, homebuyers must be happy, right? Not according to Beverly and Dwayne, two Bay Area homeowners. ‘Right now I’m living from paycheck to paycheck. I’m struggling with putting gas in my car just to get to work,’ Beverly said.”
“Their broker assured them they could afford the half-a-million-dollar price tag based on Beverly’s income as a social worker. She makes $2,750 a month. To make the deal work, the broker boosted Dwayne’s salary to an impressive $8,000 a month.”
“In truth, Dwayne is out of work and only gets a small disability check. Nevertheless, based on their inflated income, they qualified for a mortgage of $3,700 a month. That’s almost $1,000 more than Beverly’s entire paycheck. ‘I didn’t find out until the signing,’ Beverly said. ‘And I said ‘I can’t afford to pay that,’ and the realtor said, ‘Don’t worry about it, we’re gonna immediately refinance it.’”
Reading this made my blood boil. This is PRECISELY why the bubble got so out of hand. These sorts of liar loans enabled any Tom, Dick, or Harry to get into any home they wanted regardless of their financial condition. Without them, there would NEVER have been the rampant speculation which impregnated virtually every city and town in the country. I cannot convey the contempt and loathing I have for this filth. The solution is an easy one in my mind. Put a chokehold on lending standards with heavy fines and long prison terms for the Brian’s and Dennis’ of the world, and sterilization for the Dwaynes, Beverlies, and Michaels.
“People are confused”
No they’re not. Everyone knows that if you buy later, you pay less. Its the new paradigm, and its universally accepted. Who wants to be the sucker who buys on the way down? Nobody does. Wait till 2011 when prices revert to the mean, then buy a house using 20% down and a fixed, 30 year mortgage. This is how it was always done, and always will be done.
Ben, this may be the single best post ever. First of all, this realtor’s forecast page is going to provide us with month’s of fun:
http://www.impactre.com/Forecast.html
Secondly, this video on Liar Loans is just amazing. I finally understand now how it is people are afforing to buy $700k homes in CA:
http://cbs5.com/30minutes/local_story_266005029.html
“Home price appreciation will continue upward with no “Bubble” in site.”
Never trust anyone who can’t spell the word “sight”.
Where did Scars and the Bird Flu . . . fly to?
SARS not scars……. I’m not even going to read anymore.
I think SARS was greatly reduced by improving sanitary conditions, but I think it took Botox to eliminate SCARS! -
“Beverly” made me want to puke, to be quite honest. Shit, I’m so pissed off right now thinking about people like that in 500K houses, I’m going to have to walk away for awhile.
posted “Secondly, this video on Liar Loans is just amazing. I finally understand now how it is people are afforing to buy $700k homes in CA”
I had to cut it off…. When you put a human face on this, it is a sad story for our people.
I am a very compassionate person. However, it’s very hard to muster up sympathy for these fools. Why did they feel they needed to buy this home - hell ANY home - so badly that they needed to commit fraud (yes, I think stated income is fraud)? You play, you pay. I’m raising my son currently in a 2BR apartment. We live on the 3rd floor so he can’t just run outside and play and there’s no yard anyway (not to mention what litte patches of grass there are for him to run around in get littered by scumbag smokers flicking their cigarette butts). Mind you it’s not a crappy apartment complex, it’s just that so many people on this planet are crappy and have no respect for anyone but themselves.
My point is that, while I may feel that I’m “entitled” to a better standard of living than I currently have, present economics don’t agree. I have downpayment money saved, my debt is zero, my credit score is excellent. I’m frugal, thrifty, etc. And I’m beyond ready to dive into homeownership. But I will not do it if the numbers don’t work. So why the hell should I feel sorry for people who don’t map out a sensible plan first? They don’t feel sorry for me - hell, they probably think I’M the loser for being a renter.
Sorry, but this really irks me (as it clearly does so many others). But feel bad for them? Sorry, no.
Eastcoaster, I so completely agree. I will not feel sorry for the people who made the exact choice I and my SO have been disciplined enough NOT to make. (Hm, does that make sense?)
The face of a FB. Sad.
The ponzi scheme exposed. What really pisses me off is that all the risk/pain has been foisted onto stocks, pension funds, etc. That means that all the greedy banks, mortgage companies, and RE agents walk away with no bullet holes while the people lose their pensions and 401Ks.
The fabric of today’s America is rotten and now the it is just going to fall apart. This is going to be even worse that than even I had orginally thought…..
posted “The fabric of today’s America is rotten and now the it is just going to fall apart. This is going to be even worse that than even I had orginally thought….. ”
You are right, from the head down….much worse!
Fellow bloggers:
Do not be fooled by all the rhetoric that it is a “Buyer’s Market”, because it is not. After 50% reduction (or more) it will be a “Buyers Market”. I would also ask Mr. Ben Jones (the blog master) to stop printing articles that it a “Buyer’s Market”.
ABSOLUTELY! Its a FOOLS market!
People who buy now are even dumber than last year’s buyers, because now the downside is obvious. Also, they are going to be underwater for TWO DECADES if they buy today. Idiots!
Suckers market would be a more apt description.
But it is so-o-o-o much fun to figuratively tear these thinly-disguised real estate sales pitches to shreds!
I agree…buyers market my a**…
Ben has never said that it is a buyer’s market, newbie. Nor have the realy seasoned posters here. And please bag that “fellow bloggers” crap — you’re not a “fellow blogger” here, but rather an egotistic rookie.
Ouch, Chip.
It’s quite possible that Mr. Watts needs an Intervention about now.
From what I hear, it’s not good to mix Zoloft and Whiskey.
Oh- what’s that I see coming up the mountain?
Is it the ‘townspeople’? Brandishing torches and pitch forks?
What say you? They’re headed for Dr. Frankenstein’s castle?
Watts is an ass. This so called economist blames the housing bust on articles in newspapers? Imagine that no articles had been written. How does Scary Gary think the housing market would have kept going? Would every Californian buy a house that they could only hang onto for 1 year using a jumbo liar loan? Quite simply, there is nobody left who can afford current prices. That is why the housing bubble burst. It was burst BEFORE all the newspaper articles. Gary has shown himself to be an intellectual fraud, and basically the guy is just a dumbass.
I’m willing to open up a Parlay card on various exit strategies for Gary Watts.
I’m guessing the best odds are on ‘Sell House, Move Out of Country’, Adopt Poor Children to make up for Financially Ruining People.’
Second best odds:
‘Reconstructive surgery and a paper route.’
Anyone got any more?
Please feel free to expand.
Adopt poor children? Attempt to atone for sins??! This is America. Americans have no MORALS, only greed. His only option, as an American is to LIE AND DENY. Adopt poor children? You kill me!
“Do you see this, girl? She needs your help. She’s one of thousands of poor children across the globe you never see. All it takes is one small donation from you, and her life would be magical. Just send that donation to me, Mr. Gary Watts- er- Juan Valdez- care of the Brazilian Branch of the We Really Care Alot We Swear Foundation. 22334 West Broken Crystal Ball Way, Mission Viejo, CA- er- I mean Bolivia- darnit- Brazil.”
“We hope to hear from you soon. What you do now…could effect the life a young child, just like this one.”
Yeah, I could see him doing that.
“We Really Care Alot We Swear Foundation”
LOL.
Watts probably has quite a few RE investments. Seeing the increasing loss everyday could be driving him to madness.
>>I said ‘I can’t afford to pay that,’ and the realtor said, ‘Don’t worry about it, we’re gonna immediately refinance it.’”
That’s so cool. Refi me out of debt too please.
She deserves to have her life ruined. Here beginnith the lesson: PEOPLE IN THIS WORLD WILL TRY TO STEAL YOUR MONEY FROM YOU, SO YOU BETTER BE CAREFUL. Here endeth the lesson. This could be the 16th century. A fool and their money, and so on and so forth. You can’t teach a sneech! Human nature is ETERNAL. There’s a sucker born every minute!
“Marin’s median condominium price fell 5 percent from last year to $546,000. Median price for all homes fell 2.3 percent. ‘It is definitely a buyer’s market, no two ways about it,’ said Jim Wilson, an analyst with JMP Securities in San Francisco. ‘This idea that prices don’t go down is nonsense.’”
The idea that the beginning of a housing bust is a good time to buy is also nonsense.
as far as builders cutting prices,they usually want to keep the “official” price up until they have only a few units left…those picket lines of early buyers can discourage traffic.once they have made their nut it’s f’em,take the $ and run.
Thanks for the insight, Tom. I see your point: New home orders have already dropped off the face of the planet, but the builders have an incentive to keep up the illusion of high prices long enough to get through the exits ahead of the used-home sellers who still have not figured out where all the buyers went. Once the glut of new homes already built and currently under construction is cleared out of the supply channel, we should expect a big drop in prices — “It’s in the bag.”
Good point Tom.
I have seen ads for the last few units where the builder says give us your best offer. They were not doing this in when selling the fat middle portion of the units.
Good point. Also wonder if it makes a difference whether they have lower revenues or shrinking margins. To me, it’s basically the same thing. How does Wall Street see it? Seems to me the revenues are shouted from the mountain tops, but changes in margins are usually more subdued. Thoughts?
It’s also refreshing to learn that USC real estate professors are not aware of the concept of loan “buybacks.”
To be fair, many of the loan “buybacks” are for loans that become non-performing in the first 90 days. What banks are exposed to as a “buyback” is only the tip of the actual default iceberg.
I think that the buyers of the loans are incorrectly placing the riskiest part of the loan as the first 90 days. IMHO, the riskiest part of the loan is when they adjust, or the “teaser rate” expires, 1-3 years from origination. To my understanding, banks won’t be exposed to this kind of default through “buybacks”.
I think the professor largely has it right–the banks are offloading the bulk of the risk on these loans almost immediately, thereby making them less concerned with the long-term quality of the loan.
Loans that involve fraud are subject to buyback provisions, are they not?
It all depends on the terms of the particular securitization deal.
“We Really Care Alot We Swear Foundation”
Sounds like the dinner bell for lawyers.
Garcap is right, but any securitization deal written worth its salt will have enough provisions in it, worded vaguely or not, that will allow buyers recourse against the MBS sellers if the buyers can prove lack of due diligence. It won’t be much longer before we see tons of lawsuits filed on behalf of the buyers.
I say this because, ultimately, it’s the buyers who make these deals, not the sellers.
Interesting, found this at allforeclosures.com, it’s really sad the foreclosure discussion board, that is. These people are really SCARED SH*TLESS!
http://www.all-foreclosure.com/forums/foreclosures/index.html
What’s the big deal? Debtor’s prison has been out of fashion for centuries, now, hasn’t it?
For those who have their common sense in place, probably not a big deal, but for those on THAT board, it’s huge AND it’s people like Gary “good time Charlie” Watts who play a hand in their demise, NOT totally his fault, but he does have blood on his hands, especially when asserting the media has a conspiracy theorist take on the SUDDEN downturn of the housing market. He needs to take a look at this board and see how far “blowing smoke up someone’s ass” get ya.
I believe the new BK laws with taxable income for debt foregiveness is debtors prison. What possible incentives for the future when they are forced to pay income taxes plus penalties on a bad decision made under exuberance.
I will reserve judgment until I see what kind of taxpayer-funded assistance our nation’s top policymakers cook up to help out these poor souls in need.
It is certainly an amplification of wage slavery. The problem is that who are laboring under deep enough debt have no real bargaining power for their wages. They must work so they can pay. When amplified by millions nationwide, corporate profits will be immense because they won’t feel any pressure to give raises for a long time. This may be why the stock market is still doing well.
holy crap, there’s the hidden underbelly of the bubble.
It’s a balloon, you Bastard.
Maybe Mr 15% Watts should check out this foreclosure site and ponder the misery the bubble has caused.
I wonder if Mr. Greenspan has seen the foreclosure site and read the plight of these individuals?
This one appears to be screwed due to her spouse being in the military. That’s not something to be happy about. The guy’s in Iraq and about to lose his home? Yeah, that’s a soldier who’s going to have his head in the game when he goes into combat — not.
No - they fell behind last November, he wasn’t activated until last month(August).
I don’t like to pile on when someone is down, but her story about her husband and his military assignment sounds a little fishy (I’m a military officer). First she doesn’t say he was sent to Iraq, rather she says he was sent to the airport to guard against terrorists??? That doesn’t make any sense (we don’t have military protecting our airports in CONUS), also her comments about checks being mailed…we quit “mailing” checks a long time ago. Anyone in the military will tell you that it is mandatory for military pay to be made by direct deposit to your bank account (even the reservists). Also if the guy was in Iraq…though it doesn’t compensate for the danger, he would be paid a lot extra in addition to his regular military pay, i.e. tax free basic pay, combat pay, family separation pay, etc.
Plus the Soldiers and Sailors Civil Relief Act provides a great deal of protection against collection-type activities when a soldier or sailor gets deployed abroad.
“And is a Heloc really a second mortgage?”
Seriously in denial.
Amazing stuff! I read all 50 foreclosure.com posts. Some increased my schadenfreude, some increased my sympathy. It depends on their motives. Many different ways to become an FB.
In a thread on how stressful foreclosure is, this caught my eye:
Um, didn’t he learn anything the first TWO times?
I like the post “Do I have to rent for the next 10 years???”
Ha, ha! As if that’s worse than being bankrupt! My goodness, some people are going to get schooled!
The Orange County Register. “O.C. broker/economist Gary ‘Up 15% in ‘06′ Watts strongly hints that the current market slowdown is largely a product of negative media coverage. ‘Newspapers are losing subscribers and television is losing viewers. Consultants have advised them that if they want to hold their viewers’ or readers’ attention, they have no alternative but to portray fearful impending events and instill anxiety in their audiences! This raw emotion will help to keep people tuning in, thus possibly preserving precious advertising dollars.’”
Somebody needs to punch this guy in the face. Seriously, this guy is the biggest freakin’ idiot since Joey on Friends. Why would anyone with an ounce of credibility even talk to this guy? Oh yeah, they are reporters.
posted “Somebody needs to punch this guy in the face. Seriously, this guy is the biggest freakin’ idiot since Joey on Friends.”
No Joey was just dumb. This guy is like “Bagdad Bob” and need two punches!
Ben, this is one of your best blog entries ever!
The “Stated Income” BS actually began in earnest back in 2001/2002 according to a friend of mine in the lending division of a major bank.
As long as the numbers qualify you under Fannie Mae’s Decision Engine, you were in. Regardless of how you got the numbers.
This whole stated income was just a way to get people in debt, drive up a commodity (housing), make tons of commissions for realtors, loan officers, etc., commit fraud, be greedy…I could go on, but the list may take another couple of hours.
I just checked with my friend in the lending division and she says that about 75% of their loans are Stated Income.
She says “Full Doc” loans are basically extinct.
Stated Income = Lied Income
And the Fraudlent Reserve System, responsible for safety of banking and financial institutions, didn’t know a thing about it?
We are dealing with Crooks in total control of the E-Con-omy.
Jas Jain
Agreed.
The fed is responsible to no one but its owners. People need to realize this.
The whole system is corrupt. Criminals are everywhere. The whole economy is out of control. At this point i think it safe to quote, “In the end we are all dead, anyway.” Life is a zero-sum game. Whether you believe or not, Job was right you leave the way you came in this world, with zilch. Unfortunately for all of us here, trying to get a ahead while living and leave something to family or friends, or a charity when we go is fast becoming a vanishing dream. For most of us, it is just a matter of trying to keep up while fighting the barbarians at the gate.
Jas — that is the scam of our lifetime.
No, not just our lifetime, but the lifetime of the nation. Never in the US history have we had such evildoers in control.
Jas Jain
Well said.
Today my breed rescue group got their first owner turn-in surrendered because “he was upsetting people looking at their house for sale” and was keeping them from being able to sell it. Of course it wasn’t the fact they probably overpriced the shitbox by 50%. For that reason, a dog lost his home.
I hate everybody right now.
“breed rescue group”
What is that? Do you target specific breeds? I love dogs, but a big half of the family doesn’t.
The way she attacks those who create misery, you should guess pit bull or doberman. I think her heart leans more toward shepards or retrievers. I don’t think she embraces little, vicious, yapping dogs like miniature poodles, chihuahuas, and such.
That has to be an incredibly tough job. But thank you for doing it.
What an excellent day it’s been! Seeing Gary Watts having his ass handed to him on Lansers Blog in the OC Register has been a long time in coming. I can’t wait to go to my next open house and tease the local Realtors again….
CNN has a piece on about the bubble as we speak
Went to visit the old neighborhood today and spoke to my old neighbor - girl in her mid twenties. She was talking about renting out her house (bought in mid 2005 in Aliso Viejo, CA) and was talking about buying property in Long Beach. I asked her why in the world she would do that, because of the market…….. and she went on about some real estate seminar and how she was going to make alot of money, housing prices never go down…blah blah blah…. Another case here of a 24 year old about to go on a buying binge with property. Here is the website she told me about. I hope every her and one who follows this crap goes down with the ship. What a huge f’ing ponzi scheme these people are promoting. This housing market is one big ponzi scheme. Now I fully understand why all the locals in other states hate all the equity locusts here in CA. (TXchic??!!)
This newletter summarizes it pretty much on how to finance with zero down, find a good market, pyramid your profits etc….and goes to show that if so many 24 year olds are doing this, then this market is really going to tank. Love their comments that prices are still up and now is the time to still buy…
http://www.marshallreddickseminars.com/newsletter.pdf
Gack, Marshall Reddick is still reeling them in. Did you notice the prayer breakfasts he hosts?
Here are his three easy steps:
“Buying Real Estate is as Easy as 1 – 2 – 3, A-B-C
1. Select the area you want to buy. Call our agent in that area. He/she will send you a contract to complete and return. There is no need to go out and see the property unless you wish to.
2. Buy. One of our lenders, familiar with that market, will pre-qualify you to purchase in that area and any other areas in which you wish to purchase.
3. Close on the property. It will be rented out for you. Closing papers can be brought to your office or home by a notary.”
OMG!!
I liked the tag line on the mailer page: “Devoted to eliminating middle class poverty”. Right, by eliminating the middle class. His customers will be in lower class poverty.
Oh and I noticed on page 6 that one of their so called experts speaking on Super Cash Flow Weekend is good old Gary Watts himself.
“Went to visit the old neighborhood today and spoke to my old neighbor - girl in her mid twenties. She was talking about renting out her house (bought in mid 2005 in Aliso Viejo, CA) and was talking about buying property in Long Beach. I asked her why in the world she would do that, because of the market”
Why would She be interested in “investing” in Long Beach RE? Just did a thorough study of the August Data quick figures for LB. 280 SFH’s sold. Average price of $587,000 in the 11 LB zips. YOY for entire 11 zips averaged 3.5%. 2 zips showed negative. Condos had 86 sold @ 339.72 average price and +7.38% yoy but one zip showed 72% yoy for just 4 sold condos, which skewed the overall condo yoy%
These sales went into escrow in june/july when there was little awareness of the sharp nationwide/Cal RE sales declines in august/sept among the general population. These purchasers of the 366 sfh’s/condos were GF’s who obviously were still drinking the heavy koolaid from the REIC back in early summer. $587,000 average sold price for SFH’s in Long Beach in august is somewhat steep, though prices varie for each zip. Parts of east/southeast LB are still prime areas, but significant sections of LB are somewaht deteriorated older areas while several zips are really declining areas.
She may have been thinking about investing in dwtn LB condos. There are some problematic issues with the dwtn LB condo market which i will not go into here. Zipreality/zillow/craigslist will provide the listing/sales info.
I posted rather late on this blog but i want to help Ben get to 300 postings,which might set a new record.
Real Time date from Las Vegas MLS as of 6 PM on Sept 26….there are 736 revisions to list price on todays MLS Hotsheet report…that means in the last 2 days, 736 listings were repriced. This is the highest number I have ever seen in 3+ years. For all those waiting for a the sellers to “get it”, I think the sellers have reached the FEAR stage.
Posted “Real Time date from Las Vegas MLS as of 6 PM on Sept 26….there are 736 revisions to list price on todays MLS Hotsheet report…that means in the last 2 days, 736 listings were repriced.”
Like they said in “Saving Private Ryan” after they finally got off the beach…..”don’t shoot em’ let em’ burn”
That’s right, lettum burn, to the tune of a 50% downward spiral. When homes in RSM get back to 300K maybe I’ll see what’s there. It will still take some time, though!
Of topic:
on money.cnn.com:
Home improvement retailer Lowe’s, which warned on its full-year results Tuesday, expects it could take as long as 12 to 18 months for the slowdown in the housing market to stabilize.
http://money.cnn.com/2006/09/26/news/companies/lowes/index.htm?postversion=2006092614
Is there any listed company which makes as its main product “granite countertops”? I found Amex:HOM, whose stock declined 66% in the past 6 months. Are there other examples?
Just saw Glenn Bec’s show on CNN headline news tonight. I’m not usually a big fan, but this one made me laugh.
He talked about the housing bubble in relation to tulipmania, the 20’s florida land boom, and the dot-com bust. He said it was obvious that it was a bubble and he didn’t have simpathy for people taking dumb mortgages to buy a house. I think he actually called them idiots.
Yup, the bubble has hit the mainstream media hard, no matter if the media is left wing or right wing, they are all scaring the hell out of people.
Good.
I saw that one as well. Funny how he presented it (like it was sooo obvious to anyone with two brain cells to rub together).
Off topic, but hilarious-how many new landlords does this describe
http://www.theonion.com/content/node/53191
Very funny. If I showed this “article” to my wife, she might believe it.
i’m already seeing ads for seminars on “how to get rich buying foreclosures” which sould shear a few more sheep.looks like we’ll be bombing iran about the end of october,anyone have a thought about how that might affect the market?
“…have a thought about how that might affect the market?”
Scary thought, but not impossible given the neocons who hold power. However, I think they would wait until after the elections and maybe until after Christmas. Then it could be the exogenous event that unintendedly triggers the housing collapse but doesn’t sink the Wall Street boys and investment banks.
I’ve heard three potential scenarios: 1) Special forces infiltrate and place tac nukes in critical locations, then exfil and detonate, making it look like Iran’s facilities just went “boom” because they goofed up. This won’t fool any of the major powers because the residue of the events can be traced to the manufacturing country, but it will be reasonably palatable to the masses and it will send a strong message to other wanna-be’s that they need to watch their step. 2) Standard US airstrike approach. This will have minimal effectiveness on hardened targets and will require a substantial committment of time and effort. 3) Full-on invasion. I don’t see how this could be possible without a draft, and the combination of yet another war with a draft would be political suicide.
Timing: There is no way any of this will occur before the November elections. Winter has never been a good time to start a war, but if option 1) is selected, the dates won’t matter so long as the election results are in.
Consequences: Iran’s oil resources are substantial and its’ ability to lash out should not be underestimated. This would have very detrimental effects on world markets even if the other great nations did not intervene. If the action irritated great nations, the consequences could be dire. Imagine if China and Japan took offense to US actions and stopped buying US bonds and debt. The US fiscal house would collapse overnight. The US wouldn’t be able to buy raw materials to continue prosecuting the wars.
I’m not particularly worried about Iran’s ability to inflict serious damage on the ConUS. The real concern is this: if North Korea sees itself as the last nation on the “Axis of Evil” list which has not yet been invaded or bombed, won’t it think that it must take action? It can obliterate Seoul within an hour. When North Korea invaded South Korea in 1950, they almost won. This time, I think it a near-certainty that they will win. The only thing which could hold them back would be the US bases on Japan and any carrier groups which would be in theater. This is why folks are so worried about North Korea. If they already have nukes (and they do), they could use a mini-sub or one of their new missiles to smash the US bases or carrier group, then they could do as they wanted to South Korea.
The US has squandered it standing in the world, and stands in a very precarious position without solid finances, without solid diplomatic relations, without solid allies, and without solid moral ground. There is a huge amount at stake right now, and most people just don’t care. That’s how big wars start.
If you honestly believe this crap, buy oil futures. The people who actually have money on the table clearly believe Iran is going to be allowed to get the bomb; otherwise, oil wouldn’t have dropped by 25% over the last few weeks.
Re: Korea, although Iraq and Israel’s attack on Hezbollah showed that it’s impossible to win and hold territory with air power alone, air supremacy is an absolute trump card in defending against a conventional invasion. The North Koreans could level Seoul with artillery (that’s the problem with locating your capital a hop, skip and jump south of a hostile border) and could surge their conscript army south a few miles, but they couldn’t go any further than one tank of gas could take them — because with modern precision air munitions, if you don’t control the air, you don’t get resupplied, period.
“‘I can’t afford to pay that,’ and the realtor said, ‘Don’t worry about it, we’re gonna immediately refinance it.’”
There is some crazy sh!t going on out there in CA.
Yep, I am glad everyone is saying the real Cali.. as Cali goes so goes the rest of the country..
The land of make believe
Yep,the mortgage fraud is going to be a big issue . I was always wondering how so many people where able to qualify .Fraud with the loan packages combined with investor buying created a fake demand that drove the market up ,but it was false .We all had our taxes raised because of it and if there are bailouts our taxes will pay for that to . I don’t know about you but I don’t like to be F—–k with like this just because some greedy bastards want to make some easy money .Yes I am pissed .
The way to stop the mortgage fraud right now is to require a taped recording of the interview with the mortgage broker with the borrower and a recording of the loan signing. It’s come to this because everyone lies .
oops.. replace ’saying’ with seeing.
The total dollar value of current foreclosures may have already exceeded that of the previous bust. With home loans today being 3 or 4 times bigger than they were in the 90’s, the total dollar amount of foreclosed loses must be huge.
Does anyone have total dollar value loses on foreclosures today, as compared to the peak of the previous bust?
No way… not yet… maybe by next year sometime.
All we have so far are large numbers of NODs out, but completed foreclosures are still at a low rate historically. But when this really gets rolling, the dollar loss will make the last bust look like a bad night at the craps table.
Not all doom and gloom in NorCal.
There are some sob stories and I’m sure prices are going to retrench somewhat but folks, the NorCal tech economy is not bad, it’s stronger. Homes near these jobs (e.g. sunnyvale) are still selling.
High-tech added more than 140,000 jobs to employ 5.8 million people as of this June, the largest number since 2002, said the analysis by the American Electronics Association, an industry trade group.
Much of the growth came from software services and engineering and tech services companies, which each added more than 40,000 jobs between January and June. These broad categories include software makers like Oracle and Internet companies like Yahoo.
Yahoo is implementing forced shut down this X-Mas.
Be careful of the AEA, they are the ones pushing for H1B. Also where are these new jobs did they say, in China or India?
Remember, greater than 80% of new purchase in SV are ARMs, IOs.
No one can afford here.
“Both the AeA and state data take into account employees in the high-tech industry, but not technical employees at other businesses. That means — an accountant at Cisco Systems would be counted, but a software engineer at Wells Fargo would not be.”
So, right, all of the banks, financial service firms, etc, etc, that outsource their in-house IT and software development staffs to an Indian outsourcer don’t even count in this, while adding a few guys in shipping and receiving at a Dell warehouse does count as a tech worker.
Is anyone getting a little scared at this point, now that we might be getting what we’ve been wishing for?
I am not scared, but rather relieved. Even if prices drop by half, we are only back to 2001 prices. That is not a bad thing. Maybe the country can get back to making things other than houses, loans and Hummers for Flippers.
Yes.
I remember the 1992 L.A. riots during the last housing recession.
” anyone getting a little scared at this point, now that we might be getting what we’ve been wishing for? ”
I was working during the Re bubble decline yrs of 1989-1996 in a bad part of LA. Actually there was quite a bit of money flowing in the LA ghettos during that period. Where that money came from? Government transfer payments, illegal transactions(drugs), a large porportion of folks in the poorer areas working for the govermnent,ect.
There was quite a bit of criminal activity also right up to the riots, which seemed to be a cathartic release of all the pent-up anger building up in the ghetto.
The feared bubble collapse and resultant economic declines will hit the middle class indebted homeowers hardest: the innor city poor, who have very little debt and assets, will get by thru Governmnet transfer pmts and thru the operations of the LA underground economy, which will go up from 20% now to probably 30-40% during a widespread economic meltdown.
This may sound like Tin-foil stuff but The poor are great survivors in bad times. I wanted to get this somewaht OT stuff in so that ben can get his 300 posts.
The poor are great survivors in bad times.
—————–
Very true. (going to help you get those 300 posts!)
The poor are indeed great survivors in bad times — but that’s a huge problem for governments that have instituted highly progressive taxation. In a typical recession, the aggregate income of the lowest-earning quartile doesn’t decline that much. Unemployment ticks up a few percentage points, reducing total earnings, but the earnings of those who stay employed doesn’t fall that much. (If nothing else, minimum-wage laws set the floor.)
On the other hand, the aggregate income of the wealthy drops dramatically in a recession. The truly wealthy aren’t salaried; their income comes from profits and capital gains. A person who’s been racking up a million dollars a year in business profits during flush times, may see his income drop to zero or even go negative in a bust.
Now compare: One of five guys making minimum wage loses his job in a recession. Another guy who made $300,000 the last four years barely breaks even. Which has a greater negative effect on the economy?
That effect is magnified when the tax structure is set up so that the wealthy pay the great bulk of income taxes. (Which they do; people in the bottom groups actually get money back via the EITC.) The result is that in a recession, which disproportionately reduces the income of the rich (although they tend to have plenty of backup wealth to tide them over), income tax receipts get absolutely plastered.
California is running a deficit even now, when the economy has been fairly strong. Add a recession, and it most likely will go completely bankrupt.
It’s the middle classes earners who pay the greatest porportion of their incomes toward debts, taxes, gov’t fees, property taxes, ect. The very rich as you say have plenty of backup wealth to tide them over during bad times. The poor do get back more in transfer pmts than they put in, especially thru EIC, medicare, section 8 subsidies,food stamps, ect. The heavy hand of Government fees and overindebtness falls heaviest upon the working/ white collar middle classes.
The poor deal with chronic high unemployment, poverty, high teenage unemployment, lack of good-paying companies in their communities, even in goods times, which is another reason that an economic slowdown won’t affect them that much.
As local/county/state tax revenues fall look for increased efforts by these gov’ts to squeeze even more fees and taxes from already overburdened homeowners, either thru bond schemes,traffic tickets,re-assessed property values, increased utility and phone surtaxes, ect. The Gov’ts must keep their revenue streams coming in and it’s the homeowners who are the turnips to be squeezed.
I agree, but I’m just thinking about all my neighbors, who bought their houses like 20 or more years ago, but have been refinancing practically every year. If people like that go under, and I’m talking about ordinary working family people, what will happen to the economy?
It seems like the new economy is to lurch from bubble to bubble, I just can’t fathom what the next one will be, that would be sufficient to rescue us from a fall of the proportions we’re predicting.
Now be careful what you wish for next!
Another bubble is not the answer. We need to find a way to rebuild the economy on a sound basis. Another bubble will just delay the day of reckoning and make the process more difficult.
Sounds good, but it seems like Americans just can’t make anything anymore that the Indians or Chinese can’t make cheaper.
Americans have to resort to get rich quick schemes like IPO or house flipping to just maintain their standard of living.
Maybe that’s what this bubble is really all about, anyway?
IPOs and Flipping do not create wealth - the best they can do is redistribute it, and in a very inefficient way. Sure a fair number of people make money off of the frictional effects, but that’s not a net increase in total wealth.
A lot of people are going to have to go under, and it isn’t going to be pretty. The middle class in this country is going to see a reduced standard of living; it’s just a matter of when, now.
“Americans have to resort to get rich quick schemes like IPO or house flipping to just maintain their standard of living.”
This is the tail end of a credit bubble that started in the early 70’s about the time we started shifting to a service economy. We have been using credit for years to maintain the middle class standard of living and now it has just morphed into a ’speculation nation’ if you will. I look back at the attitude toward credit in the seventies compared to today and its hard believe this is even the same country. Everything now is monthly payments not cash.
Yes and no. There is a strong feeling of desperation, of being left behind, which is driving a large number of people. They’ve seen their real wages fall behind inflation, their standard of living decrease, and their dreams of retirement cast into doubt. When presented with the shining golden hope of getting rich through real estate, of earning more from the appreciation of their house than they ever earned by working in any one year (or, for some, for five or even ten years) is it any wonder that they grasp at the straw?
Another large group has lived in quiet desperation for years, utterly incapable of buying a home. With the lax lending requirements and lack of verification, that group discovered that it can have a home with just a little lie or two. Is it any wonder that they did just that?
What’s left for next there’s no paper left to juggle.
The best theory I’ve heard so far (I think it was TxChick’s) was that privitization of SS would free up the capital for another stock boom. It doesn’t look to me like that one’s going to get past Congress at this point, however. Perhaps some other way of diverting employment taxes into the private sector for fun and games, like an IRA/MSA borrowing scheme.
Another possibility is something like the WPA to pump money back into the economy after it’s taxed out.
sm landlord,
Definitely think a WPA-type program will be (is) in the works. Combine that with a FNM/FRE “mortgage rescue” program (40-year, interest-only mortgages at very low rates where the principal is not due until you sell — or something like that). I can see it.
what to do, what to do?
think FDR
Summer 1941
“Combine that with a FNM/FRE “mortgage rescue” program (40-year, interest-only mortgages at very low rates where the principal is not due until you sell — or something like that). I can see it.”
See, you say this, and it makes sense to me too. But then I think: So why shouldn’t I just throw in the towel and buy now? If the housing train just keeps chugging ahead, I might as well get on board. (Despite, yes, every fiber in my being telling me the train’s just GOT to crash.)
indiana jones said: This is the tail end of a credit bubble that started in the early 70’s…
I would add: August 15, 1971, to be exact.
And, mrincomestream, in a game of Rock-Paper-Scissors, wherein the paper is the dollar and the scissors are inflation, do you know what the rock is? It always becomes visible when there’s no paper left.
http://www.house.gov/paul/congrec/congrec2006/cr021506.htm
[long-lurker here, brought out by the best blog story/thread ever. If I could frame one representative entry and hang it on the wall it would be this one. Kudos to Ben, et al. And, yes, I'm a bit scared...and angry...and relieved...all at once.]
The bust of the housing bubble money has already migrated into the next bubble; US Treasury bonds. The bubble money is now going into the #1 perceived, safest place for your money. They have even said something to this effect on CNBC today. This is why treasure yields are going down.
As the US dollar begins to collapse, due to severe recession, you will see a flight from all US equities. There is no place to hide.
Maybe a renewed stock market bubble?
Looks pretty “desperate”:
http://bakersfield.craigslist.org/rfs/211030148.html
That’s pretty far for a 310 agent wonder if she owns it.
Hah, didn’t notice that. Hey, what kind of numbers are you waiting for before you jump back into multifamily (cap rates/grms)?
I’m already back in honestly. I’m looking at one that I’ve been coveting for quite sometime that frankly as sad as it sounds i’ll overpay a little bit for it and one that I’m considering because it has a lot of juice and the terms are right I’ll break even on the churn of getting the old out and putting new in even if the rent tanks in the same fashion as it did in the last downturn. If I can get the right long-term financing. Sorry to say I’m an owner of both. But typically 10+ grm, 15%+ cash on cash.
I haven’t bought anything for quite sometime 5 yrs at least, 3-5% caps “No” thank you but this hysteria over the bubble popping is creating antsy pants from rookie operators and some good opportunities are popping up if you know what your looking at.
Actually correction it’s been 3 yr’s since I bought anything. That’s when even the “hood” starting taking off into no no land. I remeber standing on Broadway looking at a 5 cap building with bullet holes in the side and candles on the sidewalk and I thought to myself I might want too take a break from investing.
mrincomstream
I have had rental property since 2001, I am always eager to learn more, could you define 10+ grm, 15% cash on cash?
Thanks in advance
GRM and cash-on-cash are investment valuation measures.
GRM is gross rent multiple, or the sales price divided by the gross rents from the property. A GRM of 10 means an investor will pay $1 million for a property with gross rents of $100,000.
Cash-on-cash return measures the ratio of the property’s cash flow to the equity invested.
Simple example - $1 million purchase price, 20% equity investment, or $200,000. To achieve a 15% cash-on-cash return, the property’s cash flow after operating expenses and debt service must equal $30,000.
Every property I’ve looked at over 10 grm is negative cash flow, unless you’re putting down 40-50 percent.
Or more.
And in LA, I don’t see how you’d have any positive cash flow whatsoever on a 1 million dollar property, with an 800,000 mortgage.
Ahh Sorry I just noticed I made a mistake it’s not 10+ it’s 10 or less.
At about 9 to 10 GRM and 30% down this one may get you there. I didn’t crunch the numbers just going off of what I eyeballed off of loopnet. I don’t particularly care for that style of building. Old hotel converted to units. Unless they are all 2’s I would pass. It actually cash flows at listed with 25% down but the return is marginal.
http://listing.loopnet.com/14766475
You’re shopping in the wrong zip codes.
Gary is the biggest real estate rah rah man. So anything that comes out of his trap is only for his constituents, the OC realtors. Like a politician, we should take his comments with a grain of salt, not worth a bowl of warm spit.
I’m sure this has been said in these many comments but people, you are responsible for your own financial outlook. I love the people who blame the brokers, not that they aren’t hucksters, but know what you can afford and how much your loan is going to run. Stated income loans are for business owners and freelance persons who try to shield some of their income from taxes, not for social workers!!
I think some of you are a bit hard on the average FB. If everyone else is paying these prices and all the ‘experts’ are saying its a great time to buy and the people who are ‘professionals’ in the industry all say this is the way to do it what do you expect. I am not talking about the specualtors who bought multiple houses but the families whos only fault was they belived the BS put out by the industry. Why should a social worker making 2000 a month think they know more about the housing market the a broker or banker making 20,000 a month. I think the industry professionals did know better and their greed just overwhelmed any sense of honor they ever had. I hope they all wind up in jail.
Could be. But what the weeping social worker doesn’t reveal is that all her coworkers were constantly talking about how rich they were becoming in real estate, and she said, I’ll have some of that too, please.
She ignored internal warning bells because she convinced herself that this was a get-rich-quick approach. If it had work, she would h ave been the clever one, and let everyone know. Now that the scheme blew up, it’s OPF (other people’s fault)