‘Everybodys Trying To Make The Most Money They Can’
The Miami Herald reports on one mans search for the American dream. “In the past five years, the housing crunch in South Florida has moved up the economic ladder from the low-income to the middle-class, pricing a whole new layer of workers, thousands of Quintin Taylors, out of the market. A family in the Miami area earning the midpoint income must now spend 44 percent of its dollars on mortgage payments.”
“The reality, though, is that Taylor might be priced out of the dream. He earned $75,000 last year. In December, he was preapproved for a $185,000 loan. With 10 percent down, he figures that monthly mortgage payments would be close to his $1,650 monthly rent.”
“After weeks of driving around and phoning his real estate agents, Scott Lewis and Rosie Hernandez, Taylor is in love. ‘I picture myself living (there),’ Taylor says. He wanders around the backyard. It needs cosmetic work, but there’s a built-in pool and a concrete patio. Taylor closes his eyes for a moment. He can hear the music and smell the burgers and hot dogs grilling up. ‘I want this house,’ he says.”
“The renovated house in Nichols Heights is listed for $265,000, way out of Taylor’s price range. But Taylor thinks he could negotiate. In 2002, the house sold for $91,500. Seven months later, it sold for $134,000. Current owner Domenick Vitale paid $160,000 for it last September. Two months later, in November, he listed it for $299,000. In December, the price dropped to $282,900. In late January, it was $265,000.”
“Still too high, say Lewis and Hernandez. For one thing, the house is listed as a four-bedroom, but two have no closets. ‘This is really a two-bedroom with a den and a family room,’ Hernandez says. She says comparable recent sales in the neighborhood are in the $220,000 range. One estimate by an appraiser placed the value of the house closer to $220,000.”
“Taylor isn’t deterred. A second estimate comes in at $240,000. Taylor gets preapproval for a new mortgage with only 5 percent down and decides to make a verbal offer of $240,000. His monthly payments, with taxes and insurance included, would be $2,300, $650 more than he wanted to spend. ‘I’ll just have to cut back on things like shopping, eating out and going out to clubs every night,’ he says. ‘The house is the goal.’”
“Several phone conversations later with Lewis, Vitale isn’t budging. ‘What’s going through my head is what might be going through the head of anyone involved in a deal,’ Vitale tells The Miami Herald. ‘Everyone’s trying to make the most money they can make off an investment.’”
“But then Taylor hears from a neighbor that not many people have stopped by to see the house. He decides to pass on making a written offer after all and look at other houses.”
“‘For people who can’t afford to buy, rental properties might be the answer,’ says (economist) Celia Chen. ‘There’s probably going to be a glut of condos to rent soon. A lot of what’s been built has been bought by investors who are going to have to rent them out.’”
Thanks to the reader who sent this in. This remark is pretty lame for an economist:
‘For people who can’t afford to buy, rental properties might be the answer,’ says (economist) Celia Chen. ‘There’s probably going to be a glut of condos to rent soon. A lot of what’s been built has been bought by investors who are going to have to rent them out.’
Everyone knows there is a ‘glut of condos’ , whether one can afford a home or not. Would Ms. Chen buy a condo today?
I guess in the end (several years from now), this will be looked back on as a good thing. All the flipping and easy, loosey goosey money has created a huge supply of homes. This should, again in a few years, be nice for first home buyers and move up buyers as the prices will be nice and low.
The middle men in all this, the idiot flippers, mortgage houses, mortgage debt investors, and maybe even the U.S. taxpayer will be the ones who will subsidize this.
So I, like many others who haven’t drank the kool aid will be able to move up (or into) some nice 3-5 year old homes for reasonable prices. The difference between us and Japan is that we flush the toilet so to speak after a banking failure. In other words, the banks (and whoever is purchasing this debt) will be left declaring B.K. or writeoffs.
Hey - I am related to P. T. Barnum. He was my grandmother’s cousin.
Have you visited the Barnum Family website? It’s very charming. You might like to Google it to get the url. According to that site, I think everyone who is named Barnum is related to P.T. one way or the other
Gary Barnum
New York, NY
Thanks Gary. I will check it out.
When I chose the handle, I thought it would do PT Barnum proud. He would be an expert investment banker as he was an expert on human psycology. Many great quotes from him, and he was a great historical figure.
Its fun to post with this handle on yahoo message boards about how my “firm” is upgrading a particular stock to “Super Strong Buy”. “New Google price target of $550 per share”. Funny how a lot of people don’t know who he was and don’t get the joke.
Read about Department stores plan O.C. layoffs.
“According to Federated filings to the Employment Development Department, or EDD, Federated plans to lay off the following numbers of employees at the Robinsons-May and Macy’s shops at these malls: 150 at Westminster Mall, 109 at Westfield MainPlace in Santa Ana, 82 at Fashion Island in Newport Beach, and 78 at South Coast Plaza in Costa Mesa. All these layoffs are expected to happen March 21.”
Melody,
You just reminded me of a suggestion I meant to post in the weekend suggestions column (it’s easy to get sidetracked with two small kids):
I thought we should start a thread for non-scientific observations that might indicate new shifts in consumer consumption.
That is, with appreciation topped out the HELOC ATM is in deep deep trouble, and lots of people in RE industry are experiencing what appears to be a sudden shift from gobs of easy money to having to apply for unemployment benefits. Add in an apparent end of the line for untold numbers of “day-flippers” as evidenced by record inventory headed for the exits, and all those tangential things like rising interest rates and higher minimum payments on credit cards and I think we have a “perfect storm” conditions for a lot of people to be suddenly and severly short of sources of cash.
If such a hypothsis is true, then there should be a couple of sudden shifts in consumer behavior of the affected. First would be a drastic cutting back on consumption. Second would be a scramble to find additional funding sources (like selling off everything not nailed down).
I don’t know if the percentage of people that might be affected like this would be large enough or concentrated to register on government statistics or not. Observations like yours make me wonder what happened: Normal business turns, or local free-spending customers on the endangered species list?
You’ll know when you start seeing covers of Time and Newsweek about “The New Austerity” or the “Simple Living Movement.” Those were common in the 1990s recession. I love all the new glossy mags devoted to living with less like “Real Simple” who just so happen to be loaded with ads trying to get you to buy more junk.
New shifts in consumer consumption, closing businesses, mergers, changing occupations, layoffs, moving - all play a part in the bubble in my opinion.
Yesterday, we went to a local restaurant Acapulco’s and realized it wasn’t there (all boarded up). This is in Laguna Niguel and it seemed busy. I was surprised.
I agree with this. There are a LOT of people out there who are severely overextended one way or another. And not just the “day-flippers” and the people who have been using their home equity as a piggy bank, but those who are paying >50% of their monthly income on housing thanks to exotic mortgages.
It will be interesting to see just how the fit will hit the shan when the day of reckoning is here. I can’t see how there will be anything other than a rethinking of consumer behavior once the supply of easy money is gone. How will this affect the economy and housing prices? Will there be a burst of BK’s and foreclosures when the piper has to be paid once and for all?
Another sign going up in the neighborhood today. That makes about 40+ homes for sale in my subdivision.
Lots of new home advertisements in az republic today.
Countrywide is up to 5% on 1 year cd.
Read about The rise and fall of William Lyon Homes shares.
“Amid increasing worries about housing prices in general and homebuilders in particular, William Lyon shares have lost nearly half of their value late last summer.”
Domenick Vitale is a greedy phuck and should use the ceiling fan to anchor his noose.
My sentiments exactly. He’ll puke that dump up in a few years at what he paid for it or less.
Read about County’s real estate auction draws 600.
“The Treasurer-Tax Collector’s Office holds such an auction every year. And every year, it seems to get a little bit more frantic.
Hassan Naghavi paid $155,000 for a parcel he had never seen before or even knew where it was located. The bidding for it was fierce. So he figured it had to be good.”
I think I’m going to get sick
A fool and his money are soon parted.
This auction was all over the local news here this week leading up to it. Auctions can be enormously entertaining, especially when you know the value of what’s being auctioned. I remember when a studio I used to work at went out of buisness and they autioned all the equipment off. Microphones that didn’t even work were going for more than you could buy a new one for in the frenzy. Duh.
Am I missing something here, was $80k of work put in? Why should this greedy homeowner make over 50% in several months? I would say anything above $160k is highway robbery!
Why - because the boob (Quintin Taylor) felt inclined to offer this idiot that kind of money even though Mr. Taylor knew what the previous sales prices were on the home. Until we run out of the Quintin Taylors of the world, who believe they need to spend whatever it takes to buy a home, we won’t be seeing prices come down. Thank goodness the greedy bastard wouldn’t budge on his price - may he regret his decision for the foreseeable future until he loses his ass.
That’s called capitalism, you charge what you can get.
Yeah, and he didn’t get it. Greed is alive and well in capitalist societies and because of this seller’s greed, he hopefully won’t get his price. I hope the capitalist market collapses even more, so that eventually this guy ends up losing money on this property. Yes, people can and do lose money on their investments in a capitalist market - and, I hope this guy loses his ass.
Yes, people can and do lose money on their investments in a capitalist market - and, I hope this guy loses his ass.
Capitalism can be a great discipliner. My biggest fear is that our politicians will not allow the capitalist system discipline the pigs of this bubble.
Hedge - Didn’t the comps suggest 220K? This guy probably bought it at a distress sale or the place was trashed. Time and effort might get get Taylor a similar “deal”. Why should the seller not try to max his profit. It is not greed. It is the American Way. He may regret not taking Taylor’s offer but that is his concern. I could not care less what he makes or loses and neither should anyone else.
Greed and the American Way are hardly mutually exclusive…
Anyway, what’s fascinating about this situation is that the buyer was willing to pay 10% more than comps but the seller isn’t willing to sell for that 10% “premium”. Both are interesting given where we currently are in the real estate cycle.
What precisely is your definition of “greed”? Did you see my remarks below about average homeowners cutting their prices to what you all consider a “reasonable” profit?
So, I gather if your house doubled in 3 years you would only accept a reasonable profit of, say, 10% per year and let one of the less fortunate buy at an “affordable price”?
Hypocracy abounds on this site.
Sorry giantaxe, that was meant for Accroyer.
Greed is not the American way, maybe for you it is, but for most it is not. People have a right to be concerned because these housing prices will eventually affect us all one way or another and in particular our economy. The greedy seller will eventually lose his ass , which will have a change reaction of ramifications. People have a right to be angry with the greedy, because eventually it will affect them and the economy.
Very insightful look into the mind of today’s buyers. This man found a property he liked, negociated, worked the numbers, waited for the price to drop a little. And then the day came, oh Glory, he could AFFORD HIS DREAM HOME. So all the sudden he hears from a neighbor that the home has not had many people stopping by to look at it. And he passes on buying the home. It’s all about buying because he thinks he can make quick money - even for people looking at buying their primary residence. May sound obvious to many here, but this surprised me.
Good point - I don’t know if he didn’t buy because he thought he wouldn’t be able to flip it sometime down the road, of if he figured that he didn’t want something in which others weren’t interested.
It sounded like he thought that nobody was interested in the property, so he’s not in a rush to close the deal. He’s hoping that the owner will agree to reduced price in the future.
Or, maybe it raised questions about the quality of the neighborhood.
My understanding after reading the article is that the only thing this Taylor guy wanted to flip was burgers in the backyard. Dominick put the kabash on his offer due to the fantasy price he’s gotten accustomed to in his fat head. BTW I have no idea if he’s fat but with a name like Domenick Vitale the image of a heavy-set bald guy in a white tank top t-shirt just pops into my head. fuggetaboutit!
‘I’ll just have to cut back on things like shopping, eating out and going out to clubs every night,’ he says. ‘The house is the goal.’”
Why cut back? Once you’re in the house you can get a HELOC.
Little does he realize that this Domenick guy just did him a huge favor.
“The house is the goal”….what a marooon. The house is the goal as long as it doesn’t create a black hole of a life where dreams and happiness get sucked in and die.
Great line.
Greedy speculator stands in a way of one person’s American Dream.
This is who we are refering to when we say “Let them burn”.
I will feel no remorse when they lose everything.
Blues,
First of all chances are good that the “flipper” has more money than you can count - so he’s not going to “lose everything”.
Secondly, he bought well under market at 160K with comps at 220K there is very little chance he will lose one cent on this particular deal.
Thirdly, he probably buys distressed properties and fixer-uppers for a living or side job and knows what he is doing. As you are obviously unaware, it takes considerable time, effort, knowledge, cash and risk to work in this profession. And that is exactly what it is - a job.
Fourth, the stuff about 2 of the bedrooms not having closets is an easy fix. I know it’s a small point, but I think the comps could easily be higher.
So, if you are counting on guys like this to burn, you will be waiting a long time. And if it will take these people burning to ease your anger, I suggest therapy.
People have been investing in real estate since the 1700’s. Nothing has changed.
“Thirdly, he probably buys distressed properties and fixer-uppers for a living or side job and knows what he is doing. As you are obviously unaware, it takes considerable time, effort, knowledge, cash and risk to work in this profession. And that is exactly what it is - a job.”
Without knowing anything about this particular flipper, your comment makes it sound like any flipper at selected at random is a “professional”. Given the amount of recent information about the state of the market, I find your suggestion highly doubtful.
“First of all chances are good that the “flipper” has more money than you can count - so he’s not going to “lose everything”.”
Same critique applies to this comment. Let’s be honest, flipping (in this market at this time) is not something you do if you have “more money than a person could count.” In fact, I’d bet most people who have such vast wealth would find flipping a bit grubby.
Without knowing anything about this particular flipper, your comment makes it sound like any flipper at selected at random is a “professional”.
I meant “probably a professional”.
Yes, I made some assumptions. A property in that region that sold in 2002 for 137K (I believe) would probably be worth well over 250k. In order to get it for 160K, I am assuming some degree of experience.
How about commenting about the REAL point here: A good number of the posters here think this guy should burn in hell solely because he is going to make a large profit. Further, they have no understanding that people have made fortunes over the past 2 centuries in Real Estate. This is not some new phenonomen.
And finanally, these deals are out there. People don’t realize the work involved in finding them. Don’t begrudge people profitting from efforts others are unwilling to undertake.
From what I can tell, many people here want to do nothing but sit back until others go bankrupt. Then they will come in and buy the house they “deserve” at a price they deem fair.
You’re really irritating. Why are you on this blog? Not everyone is waiting to buy real estate as an investment. Some of us just want a home so, yes, we are waiting for the largest bubble ever in this industry to lose air.
You’ve made your point (over and over and over again - ad nauseum). We get it already - you invest in real estate, you’ve done well, good for you. Move on.
Well, you make a bunch of assumptions in your post which I will not address.
What I was refering to is that the comps said 220k, but he listed it at 299k, and wouldn’t go below 240k. That’s greedy to me.
Oh and by the way, people didn’t invest in real estate since 1700s, the world is much older than 300 years.
I’m sure there was some cave flipping back in the day
In 2002, the house sold for $91,500. Seven months later, it sold for $134,000. Current owner Domenick Vitale paid $160,000 for it last September. Two months later, in November, he listed it for $299,000. In December, the price dropped to $282,900. In late January, it was $265,000.”
Domenick Vitale is a greedy jerk.
The value of a particular property has NOTHING to do with what the seller paid. Vitale is not social welfare or a charity. He is a businessman.
Are you suggesting that everyone who saw their home values double over the past few years should say “gee, I only paid x and eventhough the going market price is y; I really think that is too much undeserved profit for me - so I will slice 30% off my price”.?
Yeah, if you want to sell it these days. Why are you even here?
You seem to know everything , and are trying to justify irrational thinking. Get on another blog where evryone is on the same page as you are.
Careful. As long as no one is trolling, a diversity of viewpoints is good. Dont want just an echo chamber. If va_investor can make his points fairly and without too much rancor, Im glad to read them.
Please explain what you mean by irrational thinking?
it’s sad that society is such that renting doesn’t even enter into the equation.
RENT RENT RENT.
that’s some list of repairs for a $200,000+ property.
Is this perhaps because you expected to just be handed the wealth your parents and grandparents worked their entire lives for.
And then the next paragraph is about a couple spending $10K in upgrades before they even move in!
When it’s all said and done, you can’t take it with you.
We’re all just “renting”.
I’m taking mine.
I plan to store all my stuff before I die, cyrogenicly freeze myself, thaw out and sell it on Ebay in 2310…That Baywatch DVD Season 8 set will make me a fortune…minus storage costs of course.
“Taylor closes his eyes for a moment. He can hear the music and smell the burgers and hot dogs grilling up.”
Does his lease have a barbecue exclusion? Mine does not; if I am in the mood for hotdogs, I can fire up the grill back out on my rented patio whenever the desire to own a home wells up inside.
well my fellow bubble bears i hear alot of anger and disgust.dont blame a re investor for trying to make a buck if you were selling you would do the same.re is a market and someday you will want to sell your own home.this is a bubble of epic proportions and good luck to those whomade money myself included.with that said there will be many deals to come in the coming years so be patient.this bubble is imploding across the country and it will take years to play out many flippers will be bankrupted beyond belief .in 3 to 5 years is the time to buy people wont be able to give the title to there homes because no one willwant that crappy re.that is when you buy.be patient$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$4
Does that mean we can make fun of ‘em in 3 to 5 years…can we?
I get your point bottom but I’m not angry, it’s just such good sport and personally guys like Dominek Vitale are like a big bloated pimple to me, just beggin to be squeeeezed.
It was interesting to read the investor and your reply to him. I have no qualms on making money in any market as I do it myself. We are all greedy to some extent maybe the flipper is just a little over exuberant in his pricing which will leave him with the house when Taylor and his ilk finally wake up to a new world. As the investor said there is a lot of bargains out there you just have to know when to buy and when to sell. To buy in this market now would not be a sound decision unless you are very wealthy and a loss would not affect you. All pointers look to a downward factor in the RE market. Also, lots of external factors now affect the US as never before. The national debt and a third quarter downturn in the economy, Iran (which Israel will one day bomb) Iraq and the upcoming civil war (Turkey to invade the Kurdish north once it gets out of hand) All these things will affect the US economy. We have many factors working against an economy that was fueled by cheap money. However, huge debt both government and private will reduce this spending power and ultimately our influence in this world. When Rome went from gold to lead because of debt it faltered and fell. We are doing that now with cheap money and increased spending of money we don’t have. We are relying on foreign governments to prop up the $ and our runaway housing splurge will also falter. I work in construction and all the companies we do business with predict a very slow third quarter. After that who knows but this bubble will take many financial and economic entities with it when it pops. It will not be a slow pop either but I think fast and furious when it finally blows in the couple of years at the most. America will not be the same country and neither will the rest of the world.
Mr. Morrissey,
Please take my lighthearted post in the spirit of its purpose. Sometimes with a Guinness in hand it feels good on a Friday night to talk about things other than inverted yield curves and the minutiae of median house prices. That’s more of a Monday type activity.
I have long thought about the United States’ future in the global stage. Yes you are correct about the fall of the Roman Empire, over extension of her borders, infighting and economic blunders all had a hand in it’s demise. I ask you this: At it’s peak and even after who could have imagined it ever ending? Or ask the British the same question in the 18th and 19th century. The sun never set on the British Empire until it did. The list goes on and on. Someone posted here a while back about the stages of cultures and societies where it starts with a struggle for freedom and evolves in several stages until apathy sets in and then devolves in a long (or short) slide down to oblivion or a ‘lesser’ prominence. What will be the role of the US in the 21rst century and beyond? Will China be the new leader? I do not know. What I do know is that no culture or society is immune to decline no matter how grand and no matter how powerful it is. Is the housing bubble a small piece of a much larger picture as you suggest? I would tend to agree. What will happen in the wake of the fiscal and political policies of the early part of this century is very difficult to determine. How we appear to ourselves and to the world in the aftermath is even harder.
Rainman
Hey it’s all risk-vs-reward. Though I personally fell the guy is a greedy idiot, If Dominck wants to risk the carrying costs and potential loss if/when prices go down, he can ask the moon for his property, who cares. He is what he is, and no one will be forced to buy the property at the current asking price, though he cetainly may be forced to sell it for a loss when he can’t carry it anymore.
I don’t blame investors for tring to make a buck. I blame them for whining and complaining when a buyer with some knowledge, intelligence and spine decides to pass up the ripoff they call a “deal”.
If you’re going to invest in ANYTHING AT ALL, you need to understand there are NO GUARANTEES. You can lose everything if market conditions change, and if that happens it is not the rest of the world’s problem.
I go to Costco and see the huge lines and a full parking lot.
The same people who pay 50% over on their house want to make it back by saving 7c on cheese.
The people who come to this board on a regular basis know how this is going to end; the trouble is the wait. Plus, you won’t get an honest answer out of anybody about how tryly bad of a deal they made…unless a lawyer tells them they can get their money back (+punitives), then they sing from the rooftops…
Hey, man, the polish sausage & coke combo for a buck fifty is pretty tasty!
LOL. I noticed that too. People happily take on fortunes in debt but they’ll cut coupons and drive across town to save cents on cheese.
The English have a saying: “penny wise and pound foolish” — that about sums it up.
I welcome the comments from VA investor. I really enjoy this blog (Im here every day) but the one-sided doom and gloom does get old.
I do agree with others: This fellow is greedy. Maybe he is loaded, and he can afford to wait. Maybe he’s a professional. I don’t know what he pumped into the house after buying it, but the way I read the story, he comes off as greedy.
Nobody is looking at his house, and he has an offer slightly above what the neighborhood homes are going for. And he’s NOT selling? Hey, you get what you deserve.
Risk Vs. Return
Isn’t life about having the unexpected take place? Whether good or bad?
Forced to ’settle for a way of living’ - sounds overly dramatic.
There does seem to be a sense of “entitlement” prevalent in certain of today’s generations, I am a late 40’s boomer and me and my husband never had these thoughts. By this, I mean thoughts that we somehow deserved to live a certain lifestyle -i.e. a prosperous good life in an upscale community.
In fact, in the early eighties we were quite depressed to discover that we could not even afford a 1 bedroom condo in a slum. The difference was that we were not angry, jealous and railing against ANYBODY. There was no thought that it was someone’s fault or that we deserved better.
We spent two years renting while we spent just about every weekend looking at houses. We finally found a fixer-upper that looked awful (on the inside as well as the yard). It had been a rental for years - shag carpet soaked in cat urine, coppertone and avacado appliances, etc.
It was a steal and we bought it on the spot from the investor owner for 95K. Put 5% down and got a 1yr Arm (yes, in the mid-80’s). Sold it exactly 2 yrs later for 190K and haven’t looked back.
I fail to understand today’s “entitlement”, anger, envy, rage, etc.
lovely! so presumably your diligence in waiting and looking included fixing it up too, right? adding value by removing the catpiss and such?
Try addessing the point - blame and entitlement.
I saw this same story and two words come to mind- arrogance and greed. I hope Mr. Vitale sits on this house and watches the price go down to where he bought it. If anyone is familiar with this area. Liberty City is like Watts or South Central L.A.. The guy tries to flip the house 2 months after buying it for and wants almost 100% more than what he bought it for. Talk about absurd.