‘This Year, There Will Be Some Pricing Errors’
The Eureka Reporter from California. “Vince Malta, who is the current president of the California Association of Realtors, spoke to members of the Humboldt Association of Realtors at a luncheon. Statewide, home sales have decreased 30 percent from the same time last year, and Humboldt County isn’t far behind at 27 percent, Malta said.”
“The local market has also experienced a 6 percent drop in overall home prices and more houses are remaining on the market for longer, quite a change from recent years when sellers had buyers lining up for houses that could be sold immediately.”
“‘This is a normal market — you actually will need to do something!’ Malta joked, then seriously added, ‘I consider this to be the year of the realtor because in prior years, you could make no mistakes. This year, there will be some pricing errors.’”
“Citing Humboldt County’s median income of approximately $30,000, Malta also touched upon the need for affordable housing in the area. ‘I don’t see how the majority of people here can afford housing and that’s a big problem,’ he said.”
The Orange County Register. “Here’s what the researchers at Real Estate Economics in Irvine are telling their builder clients about The O.C.: The current ratio between median new home prices and household incomes is $9.90, much higher than the previous peak ratio of $5.40 set in 2nd quarter 1989.”
“Relative to household income, $0.62 of every dollar was represented by mortgage costs during 3rd quarter 2006, which exceeds the peak ratio of $0.49 set in 2nd quarter 1989.”
“Over the next four quarters, the mortgage cost-to-income ratio is expected to remain at high levels, reflecting the impact of overvalued prices and forecast higher interest rates. Some downward price pressure and slower sales per development will become more apparent over the next four quarters.”
“The current condition of overstated prices will need to further correct. There remains strong demand for all types of housing in Orange County, but new housing product must be offered at market supported prices.”
“California’s real estate commissioner cautioned agents recently against trying to influence property appraisals to help clients get loans.”
“‘Many licensed real estate appraisers are concerned that, on occasion, attempts are made to pressure them into performing appraisals for a minimum value specified by a broker in a transaction,’ state Commissioner Jeff Davi wrote.”
“Anaheim appraiser Karen Davidson, president of the Southern California chapter of the industry trade group, the Appraisal Institute, said that while pressuring appraisers is a longstanding problem, it may be on the increase lately because of declining sales and property values.”
“‘The values that the appraisers are coming up with are lower than they were,’ Davidson said. ‘That might kill some deals.’”
The Press Democrat. “Housing costs are eating bigger holes into the budgets of families in Sonoma County, where more than 4 in 10 households spend more than a third of their income on housing, according to a Census Bureau study.”
“After two decades as renters, Rosa and Juan Meza bought their first home in Cloverdale last month. To make the purchase, they took out an interest-only loan and financed the entire $455,000 price. The couple spend half their monthly income for their $2,300 mortgage payment, which is more than double the rent they paid for a house.”
“‘It does feel a little tighter. But you have to budget to make it work,’ Rosa Meza said. ‘I know a lot of people who buy homes and they just work for their home. It’s a big sacrifice for a lot of people.’”
“The Mezas, with a son and daughter, don’t eat out at restaurants, buy fewer new clothes and mostly spend their money on gas and groceries. ‘We don’t really splurge on stuff. We budget so we have money set aside for the mortgage and savings,’ she said.”
“Those are small sacrifices to own the roof over their heads, an investment they expect to increase in value and boost the family’s wealth in the long run, Rosa Meza said. ‘We were kind of tired of just paying rent,’ she said.”
“Most home buyers Roger Farah makes loans to spend more than 30 percent of their income on mortgages and some top 50 percent, he said. ‘They’re financing more of their purchase. We’re starting to see more people coming forward with less down,’ said Farah. ‘They’re not only counting on the market to build equity, they’re looking at the benefits of living in a home.’”
“Fully two-thirds of home purchase and refinance loans in the county today are either interest-only loans or negative amortization mortgages with minimum payments that don’t even cover the interest due.”
“‘It does allow them to buy more house. They are proving to be popular,’ Farah said.”
Roger Farah says, “They’re not only counting on the market to build equity, they’re looking at the benefits of living in a home.”
But I ask, Have they looked at the downside of living in a home? The hobo life offers many benefits.
I’m a man of means by no means, king of the road!
They picked the wrong time to count on the market to build equity.
Remember when Sea Hunt, in Airplane, said ,’It’s the wrong time to stop sniffing glue.’ ? hehehehehehehe
I’m glad you picked up on the subtle reference. That was exactly what I had in mind.
GREEDINESS!!!! THAT HAS BEEN MARKET RESEARCH FOR ALL DEVELOPERS, INVESTORS, AND HOUSE POOR HOME BUYERS.
When I refused to buy a house which I could easily afford with my salary just because I had to put my name in the lucky draw, my other friends looked at me and thought I was a fool. 4 years passed by and they started to see why. There is no bottom for this craze the houses sold for 650 K in mif 2005 are offered at 499K in Folsom, and this is just the begining and specuvestors have not switched to cash burning plan B. Let see when they will reallize that plan B or for that matter Plan XXX will not work if they had bought the property in last 5 years.
Patience will be rewarded heavily! They are not making any more Buyers.
I will at least give them credit for BUDGETING..making sacrafices for the life they dream of and perhaps making it work. It is the yups with the entitlement mentality that I have no respect for.
Sure glad Jeff Davi (Cal RE Commish) is looking out for our best interests by curtailing the practice of “influence property appraisals to help clients get loans.”! ….or is this more of a CYA attempt?
he took the wrong exit….2 years too late
Yeah, can’t say I remember the commish complaining about hitting the numbers on the way up. Money talks and bullshit walks. And RE is flat out running.
I think there must be something in the water in Humboldt county (other than dope, of course). From my perspective, there is still a considerable number of people wanting in on the real estate action here, despite it being obviously softer in the past year.
The 6% decrease in price pales in comparsion with many other areas of California. My old neighborhood in Visalia has already fallen 25% in the past year! The tract homes that were selling for $365K in July 2005 are now down to $289K, and are not selling now. It appears that anything in Eureka, by contrast, that is even slightly below the newest comps sells almost immediately. The other selling fools are chasing the market down.
- “After two decades as renters, Rosa and Juan Meza bought their first home in Cloverdale last month. To make the purchase, they took out an interest-only loan and financed the entire $455,000 price. The couple spend half their monthly income for their $2,300 mortgage payment, which is more than double the rent they paid for a house.”
“‘It does feel a little tighter. But you have to budget to make it work,’ Rosa Meza said. ‘I know a lot of people who buy homes and they just work for their home. It’s a big sacrifice for a lot of people.’”
How sad, SOON - They will be in forclosure.
“After two decades as renters, Rosa and Juan Meza bought their first home in Cloverdale last month. To make the purchase, they took out an interest-only loan and financed the entire $455,000 price. The couple spend half their monthly income for their $2,300 mortgage payment, which is more than double the rent they paid for a house.”
Brilliant, I mean absolutely brilliant. Pay more than double your rent to lock into a depreciating asset you have no hope of ever paying for, for a little false sense of ownership? WTF?!! I mean stay in the rental and bank the difference and do something for your kids future you braindead pukes! I hope they find themselves weeping on their porch when the constable shows up to lock them out.
IF they were paying 1/2 their money on a FIXED RATE mortgage then MAYBE it would make a TINY BIT of sense, especially if they expect to be making more later (like the wife can return to work when the kid starts school, etc.)
However, it’s an I/O adjustable mortgage. They’re simply suckers. Now they’re paying 2x rent…except to the bank.
Don’t they realize that the correct thing would have been to make the sacrifices they’re making now AND STILL RENT and save the other half? You can get well over 5% now on 5 year CDs.
Duh!
Of course, this way they may end up qualifying for foodstamps and welfare….
Sad indeed. But people want instant gratification, who is going to wait 5 years ? Not many, they want their house and they want it now, suckers. I do have empathy for folks like these, but will not like it if the government has to bail them out. What happened to the logic?
Sad truth is, they bought into the mantra that if they don’t buy now, they would never be able to buy. They will pay for that with their future.
Agreed Bear, but what about the system that makes people do such stupid things. Heck, in 1999 the Chicago Tribune ran a story exhorting retirees to ditch their bonds for stocks - lest they countinue to lose out on billions. Five years later it the SOS, but with crappy homes and condos in terrible locations. Education people, if getting ahead were so easy I wouldn’t see any homeless people on the way to work. Welcome to the postmodern era folks, its everyone for themselves - and people had better wise up fast. There’s a lot more trouble down the road.
In my mind, these are the people who get taken and have no idea what hit them. I do have one question, if they rented for 20 years for half the current payment why did they not put any money down? If they can afford the double mortgage they should have money saved - I hope. Maybe they do have money saved and know that it is safer in another form of investment- doubtful though. To all renters - save your money as though you bought a home. If it costs 2400 to buy and only 1200 to rent then put 1200 in the bank *(if possible). This will be your downpayment once prices adjust back to reality. It also gives you a better idea of the ‘cost of ownership’ without having to reach further in the pocket to pay for repairs.
That’s exactly what I do in OC. Between my wife and me, our rent is 7% of our gross income (hard to believe in OC, I know, but true nonetheless). We save like bandits and are able to live a reasonable approximation of the good life. We’ve saved a fair amount of money, and let me tell you those CDs are “building equity” a lot faster than a condo or SFH!
Saving money? I’ve reported you to the Homeland Security Department. Now you quit that crap and get your ass out to Best Buy and spend that money and borrow some more or your patriotism, and indeed very soul before God, will be in question.
Do you all remember when after 9-11 when the President told us to go out and spend our money? I am a fiscal conservative and typically we vote Republican but that comment did not sit with me well. The crazy thing about it is People did go out and spend which prevented a downturn earlier but it is also was got us into the no savings rate mess we are currently in. Politicians are so short sighted but so are the consumers of America!!
TWICE Bush did instant tax cuts in the form of checks sent to every taxpayer! One was for $500, or so, and the other only went to people with dependent children.
What DOPES America is! He could have simply added a “subtract $500 from your taxes owed” line on the next years taxes. Instead we all had to pay $$$ to mail the checks out, process the check, and a letter from the IRS explaining what the checks were for.
Bush did this, of course, to get people to go out and SPEND! Stores like Wal*Mart cooperated, offering to cash these checks.
It was simply a SCAM to BUY VOTES from STUPID PEOPLE.
It’s just like people who are HAPPY when they get a tax return! That means you’re paying TOO MUCH! You should try to work it so you end up oweing just under the maximum amount you can without a penalty. THEN you’ve done the best you can. If you get a check back, it means you gave Uncle Sam a free loan. How STUPID is that?
oh, and Shakes, I too am a Republican in theory, though I don’t always vote the party line.
Yea, Theory and todays reality don’t seem to match, Kind of like rent prices and cost to own have disconnected. I changed to an independant a while back since I can’t stand either party any more - no offence meant for the die hard Rep’s or Dem’s!!
Republican, Democrat, what’s the difference? They’re both evil. I made the hideous mistake of voting for Bush in 2000, then voted for Kerry in 2004. I am ashamed of our government. They are largely a bunch of fat, lazy, overpaid white bigots who are out of touch with what the American people want and need. Their own interests, and those of the big business, dominate policy both at home and abroad. They don’t care about the personal well being of anyone. One only has to look so far as this most recent scandal involving Foley the hypocritical child molestor. There were signs long ago that he was a problem, but rather than protect the children of our country, they kept a lid on it so as not to weaken the party. Sickening, just sickening.
“They are largely a bunch of fat, lazy, overpaid white bigots who are out of touch with what the American people want and need.”
For the record, I think the GOP are in touch with the youth of America. Ahem.
To be perfectly fair, both Democrats and Republicans both sleep with pages! But Democrat Gerry Studds, after getting caught, was re-elected several times!
There is one difference between PUKES and DEMS. I don’t have to watch my wallet of my kids around DEMS.
If going out and spending money was all that America did after 9/11, the world would be a safer place today… (in my opinion)
if they rented for 20 years for half the current payment why did they not put any money down?
Because hubby spent it on Rims for his SUV?
They could have had “pride of ownership”…of a 325K back account. EASILY! With very conservative investment saving 1200/month for 20 years…probably more like 385-400K if all they had invested in were investment grade corporate bond funds, and I-Bonds back when they were paying 7%.
455k for there first home purchase???? I have got to be living on the wrong planet.
doesn’t anyone go from step to step to upgrade there lifestyle in stages anymore?
It really depends where you live. A starter home in L.A. is easily 455k. In some areas this price is a starter condo. It stinks, I know.
The $455k starter home captured my attention, but the no down interest only loan on less than $50k per year salary is what triggered the side splitting laughter…
It is also timing. If you are an educated professional in your early 30’s, ala me and my friends, you spent your twenties in college and law/medical school, took out huge loans to do so, then upon graduating realized your entry level wages didn’t come close to being able to buy a “decent” home in a “decent” area with “decent” schools. So, like me, you rent in one of those decent areas, commute 1.5 hrs each way to get to LA (where the work is) and watch in horror as a cookie cutter small-lot home rises further out of reach. A starter home in Chino Hills or Rancho Cucamonga is 600k (no pool). This is SAN BERNARDINO county. What’s funny is, the areas that are closer to LA, where crime, schools and congestion is much worse, actually costs more for an even smaller home.
Right there with you, IEF, on the opposite coast. There should be some word for being generationally disadvantaged. Attend college and graduate school during years of massive tuition inflation and student aid cuts, graduate with student loan debt just in time to watch housing become unaffordable even for the high-income first-time buyer, become successfull just in time to watch my lifetime tax burden balloon enormously to pay for a war I don’t believe in and tax cuts to folks who don’t need them.
Sigh…
Wow, Here is good old Appalachian I am living the same dream (er nightmare).
Exactly, this is what I am doing. But everyone thinks I am crazy.
Well said. And if you want kids and are in a two-income couple, live on one income and bank the other — this way, you’ll be prepared if/when you NEED to live on only one income. (And also pick up The Two-Income Trap, very enlightening book.)
Incredibly bad timing.
“It does feel a little tighter. But you have to budget to make it work,’ Rosa Meza said.”
Just wait ’till they switch from KY jelly to valve grinding compound!
Anthony –
An old Humboldt County kid myself ……last graduating class from ‘College Elementary School’ (CES), in 1969-70. It’s now Gist Hall on Humboldt States Campus. We were the guinea pigs for the teaching students at HSU ….. then survived Arcata High and HSU …..
Humboldt survives amazingly well by the combination of very few incoming equity refugees offsetting the very few that ever leave ….. newcomers seeking the quiet and cool climate lifestyle, and those leaving - looking for a living. The climate is available all along the west coast, but Eureka/Arcata supply the right balance for some - of community size, college town, and although dreary, ocean-side activity. Difficult access though from the rest of the world…..
When the lumber industry died in the 60’s – 70’s, the money never left, but nothing to spend it on. I agree with you that it is amazing the area does not become ‘Visalia by the Sea’. No population growth in 40 YEARS, which is a pretty clear indication, “everyone doesn’t want to live here”. Their prices will plummet along with the rest of this market, in due time. 10X income doesn’t work there either.
Probably best to turn the keys to the County over to Robin Arkley and see if he can add the needed charm to the rest of the northern California coast….. he did a pretty good job with old town Eureka.
Here is one that left. Humboldt is a dreary place both physically and mentally. I can’t believe the bubble in house prices there. Most of the housing stock in Humboldt is old, drafty and in need of a paint job.
Really prefer Bend, OR where we are under going our own bubble-pop. Lots of FB up here.
heh. Funny you mention Robin Arkley. I work as a programmer for the servicing company he owns (specializes in non-performing loans), and know for a fact that he is planning on making a LOT of money from this crash. This spring we rolled out the new foreclosure management software we created to to help streamline that process…
I am in Humboldt county and I won’t touch these ridiculous prices with a 10 foot pole! You should see the looks that realtors, builders, loan officers, and sellers give me! As if I am taking food out of their babies mouths! By the way, we can actually afford a house here with a real loan and won’t touch the market because it is seriously only a matter of time! A year ago there was only about 250 houses for sale in Humboldt county and we are now hovering around 800. Not as many people are buying as the realty business would like us to think!
Humboldt County IS plummeting. In August 05 the median price was $315K, compared to $290K this August, and it’s off 17% from it’s peak of $350K in March this year. Also, sales fell 28% from 148 to 106 units from August 05 to August 06.
http://www.humboldt.edu/%7Eindexhum/realestate/median.GIF
“Those are small sacrifices to own the roof over their heads, an investment they expect to increase in value and boost the family’s wealth in the long run, Rosa Meza said. ‘We were kind of tired of just paying rent,’ she said.”
Or rent, have a nicer house over your head, no maintence, and save tons of money and buy nice things. I would rather live comfortably than havin g an albatross around my neck for the rest of my life.
Seriously. And WTF is the point of living in Sonoma if you’re not going to do things like go out to dinner or splurge on other stuff? Why not just move to f**cking Kansas?
Why the negative attitude on Kansas? Enough of the west coast dribble - were so great her on the west coast. Tell me again what the median income vs. medium home price is??
Actually, living in Kansas is preferable to living in California anyday. No pollution, actually “real” people, cheap housing, and public/post-secondary schools (KU) that are among the best in the nation. California doesn’t have any of that going for it–just tons of illegal aliens, dumb schoolchildren, even dumber, more greedy parents, an obsession with pickup trucks & SUVs, high gas prices, etc.
I used to live in Kansas (now in CA, unfortunately) and can say quality of life was much better in Kansas. Sure, no ocean and no mountains, but with the stash of cash one has by owning in the midwest, one can easily afford such things and much much more. After all, places like Fresno could be roughly compared to Topeka or Wichita, but are less than half the price, have a much more educated population, surprisingly high paying jobs, and low housing costs.
i’ll take kansas over fresno - or excremento, ie, palmcaster and the like ANYDAY
You tellin’ me thar ain’t no pickup truks in Kansas?
I grew up in Lawrence, Kansas -Rock Chalk Jayhawk go KU!!! and it was a great place to grow up!!! It does lack mountains and oceans that I am now partial to now that I live in North San Diego. Everyone has their own idea of what a home needs to be. I still long to have a couple of acres of land due to my upbringing but I want them in SoCal due to my appreciation of the weather etc. that is why I am looking at Bonsall and Fallbrook as areas I can get away and actually have a piece of land if prices come down. To bad mouth Kansas, without having spent time there is unfortunate for those who choose to do so. It has many great things about it. Yes Kansas has pick up trucks and so do a lot of my neighbors-to each his own!!
The best part about Kansas is you don’t have to waste time at school learning about evolution or the big bang theory. In fact, most of theoretical physics including quantum dynamics is off limits. I’m sorry, but living in Ohio I know what the midwest is like - it like living in the 13th century, intellectually speaking.
Ah, that ignorance is spreading everywhere.
I was reading an article a couple of days ago, now math is being attacked because it includes the study of the infinite. Excludes more advanced parts of algebra, calculus, probability, anything to do with set theory.
They are considered as beyond study, only the church and the bible can consider or deal with the infinity.
Seriously, I’m not joking.
OMG! as my daughter would say. Surely you joking about the math.
I would take Sonoma over Ohio. Ohio really is pretty boring and you risking your life every time you go out to eat (not that every restaurant in Sonoma is great).
Growing Zinfandel in Kansas is a bitch. You’d have better luck in Ohio.
Oliver
That stuff is what makes me sick. Religions being against Human progress. They would deny a cure for cancer because it interferes with “God’s Plan.” Those people should be sent to Iran.
Anthony & Shakes –
This is getting a little scary ….. all this Kansas talk. Both parents were graduates of KU, and my grandfather, Karl Klooz was the Bursar at KU in the 40’s-50’s. Apparently Fog Allen was a weekly dinner guest, according to family legend (I know my mother wasn’t doing the cooking, or he wouldn’t have come back).
Big Jayhawk family ….. 6 more months till March …..
Sorry … Fogg
OT here, but okay folks, let’s leave the religion-bashing alone. The last time I checked, a lot of hospitals I drive by had a lot of “Methodist,” “Presbyterian,” or “St. Whatever” on it. Don’t recall the last time I saw the Atheists Community Hospital. Goes a long way to say that action supported by belief goes a long way. Okay, I’m off my soapbox.
Religion and politics makes the world what it is. I’d include sex but even that seems a bit political the last few days.
I live in Alabama. And I bet maybe a fourth of the folks here think the sun rotates around the earth. It isn’t bashing religion to expect (even insist) that ignorance and superstition be excluded from the classroom.
Include it and … well, you takes your lumps.
Tom,
Ever see a state or university hospital?
Anthony,
“…public/post-secondary schools (KU) that are among the best in the nation. California doesn’t have any of that going for it.”
Ever heard of Berkeley or UCLA? In fact, UCSD, UCSB, UCI, UCSC and UCD are all ranked higher than KU. Stanford and USC also (although they are private.) KU is tied with UCR. I think the only UC they are ranked higher than is Merced.
http://www.usnews.com/usnews/edu/college/rankings/brief/t1natudoc_brief.php
Hey Bruin,
You list all of these schools in CA - I’m sure they paid to get in the listings. Just like USC and/or thier boosters pay thier football players. Just like PAC-10 officials get a hand out to change the outcome of games.
Since thay have soo many overly educated persons in CA. You would think that if they combied all of thier two brain cells that they could determine basic supply and demand!
DUH! — I’ll pay 1,000,000.00 for a crackerbox house.
Please answer 1 question, How much debt does CA have??
NORTH MEXICO = CALIFORNIA
ok_land_lord,
Baseless assertions (which are laughable) + racist capitalized equation =/= an argument.
Hope that helps.
I lived in Lawrence (20-30 miles from KC), and having lived all over the country, I can say that the KC-Lawrence area is by far the best place I have ever lived. Cheap, lots of stuff to do, nice friendly people, weather isn’t too bad, and cultured. I would take it over DC or CA any day.
My son’s take on Kansas-everyone is fat and everyone smokes. Haven’t been there myself, but with that ringing endorsement, don’t think I’m missing much.
Nothing wrong with Kanasas, except: Terrible weather (hot and muggy summer, cold cold winter), no jobs, FLAT as a pancake, low levels of education among the populace (though there is Lawrence), BIBLE-BELT. Thats a good start.
However, my best friend just moved to a small town (Girard KS) from San Diego, chiefly because he and his wife could afford the 45k they spent on a house. He was lucky, he found a job that pays 35k, only a 40 minute commute from home. Its a small town life and they are fine with that.
Josh
tired of just paying rent? They couldn’t even save a downpayment while renting at half the mortgage. How are they going to manage any fluctuation in income or expenses?
Twenty years of renting and they couldn’t save anything for a down? So now it’s different?
This is terminally stupid. They’re tired of paying rent to a landlord so now they are paying twice as much “rent” to a bank for an interest only 100% loan in a falling market. So sad.
Even sadder, the two of them (two heads are better than one) discussed this, hopefully had a “what if,” “devil’s advocate,” scenario, and could intelligently figure out the consequences of their decision. But I guess they did not have the synergy to see that they would have easily been better off renting.
Why? There are better things in life than eating out and consuming - home ownership is one of them.
Yep. A mortgage calculator I’m looking at courtesy of Arizona’s “Best NewHomeslifestylesTM” magazine states that with an income of 74k (such as the Meza’s) they would qualify for a loan of 234,151k at a fixed 6.5%.
So, what I am thinking is that they waaay overshot themselves in getting approved for a 455k loan.
What are these people doing living in a home/neighborhood that is priced for residents in the 150k salary per year category???
So harsh and mean.
So is the family better off eating out and renting?
I was raised on home cooked meals and wore used clothes form church sales. My parents scraped to own a home in the 60-70’s so I can’t fault these folks for taking advantage of historically low interest rates and getting ahead in life instead of consuming.
Aztrias,
I’m pretty sure you know this, but the point is they’re not buying a house. They’ll likely “own” it for, what, 2 years max before foreclosure takes it away. How exactly is that ‘getting ahead?”
Full disclosure: I don’t work in real estate. Can you say the same?
Did your folks use interest only? If so, they don’t have a house today.
And why these people use IO when rate is low (will go high)?
Another point is that life should not be about paying the bank so you can say you own a home. There needs to be something more.
By making this decision, they have destroyed their lives for the next 12 years, and they share much of the blame for not educating themselves about the possible ramifications of the most important investment decision they will make.
‘No More Hiding Days on Market by Relisting’
‘RE Infolink, the company that operates the multiple listing service for the five California counties that make up the Silicon Valley, has changed a policy to make relisting a home more difficult.’
‘Previously, all it took was paying a $25 fee to earn a new MLS number and hide the “days on market” figure. Now all homes on the MLS will display the correct days on market number unless they have been taken off the market for more than 30 days.’
‘The change was prompted by a recommendation this summer by the CALIFORNIA ASSOCIATION OF REALTORS®. Relisting can mislead consumers, and it also corrupts the integrity of data on the multiple listing service, says June Barlow, general counsel for the CAR.’
‘We’re real persnickety about keeping the data clean,’ Barlow says.’
Source: San Jose Mercury News, (09/29/2006)
Keeping the data clean now? These people are loopier than born again virgins.
ROTFL.
This sneaky relisting thing is exactly what happened with the house behind me. It was off the market for, oh, two and a half weeks, given a slapdash paint job, staged, then re-listed as if it hadn’t been on the market for three months already. And it still took five more months to sell.
Relisting is rampant in Seattle as I track listings by address and MLS.
I see the latter change but not the former.
Every trick in the book is being used to try and sell these tired decaying SEVERLY overpriced houses up here.
This whole thing is sort of like being offered a loaf of moldy bread at twice the price of a “regular” loaf……
I agree. I think that poor flipper Seattle Eric is done. He most certainly missed his window of opportunity and it looks as if, even if he gets his wishing prices on his flips (no chance in hell), he will still lose money. I just read his blog and the desperation is showing through. He is now referencing a Forbes article which predicts Seattle real estate will increase by 59% in the next 10 years. Reading between the lines, it becomes apparent he is blowing through all personal cash reserves. He has a tear down bleeding him of $2100 per month. Factor into that the notes on the two flips and I am sure he is burning close to $6k per month if not more. He is now trying to unload a piece of land in Mexico to generate some cash. Tick tock tick tock…
There is a new term in real estate, it is called “carrying costs”. This means the cost to carry a property until it is sold. Time is not your friend when RE does not shoot to the moon while you search for a buyer. See Eric - he is being bled to death with carrying costs……. Oh did I say NEWTerm, I meant to say a BASIC term that every RE investor should know prior to entering a deal but I did not want to insult your genius Mr/Mrs UPSIDE DOWN FLIPPER!!!! HA HA Tick tock, tick tock, the tell tale heart is trying to tell you you shouldn’t have leveraged your ass into bankruptcy!!!!!!
Malta - ‘I consider this to be the year of the realtor because in prior years, you could make no mistakes.’
Year of the FSBO - so you don’t start 6% in the hole.
Year of the flipper - you might lose money?
Year of the ARM/HELO - it might reset?
Year of the soldier - you might get shot?
Dees gyes.
2007 is shaping up to be the year of the bagholder.
Quote ““Those are small sacrifices to own the roof over their heads, an investment they expect to increase in value and boost the family’s wealth in the long run, Rosa Meza said. ‘We were kind of tired of just paying rent,’ she said.”
UFB. She doesn’t realize that with an interest only loan, she is still renting albeit from the bank. The bank rent is x2 what she paid before. I wonder at what stage the light will go on. “Hey whacha mean I’ve been paying all this money and I still don’t have any equity”.
Hm. I wonder If I can sell her some tulips.
Hey, as long as they can pull those payments for 30 years, they might have some equity in the end. God help them if they can’t last 5-10 years.
Noooo God help the stupid investor that bought those Mortgage Backed Securities when she defaults on the house and it’s worth half what the mortgage was.
Might be you… the holdings of those MBS are pretty spread around. Some cash flush firms in completely unrelated sectors might be holding some.
“Now all homes on the MLS will display the correct days on the market unless they have been taken off the market for more than 30 days .”
Oh come on ,30 days isn’t enough . That should be 90 days or more .
These people are so insulting .
In this market, 30 days not selling amounts to several percentage points they will be losing. Chasing the market down? That’s my guess.
The Orange County Register. “Here’s what the researchers at Real Estate Economics in Irvine are telling their builder clients about The O.C.: The current ratio between median new home prices and household incomes is $9.90, much higher than the previous peak ratio of $5.40 set in 2nd quarter 1989.”
The ratios should be dimensionless, wtf is the ‘$’ doing in there?
I assume they meant that the current ratio of house price to yearly income is approximate 10:1 ?
Right, $80K Annual Household income, $800K house. The problem is that it is obvious to any one with hald a brain a person earning $80K cannot afford close to a million dollar house. I honestly believe folks are buying these really do not understand these numbers. I had a realtor last year giving me the whole third degree “if you don’t buy now you’ll never get in” I started telling her about a La Jolla home on 5 acres of coast property with 19 bedrooms and bathrooms which was listed at $30 million. She was like how can you afford that? I responded I could no more afford a $700K house than I could that one so I had decided to think BIG and she shut up.
What’s even stranger is I’ve met people who believe that if they’re carrying a 650K i/o mortgage, and they fantasize that their house is worth 800K, they believe that their “net worth” is 800K!
They think to themselves “Isn’t America Great! I’m practically a Millionaire” and go out and spend like they are.
What part of NET do they not understand? Guess they failed math in high school and did not attend college.
That’s awesome, I love that response. Think Big!
To the uneducated it appears to be some small numbers so it must be telling them home prices are only $4.50 overpriced. Heck even the poorest FB can come up with that amount of money.
Damn that Lansner! He’s obviously not a real OC resident. A real OCer wouldn’t allow Hollywood to dictate the nickname of the area, especially when it’s the title of a stupid TV show. THE OC? THE Orange County? But did he listen when I emailed him about it? No.
Silly? Maybe. But a man has to stand for something…
I agree 1000%.
No native calls it the same name as that stupid show.
this will be the last “year fo the realtor”
in EU commisions run 1-3% and most deals have no realwhore
-got net ?
How do they do it?
Interesting article from Guardian
America is living beyond its means
China and India will be calling the shots when the US is no longer top dollar
Larry Elliott, economics editor
Monday October 2, 2006
The Guardian
It’s 2056. After a coup in Saudi Arabia, the new government announces it is cutting off supplies of its dwindling stock of oil to the United States. The White House responds by sending in the troops, but is forced to withdraw after Beijing says it will only continue shoring up the dollar if the military action is called off.
Marking the 100th anniversary of Suez, the Americans have no choice but to comply. Fanciful? Ludicrous? Certainly, that would have been the reaction of the traders on Wall Street who last week sent the Dow Jones industrial average to within a whisker of its all-time high. But even if the US can avoid a hard landing in the short term, as equity dealers believe it can, the medium and long-term risks to the economy remain.
Sounds like the wet dream of every Guardianista. I actually hope they get what they wish for, I’d love to see them bow down to the Chinese.
They’ll be bowing in dhimmitude long before that.
In the book “The World is Flat” which I highly recommend. It states that the Chinese were once afraid of the bear (US), then wanted to dance with the bear and NOW they want to become the bear!!! Our trade deficit is allowing this to happen so it may not be completely out of the question!!!
Yes and I remember in 1989 when Japan was “taking over the world”.
Its hard to imagine, with their vast populations, China and India not growing far more rapidly than the US in the future….after all, they’ve only been totally stagnant for most of the last 40 years.
But both still have significant political problems which, at about any time, can derail their progress. Bet on them, sure but don’t imagine that somehow they’ve found the economic “holy grail” that somehow eludes the US.
The US will muddle through this and adapt. Why? Unlike China and India we have a history of pretty rapid adaptation and an economic and political system that’s flexible enough to bend but not break.
2056? Odds are I’ll be dead by then.
No one remembers Japan I presume? Economy built heavily upon export, especially to ourselves. World economy slows, international trade lessens. Just like Japan, China is built on efficiencies in industries which engage in international trade but is apparently weak on domesetic consumption and the industries that support it most likely. China is accumulating this vast reserve that most likely will do it no good in the long run. The dollar will take a hit and the US will go into recession but due to the nature of the US economy (more dependent on on internal consumption than trade), after a few years of destabilization, production will increease domesetically and restabilize the economy. At least that’s my $0.02.
China has a demographic disaster looming. Years and years of the ‘one child’ policy have resulted in country full of geriatics that in just a decade or so will not have enough young working people to support them. Our “crisis” with Social Security pales compared to what is in store for the Chinese. And the fact is that the vast majority of Chinese are still dirt poor and do not have the resources to weather such a crisis. I put it at about even money that China is still an intact country in 20 years.
India has the potential to be a much wealthier, more power country than China. And the USA isn’t necessarily in as bad a shape as we sometimes think. I think we’ll be ok.
Way to pull that right out of your ass. China’s “one child” policy is only in effect in urban areas, not throughout the country. Furthermore, China doesn’t have the healthcare infrastructure to support extreme longevity like Western Europe, the US, and Japan do. They also don’t have an entitlement wealth-distribution system like Social Security to drag them down. China and India are going to be hit by an aging population, true, but far less than the areas mentioned above.
“Fully two-thirds of home purchase and refinance loans in the county today are either interest-only loans or negative amortization mortgages with minimum payments that don’t even cover the interest due.”
TWO THIRDS of mortgages are not conventional loans for that county. Oh man… Talk about racing to the edge of the cliff and past.
That picture of Willie E. Coyote standing over the canyon as the road runner wistles…
Neil
Here is an interesting article that brings up the great depression.
http://news.yahoo.com/s/ap/20061003/ap_on_bi_ge/troubled_housing
Interesting, but I disagree with Of the areas with falling prices, 73 were forecast to hit their low point by the end of this year with the rest seeing a trough for prices in 2007 or later.
I’d love to know how ~20% of the housing markets could become fairly priced in a few months. Sorry, but this downturn will take over 9 months just to get its legs. “Flippers” won’t be exorcized in 3 months… that’s just wishfull thinking.
There is something like two to three years of surplus inventory out there. Plus, builders are still building fast enough to add another year onto the inventory before they slow down to the absorption rate.
This is all just the warm up act until 2Q2007.
Neil
Agreed.
2Q07 should be an interesting time period.
By mid 2007 all bets will be off and by the end, I doubt there will be much talk of an imminent comeback.
Concur, 2007-2008 as the main body of the correction for most areas and in a few markets out to 2009 and 2010.
That is my thoughts (plug for my blog of zero readers):
http://recomments.blogspot.com/
It gives my timeframes. I do agree some markets (like Miami condos) will stretch out for a while…
Neil
Neil, I read your blog and it does a good job explaining the emotional process behind the boom-definately worth a read. AKA a plug for it!!
Thanks Shakes!
I had to look more into this, because as this is the 2nd “mania” to pass me buy, I had to understand it better. Note: I do not take credit for the emotions nor the sequence, that’s old investor advice.
Above my desk at work I have the 15 emotional states of investing posted to remind myself that markets are *not* perfectly rational.
Neil
Have you already forgotten the downturn began over a year ago? By October 2005, sales were way down and inventory had been going up for some time. Mid-2007 for the bottom seems quite reasonable to me.
Bill,
I lived in LA during the last downturn, and in our area, the prices were declining from 1989 through 1994/1995. Prices for our old house did not reach 1989 levels until 2000/2001 — over 11 years.
During that “bubble”, people actually had to *qualify* for those loans and most put 10-20% down. This bubble is much, much worse.
I found the dancing mortgage loan ad to be more than a little ironic.
Zandi is predicting several percent declines for the nation with many markets hitting bottom at the end of 2006. This seems widely optimistic. I don’t see how the inventory can begin to clear until prices go down more than 20% in the hot markets. Reducing the inventory does not work when a family sells one house and buys another. It takes “first time buyers” or speculators. Speculators, including second home buyers are going to be net sellers for several years.
“‘It does allow them to buy more house. They are proving to be popular,’ Farah said.”
That should read: “It does allow them to buy more house then they can afford, they are proving to be very dangerous.”
I’d prefer, “It does allow them to pay far more money for the same sh@tty house.”
Seems people are just getting supersized *mortgages* not houses.
Honest appraiser-posted this for you late in another thread …..
HonestAppraiser, I feel for you. I am a loan officer for the last 10 years and no i dont do toxic loans. Thruout the years i have had to listen to customers complain about getting “jobbed” by the appraiser, even when i point out the nearly identical comps on the appraisal. They dont understtand that by and large the appraiser will do everything he can to help support a value necessary to do a loan so, if your house came in 30% less than you expected, it is you the customer that was jobbing us …wasting our time. In all of my years of doing this i have noticed one glaring fact that makes 0 sense. 90% of the appraisals i get come in lower (even if just a little) than what the customer wished for. Since customers are not professional appraisers shouldnt their uneducated guess be wrong equally on both sides. In other words shouldnt half guess too low and half too high? What is really obnoxious is when they tell me they bought the house 6 months ago for 130k but now its worth165k. Why, is your name on title worth 30% more than the old homeowner?
When the borrower purchased the property they “got a deal” Thats the standard line..
Many licensed real estate appraisers are concerned that, on occasion, attempts are made to pressure them into performing appraisals for a minimum value specified by a broker in a transaction,’ state Commissioner Jeff Davi wrote.” Anaheim appraiser Karen Davidson, president of the Southern California chapter of the industry trade group, the Appraisal Institute, said that while pressuring appraisers is a longstanding problem, it may be on the increase lately because of declining sales and property values.”
“‘The values that the appraisers are coming up with are lower than they were,’ Davidson said. ‘That might kill some deals.’” (I dont like how this is implied)
The appraiser interperts data and arrives @ an estimate of value…
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If they couldn’t save BEFORE while RENTING for much less (hence little or no downpayment) how in the F**K are they going to stretch to pay so much more to OWN?
theyv’e doubled their payments and still they are only paying about 5% of that loan back every year. There’s no way this couple got that loan for that rate, never mind pmi etc. They be out of that house within 18 months when the principal has crept up to 500k and full payment kicks in. its really sad to see that. The slimeballs that are pushing these innocents to disaster should go to jail.
They are slimeballs for pushing bad product on dumb people. But why should they go to jail? I thought it was common to read something before signing. If someone can’t ask how these loans work than thats too bad.
But I also do believe that people buying cars should glance through their car manual, but I guess even buying the other biggest ticket item in a lifetime is not really a big enough deal to read a couple of pages of text.
Each time I was making an offer on a condo these last couple months I read over each offer from front to back even if it was written on the same looking template. Too bad I no longer qualify for the state FHA loan since my overtime pay has taking me over the qualifying limit.
add in the 07 resets and stir
“Relative to household income, $0.62 of every dollar was represented by mortgage costs during 3rd quarter 2006, which exceeds the peak ratio of $0.49 set in 2nd quarter 1989.”
“Over the next four quarters, the mortgage cost-to-income ratio is expected to remain at high levels, reflecting the impact of overvalued prices and forecast higher interest rates
I travel to Eureka for some fishing (Smith River) and its a very beautiful remote area with the State Prison the largest employer. You never see new auto’s or trucks, looks like 1985, really. But Humbolt county has all this expensive new home developments close to Eureka and I just have never understood who the heck is buying this stuff. 500K to million plus for homes with Eurkea itself in the 300K to 500K range with average income @30K?
WTF
It is all that speculative money pouring in from Santa Rosa.
Yes, housing is just as expensive as it is here (northern Nevada).
AT least (as of right now) people have jobs in Nevada.
At least in Humboldt County you can hug a big old redwood and breathe fresh air - what a gorgeous place - I’d rather live in a trailer there than in a house anyplace in NV.
I like Humboldt county. I went to Fortuna High school. And it is gorgeous.
That said I live 20 min away from Lake Tahoe.
“Fully two-thirds of home purchase and refinance loans in the county today are either interest-only loans or negative amortization mortgages with minimum payments that don’t even cover the interest due.”
Hello! Does anyone else see a problem here?
Not just yet. The alligators will need to feed for a while before the foreclosure tsunami arrives.
“‘This is a normal market — you actually will need to do something!’ Malta joked, then seriously added, ‘I consider this to be the year of the realtor because in prior years, you could make no mistakes. This year, there will be some pricing errors.’”
Now………WTF does this mean? Is this person insane?
-
I think it means that sellers and realtors will have to sharpen their pencils to make the pigs sell - as opposed to dream pricing.
Sorry Gekko, you’re wrong….He’s insane.
I wish all the housing bust bogs would start talking about the real cause of the housing bubble and the upcoming recession. It’s called the Gramm-Leach-Bliley Actpassed by Congress in 1999.
Just a little bit of basic maths in regard to prices and mortgages. Let’s assume 3 years ago an average mortgage was $200,000. With a 100% increase in prices than let’s assume the average mortgage has doubled (now $400,000). OK, $400,000 at 7% interest that is $28,000pa. Now to be paying $28,000 interest on a $200,000 loan the interest rate would have to be 14%. I know this is very basic maths but I think it’s enough to make my point about how things have got out of whack. All this has happened in 3 years.
the figure of two thirdsof loans in sonoma county being exotic loans is,i believe only referring to puchase loans.in the shop where i work at least 85% of the refi’s are i/o or neg am products.as far as prices being out of line,i know a physician who went throgh a divorce this year who was unable to refi for enough to buy the wife out,they bought 15 tears ago,refi’d to a 4.75 15 year fixed about 3 years ago,and built a small office on the property.no,they weren’t heloc’d,yes they are sensible and responsible…just so much growth in prices that a physician with very little debt couldn’t afford half a house withut a suicide loan,which after i explained it,he did not want.(not a dumb guy)he now is renting an equivalent place,the wife who wanted to party!!! is in sf,and he has a stunning and wealhty eurasian gf.bless him
Sonoma and Napa are beginning to look like one big open house. was working with a guy from Napa who told me that Napa RE goes up 10% a year and that’s why he was doing a 70K remodel so he could retire a millionaire before 32. (he works in a tasting room)
George is now talking from both sides of his mouth! :
http://bakersfieldbubble.blogspot.com
Thats a nice tie, though. He would have made a great male model for the old J.C. Penny catalogs. Now to be a clothing model you have to have no teeth so that the Wal-Mart shoppers will identify with you.
That article in the OC Register was on the front page. It’s VERY deceptive. While looking at the front page, my wife glanced over and chimed: “what? renting in Orange County is more expensive than buying?”
Needless to say, the pictures in the article had the desired (deceptive) effect on her.
They show a map of Orange County, and for 10 or so different areas they show bar graphs of average percentage of gross income paid for housing by homeowners vs. renters. The percentage income paid by homeowners was, of course, less than that of renters. Numbers tended to be 27-30% for homeowners, and 30-33% for renters for different areas of OC. Gee, I wonder why?
Let’s break it down. First off, many homeowners already own their home and have no payments to make, so that skews the averages. Second, those in higher income groups will of course have a much higher probability of being homeowners (there are tons of low-income communities, particularly hispanic, where pretty much everyone is renting, making say $15-30k/year).
But the way the graphics were designed, they are supposed to make you think that renting is more expensive than buying. It’s the worst kind of deception, and is regularly commited by the likes of the OC Register, LA Times, the radio, TV, you name it.
Just like the recent “unexpected 4% rise in new home sales” the media jumped on. Numbers that are correct, but given in such a way that distorts reality badly.
Having to explain this stuff you wonder if people just think you’re a jerkwad who just doesn’t get it, like everyone else does. I am beginning to hate the MSM. I’ve seen this stuff before and it’s really sad.
It’s also possible that even if the reasons you state only skew the statistics marginally, that there is another huge factor: most of the homes counted were bought before the price runup in the last few years. Those folks all have a low cost basis and are paying less than renters.
The real point is that in the long run, owning pays off. That’s why on average, OC owners end up play less than OC renters. As you approach retirement, the stable home payment (or lack of) on a long term investment sure helps.
Seeking advice on the SF/SJ market, I had many longer term residents tell me they bought during the madness of the mid 80’s and stretched to get into a home. Eventually they grew into their homes and payments.
Get as much home as you can afford and of course get a fixed rate when they’re in the 7% range.
but, dont buy now when prices are ridiculous…..buy when they are 40% lower.
“Get as much home as you can afford and of course get a fixed rate when they’re in the 7% range.”
OK, I’ll bite. Care to give a guideline as to what that “as much as you can afford” should be?
That malarky about the long run ownership applies to stocks as much as homes. Good idea to buy JDS or Cisco or Pets.com stock back in early 2000? My point is it’s an overly broad statement that is quite often not true, and when used overly broadly, is simply more air in the bubble. Besides, I think you have your numbers wrong, even on average right now, OC homeowners are paying *more* quantity-wise, then the renters are. Just percentage-wise it’s a lower number. That’s because on average, renters make far less money. Hence lower number over much lower number is a higher portion.
You should *always* carefully consider what you are buying, why, for how much, and what are the consequences. When people stick to broad statements and rules of thumb to avoid the details without questioning them (like, uh, what are the earnings of this $200 stock, anyway), they often get burned.
Sorry, but your comments are laughable.
The real point is that in the long run, owning pays off
You mean paid off. Past tense. And it will pay off again when prices return to historical levels.
I lived in OC through the 90’s, and far more who overpaid in the late 80’s lost their homes to foreclosure. The lucky ones who had the resources to hold out 12 or more years finally came out OK, but in all cases buying in 93 94 would have allowed those buyers to buy at least 30% more home even though interest rates were very high at the time. I agree it is possible that in 15 years, prices may return to their current levels, but that is a long time to pay a $4000 to $5000 a month in mortgages and tax etc if you don’t have the income to cover it.
Looks like WCI Just warned lower Q3
WCI Communities’ (WCI ) third-quarter earnings will be “significantly below” what the company initially forecast, sending shares lower in the after-hours session.
WCI shares sunk 5.3%, or 90 cents, to $16.26 in recent extended trading.
WCI just warned..
Homebuilder WCI Communities Inc. (WCI.N: Quote, Profile, Research) warned on Tuesday that its third-quarter earnings would fall “significantly” short of estimates as it writes off some costs and orders for new homes fall some 80 percent.
WCI said the write-off of about $13 million of costs associated with land options which were terminated will trim about 18 cents a share from its quarterly profit.
The company, which said it still expects to report a profit, previously forecast earnings of 52 cents a share for the quarter. Wall Street analysts, on average, expected the company to earn 54 cents a share.
“With the current slowdown in demand, we believe we own sufficient land to support our operations through the foreseeable future. We have concluded that it is more prudent at this juncture to apply our cash flow from operations primarily toward debt reduction and stock repurchases.” Jerry Starkey, WCI’s chief executive, said in a statement.
WCI is down ~5.25% in after-hours currently. I’m kicking myself, cause I’ve been meaning to buy some puts on it, but was expecting the nonsensical homebuilder levitation to continue for a while longer.
It will be interesting to see how it trades at the open in the morning…
Jon
I have a hard time believing that with the continued bad news that the PPT can keep supporting this one…. especially if they run out of cash. It will have to break 15 soon. Also, if you look at the HGX (Housing index) it looks like support will be broken tomorrow and will make another leg down. That is unless the PPT can force a reversal.
Sorry if this is a double post: WCI JUST OUT
Homebuilder WCI Communities Inc. (WCI.N: Quote, Profile, Research) warned on Tuesday that its third-quarter earnings would fall “significantly” short of estimates as it writes off some costs and orders for new homes fall some 80 percent.
WCI said the write-off of about $13 million of costs associated with land options which were terminated will trim about 18 cents a share from its quarterly profit.
The company, which said it still expects to report a profit, previously forecast earnings of 52 cents a share for the quarter. Wall Street analysts, on average, expected the company to earn 54 cents a share.
“With the current slowdown in demand, we believe we own sufficient land to support our operations through the foreseeable future. We have concluded that it is more prudent at this juncture to apply our cash flow from operations primarily toward debt reduction and stock repurchases.” Jerry Starkey, WCI’s chief executive, said in a statement.
When most people buy a home…they are buying an option. They don’t really own the home. The bank owns the home. They buy an option to buy. But it isn’t presented that way. These people think they own the house. And that works out fine if the house appreciates in value. But if it depreciates in value and you cannot make payments or no longer want to make payments you can foreclose or walk away. I find it strange that so many people walk around believing they own their homes. They have simply taken another step into the enslavement of credit. It can get to the point where you can’t take vacations, go to restaurants, send your children to good schools, enroll the kids in music lessons, etc.
What is wrong with renting. The difference right now is…yes, you throw your money into a hole when renting. Today what many of these people have done is throw themselves in same hole along with their children. It is stupid and part of the brainwashing of America.
“We have concluded that it is more prudent at this juncture to apply our cash flow from operations primarily toward debt reduction and stock repurchases.” this is a quote from WCI’s chief executive
WCI is very short of cash, they are running cash flow negative, sales are down 80% and they are spending their remaining cash to BUY BACK STOCK!
you can’t make this stuff up…completely amazing
This will make GS smile………..or maybe the PPT will fix it tomorrow
Buying back stock when there’s high short interest gets you more bang for the buck.
They are using the company cash to support the stock so they can unload it themselves.
Who else is going to buy those millions of shares?
Housing downturn turns other areas of the economy sour…..This is part of the way it works out in this book I just finished called “The Second Great Depression - Starting in 2007, Ending 2020″
http://tinyurl.com/nrqbo
It is a very pessimistic view of our situation….but another book I am in the middle of: “Three Billion New Capitalists” seems to bring up very similar ideas, but has a slightly less drastic end. (still not a pretty end)
http://tinyurl.com/mcfjb
I guess the lesson to all of this is to become an active asset manager, and keep your eyes open for the edge. (so that we can keep ourselves from falling over it)
“After two decades as renters, Rosa and Juan Meza bought their first home in Cloverdale last month. To make the purchase, they took out an interest-only loan and financed the entire $455,000 price. The couple spend half their monthly income for their $2,300 mortgage payment, which is more than double the rent they paid for a house.”
Wow!! I mean Wow!! People can be so stupid. Never suprises me.
It has been a myth here in MASS for 3-5 years that renting is
A) Making your landlord rich/paying his mortgage for him
B) Throwing your $ down the drain.
C) Not building equity.
Don’t worry about it we will refi you in 3 years. (Which starts the clock again) They forget to say the value will need to 25%-35% higher to be able to refi.
Cloverdale is basically the last choice for a place in Sonoma County. It is the most furthest away town from job centers, etc. I wouldn’t mind it if I was retired though. As we have a downturn, it’s going to be harder for the outer reaches to keep their value. The houses are adjusted about $50K-$75K lower than the bigger city houses these days. They use to be worth only 60-70% of their bigger city house counterparts 5+ years ago, and I wouldn’t be surprised if that became the long term trend.
If I were to speculate, the Mezas were probably doing fine in a Santa Rosa apartment. They trapped themselves in a suicidal mortgage, and they are going to regret doing so over time. I only hear of minorities buying in this county over the last year.
I only hear of minorities buying in this county over the last year.
——————————
Same pattern here in San Diego, from what I’ve seen. Seriously, the “benevolent do-gooders” who want to get “minorities” into suicide mortgages at the top of a housing bubble should be tried and fried.
And why the hell wouldn’t illegals be buying now?
Even as the market tanks, they’ll be able to essentially walk, assume someone else’s identity, then do it all again in a year or two.
Kinda reminds me of all the mexicans I saw dumpster diving in the central valley…although in some cases they weren’t fishing for aluminum cans…I remember seeing a few in my old neighborhood with a plastic bag snatching out papers…
http://www.cnn.com/2006/US/10/03/Dobbs.Oct4/index.html
Dobbs: Are you a casualty of the class war?
NEW YORK (CNN) — The Dow Jones Industrial Average has hit an all-time high and Wall Street firms are posting some of their best earnings ever. For the first time in our nation’s history, the Forbes list of the 400 wealthiest Americans includes only billionaires. In fact, having only a billion dollars means you’re not on the list. As a group, the Forbes 400 has a collective net worth of $1.25 trillion.
So the rich are doing well. But how about the middle class?
More Americans than ever are living in poverty, living without health care, paying more for housing and for the costs of our public education. And real wages are falling.
Real median earnings of full-time working males fell nearly 2 percent last year, according to the Census Bureau, while the real wages of working women fell by 1.3 percent. Despite that, real median household income did manage to rise slightly last year, though that small gain was the first increase in household income since 1999.
So what has been keeping our middle class afloat in the face of rapidly rising costs? American families have been living on, as well as in, their homes. More than one-third of homeowners are spending more than 30 percent of their income on the cost of housing, a level that pushes the edge of affordability. Nationwide median home values from 2000-2005 jumped 32 percent, and homeowners have been pulling equity out of their houses in order to keep up with escalating tuition bills, health care costs and energy costs.
But not everyone is so lucky. The number of Americans without health coverage rose by 1.3 million last year, up to 46.6 million, according to the Census Bureau. What’s worse, more than one in 10 American children are now uninsured. Fewer employers than ever are providing health care to their employees and those who are still lucky enough to receive employer-provided coverage are paying a much larger share: The Kaiser family foundation says the cost of family health insurance, in fact, is up 87 percent since 2000.
The same holds true at the pharmacy. Prices for the most popular brand-name prescription drugs this year rose substantially higher than the annual inflation rate, as has been the case every year this decade. The AARP concluded prices for the top 193 drugs climbed 6.3 percent over the last 12 months ending in June 2006, while inflation went up 3.8 percent. Generic drugs, however, rose 0.4 percent over that period of time.
The costs of higher education are also hurting middle-class families like never before. In this increasingly credentialed society, the total cost of tuition, fees, room and board at four-year public colleges and universities has ballooned 44 percent over the past four years. And the proportion of family income it takes to pay for college is growing for families everywhere. The biggest jump, according to the National Center for Higher Education, is in Ohio, where college costs now take 42 percent of the average family budget, up from 28 percent in the early 1990s.
Our dependency on foreign oil is also hamstringing working men and women. Gasoline prices are back on the decline (for now), but many Americans this summer were shelling out double what they used to pay to drive their cars. And gas prices now, while lower than at their peak in August, are still about 60 percent higher than in January 2001.
Perhaps one of our nation’s leading business magazines would like to create something called a Forbes or Fortune 250 Million list, which would reveal the dire financial pressures that our public policies have produced for working men and women and their families. It’s time for all of us to focus on that deep chasm we have allowed to open between the wealthiest Americans and the middle class and those who aspire to it.
Otherwise, there will be 250 million casualties in what has become nothing less than class warfare.