Looking For ‘True Market Value’ In California
The Press Enterprise reports from California. “Plenty of consumers are still finding themselves in financial hot water. And bankruptcy lawyers across Southern California reported an uptick in filings this past summer, and most expect the numbers to eventually climb back to previously high levels.”
“In addition to higher minimum payments and out-of-control consumer spending, increasing foreclosures and mortgage defaults are expected to swell the number of bankruptcies. ‘Variable-rate mortgages are just starting to bring people in. Over the next 18 months, it will continue to climb,’ said (attorney) Stuart Price.”
“‘With the adjustable-rate mortgages adjusting in the next year, people’s mortgage payments are going to go from $2,000 to $3,000 - those are big numbers,’ said (attorney) Barry Borowitz.”
“Bankruptcy attorney Leon Bayer said he spoke to a man last week who borrowed on his home a year ago using a ‘negative amortization’ loan. ‘His house is worth $500,000, and the balance is about $525,000 because of the amortization,’ Bayer said. ‘He’s a pensioner, retired from city of L.A. He’s going to have to let the house go.’”
“Such exotic loans are part of the problem, compounded by homeowners who have sucked all the equity out of their homes.”
“‘People have been using the house as a piggybank,’ Bayer said. ‘When the real estate market stops accommodating them, there’s no value increasing, they can’t (refinance) again and there’s no more equity in the house, and now they have $50,000 in credit card debt.’”
The Union Tribune. “Twenty people went to an auction of new model homes yesterday looking for a bargain. They were joined by about 80 ‘looky-loos.’ In the end, the potential buyers wanted too much of a good thing, and the auctioneer’s hammer never fell.”
“Sixteen upscale homes in the Bressi Ranch development were advertised as up for auction at La Costa Resort and Spa. Buyers were willing to pay about $1 million for a home listed at $1.4 million or $1.5 million, and as little as $650,000 for houses priced near $1 million.”
“None was accepted on-site, though auctioneer Mark Weitz told some of the high bidders that he would take their offers to the homeowners. ‘The good news from the auction is that the investors did not lower the price and kept the value up for people who live there,’ said real estate agent Kelly McLaughlin.”
“Indeed, some of the looky-loos were local residents who wanted to see how much people would pay for homes in their neighborhood. They weren’t happy with the offers.”
“But Amanda Pion-Goureau, a Bressi Ranch resident, wasn’t buoyed by the auction results, saying a house ‘ultimately is only worth what someone is willing to pay for it.’ She thought the prices being offered by the bidders ‘reflect the true market value.’”
“‘They’re beautiful homes,’ Ed Andrews of Long Beach said as he sized up the model homes with his wife. But he said he wouldn’t pay more than two-thirds of the asking price.”
“And a few people were simply sightseers. ‘I just wanted to see what kind of a fool would buy these overpriced homes,’ Bruce Azimi of Oceanside said.”
“Weitz would not disclose the minimum bid for the houses. But the owners, a group of Los Angeles-area lawyers, apparently would need about 80 percent of the asking price in order to clear their own debt with the banks holding the mortgages.”
The Sacramento Bee:
‘The housing market is faltering. The economy is slowing. But Richard M. Kovacevich, chairman and chief executive of Wells Fargo & Co., remains cautiously optimistic. Kovacevich said he believes the economy, while slowing, can avoid a recession. The housing market, meanwhile, is likely to bottom out sometime next spring.’
‘Q: Just how bad is the housing market? A: It has slowed dramatically. I’ve been saying now since the end of last year that the residential market would slow. … But even I have been surprised at the speed of the reduction in activity, particularly in the last three or four months. However, assuming it doesn’t get a lot worse, this is actually good news.’
‘Q: Good news? Why? A: The markets were getting frothy, particularly along the coast, and Arizona and Nevada. The price increases were getting to an area of concern. One of the reasons I think we’ve seen this dramatic decrease, particularly in the frothy markets, is that 20 percent of the new home and condo demand was speculators. … They’re gone.’
‘That’s one of the reasons we had such a dramatic decline, (but) it’s one of the reasons I’m anticipating it’s not going to be a free-fall because we had to get the speculators out of the market.’
‘Q: Don’t you share some of the blame for loosening standards for mortgages and making exotic loans? Wasn’t the last year of the housing boom fueled by borrowers who had no business buying homes? Won’t that come back to haunt you? A: Certainly there’s going to be more foreclosures and borrowers who are going to be in trouble, (but) we never got into that part of the business. … That won’t be impacting us.’
‘The housing market, meanwhile, is likely to bottom out sometime next spring.’
In other words, the longest and most extreme period of real housing price inflation in US history will have the shortest and most benign resolution.
The speculators are gone as buyer but they are still sellers. It’s only after the speculators have sold and iventory has returned to normal that the market has a chance of recoverying. When economists, bankers and realators say that the flippers are gone, do they really mean that they have closed out their positions (i.e., sold)? My impression is that there is still a large group of flippers caught with property as the music stopped. Most of these seem to by hoping and praying that the market will recover. As anyone who trades stocks and/or comodities knows, hoping for a recovery when the market is in free fall is often a bad and very uncomfortable bet.
How come you seem to be so much smarter that the Chairman and CEO of Wells Fargo. What am I missing here?
Bubble Follower
I don’t think you don’t really anyone to answer your question, but I will bite with my own question to you.
Do you really expect anyone deeply involved in the food-chain of home-selling (such as, for example, the CEO of Wells Fargo) to admit that the market is in outright shambles and that history tells us it usually takes many years to hit bottom (and not 18 months)?
Wells Fargo makes money originating mortgages, earning interest from mortgages still held on their balance sheet, and in the event of default of said mortgages, from exercising their 1st lien and selling the assets. Do you really expect them to admit/agree with the worst case scenario?
This beast is feeding on itself, and when we are in a recession (or significant stagnation) 6-12 months from now because of it, the Wells Fargo schmuck and all others (David Lereah, Leslie Young, et al) will all be claiming they never saw the economic slow-down coming so they can’t be held to their previous rosy forecasts.
I’ll bet anyone on this board a $1.00 that this exact scenario comes to pass.
I think the sh@t is really going to hit the fan after the election.
For between 55cents and 60 cents you can buy January 17,2009 leaps for Wells Fargo at a 25 strike price. Say you paid the 60 cents and Wells Fargo drops to $18.40 - your return is 1,000%. Anyone feel like gambling?
Bubble follower - that actually sounds pretty good. I don’t usually BUY options (prefer to sell them, since most expire worthless) - but this one could be worth a small wager. Nickel dime compared to buying a goddam house!
Bill –
That is exactly what I think. The bankers and industry economists are spinning the absence of flippers on the demand side as good news, as they somehow claim that this means the market will recover by mid-next-year. But the flippers are still lurking, waiting for their chance to escape, and representing one of several sources of latent inventory which will drive the market down, along with new homes that are still under construction and used homes financed by ARMs which will reset at monthly payment levels the owners will not be able to manage. Until all the latent inventory is worked through, the correction will not be over.
Some bold predictions from the editor of Real Estate Decline.com. Predicts median home price in Phoenix, San Diego, and Miami to fall an additional 20-40% in 2007.
http://www.realestatedecline.com
…I hope he is correct!
I thought we were through the worst, big comeback next spring as buyers flood back in and start bidding up prices again.
The only thing that could even begin to stand a chance of saving the current housing market is if wages rose to the point these properties were affordable, and somehow I cannot see where my employer is going to start doling out 100% wage increases next year. I’ve been stuck at much the same income now for 6 years, and my cost of living is taking a much bigger chunk of what I have left. I just don’t see this happening at all, and I do see a solid 5 years of declines and pain ahead for the housing market if not much much longer as in Japan over the past 15 years…
“The only thing that could even begin to stand a chance of saving the current housing market is if wages rose to the point these properties were affordable…”
Exactly! I’m sick and tired of listening to “experts” who are depicted against a backdrop of computer monitors with streaming financial data trying to explain the “soft landing” scenerio. The middleclass is mired in debt for housing, transportation, healthcare, and education expenses that have outpaced the rate of inflation while real wages have gone flat. It’s “game over” for this generation.
Yeah, you are one of the first to mention education expenses on this blog. I am a former college faculty member and was totally disgusted with how professors think they should be immune from any economic distress that might affect the industrial sector. Worse, the bloated univ administrations just figure that tuitions are like house prices — the higher they are, the more the public thinks it’s getting a better product. Anyone remember when the President of Mount Holyoke decided about 20 years ago to LOWER tuition? And what happened? The applicant pool DECREASED (if it doesn’t cost as much as Smith and Vassar, it’s not as good). HAha
I hate to the see the realtor whores get a false bounce this spring and try to play this crap out for another year. I feel like this spring is like the front line and either it busts and the whole then goes to pot like it should or the real estate false economy gets another year at this crap. The general public needs to just get a clue that ARM toxic loans are killing them. I myself am posting on other blogs and trying to get the word out that if you cannot afford a home with a 30 year fixed fully amortizing loan, then you just cannot afford one. The realtors are all talking spring now like it is the second coming or something. To me this spring is like is like the battle of Bastogne, we need to put end to their bullshxx. I know I sound extreme, but these realtors will pull ever trick in the book and then invent some knew ones. We know how much they lie and they will screw anybody they can for a commission.
“The general public needs to just get a clue.”
THAT, is the painful reality that informed, intelligent folks on this blog are seeing more and more. The general TV watching, product consuming public don’t have a clue, and for some of them, even when it hits them in the head, they’ll just roll into denial mode and wonder, “how did this happen.” Pass the xanax, please. They greedily and readily jump toward perceived profit w/out reading the fine-print on their loan(s) and researching facts to their own peril. Chompsky talks about “Joe sixpack” poring over football stats and various team and player idiosyncracies, yet he takes at face value the BS and/or spin the media throws out at him regarding the political/economic environment.
DOC
It is not that complicated. It is impossible to underestimate the average attention span of the average American (if there is such a thing). I think that most people have already turned their attention away from housing to other problems (take your pick: Iraq, Congressional scandals, Madonna adopting a baby, etc).
Madonna adopted a baby?
The middleclass has to settle for Elmo while the movie stars go shopping for dolls (brown kids) in the third world.
>
In San Diego, at least, there is no chance in hell for a bounce. Trust me on this.
Real estate whores think this spring will be the ticket. To them it is like the second coming or something. I hope they do not get a false bounce and try to play out their false real estate economy for another year. Those SOB’s will sell their own mother for a commission.
I seem to recall we missed the spring bounce last year…
I think we’ll see a flood of trapped inventory entering the market in the spring. I look at all the new construction on its way in this area… (starts are *still* ahead of the abosorption rate!).
I stand by my prediction that 2Q 2007 is when it gets interesting.
Neil
I am so sick of this realtor double talk, this spring we will get the market back on track. They need something anything to be able to open the barn door with a bunch of lies. They pull out the old 15% a year, not making anymore land, or the old favorite buy now or you will be priced out. They all are so full of crap, I feel sorry for all the FB’s out there. These guys have ruined their lifes, but it is their own damn fault for drinking their snake oil.
It’s all in the ARM resets. It ain’t real for the average schmoe until he opens the envelope to his house payment and sees HIS new payment amount. Next year is when the major resets start to occur. I would think that fact, plus continued finish up building should bring out a Tsunami of of inventory.
DAVID,
I feel sorry for about half of the FB’s out there. The other half… too greedy. It doesn’t matter, they’re all getting sheared. We need this to correct quickly to keep our economy afloat. Sigh… I know the politico’s will screw it up, but I could hope someone would be smart about it? Couldn’t I?
Imploder:
Unfortunately, I have to agree. The sheeple won’t believe it. Then they’ll refinance… and… but… oh sh&%! Sadly, that refinance means 2007 is a drop, but not the time to buy.
My latest blog article is “No news.” We’re in a standoff and its obviously going to last a bit.
But I have no doubt that (IIRC) the 8% of ARMs reseting this quarter and the 9% in 1Q 2007 will set up nicely for the 11% of them resetting in 2Q 2007.
Now what kind of book will DL write for that event!
Neil
Thanks for those actual figures on ARM reset timetable
Seven Years of Plenty, Then Seven Years of Famine. So Say Genesis. The seven years of famine started in Pismo in November 2005.
These predictions of mild cooling followed by a recovery in demand by the homebuilders and banks remind me of the fall of (I believe) 2000 when Cisco and the rest of the telecoms were predicting the same as the bottom fell out. Will history rhyme just 6 years later?
Could an argument be made that of the “10 year run up” a substantial portion of it was a pendulum swinging back from the prior overreaching drop in prices following 1990’s drop? In other words part of the rise was a return to the mean? Therefore the mean (where prices should be) is not that much of a drop from 05 levels?
A price a little below 2005 levels is a price that the average income can’t buy. Now that interest rates are higher and toxic loans are going bye, bye, houses are going to go for what someone can pay for them, otherwise there are not gonna “go” at all (i.e. the market will set the price)
Where *should* prices be? Absent fundamental changes in the market, most would look at historical price to rent or price to income ratios. And those ratios really got out of whack in most areas in 2002. Since rents in most areas haven’t risen much since 2002, I’d say inflation-adjusted prices will return to 2002 prices.
Also, look at Schiller’s NY Times long run housing price index. Inflation-adjusted prices were largely unchanged over 100 years. Except, of course, for the huge increase the last decade or so.
‘That’s one of the reasons we had such a dramatic decline, (but) it’s one of the reasons I’m anticipating it’s not going to be a free-fall because we had to get the speculators out of the market.’
As demonstrated by the Bressi Ranch auction debacle, the speculators are not really gone, but have simply migrated from the demand side of the market to the supply side, and are currently trying to find the exit door which does not cost them their shirts on the way out. Along with the departure of speculators from the demand side went the support for astronomically high sales prices.
And the reason the Chairman of Wells does not see this simple point. Maybe not seeing simple is not required to be a bank chairman.
If you’re a CEO you don’t predict doom as that’s admitting you screwed up. You talk your book and hope things work out. If not, you get your golden handshake and walk off into the sunset while some other overpaid genius gets to sort out the mess.
Plus it tells Wall Street to sell your stock, which means your stock options are worth less and it means that the Board of Directors is looking for a good corporate headhunter to find them a new CEO
Maybe lying is required to be a banking CEO.
CEO’s lie, no way, not in this Country. Enron, Woldcom, Tyco, every CEO is full of it. I just hope the general public does not fall for this crap. I will never understand why someone would get a ARM interst only loan or a fixed rate interest only loan for that matter. It blows my mind.
I have a theory that as a person rises in any organization, corporate, public service, religious, etc., there is an inverse percentage of rationale thought that person is capable of. Perhaps I need to adjust my theory to include an decrease in the ability to tell the truth.
Take a look at the auction results for the 51
properties that were on the auction Saturday.
The bids were significantly lower than the Zestimates.
Oct 21 Naples Auction Results
O’boy…………
That says it all……….
thanx for the info on the Naples auction - I’ve been looking for this. As an aside a trip to Naples in January, 06 gave me my bubble “baptism”. Unbelieveable would not be strong enough.
Ah yeah, now these auction are something I can really relate to. In Australia, auctions are considered the real test of market value. Here, auction sale conditions are normally based on 10% deposit on the fall of the hammer, balance in 30 days.
When a downturn really gets going there are normally no bids on the day of the auctions, and the low balling then starts afterwards. Great sport if you are cashed up or have pre arranged finance.
“Cashed up,” I like that.
Economy is slowing?
There was a recession level of job listings in todays’ Boston Globe Help Wanted section.
It was acutely observable.
Meanwhile, the Real Estate For Sale section was as big as the balance of the paper.
With the Dem’s headed for a takeover of Congress, and all the manipulation of gaz prices and the stock market going for naught, the Perfect Storm is building.
Here are the MLS for 1 of the WF owned property in Loma Linda CA,
http://tinyurl.com/sjo9g
And here’s the property tax info. on it,WF is selling it less than the assessed value,don’t know how much they’re in the hole but the FB owned the prop for less than a year.
http://tinyurl.com/y73ynt
“In the end, the potential buyers wanted too much of a good thing, and the auctioneer’s hammer never fell.”
In the end, the greedy attorneys who tried to auction these homes at above-market prices were completely skunked — there were no GFs in Carlsbad willing to take the bait.
GS, did you see Rich Toscanos chart?
Rich is very talented with producing simple charts that convey a powerful message. His charts clearly show that months supply has grown from 5.5 to 9 from mid-summer 2006 to more recently, and price per square foot is off by 6% YOY. As Rich suggests, a forecasted 8% maximum decline seems wildly optimistic given that we are already off by 6% and we seem to have barely scratched the surface of toxic loan resets / foreclosures etc.
Hey, isn’t Rich T./Getstucco?
Nope.
The auction definitely speaks to the current value of the Bressi homes. Does the builder have any new homes left to sell? The builder prices, after incentives, will likely fall to the current value.
As to the lack of sales at the auction, if the sellers don’t truly need to sell, they can simply hold on and hope for future appreciation. I’d imagine most of the laywers have sufficient salary to feed the gators, although that will obviously curtail their spending in other arenas.
From what I understand, the builder is sold out. These homes were models that the builder leased back from the investors.
Although some attorneys might make decent money, these homes are *expensive* and I highly doubt rent would come anywhere near what the carrying costs are (though I’ve seen many try). I don’t expect this market to turn around anytime soon. The last cycle took 10-11 years to break even — and that was without a credit bubble.
This is going to get ugly.
From the LA area:
A friend of mine is a part owner of a big name RE brokerage office. She says it’s completely dead. She is a big time agent and hasn’t seen a paycheck in 6 months (she sells very high end stuff). The management is getting together next week to slash the agents by 20%. The lowest 20% in production are just cut, that’s it. The ugliness of what’s coming will start becoming apparent in LA in the next couple months.
The stories are beginning to sound like the dot com startup meltdown in SV around 2001. Come to think of it, there are a lot of similarities: Sticky prices, owners/founders who are used to last year’s prices. Soon the backruptcy stories will happen.
Awesome. What area do they work?
I’d rather not say, as the story was told to me in confidence and the agent cuts have not even been announced to the office. It is a very expensive area in LA county.
I understand. But thanks for the uplifting news. I was beginning to lose faith that LA will crash as spectacularly as I’ve been wishing.
It’s a sad thing that we all make postings about foreclosures and then say “thanks for the uplifting news!”……
imploder Laughs Out Loud!
Is there any area in LA County that isn’t “very expensive”? You didn’t narrow it down very much, from where I’m sitting.
same thing at my significant other’s lender in San Diego, no cost of living adjustments this year for those still on board and many jobs cut. They have 1.2 million they can’t fund this month, no investors will touch sub prime loans right now. These loans are for people to keep their homes, a last chance if you will, they won’t be getting out of default this time. Good to see more fuel for the fire coming online in San Diego, as if 30,000 homes wasn’t enough, and we haven’t even hit the major resets of 2008!
I’m glad these San Diegans keep listeing to that guy on the radio, George Chamberlin, he’s doing all the work for us. “Housing is fine, don’t worry folks”. Hoping people are still taking the bait, the more people the fall for his rosy reports the better for the bears who really do know what is going to hit in 2008.
Compton’s pretty reasonable. Only 1/2 mil for a crib and usually comes with home entertainment center. Well actually is just you barred front window, but it’s pretty much like watching “Cops” reruns.
Deb,
Thanks for the insider tips. I live in Valencia and has been monitoring the listings but the prices doe not seem to budge. A $10,000 reduction here and there. Obviously, that’s why activity is on a standstill as you reported.
I posted this a couple days ago, but it is a good example of what will be coming.
A house in Calabasas sold for $840k last summer. It is back on the market with something like “OWNER MUST SELL, FACING FORECLOSURE. SUBJECT TO LENDER SHORT PAY APPROVAL”. Asking price today? $779k.
It’s comin’…
“A friend of mine is a part owner of a big name RE brokerage office. She says it’s completely dead.”
A mortgage office across the parking lot was gangbusters during the runup from 02′ to 05′. Mid-late 05′ it turned. No more traffic in the parking lot. 5 cars, 4 cars, then 2 cars in mid-late 05′. A total morgue. Broker and his wife looking like they didn’t know what hit em’. No more wide smiles and chuckling it up in the parking lot with realtors and FB’ers. Now the office is vacant with printouts on the windows. Don’t even need to read them. They’ve moved to a smaller office and laid off all their staff. Endgame.
DOC
I also have a husband/wife, mortgage broker/realtor couple. The wife has already gone back to a her previous occupation and the husband is going from mortgage company to mortgage company looking for work, and not finding it. They now have to sell their multiple homes (almost 100% financed, considering HELOC, etc.) and homes are sitting…sitting…sitting.
Also, in Sherman Oaks, I’ve seen homes for sale that were sitting in spring. Cheesy price reductions, and nobody’s looking. In 2004/2005 these homes were gone in days at the original list prices.
Seems nobody wants to blink yet in the SFV. It is one of the stronger markets because there is realy money there, no doubt (international, banking and entertainment, among others). That being said, it will fall, but will likely be one of the last to go, IMHO.
Edit button! Sorry for all the typos!
I follow Da Valley to as I use to live there and understand the market. Thanks Deb for all your postings!
Quick note on the SVF:seems like Studio city/North Hollywood springing up new apts/condos like Mushrooms in a damp meadow. Was going along magnolia ave eastbound thru area just north of 101 from Coldwater canyon blvd to Hollywood Wy, and this area seems festooned with new muli-unit projects, almost one on every block. Studio city/Nhollywood looks like an LA hot zone for new apt/condo projects.
“‘They’re beautiful homes,’ Ed Andrews of Long Beach said as he sized up the model homes with his wife. But he said he wouldn’t pay more than two-thirds of the asking price.”
Another problem with sale by auction: Those who show up tend to know what they are doing. It sounds like those willing to make offers were savvy to the fact that Carlsbad homes are overvalued (at least in the owners’ minds) by 50% or so from a long-term perspective.
And if these lawyers only owed 50%, would they have accepted the offers?
Yes, because its all based on need verses what the market will bear or what a fair price is .
“But the owners, a group of Los Angeles-area lawyers, apparently would need about 80 percent of the asking price in order to clear their own debt with the banks holding the mortgages.” ”
The traditional predators in our economy might find themselves as preys. There are many “professional” groups that eye the middle-class savings and look for ways to get at that.
Jas Jain
Its not what you owe on a house…
“But Amanda Pion-Goureau, a Bressi Ranch resident, wasn’t buoyed by the auction results, saying a house “ultimately is only worth what someone is willing to pay for it.”
Certainly, Amanda “gets it”.
Some investors never learn…sometimes it’s better to willingly take a small loss than hope to break-even or make a profit. As this market crashes those small losses will become gigantic losses.
It’s always better to “sell when you can, not when you have to”.
““Plenty of consumers are still finding themselves in financial hot water. And bankruptcy lawyers across Southern California reported an uptick in filings this past summer, and most expect the numbers to eventually climb back to previously high levels.””
I knew a bankruptcy lawyer in SoCal in mid-1990s when the bankruptcies were high. He came up with the term — Trickle Up Poverty. he was just ahead of his time. Now, we shall see Trickle Up Poverty for real until the middle-class is reduced to less than 10% of the population.
Jas Jain
There is a definite trend to eliminate the middle class in America. I guess in another 40 years there will be a big fence along the southern border with Canada.
“There is a definite trend to eliminate the middle class in America.”
And asset bubbles are the most afficacious method of accomplishing this. And bankers must accomodate.
Jas Jain
The middle class is shrinking. The causes: high US taxes, including 15% FICA. The “lawyer” tax. Some fool spills hot coffee in her lap and tries to shake down McDonald’s for a few million. And regulation for business. Now way we can compete with China and India. They’ll laugh all the way to the bank.
Anon in DC-You got that right. We are paying taxes up the Wazooo! There is nothing we do that does not require a tax. State and Federal tax, RE taxes, cell phone tax, fixed line tax, hotel or occupancy tax, sewer tax, gas tax etc. etc. etc. And stretch Pelosi, John Kerry do not think we are taxed enough. Wake up Sheeple.
What kind of kool-aid have you been drinking?
It’s not the taxes, it’s the distribution of the burden that is totally screwed up these days . . . and you can thank the Republican party for that. FICA should be axed and the income tax increased accordingly . . . FICA is a regressive tax that is levied disproprtionately on the middle class and lower class.
Meanwhile, the country club set and those that live off their inherited wealth are whistling dixie.
I get the sense you are one of the “sheeple” . . . and you don’t even know it. Sad.
Oh come on. Most of the country club set are not inherited wealth. Keep it up. You are not smart enough recognize that both parties are screwing YOU! DOPE!
“You are not smart enough recognize that both parties are screwing YOU!”
Ummm, then why blame only Pelosi and Kerry? Looks like you flunk your own intelligence test.
Vote NO on Prop 88 (Parcel Tax) and YES on Prop 90 (Eminent Domain Change). Plus NO on ALL the judges and ANY spending propositions. Ifeel better now . Thanks Ben
FYI, Prop 90 apparently includes some goodies that allows land owners to sue over any change in government policy which might ‘hurt my property values.’ Plus, Tom McClintock is not backing this proposition; he was the sponsor of the bill attempting to fix Kelo in the legislature.
taxes? You haven’t SEEN taxes yet, wait for the bill the Gen Xers are going to get to pay for the deficits the government has been running the last 7 years. I’ve seen the numbers, scary! Max out those Roth IRAs young’ins cause your golden years aren’t going to be anything like your parents, this doesn’t even account for the lack of social security.
Taxes on what? Wages will be increasingly squeezed by offshore labor and the tax base will continue to shrink. When I was working as a W2, I noted OT was taxed at a rate of 56% on amounts over 40 hours thats what about 10% CA Tax, 7.5% SS Tax and 36% Fed tax plus some misc taxes for this and that…
This is so regressive as to be rediculous ..
Mike in Pacific Beach, I’m afraid you’re right. I’m thinking of cutting back on the 401k, too, and just doing the ROTH (maybe the ROTH 401k) since we may be back to the 70% tax bracket in a decade or so.
You poor people, don’t you realize that putting you retirement into a retirment fund simply makes you one of the “fortunate few” who will be offered on the altar of a broken social security system? Do you actually believe for one minute that the tax laws that create “IRA’s” and “401k’s” cannot be changed to prey upon you?
Get wealth. “Wealth” will be taxed last. Retirement funds will be divvied up sonn as SS hits the skids.
- “In addition to higher minimum payments and out-of-control consumer spending.”
Out of control consumer spending? Just how can I reconcile this with the recent reports of HIGH consumer confidence?
No kidding consumer spending is out of control. As soon as gas prices fell everyone felt relief and went out to celebrate by spending! My employer has bought all of my gas for the last 3 years and I have been hunkered down saving all the money that I could for the last 3 years. Americans as a rule - piss off every dime that they get their hands on.
“Buyers were willing to pay about $1 million for a home listed at $1.4 million or $1.5 million, and as little as $650,000 for houses priced near $1 million.”… [none sold]…‘The good news from the auction is that the investors did not lower the price and kept the value up for people who live there,’ said real estate agent Kelly McLaughlin.”
Snigger. Auctions are better than appraisals buddy. The last comp for these houses is not the sales price but the high bid. Any appraiser knows exactly what each of these homes were worth only a few days ago. Anybody who doesn’t acknowledge the comps just got slaughtered is lying. Hopefully someone can go on zillow and edit in the latest value data.
“‘They’re beautiful homes,’ Ed Andrews of Long Beach said as he sized up the model homes with his wife. But he said he wouldn’t pay more than two-thirds of the asking price.”
Ed buddy, I think you are close to the money. Perhaps just a tad high.
Yep. I’m not prediction a depression but there are lessons to be learned from it. It’s amazing how little people know of out recent history. In the depression it was the really fancy stuff that went for a song. The rich already had enough for their purposes and this near high end stuff wasn’t any use to them and they were smart enough to know it was dead money for a generation at least. Thus there were no buyers for high cost items with only ordinary utility.
Flash forward 2009: “Aw cr@p, my mom just died!” “I’m sorry.” “No, you don’t understand, the old bag hated me. She left me, the McMansion in Carlsbad.”
And the Realtor said “The good news from the auction is that the investors did not lower the price and kept the value up for people who live there,” said Kelly McLaughlin, a Prudential California real estate agent. Great news Kelly we have no market. Listing the house did not sell it, auctioning did not sell it. So where do we go from here with all your good news? Would foreclosure be the good news you are looking for?
“kept the value up for people who live there,” said Kelly McLaughlin” Nothing sold even at auction, so I’m real happy to report that I will be eating at Jack in the Box for the next 6 months since I can’t sell these over priced turkeys, but my neighbors are happy that the values are still there. What!!!
True, but doesn’t the Realtor guild exempt auctions from the comp calculation on the theory that it’s not a normal sale?
Once the deed is recorded. The appraiser will see it as he uses County Records and it should be used in his appraisal. Right? Anyone else wanna chime in?
I’m not being clear. The Appraiser I’m referring to would be one for the sale of another house in the neighborhood in the future.
ISTM that depends on whether the appraiser was hired to “hit the numbers” or to protect the lender. Only when the lenders can no longer securitize their loan portfolio and are lending their own money will we go back to the latter type of appraisal.
“‘I just wanted to see what kind of a fool would buy these overpriced homes,’ Bruce Azimi of Oceanside said.”
LOL, quote of the day…must be a housingbubble blogger.
I thought it was one of the posters here:).
Reading that quote is hilarious. This GF theory is reaching the masses or Bruce must be a Ben Jonesian. Way to go Bruce! (and Ben).
At least one of our bloggers was there yesterday. Sounds like Bruce is one of us.
Gotta love it when one of “Ben Jones’ groupies” gets quoted in the local paper.
“Indeed, some of the looky-loos were local residents who wanted to see how much people would pay for homes in their neighborhood. They weren’t happy with the offers.”
I bet! My wife would have gotten a kick out of that. This weekend she found an add avertising a 599K home as being a “one time this weekend reduction to 569K”. So she calls the agent and asks her if that means she has to wait ’til Monday to offer 469K…….no lie. The agent went all-out-of-shape on her. Yeah, my wife is just a tad more schadenfreud than I am.
Kudos to the wife! I say you buy her flowers for that great story…
Your wife rocks!!!
The total “value” of these 16 homes would be something like $20m, so they’ve borrowed about $16m. Their payments must be something like $100,000/month. Plus they probably had to pay up front for the auction that produces no sales. Something tells me, they’ll be open to negotiate real soon.
They may not have room to negotiate. It may be necessary to negotiate with the lender after foreclosure, but this may take some time. Nothing in my thinking right now sees much opportunity to buy at a fair valuation for at least 2 years…
At least they did it through an LLC.
If they have kept their accounting clean, they might just escape unscathed.
Maybe TxChick or one of the other lawyers can give a laypersons expalanation of how they would pierce the veil of the LLC.
Thanks.
Great point/question, Sunsetbeachguy. Any experts on how they would “pierce the veil of the LLC?” My limited amateur thought is that LLC’s are a relatively new structure that haven’t been subject to much real world (and in court) stress testing of this sort? Exactly how limited is one’s liability as far as personal assets held outside the LLC?
They should be completely protected. If you own stock in XYZ and it goes bankrupt, they don’t go after your assets.
LLC means “limited liability corporation”. So that’s that.
No need to pierce the veil. In all liklihood, the bank required the notes to be signed by all members, and their wives.
yep… called personal guarantees (although the wives signing may not be required as that is not legal in most states)
Right. If the lawyers are even minimally competent (although there’s never any guarantee of that), there will be no way to pierce the veil of the LLC.
However, any form of limited liability entity — LLC, corporation, limited partnership, whatever — cannot just run out and get credit. A newly-formed corporation has no credit history. Therefore, banks generally require one of the LLC’s members to personally guarantee — co-sign — the mortgage. The title to the property will be held in the name of the LLC, but the guarnator will still be on the hook for the mortgage if there is a deficiency.
The LLC won’t help them if the banks required the principals of the LLC to sign personally on the loans (which is common when LLCs buy property).
I suppose that it is possible that they put enough money down to borrow the money from the bank without personal guarantees . . .
The good news (for those of us that would like banks to stay solvent) is that with an LLC, it is unlikely that they obtained the loans by lying about the homes being their primary residences, and actually needed to put some money down.
How long before they start suing each other?
thats awesome !
Auctions work when there is a shortage of housing or if the owners have a very realistic reserve price. They are hoping to get two people to really like a house and out bid each other.
Sounds like that plan worked real well now, no?
Auctions always work, but the sellers don’t always like the price the auction delivers.
“Twenty people went to an auction of new model homes yesterday looking for a bargain. They were joined by about 80 ‘looky-loos.’ In the end, the potential buyers wanted too much of a good thing, and the auctioneer’s hammer never fell.”
Oh, the hammer fell alright, right on the sellers’ ‘nads.
hahahaha………and I bet it was painful
HA HA HA!……..Not the kind of “getting Hammered” I’m into!
“The good news from the auction is that the investors did not lower the price and kept the value up for people who live there,’ said real estate agent Kelly McLaughlin.”
LOL - this Kelly McLaughlin is a clueless tool. Auctions are a real-time pulse of the true market value. The obvious fact is that the market value does not match the owner’s perceived value. Economics 101…and more proof that realtors are self-serving and will say anything, true or not.
It will be interesting to see what prices are paid when at the foreclosure AUCTION!
Foreclosure auctions can be fun. I’ve bought two houses that way and came very close on two others (sales were reversed bason on some procedural things).
The key is to be willing to be outbid and keep coming back. It’s OK to lose 4 out of 5 auctions. That way you can be sure you’re not overypaying. Let the other buy overpay.. he’ll buy and won’t be at the next auction.
This priciple works on Ebay too.
Having moved to LA in September 2004 and having sat on the sidelines, I feel pretty good right now. The one thing I always keep in my mind when I think about will prices go down drastically: “Who can afford a $600k condo without an exotic mortgage?” At the end of the day, I know that when I make ~3x the median household income and would have to stretch to do this, the vast majority of those around me you got into the market are totally screwed….you can always find more idiots to sign up for things, but eventually they have to pay.
Eric
Eric:
You didn’t get the memo, since they last surveyed salaries (Census in 2000) everyone in LA/OC is making $200K/year.
The new LA/OC median household income is $400K.
sarcasm off
i remember in 02 or 03 people saying you were foolish to pay off your mortgage when you could just refi for ever. man a actually recall a few saying ‘forever’.
i hope they sold in 05.
People are still saying this here. Would work a bit better if interest rates could continue dropping forever, with enternally rising prices. It’ll become a bit pricey paying the refinancing costs when interest rates are flat or rising, though, even assuming sufficient equity to qualify. But people don’t seem to be thinking about this. Rather, there is an unexamined assumption that ever-increasing equity will make it all affordable.
Yup, definately one of those “it works until it stops working phenomena”
Eric,
My exact thinking. My wife and I make close to $180K annually and buying a house in Valencia, CA means that we have to pay about $5000 a month for the house (after 20% down). While it won’t be a budget buster, we will need to alter the budget. I’ll keep on renting for $2000 a month.
Same here! We are doing the same thing too in Valencia as well. You’d have to be crazy to pay $5000/mo. for these crap boxes! I am not going to make someone rich on my back!! NO WAY! And we could definately afford the payments too, but why???
Right now most of the pricing on listings is based on what the seller either needs to get or on what the “wishing price” is .
I have noticed lately you will get the same tract homes listed at 100k price differences with only minor differences .I have noticed alot of listings in LA are at the peak 2005 price and the sellers think they are discounting because they didn’t raise the price 10 to 15% .
The market does not care how much money the sellers need to get .People who have tons of equity are in a perfect position to be able to sell if they want to but they aren’t doing that .
On one tract I know of they have the same house listed at about a 200k difference ,(one is listed at 950k and one is listed at 750K ).
So, I think everybody is crazy out there and nobody really knows what a fair price should be right now . What we have is a dead market where people have lost all faith in prices .
This is like the peaks on a stock market top, where the high and low for the day spreads way apart… Everyone is groping for the extremes, and trying to get a grip on current valuation.
Here is a story of a real auction. Auctions work when you have unique items!
From SacBee
Ex-LA Times publisher’s rare car collection breaks auction record
The Associated Press
Last Updated 10:04 pm PDT Saturday, October 21, 2006
An auction of 90 rare cars and motorcycles owned by late Los Angeles Times publisher Otis Chandler brought in over $36 million Saturday.
Two classic cars sold for more than $2 million dollars each. A 1931 Duesenberg J Special Phaeton fetched $2.64 million and a 1904 Mercedes 40/45 HP Sports Touring went for $2.25 million, auction officials said.
More than 1,200 bidders and automotive enthusiasts crowded into Chandler’s Vintage Museum, which housed the collection, for the auction by Gooding & Company.
Company founder David Gooding believes the auction broke the previous single day auto auction record of $21 million with 33 cars and motorcycles still to be sold. The final tally was $36,094,250.
The highest-selling motorcycle, a 1907 Harley-Davidson 440CC Strap-Tank Single, brought in $352,000.
“Usually in a collection, when you liquidate it, there are one or two great items,” Gooding said last month. “Every one of these great items is the best of its category. It’s one of the finest (collections) in the world.”
Chandler began collecting cars when he was a student at Stanford University in 1947. He wanted the cars to go to collectors after his death.
“We felt the auction would be the best way to pass on these collector items,” his wife, Bettina, told the Ventura County Star.
Chandler, who died in February at age 78, was publisher of the Times from 1960 to 1980.
Check out the Duesie
5000 lbs, 265bhp, and a top speed of 120mph. And this is in 1931 SWEET!
Sunset….funny thing is, if you asked the average Joe or Jane, you’re right, that’s what they’d guess. Amazing how ignorant people are about that….
I know, I endure that kind of claptrap on OCR’s RE blog from the bulls, getting lectures about budgeting and saving.
Geez, like saving 25% of your (double the OC median household income) gross isn’t enough.
You keep it up over there at Lansner’s. We all appreciate it!
‘The good news from the auction is that the investors did not lower the price and kept the value up for people who live there,’ said real estate agent Kelly McLaughlin.”
Wrong, Kelly. SELLING the houses for at or close to the asking prices would’ve kept up the value — for now. But in case you didn’t notice, you ignorant twit, THE HOUSES DIDN’T SELL!!!
Hey Sammy I think you must have had a typo when you typed the word “twit”. But you were close.
LOL. There’s some words I never use, even if they fit.
Pinko!
Once again, folks: those of you who think that this is all the realtors’ fault simply do not comprehend how real estate works. No realtor was responsible for financing the houses that sold during the boom. That was the responsibility of the banking industry in general and mortgage brokers, appraisers and underwriters in particular. It is mortgage brokers et al who tell potential sellers WHAT THEY CAN AFFORD, not realtors. And despite what you may want to believe, sellers will most likely seek out realtors’ services in the coming correction. They didn’t necessarily need help with pricing, marketing, and negotiating when times were good, but, as things head south, realtors’ services will be in rising demand.
Sure, sellers will seek out a realtor.
But why should a buyer?
Realtors aren’t all to blame, but I heard far too many chant “buy now or be priced out forever.” Now the first time buyers are priced out. Cest la vie.
This doesn’t get interesting until 2Q 2007. Then hold on.
Expect new realtor(tm) regulations.
NEil
you can get a license in 3 weeks… please anyone can be a realtor. realtors dont really do anything… take the buyers out of the market (as in right now) and see how much a ’superstar’ realtor will do for your listing. please……
“…as things head south, realtors’ services will be in rising demand.”
Yes, for doing things like temp office work, rounding up shopping carts in the home depot parking lot and picking avacodos.
LOL!!!
Susan,
Do you recognize any of these names?
David Lereah - Chief Economist and Senior Vice President, National Association of Realtors
Gary Watts - Southern California Real Estate Forecaster and Broker
Leslie Appleton-Young - Vice President and Chief Economist, California Association of Realtors
Are you saying these folks had nothing at all to do with fostering the “real estate only goes up” attitude?
Ric,
After reading your reply I realized my rebutal was too… “nice.”
Man, any group who funds such lies is definatly 100% responsible for the downfall. Ok, I find exceptions. (e.g., I like Casagrand’s “big house” report and “Jim the realtor” seems to shoot straight). But most realtors deserve the enema they’re about to receive.
Now why was I too nice? Let’s say my wedding planning is going well and any man who’s been through the process is happy for every good week.
The REIC is going to find themselves on the defensive… oh for about three years. I’m not exactly going to be on their side…
Neil
Susan -
Have you been hired by the REIC to test run some CYA campaign. Go try it somewhere else! We know the truth and will grow more pissed at you for trying to re-write history!
(In Best Jack Nickolson voice:)
“Where did they teach you to talk like this? At some Panama City sailor-wanna-hump-hump bar, or is this getaway day and your last shot at his whiskey?….Sell “Chump” someplace else…we’re all stocked up on “Chump” here.”
“No realtor was responsible for financing the houses that sold during the boom.”
No, however, I’d enture to say the majority of RE salespersons happily recommended mortgage brokers and their fiscally dangerous loan products that could “get them in” to close the deal.
DOC
Susan in Wisconsin,
Read what goof-balls like this guy said a few months back regarding FSBO’s…. the folks here remember these condescending remarks.
Maybe it’s just the way agents act in Wisconsin?
“It’s a commission-avoidance scheme,” said Sheridan Glen, manager of the downtown Madison office for Wisconsin’s biggest real estate broker, the First Weber Group.
http://tinyurl.com/yaos9o
susan - you must be irritated and all, with having to turn in your leased lexus (at a loss) and eating at applebees. everything is cyclical and i am sure sometime in 2011 you can re-lease a new lexus. you really should be quiet about your complaining. your so-called professional organizations have been trumpeting real estate above and beyond what income levels can support. simply reality.
Eating at Applebees=soft landing. Waiting at Applebees=hard landing. Sleeping with the pervy manager to get shifts at Applebees=crash.
Susan, do you think it is ethical for a realtor, when asked by a buyer, if home prices are going up or down in an area to lie and say prices are going up when the fact is prices are falling? That’s what realtors do in my town. People have purchased homes using risky financing because the realtor told them that the appreciation on the home would allow them to sell the home in a couple of years for a nice profit. There was a story in my local newspaper several months ago with a picture of two female real estate agents and their victims (homebuyers) sitting on the sofa in the living room of the victim’s new $850,000 home. The gist of the article was how these clever realtors were able to get this middle income couple into this home. Two different ARM loans were used.In the story it was hinted that the price of the house would go up and this increase would justify the risky loans. This story was in the Santa Barbara News-Press about 6 months ago, after it was clear to anyone who was paying attention that real estate prices were falling in this area.
And people who ask realtors for insight on where the market is going are idiots. That’s like asking a car dealer whether they’ll get a better price in six months–what do you think he’ll say? Whenever you’re talking to a salesman of any stripe, the best time to buy is always now and the best thing to buy is the biggest price tag that you can get approved financing for. And you better buy today, because prices can only go up!
Families that relied on realtors for objective advice on are idiots. Realtors are not qualified to give recommendations outside a very narrow spectrum of facets of a home buying decision.
Yup, salespeople trying to sell you a house are a constant, you can’t really blame them for the bubble.
Susan,
I just received a realtor™ solicitation. The copy reads:
What are your waiting for? The RE bubble burst and it is now a buyers market…. yada yada … let me help you.
Do you honestly believe this realtor™ has my best interest at heart or his own? It’s the worst time to buy and you realtors™ know it but you just don’t care. How many more lives do you need to destroy? Have’nt you destroyed enough lives over the last 2 years?
There are no GFs on this blog; go troll for prey elsewhere…
posted ” No realtor was responsible”
Only following orders!
Susan posts “Once again, folks: those of you who think that this is all the realtors’ fault simply do not comprehend how real estate works.”
Well you must comprehend this, now and for a long time you are going to eat miles of shit. If if you are right for the next few years you will not be able to bub two nickles together.
Get honest work.
Susan,
I have been in real estate for 25 years and I can tell you this……….real estate salespeople operate on one system and to put it one word ………conditioning.
On the run up it’s a matter of conditioning the buyer to higher prices.
On the way down it’s conditioning the seller to accept low prices.
In both these situations fraud can and does take place……..I’ve seen it, and that’s why realtors have such a bad name.
They will “seek out” realtors alright. Only they will be carrying torches and pitchforks when they do. I expect more than one, “realtor stabbed 113 times” story to appear on CNBC before this is all over.
She’s BACK. Susan, are you the Terminator of the Realty (TM) business?
The #1 reason why the housing market is crashing; The sky high prices. Yes, it’s the price stupid.
Who cares how the prices got so high, most people cannot afford the sky-high prices anymore, period. Until people can afford the prices again, there will be no buyers.
The market will not come back until prices are substantially lower, even if that means giving back all the gains for the last 5 years. Why can’t the talking heads just admit this as fact.
The reason why the market crashed is because, the prices got too high.
Realtor’s may not have been “responsbile” for financing the purchase, but I know that they work very closely with those who do and whenever I brought up the question of affordability it was the realtor who pencilled out how a specific property could be affordable using teaser rates and exotic lending. So while you are technically correct, I believe that the line that separated the realtor and the financier was blurred in far too many cases.
Susan,
Nobody in here is saying this is ALL realtors’ fault. To me the main blame lies squarely on the fools who for the past several years have bid up houses to ludicrous levels, by taking on irresponsible levels of debt — and in doing so, placing homes beyond the reach of more prudent, fiscally responsible would-be homeowners.
The reason I detest 99% of realtors, is that 99% of them seem to be completely devoid of personal or professional ethics and integrity. They will invariably tell their “clients” (victims, more like) that “now is the right time to buy REGARDLESS of how bad that advice. In addition, they bear a large share of the moral responsibility for steering naive or downright stupid people into houses they manifestly could not afford, in collusion with venal mortage brokers and crooked appraisers. Those people TRUSTED their realtor to look after their interests (just writing that makes me want to puke) and instead were cynically and ruthlessly screwed. Granted, there might be individual realtors who were honest and ethical, but the vast majority, and the industry itself, richly deserve the contempt that so many in here heap on them. I give you Exhibit A, the infamous “Suzanne researched this” ad:
http://www.youtube.com/watch?v=Ubsd-tWYmZw
Clearly the FBs deserve the lion’s share of the blame for the collapse of the real estate market. And anyone who trusted their realtor for quality advice are idiots. The same people “trusted” their financial advisor five years ago and never questioned why no-load mutual funds were never discussed. People who entrust their financial decisions to interested parties are idiots and deserve to lose a good chunk of their savings.
Realtors are useful if you’re new to an area, don’t know a soul, and don’t have the time to research things like schools on your own–although if we ever found ourselves in that position, we’d probably rent for 6-12 months to get a feel for the area. But if you have to buy blind, the right realtor can be helpful. Those who know their area (and not all do!) can provide some useful insights into good neighborhoods, schools, etc. But if you’re familar with the area, know what you want to spend, and have access to a computer, realtors are rather useless except for giving you an occasional self-esteem boast by saying how smart you must be for buying now in such a great area. But assuming you have an IQ above room temperature, your realtor is really just a cheerleader. Anyone who depends on their advice on an investment on where to get a bite to eat is more likely than not to be disappointed. People are finally seeing realtors for what they really are: overpaid check-out clerks.
“Realtors are useful if you’re new to an area, don’t know a soul, and don’t have the time to research things like schools on your own–although if we ever found ourselves in that position, we’d probably rent for 6-12 months to get a feel for the area. But if you have to buy blind, the right realtor can be helpful. Those who know their area (and not all do!) can provide some useful insights into good neighborhoods, schools, etc. But if you’re familar with the area, know what you want to spend, and have access to a computer, realtors are rather useless except for giving you an occasional self-esteem boast by saying how smart you must be for buying now in such a great area.
I agree with all you said with one cavet. A realtor may have knowledge of properties entering a market you know very well. In both my case and that of a friend I recruited, established relators were helpful in finding good properties for sale quickly and in his case the realtor cut his profit to close the deal.
Not just any bozo will be helpful. An established relator who’s been working the boom and bust cycles can make a difference even if you do research an area and know it.
“Have you been hired by the REIC to test run some CYA campaign. Go try it somewhere else! We know the truth and will grow more pissed at you for trying to re-write history!”
For those here looking for the bogeyman (or woman) to blame, I wish it were so easy. I am not a troll; yet I am someone who understands that this real estate did not play out in a black and white way but has evolved in many shades of gray, with plenty of blame to go around. But, I might point out, there can be NO MORE BLAME than the run-up in dot coms in the ’90s. In the real estate run-up, everyone was looking to make a buck. Once again, to insinuate that the bulk of the blame lies with realtors is as misinformed as saying that all lawyers are unethical crooks. Would that it were so easy…..but it isn’t. And those of you who post these pithy one-liners about “evil” realtors undercut your credibility.
You are a co-conspirator to the biggest fraud on the American Dream; you and your cohorts destroyed the lives and dreams of many Americans over the last 2 years; go seek forgiveness for your sins elsewhere and pray for the families you destroyed.
Ditto.
Oh, others deserve blame and FB’s will have a hard look in the mirrow. But in late 2007, when you see what state the economy is in due to the need to make a quick buck…
Don’t expect any of us to stop the realtors ™ from being tarred and feathered.
Blame will carry far. But when bank’s start to fail, people we bemoan their loss, not the loss of a realtor’s office.
I’d say more, but I usually don’t cuss much.
Neil
Who has said realtors deserve “the bulk of the blame,” when a half dozen posts on this thread alone assign it to FBs?
You claim that you’re not a troll yet nearly all of your posts are a similar variant to the same strawman: we’re blaming realtors for one of the worst financial disasters in modern history and that’s unfair because no one here understands the industry. Fine. Why not spend a few lines explaining what wonderful insights you have?
I don’t think that anyone here has ever complained about realtors as something other than an annoying parasite that provides limited useful function in the system. We fully understand that you’re just the opportunistic secondary infection, not the ultimate cause of a terminal disease.
So here are some insights, per Walt 526’s request. First, interest-only loans can be an effective financial vehicle for buyers who have 25 percent or more equity in their houses and do not plan to stay in their homes for more than five to seven years. Second, areas across America that have good public transportation, few brand new homes or condos and a highly educated workforce will fare much better in the next real estate stage than places that do not have same. Third, prices will stabilize in such areas–perhaps even drop to a small degree for a few years–but rents in those areas will rise annually much more than in recent years. Fourth, smaller homes with some “green” features will be ascendent in this coming market; this is all to society’s good. Fifth, I am 65 years old and I am not new to real estate cycles. I OWNED property during the days of 18 percent mortgage rates and high energy costs and, believe it or not, the world did not cave in and prices throughout most of this country did not fall precipitously. Sixth, most of you appear to hold the baby boomers responsible for the latest real estate cycle. Better learn to respect them and work with them as they will retain the power at the ballot box in the coming years.
Seventh, you are an idiot.
I’ve talked to a lot of idiots about this mess and your comments are just as stupid as theirs. Thus, you join the “idiot gang”. Congratulations, your membership number is 46,258,321 and growing rapidly.
65 Y.O w/ an I/O loan but you’re not worried ‘cause you have the power to vote in a bail out?
My 67 Y.O. mother in law was in real estate her entire life; she now lives in a mobile home that she financed w/ an exotic mortgage. She preached the real estate mantra till late last year when her flip went sour. She has maybe two years till BK if there are no health issues with her or her husband.
My wife and I now discuss ways to bail her out. Surprisingly, it’s my wife that refuses to help financially.
BTW, the run up in r/e prices during the 70’s was minuscule compared to this bubble.
Good night!
“…I am not new to real estate cycles. I OWNED property during the days of 18 percent mortgage rates and high energy costs and, believe it or not, the world did not cave in and prices throughout most of this country did not fall precipitously….”
You have strengthened my argument with these anecdotal remarks. This is not a normal cycle. Look at income to price statistics; they are way above normal. Look at lending standards; they are looser than normal (no doc loans). Look at downpayments; they are zero or even negative. Look at mortgage types; the percentage of borrowers using ARMs are above any measured historical norm. Look at the homeownership rate; it is at a historical high.
Can you imagine the kind of pain and suffering homebuyers are going to reap when all these statistics start rushing back to the norm?
Yeah know, I don’t necessarily agree with her, but I don’t see how namecalling directed at Susan or any other poster really advances any argument…
I disagree. Maybe more name calling aimed at the people spewing all of this stupidity about real estate would have ended this mania a lot sooner.
The world needs more shame. Maybe it would end a lot of bad things in this world, like really fat women wearing halter tops and fools spewing nonsense about real estate.
I agree, bring back shame and shaming punishments.
NYCityBoy,
Keep in mind, all of us are guests on Ben’s blog. Too many message boards have been ruined by infantile insults and flame wars that caused the more mature (and valuable) posters to move on in disgust. While some of us are pretty opinionated, I don’t want to drive out anybody who happens to think differently than I do, even though, by definition, they’re wrong.
“Yeah know, I don’t necessarily agree with her, but I don’t see how namecalling directed at Susan or any other poster really advances any argument…”
Walt526 –
Ahoy, matey, show us your stripes! Why don’t you and Susan go post on the SDCIA board, where you can find some idiots who might buy your stupid arguments…
I agree. Realtors aren’t to blame. How could a group of imbeciles have that much power?
The federal reserve is #1. Partial reserve currency is #2. That is what drives speculation and “flipping” assets.
I’d put crooked appraisers and loan officers at #3.
Realtors get a lot of crap because they have a legal monopoly that allows them to make way more money than they are worth. The past 3 years, nobody has needed a seller’s agent.
But, ultimately, the anger on this board should be directed at the government. Government messes with our money - creating boom/bust bubbles. Government allows realtors to throw up barriers to entry preventing competition from driving down commissions to a reasonable level.
The community college grads in the realtor “profession” are just trying to make a buck. And there is nothing wrong with that if it is done honestly.
Nobody is ‘evil’ here. Only stupid. And that is mostly the American voters.
What are you saying? An AA in Human Studies from a local community college, passing an easy multiple-choice exam on the fourth try, and a cheap boob job don’t entitle someone to earn a $100k a year?
And riddle me this: who elected said government? The same idiots who don’t save, don’t consider the interests of future generations, and are totally myophic when it comes to cause and effect, be it in the social, political, or economic realm.
I disagree with your assertion that nobody is ‘evil’ here (with regard to bubbles). People who are profoundly amoral and devoid of conscience or ethics fit my description of evil.
Yup, is it any wonder that an increasingly profligate people elect increasingly profligate politicians?
Yup, is it any wonder that an increasingly profligate people elect increasingly profligate politicians?
Like all the other culprits you listed, realtors™ saw an opportunity to exploit the masses and they took it.
Realtors™ like Susan did’nt ponder ethics; according to her, “…In the real estate run-up, everyone was looking to make a buck….” Furthermore, she willing cast and compares her profession to the evil fraudsters of the dotCom era as if that strengthens her moral argument. Gimme a break!
My thoughts exactly, mrktmaven. She leaves a slime trail in her wake.
Susan,
It would be refreshing if you would just come out and say, “My name is Susan, and I’m a realtor.” Confession is good for the soul, and there’s gotta be a 12-step program for y’all.
In all seriousness, getting a realtor’s perspective in here wouldn’t be a bad thing, though it would raise a lot of hackles. Any fair-minded person would concede the point that “there’s plenty of blame to go around.” However, that doesn’t absolve realtors and their profession of their share of the blame. In situations where “everybody is responsible,” the subtext is, “nobody is accountable.” And the excuse that “everyone was looking to make a buck” doesn’t let anyone off the hook for snarky and unethical conduct.
Nobody in here is giving the FB’s a pass for their stupidity and cluelessness. The thing is, while the FBs are a vast lemming-swarm, they were acting as individuals. Realtors were part of organizations that were, and still are, deliberately and wittingly misleading people into making bad decisions. Just look at the cluelessness and deception being spewed by the so-called NAR spokespeople and “economists.”
Well said Sammy; you captured the essence of my argument, organized co-conspiring Realtors™ are not entitled to a free pass.
Susan,
There is a difference between trying to make a profit in securities and the profiteering I have seen in RE. The securities markets are failry well regulated and everyday investors and traders must adhere to the guidelines. Of course we will always have those who do not play by the rules, but IMHO in securities that is a smaller percentage than what I experienced in RE. In fact my perception of the REIC is that unethical behavior is actually the majority and it is a minority in that sector that acts with the clients interest in mind.
There is nothing distasteful about making a profit. There is a lot that is distasteful to me about making a profit through deceipt, misrepresentation, manipulation through fear and pressure. I believe that as this unfolds the irregularities, lack of ethics and outright fraud will become apparent. And that is what I am griping about becuase it is and always will be just plain wrong to rip off anyone.
Yes, I am a realtor and have been for 18 years. I believe I said so in my first post not long ago. I also was an award-winning investigative reporter during the Vietnam War and those years in the trenches taught me about how complex the world is and Richard Nixon in particular taught me that someone can be brilliant and terribly flawed at the same time. I have lived in an 1,750-square foot bungalow for almost three decades (that my husband and I love) and raised our three daughters there. I own my home outright. My taxes are $8,543 a year, and I am happy to pay them. I am also a card-carrying liberal who thinks that George Bush and his minions have come close to destroying our country and I pray (although I am not a church-goer) that our country chooses to throw the bums out come November. But I find it hypocritical that many posters here think that it is FINE–and ethical and moral–to make money in the financial markets but reprehensible to make it in real estate. And, in answer to Sammy’s comment above, I would like to point out that most real estate agents are independent salespersons who do not answer to their realtor “organization.” That’s just wrong information plain and simple. And, in case you are wondering, I have not had a boob job…that would be guaranteed to scare the grandchildren.
Susan,
First, let me say thank you for your comments. Clearly you and I are working different sides of the street, but you represent a point of view that deserves to be heard in here and weighed for its merits.
Second, as a TRUE conservative, I despise George Bush and his neo-cons as much or more than you do. He has been an unmitigated disaster as President. Some of us are working for a Republican Party that puts the interests of Main Street ahead of those of Wall Street. And for the record, I think there’s as many snarky, dishonest financial sharks as there are sleazy realtors, mortage brokers, and appraisers.
As far as your response to my comment about realtors being “independent”, I’m not sure the distinction matters when virtually 100% of these so-called independent salespersons echo the NAR-crafted party line. I’ve even had local realtors give me a “fact sheet” circa late 2005, generated by the national NAR to counter “bubble” claims. Of course, the “fact sheet” was and is laughable in its disingenuousness and distortions. The quotes here on Ben’s blog attributed to realtors in various local markets betray either a truly mind-freezing stupidity and cluelessness, and/or are part of a deliberate effort to conceal from would-be buyers the true magnitude of the crisis in the housing market.
So, while I thank you for offering us contrarians a contrary point of view, I think my disdain for realtors (99% of them, anyway) is justified and appropriate.
Sincerely,
Sammy S.
Susan posts ” I have not had a boob job…”
Thanks, that was my next question. Since you are bare it all honstly how many people have you corn-holed… well you know just doing your job?
Susan, please put politics, boob jobs, and family aside; they are irrelevant to ongoing argument.
I think Susan thinks we’re mean.
I don’t want to be mean, I just want to be honest.
And to be honest, I really don’t think anyone fully understood the actual ramifications of a bunch of numbskulls running around trying to imitate ‘Flip This House’, ‘Property Ladder’, and ‘Buy Me’…among others.
Sorry, forgot the book. ‘Rich Dad, Poor Dad’.
What Susan is seeing- that we see- is the ramifications of a MANIA.
Mania’s aren’t good. They really aren’t. We’re going to see the end result of one now, and it won’t be pretty.
That’s what I see as the main sticking point between Susan and us seeing eye to eye.
When she gets perspective on the abhorrent SCALE of this mania, she’ll be better able to handle the shock of this mania.
When 20 year old valet guys at hotels can get fraudulent lenders to get fraudulent realtors to get fraudulent appraisers to give the 20 year old valet guys 10 homes in the same Californian coastal city…
…something is very, very, very WRONG with the ’system’.
And it ain’t the ‘fundementals.’
The entire real estate industrial complex, and their willingly participating, entrepreneurs and risk-takers, are to blame for destroying the American Dream. They drove prices to sky-high levels, which ruined it for everybody, and destroyed the lives of many good families. They should be ashamed of themselves.
I’m not looking for the bogeyman but if I find him I’ll be sure to tell him it’s a buyer’s market.
As you say — everyone was looking to make a buck, but what you leave out is that most realtors wouldn’t let ethics or a sense of decency get in between them and another fat commission.
One thing I agree with you on, though — that realtors don’t deserve the bulk of the blame… only their share. Greedy buyers and fraudulent mortgage brokers are just as morally bankrutpt, and if there’s any justice in this universe, soon financially as well.
Can someone please just call it what it is; A SUCKERS MARKET, until prices come back down to normal.
“In the real estate runup, everyone was looking to make a buck.”
That about sums up the reason for the contempt directed at real estate agents. No need to mention that millions of Americans considered their agent a professional who was knowledgeable about the market and was going to help buyers find a good deal in a confusing process. Really, just consider the idea of a real estate agent as a “professional”–it’s ludicrous. No education, no standards, no ethics required…just a willingness to lie, cheat and connive to get that commission. Used car salesman sandbag clients, but the realtors have set up their clients to torch their financial futures. And a hollowed-out economy dependent on building and selling overpriced crackboxes is now crashing–and will impact even the prudent savers and renters among us. Just like a hooker or a pimp–if you’re willing to do anything for a buck, then you live with the contempt you’ve earned.
Third, prices will stabilize in such areas–perhaps even drop to a small degree for a few years–but rents in those areas will rise annually much more than in recent years.
Susan, I’d like to know your basis for making such assertions as if they’re statements of fact. I would submit that you and your coherts don’t have the slightest idea of how this is going to play out or how bad it’s going to get. As far as “rents going up,” I can’t for the life of me see how. There is huge surplus capacity in, for example, parents’ basements, where a lot of FBs are going to be residing while they regroup from their fiscal errors. Rents won’t be raised appreciablely, IMHO, because there will be too much housing stock for renters to choose from and there’s going to be a whole landscape populated with folks whose credit will be ruined for years. But, the following is my wild-ass guess and I wouldn’t presume to state it as anything else–unlike you and the NAR.
Oops, I meant the PRECEDING is my wild-ass guess.
Is it just me, or has anyone else noticed an uptick in the number of trolls visiting the bubble sites lately? There have been several at the Piggington site in the past week as well and now this Susan character as well as that idiot Dan. Me thinks they are starting to squirm and are taking out their frustrations on us.
What exactly does it mean to be a troll on this blog? Is someone a troll if they thinkthat the “group think” often displayed here undercuts the value of this blog? If so, color me guilty. I am simply trying to prompt more nuanced thinking. I think lively discussion representing a wide range of backgrounds and knowledge is valuable. Live long enough and you see the virtue in diversity.
Your argument about groupthink is bankrupt here. Us bubble believers have been observing a mass Housing Psychosis for the past several years and you want to lecture us about group think?? That’s very hypocritical.
Actually Susan, I apologize for the way I worded that. I actually don’t think you’re a troll because you seem to sincerely believe what you say…albeit wrong and clueless to real market dynamics.
I think NAR/CAR is paying realt-whores to post F.U.D. style posts without any substance that detract from the discussion at bubble blogs.
In a similar fashion as the the way unions pay strike wages for members that walk the picket line.
First, I’ve read your apology already JWM.
But right now, the bubbleheads are counter “group think.” In about a year, the sheeple will align with our perspective. In two years, the sheeple will be panicing.
Those are who you should worry about Susan. Not us. While many of us would disagree with each other (e.g., conservative vs. liberal), we tend to be fundamentals based as a group.
Get the fundamentals in line and 75% of the current readership of Ben’s blog will be writting about their new home purchase.
Until then…
Have numbers for a turn around. We’ve been posting our’s for a long time on why the market is going to turn south.
Neil
So Susan, what’s your outlook for the market? Do you think now is a good time to buy?
Waited an hour. No answer, what a surprise. Could it be that silence is the wiser choice. After all if someone steps into her office and ask her that, what do you think she’s gonna say, even after obviously repeated perusals of this blog and all the information it contains?
“There’s Never been a better time to BUY!
Your a good writer Susan, and obviously proud of that fact. Why didn’t you stick with that.
then if knowledge is valuable, you have decades of experience in RE, and you dont parrot the NAR lines… why did you put buyers into properties after 2004? When i originated mortgages in the early 90’s for a major bank in so-cal i told folks our mortgage protection plan was not a bargain. i was bonused on that product at a higher rate than my origination commissions, but i could not look them in the eye and say ‘id tell my mom it was in her best interest to buy it’. so which is it… either your profession offers little other than running around the neighborhood or you do actually have insight but dont use it because you only see $$$$
“color me guilty” How come, with 25 years in the real estate business, and being qualified for AARP, you haven’t made enought profit in the greatest real estate run up in the history of the world to retire and never work again. It blows me away, that being a real estate professional, that you have opinions about a market that gave you the inside to make millions and you are still are hustiling for chump change. I never take real estate advice from someone who makes less money than me, and the chances are you are low man on the totum pole on Ben’s Blog.
I think it’s nice to have a contrarian such as Susan stopping in.
I will fight & die for her right to say things that are utterly ridiculous.
If I happen to get hit in the head by a flying saucer at some point, with blood running down my cheek and my eyes spinning different directions…
…I hope you’ll all do the same for me.
Free Speech.
It’s damn messy, but it’s the best we got.
A ‘more perfect’ mess, I guess.
Susan,
I have to admire your resolve and it seems that you sincerely believe what you’re writing here on the mother of all bubble blogs. However, you are wasting your time. You are not going to win anyone over here. I agree that it is not soley the Realtors to blame for what has happened for the past several years, but as a group, realtors were functioning as enablers. They were spouting nonsense like: buy now or be priced out forever, not making anymore land, etc and a large number of them had to know that they were profiting off the future financial demise of many people who entered into suicide loans to purchase homes when they really had no business doing so. There is definitely a certain amount of culpability to be assigned to realtors as a group. As to your predictions of the market…well…I would not bet on those scenarios playing. About 2 Trillion $ of resets in the next two years says that there is going to be some pain in the bubble markets.
Realtors are enablers. That’s the damn job.
I don’t like them as a group and want better policing of the industry but they are not the problem.
Loan fraud drove the price increases and subsequent defaults. It is not a Realtor’s responsibility to validate the lender’s decision or play Daddy to a foolish or dishonest buyer. They work for the client but not as a supervisor.
If loans (lenders) were policed as they should have been, the market would have cooled long ago and looming defaults not as problematic.
JTZ,
Absolutely correct, IMHO. Many realtors actually believed the hype that RE only goes up and that those who didn’t buy that day would fall further and further behind in obtaining “The American Dream” (blech!).
If the lenders and financial regulators (public & private) did their jobs, this bubble would not have grown anywhere near as big as it did.
All the realtors and specuvestors in the world could not have pushed prices up beyond normal affordability if it weren’t for the lax lending standards. These salespeople and naive buyers were simply pawns in the Big Boyz game. They are nothing without the credit market.
Well said. Realtors were complicit in steering people into homes they couldn’t afford, and seem to be congenital liars. But the mortage industry are the real villians of the piece, as they willingly and eagerly took advantage of naive and stupid homebuyers. Of course, you can’t protect stupid people from their own bad decisons, but in 1999 most of these FBs would’ve been laughed out of the bank had they tried to take on so much unsecured debt.
I agree, realtors are at the bottom of the blame matrix, but not all of them were stupid enough to drink their own coolaid. In terms of ranking, here’s who I blame:
1. The Fed / Greenspan
2. Mortgage Industry
3. Homebuilders
4. Realtor Cabal
I have to object to some of the “troll” accusations. Back during the tech bubble era, when I was shorting a lot of the tech garbage, I was routinely called a boiler-room basher. Not so. I told them I was a short and why I was shorting their insanely overprised bubble.com stocks. They were so deep into the groupthink mode that they were completely unreceptive to contrary information and insights, even when it was valid — and it cost them. So, lets not be so quick to write off contary opinions as trools or RE touts.
As the great Professor Piggington has said:
“In God we trust, all others bring data.”
I have yet to see a well-researched plausible REIC case for buying RE today in my market.
Now that’s an interesting thought: The bubble has become generally accepted and is no longer contrarian. Therefore, we should buy real estate …
you first….
Only a fool would buy real estate now. I don’t intend to buy until late 2007 at the earliest, and would prefer to wait until 2008/2009 (though wife also gets a vote, meaning it’ll probably be mid-2007). Being open to contrary points of view, and acting on them, are two very different things.
“But I find it hypocritical that many posters here think that it is FINE–and ethical and moral–to make money in the financial markets but reprehensible to make it in real estate.”
Do you understand the difference between a paper investment and a home, a place to live and peacefully raise a family. As a liberal, do you even understand why HUD was created after the Great Depression? Do you even appreciate the ironic role you and your REIC cohorts played in exploiting the benevolent government agencies created to stimulate the American Dream? Government sponsored enterprises that served your industry well for several generations and are currently under a dark cloud of disrepair. Do you even comprehend what’s at stake?
Excellent remarks.
“Government sponsored enterprises that served your industry well for several generations and are currently under a dark cloud of disrepair. Do you even comprehend what’s at stake? ”
No, she does not and will likely not engage in the necessary mental effort required–especially if it leads toward enlightened self-criticism. If true critical thinking were exercised to any substantive degree–she would have stopped posting long ago. Old-age, plus stubborness and denial=well, you get the picture.
DOC
The realtors closed their eyes to what they were doing to their fellow man and country because they were making a ton of easy money .
Susan cannot tell me that a realtor doesn’t know it when they are putting a person in a property they can’t really afford long term .Susan cannot tell me that a realtor doesn’t know it when they induce a seller to buy another property before they sell their old property .Susan cannot tell me that the realtors didn’t play a big part in the run up of this bubble mania in real estate with all their false predictions and spin about being priced out forever .
Susan cannot tell me that realtors don’t know it when they are putting a investor in a property and they know that the investor is lying to get the loan, and the realtor knows who to send that buyer to to get the loan . The realtors knows all and they are the set up person . You either refuse to go along with fraud as a realtor ,or putting people in property they can’t afford or you only see dollar signs and you do whatever it takes to make the deal fly .
It’s to bad that people are going to need realtor services with this upcoming decline because won’t be nice dealing with a fox in the hen house .
The main thing I have against Realtors is this: they continually try to hide data and information, and viciously defend their right to do so. If they are so useful as salespeople, I can’t understand why they won’t let go of the MLS info. Seems they can’t figure out what the purpose of their job is (dispensing closely-held information…or brokering negotiations between buyers and sellers).
They are a doomed industry fighting a rear-guard action. With the advent of the computer age most non-dolts don’t need a realtor to find a house. They are like the “financial analysts” of the Bubble.com tech fiasco: most are clueless, and the ones who do know what’s going on, are deceptive and duplicitous. As a class of people, they are beneath contempt, and more and more people are realizing that and looking for alternatives. Those alternatives will emerge, because the demand is definitely there.
Not only do realtors try to hide data , during the mania many realtors were buying the good listings and remarketing them before the escrow closed at a higher inflated price pursuant to a double escrow or other means . It’s true that the appraisers accepted the higher sales price but in alot of cases the appraiser didn’t have knowledge of the other lower sales price .
Don’t tell me the realtors didn’t have a hand in driving up the market and they took full advantage of the easy credit market .The problem is the agent greed along with sellers priced everyone out of the market .
Susan , you are defending people ,(real estate agents ), when you know the industry should of objected to the mania . What kind of real estate agent would send a borrower to a mortgage broker who put them on a ARM loan with a pre-payment penalty when they knew they couldn’t afford the loan they got ? It’s all evil .There are a few good sales agents and a few good lenders but they couldn’t hold up the bulk of the industry that was feasting on the stupid greedy people .
Stop defending your industry Susan and see that your group betrayed the people as well as the lenders did .
Depends on the market, and whether or not it’s made of condos, single family homes, or cooperatives. I think the Coop market in New York will always need realtors and brokers, because they’re the ones that take people to the boards. Coop boards are notoriously difficult. They require a lot of financial data on income - and a lot require cash downpayments of 20%, 40%, some buildings even require 100% in cash. I know of at least one West Side building (nice building, one bedrooms selling at $650,000 to $850,000 or more) that rejected a couple for not having enough income, even though the parents of both were wealthy and would have just written the checks themselves if the kids couldn’t cover. No go, had to be the buyer’s income. And this wasn’t even a hard building! In NYC, people like J. Lo get rejected in favor of Ibankers because ibankers don’t have paparazzi and security. In that market, a good agent is the one saying “you’re not getting in there. Let’s go someplace else.”
Granted, I’m all for property rights, and doing what you want with your money, but considering how many people are going to lose their shirts, I think homeowners associations should stop worrying about the trash cans being out front or the color of the houses, and start mandating downpayment minimums.
this is why help-u-sell, mls access via website etc. are argued against by realtors… they fear it. otherwise they would take their beloved buyers to fsbo…. but they wont. we just need enough people to understand this and then it will turn.
i just put together a living trust for my kids.. via the web. its boiler plate now (like real estate docs) and it cost me hundreds instead of thousands.
Don’t think anyone said this, but if the auctioneer says the sellers need 80% to break even, the sellers will make lots of money at 80%. A smart seller NEVER tells the buyer his true bottom line price because a smart buyer will try to buy at or below that price. By saying “we need 80% to break even” you can argue loudly for 82% with the line of “so we make at least a little money off of this.” If the seller is backed down to 80%, the buyer thinks he screwed the seller, but guess who really won?
So, here’s the real bottom line-those houses were probably purchased by the group of lawyers at a 30 to 50% discount from asking price. Congratulations Bressi Ranch full price buyers–you’re down hundreds of thousands of $.
but i thought the lawyers did not actually sell any of the units at the auction? they probably have a bullet loan coming due soon. then they will start suing each other probably