“The Last One In Loses”: California
The Union Tribune reports from California. “In a sign that San Diego County’s once-soaring housing market has returned to earth, analysts say the number of homeowners seeking mortgage debt forgiveness is on the rise.”
“Such transactions, designed to prevent defaults, often are called ’short sales.’ They occur when home prices fall and mortgage debt exceeds the value of the property.”
“Short sales are ’something new and, to be honest with you, something kind of scary,’ said Erik Weichelt, a San Diego real estate broker who specializes in foreclosures. ‘If a short sale doesn’t work, it becomes a foreclosure. When prices went up, people got in over their heads.’”
“One of those people was José Padilla, who used an adjustable loan to become a first-time homeowner last year. He recently decided he no longer could afford to pay his mortgage or the homeowner fees on his three-bedroom condo in Paradise Hills. Facing foreclosure, he views a short sale as his ‘best option.’ ‘I do know it will impact my credit score,’ Padilla said.”
“Sandicor CEO Ray Ewing said only five listings in 2005 contained the words ’short sale,’ out of 41,492 sales of attached and detached homes in the county. As of Nov. 20, short sales were noted for 55 listings, out of 27,571 total sales.”
“‘We’re doing a whole lot more loan modifications,’ said Robert Padgett, whose job is loss mitigation director at Freddie Mac. ‘We are starting to hear the same sort of rumblings you already may have heard, that it is not very far off,’ he added.”
“According to DataQuick, locally the number of default notices, the first step toward foreclosure, was 1,025 in October, nearly three times the number filed in the county a year ago.”
“Lenders enabled more buyers to qualify, but they also raised the risk of default, said Dennis J. McKenzie, a real estate instructor who teaches short-sale courses in Southern California. To keep buyers in the marketplace ‘lenders had to Mickey Mouse the financing, liberalize the financing,’ he said. ‘It’s gotten to the point of no money down, interest-only payments, negative amortization.’”
“Many buyers who entered the market at its peak, in November 2005, have realized little or no appreciation, he said. ‘It is like a chain letter. The last one in loses.’”
“Padilla purchased his Paradise Hills condo in April 2005. Tired of ‘throwing my money away’ on rent, he visited a mortgage broker to see if he could qualify for a home loan. ‘It was just at a very high interest rate. I put zero down. The only thing I had to come up with was the closing costs, which were about $11,000,’ Padilla said.”
“Padilla said he took out an adjustable loan with a starting interest rate of 8 percent. Long before his monthly payments were scheduled to adjust upward, he began to buckle under the weight of his debt. When he put the condo on the market in March ‘I did not get one single offer. I tried refinancing and I couldn’t because the value of my home went down.’”
“In October, Padilla stopped paying his mortgage and homeowner fees. Padilla said he left because he felt overwhelmed. ‘It was just too much.’”
“Padilla said he recently was offered $295,000 for the condo, but that’s $60,000 less than he owes. To make the sale work, the lender has been asked to forgive the difference.”
“For the first time in a decade, the number of residents who left California for another state in 2005 exceeded newcomers who moved here, according to the newest figures from the state Department of Finance.”
“California recorded a domestic net loss of about 29,000 people last year, the first negative flow of residents since the mid-1990s. Anecdotal evidence suggests the high cost of housing was the primary reason people fled the nation’s most populous state.”
“Stephen Gallant moved to Michigan this summer after nearly three years in the posh Silicon Valley suburb of Los Gatos, trading a $2 million house for one in a Detroit suburb that was about half the cost and double the size. ‘If I’m going to spend $1 million on a house as opposed to $2 million, that opens up a lot of purchasing power, the ability to go out and do other things,’ he said.”
“Wayne Brown gave up $40,000 in income to move from the Bay Area to Kansas. And he feels great. It got to be too much last year: the commute to downtown San Francisco that sometimes took two hours, the housing-price spiral, and the high-wire borrowing that paid for it.”
“‘I would find myself sitting in traffic,’ Brown recalled, ’screaming at people.’”
“When the Kansas job came up in early 2005, Brown and his wife, Teresa, sold two Bay Area homes and happily settled in a suburb of Kansas City. They have never looked back.”
“California leads the nation in the number of homes going into the foreclosure process with 136,444 so far this year, up 68.5 percent from 80,989 in all of 2005, according to figures compiled by a Fair Oaks-based real estate investment advisory firm.”
New Math:
I put zero down.
The only thing I had to come up with was the closing costs, which were about $11,000,’ Padilla said.”
Huh? You put zero down - but gave them $11k.
I’ll bet that the 11 grand was spread between a couple of gold card advances.
Don’t you know it. And he’s worried about his credit score from a short sale AFTER not paying the mortgage for several months?
I don’t understand this manical willingness to fall on your financial sword to preserve the credit score. If you can’t pay your bills now, what good is the credit score going to do you anyway?
I don’t even know what mine is and could care less.
The problem with really bad credit is it can make it hard to rent and even get a job. Of course I recon this guy knew he would not be able to make the payments when he bought the place if prices fell, which at the time was inconceivable of course!
There is something weird going on our public schools. One of my hobbies is getting kids to open up IRAs and I keep hearing the same “Don’t I have to get a credit card to start establishing credit?” from kids when we talk about savings / debt.
It must stick because I can see we have people going down in flames and the only thing they’re worried about is their credit score.
Txchick57,
For some reason people treat their financial score as if it were the Holy Grail or something. They are willing to absorb any type of hit to maintain it.
I think that they believe that as long as the score is preserved that they may one day use credit to buy whatever the next “Big Thing” is, in order to sell later to get rich quick without any real work.
It is my belief that this is why so many people will endure anything in order to keep that score intact. Does anyone else have any ideas as to why the madness to keep the score intact????
Well unless you have a rich Uncle Henry, access to capital is pretty much restricted. You can either go see Vinny and put up your legs as collateral, or fill out a form online for instant approval for credit. Considering that so many people are in a situation where they have all of their paycheck going to bare necessities (lets just say food, shelter, transportation) there isn’t much left over to acquire the accoutrements that make modern life worth living.
What percentage of folks that purchased a PS3 actually had the cash to pay it?
Could it be somewhat location specific? I’ve noticed that here in Vegas lots of employers run credit checks before making a final job offer, regardless of the type of job or level of responsibility. This includes jobs that have nothing to do with finance. That’s something I hadn’t run into in other cities.
Also, auto insurance rates here are partially dependent on your credit rating, as are auto loan rates. Finally, it can be difficult to rent an apt with bad credit, though apparently that’s not the case if you want to rent a house. I often see signs advertising houses for rent saying “bad credit no problem.”
Bottom line: The cost of living is higher here if you’ve got bad credit.
Sorry. This comment was in reply to Txchick’s question, above.
SCS,
From the stories coming out, it seems there should have been more restricted access to capital.
Peggy,
I understand how having bad credit could hamper you - in truth it probably keeps the idiots from doing more mischief to themselves - but where was their concern for their credit scores before they took on a half million dollar liability on a 30k salary?
“There is something weird going on our public schools. One of my hobbies is getting kids to open up IRAs and I keep hearing the same “Don’t I have to get a credit card to start establishing credit?” from kids when we talk about savings / debt.”
When I bought my car at 21 straight out of college I had to pay a high interest rate just cause I had no previous debt/credit history. The lowest any bank would go was 15%, and I wound up having to go through Chrysler Financial (at 8% I think).
I am just trying to get it paid off early instead of switching.
Right,
That does not sound like zero down to me. It sounds like $11,000 down.
Except that closing costs do not go toward the purchase price of the house. It just pays for the transaction and loan to occur. This money ‘goes down the drain’ unless you can ‘make up for it’ with appreciation.
loan boys make big money on fool
Repost by me. Some of my posts aren’t getting accepted for some reason.
“early signs of credit distress” in financial institutions’ holdings of so-called “subprime” mortgages.
2 or 3 weeks ago you didn’t hear anything about MBS holders in the news. Now it is a daily occurrence.
http://biz.yahoo.com/ap/061211/home_mortgages.html?.v=2
Mortgage credit is going to/ HAS TO tighten significantly now. This will be the start of the real bubble bursting. What we have had thus far is just a precursor to what is to come.
Agree - so far only the weakest have died. Like the flu killing the elderly and children first - then hit will hit the “healthy”.
Or you know, like in the disaster movies, where the dumbasses get killed first and then we work forward to the hero. Posideon Adventure for example.
LOL! Ha!
An excellent example…
Txchick,
That is one of my favorite movies ever. Would you say the reverend Scott is a hero or a dumbass though? I know Mr. Rogo was a hero of sorts. I cant figure out which of them was more the hero.
Shelly Winters “BIG” hero in that one…
I think she drowned … still very big ……
Does there really got to be a morning after?
Flu? I think you mean Ebola virus.
“What we have had thus far is just a precursor to what is to come.”
Agreed. It is indeed a worst-last storm…
(You will have to google hard to understand this, or else read this book:
Under the Whirlwind: Everything You Need to Know About Tornadoes but Didn’t Know Who to Ask (Paperback)
ISBN: 0968153704 )
One of those people was José Padilla, who used an adjustable loan to become a first-time homeowner last year.
Okay probably not the same guy but no doubt they probably would give an adjustable rate loan to a terrorist in prison.
Call me jaded, but this thing is just starting, and I’m already getting tired of these Joe Everyman stories about how “I bought a million dollar house/4 houses on $50K of income and now I may lose it all.”
Plenty more of these to come, I’m sure. A year ago this guy would have laughed at anyone who told him it was a bubble and he wasn’t going to make $200K like the greedy slobs before him. Now he (and countless others to come) will be quoted in the press, pointing fingers because they never assumed borrowed money needs to be repaid eventually.
Why would you be overwhelmed even before the loan adjusts?
Jose wanted to get in the game, plain and simple. He knew he was not throwing rent away, and that this loan made zero sense. Effortless riches was all he saw, and all he planned for. The re-fi’s were the plan, and when that dried up, oops.
Yep I agree. If the market had continued to rise he would have been a genius. Now he is a bagholder, too bad for him and the previous seller is just happy to have his money.
Yep,
Our pal Jose had no backup plan, nothing. Just a blind faith that he was going to hit blackjack.
Jose did not know he was playing blackjack — he thought the gains were “in the bag.” Gary Watts told him as much…
The gains are in the bag, he’s just in there with them….
imploder always smells contents “bag” before purchasing. suggest Padilla should have done same…
“In October, Padilla stopped paying his mortgage and homeowner fees. Padilla said he left because he felt overwhelmed. ‘It was just too much.’”
Sounds like he sure is letting it go pretty easy…. But Easy come, Easy go. There in lies the problem with what has occured. The money was TOO easy to get.
A year ago this guy would have laughed at anyone who told him it was a bubble and he wasn’t going to make $200K like the greedy slobs before him.
Damn straight he would have said that. You bet. He would have said exactly that.
“Call me jaded, but this thing is just starting, and I’m already getting tired of these Joe Everyman stories about how “I bought a million dollar house/4 houses on $50K of income and now I may lose it all.”
i agree qith your comment, but 2 years ago he would have been hailed as a genius investor and future millionaire
funny how things change so fast
as for the credit score thing, i beleive it is important to have a high score, it makes anything you buy with terms alot cheaper, and in nyc alot of the companies do run credit checks for the pre employment screening, my wife is starting a new job in 07 and had to get her credit run and a drug test
i guess if you have a horrible report-and owe major manoey they may feel you are a theft risk or fraud
major money -sorry it’s been a long day
Well, I guess in that case, if all of these people whom lost all— may not be able to get jobs because thier credit stincks. Then that means there will be less people in the work force.
“as for the credit score thing, i beleive it is important to have a high score, it makes anything you buy with terms alot cheaper, and in nyc alot of the companies do run credit checks for the pre employment screening, my wife is starting a new job in 07 and had to get her credit run and a drug test”
The difference between having a CC score in 800’s and one in high 600’s-low 700’s is that you pay average 15-20 % rates on CC’s with the low scores and with a high score you can obtain FIXED rates on cc;s at around prime rates(7-8%)or in a few cases below prime for those with almost perfect credit(3.99-4.99 percent balance transfer for life ) In LA credit scores seem to count for little as far as getting stuff like autos or getting low-level jobs. But then a large % of LA population operates cash-only.
My Citibank rewards credit card offered me 3.99% for life on balance transfers or checks, and I tried to get them to waiver the 3% transaction fee but they refused so I refused their offer.
Here is the catch on these “for life” low interest deals:
They can increase your minimum payment to any amount at any time, and they can increase your interest to the “default” rate of 32.24% if you forget to tithe at church on any given Sunday or dispute anything with any merchant.
One story I read said employers dont want new hires with bad credit fending off collection calls, worrying and wasting time dealing with personal finance issues on the job.
SFer: heck yes, there are plenty more of these to come. This is going to get wicked, especially since so many still seem to believe our economy is healthy. If you are still in the city, have you heard anything about how sales are going at Rincon Hill, Watermark, and Infinity? Drove over the bay bridge today, and am just having a hard time believing these condo towers will be successful, but you never know. Strange things happen in SF.
Well, SF has no deficit of real estate zealots who believe you can’t lose money here. Maybe in Sacramento, Phoenix, Vegas, etc., but not “here” because “it’s different.”
That being said, from anecdotal knowledge, all the new towers are selling. Not selling out, and not going for asking prices, but inventory is moving. I know several have had price reductions already or are offering incentives (especially loan buydowns). But there are two types of buyers for these places:
1) The truly wealthy who can afford a $1.5MM condo - they don’t care if prices fall. More of these people in SF than everybody on this blog likes to believe, unfortunately.
2) The last remains of speculators who get a toxic loan and spend $800K on a one-bedroom thinking they’ll flip it in a year for $1MM.
But in terms of real buyers (i.e. working couples/families who are looking for homes to live in full-time)…..not much moving at all here. Hope that answers your question.
SFer,
I agree that there are a lot of folks in SF who can afford a 1.5MM place. The problem comes those who have bought/are buying whos abilty to buy is marginal. You really can’t swing 50% of your gross got mortgage payment in a flat or declining market.
If you can by with 20% down and at 30% - 40% if your income wiht a fixed loan, you’re fine. If you have to get into that place with 0% down and 50% of your income to make the mortgage, you’re hosed.
I think there are more of the latter than the former. We’ve heard from two of those today.
IIRC, the consensus said that in the second half of ‘06, we would begin to hear these stories emerge. And that in ‘07, when the real adjustments to the 2-year and 3-year adjustables occur, that these would be common place.
Once again, the consensus opinion on this blog has been eerily accurate. The rest of it (especially the REIC pronouncements) are simply noise.
Frankly there is not that much big money in the city. The high rollers live in Hillsboro to the South and Mill Valley in the North. So who is left buying 1M condo at 1,000 sq ft in SF city? Not retirees… too expensive…
I know a guy in the city who makes no more than $90k per year and has a neg-am on his primary residence, which is a million dollar + condo in Pacific Heights. He also bought a condo to flip and last I heard was still bleeding using it as a rental because he could not sell to cover. Sure, there is plenty of money in SF, but how many are there like my friend? That’s the real question.
There are going to be people who stretched too much to live in SF. That’s awlays been the case — it can be 90k in pacific heights or grad students in the Mission Dst. who scrap by off a stipend.
I don’t see any signs the SF market will crash - high vacancies and high inventory.
Price corrections and individual losses are going to happen and prices will have to come down for many places but overall the economy hasn’t soured nor The City lost its appeal.
High prices, high vacancies, high inventories are enough to make prices correct. All three are in place.
The rest of the bubble is enough to force a crash and to correct the “robustness” of the economy. Sure, some places will fare better than others. SF is such a place. It’ll do better that Bakersfield and Modesto. I don’t think that says as much about SF RE as it does about Bakersfield.
What have they actually ended up charging him with? Anything?
last i checked “innocent untill proven guilty” was the American way.
haha.
heeheehee.
BWAAAHAHAHAAAAHHHAAAAA!!!!!!!
God that was funny. Innocent until proven guilty. Stop it.
You are so cute when your being so gullible.
i guess you haven’t checked for awhile.
That’s pretty good.
“Innocent until proven guilty.” is still the rule. However they can datain you indefinately (=jail you for life) without bothering to go through the pesky business of determining guilt or innocence. Should save money on all those pesky courts and lawyers. We just need more foreign prisons.
By the way, everyone, Paradise Hills? It ain’t no paradise, I’ll tell you what.
shortsales 101, if jose has and meat on the bone, the lender is not going to roll over and take a $60,000 hit. if he’s broke, they’ll let him walk, then file a 1099 to the irs for the difference (debt forgiveness). i’ll bet a dollar that these flippers with assets think they’ll just have to attend a short sale seminar and then hand over the keys, and their trouble will be over.
Not to mention that, like Casey, they think they can walk away totally unscathed credit wise. Mindboggling.
“early signs of credit distress” in financial institutions’ holdings of so-called “subprime” mortgages, especially in California.
2 or 3 weeks ago you didn’t hear anything about MBS holders in the news. Now it is a daily occurrence.
http://biz.yahoo.com/ap/061211/home_mortgages.html?.v=2
Mortgage credit is going to/ HAS TO tighten significantly now. This will be the start of the real bubble bursting. What we have had thus far is just a precursor to what is to come.
I posted this before but it didn’t post for some reason !
Casey Today:
Oh Lord, won’t you help me to unload this debt?
I’ve too many houses, I can’t sell them yet.
My credit is wilting, but me website is fine,
Oh Lord, won’t you help me, my life’s on the line.
Casey Next Year:
Oh Lord, won’t you help me, I can’t get to sleep.
‘Ol Bubba will hear me, if I so much as peep.
He said he’d protect me, but the price is so steep.
This jail cot is lumpy, Oh Lord help me sleep.
Casey in 5 to 10 Years:
Oh Lord, won’t you help me, probation is hard.
I can’t get financing, they call me a ‘tard.
I have no employment, I sure need a job,
Oh Lord, won’t you help me, probation is hard.
Oh Lord, won’t you buy me a two-bedroom flat?
My friends all own condos, now what’s up with that?
I work all the day long to pay all my bills,
A coke and a burger, would you like fries with that?
Oh Lord, won’t you buy me a Hummer H2?
I slave at my workplace, I sling all this food,
Oh prove that you love me, and I won’t be rude,
So Lord, won’t you buy me a Hummer H2?
Some people never learn. I’m guessing Casey won’t either.
Hilarious. Well done.
Yes! well done.
Posts like this are adding to the weight of “Ben’s Housing Bubble” book, which just adds to the cost ….. very nice work sm_landlord.
Please don’t say that name. I get the shivers every time he’s mentioned. It’s kind of like Voldemort in Harry Potter. Let’s call him he “He-Who-Must-Not-Be-Named” or “The Moron-Who-Must-Not-Be-Named”.
These people just don’t realize that bankrupcy isn’t something that they should be trying to avoid. They should be trying as hard as they can to get bankrupcy protection. Of course in his case, public admissions of fraud probably means that he can expect to be made an example of, rather than hope that his creditors will sweep him off stage with some short sales and a bankrpucy proceeding. They they can say “See, just a few bad apples, there are not problems with the industry as a whole. Move on, nothing to see here, no need to look at our books, just keep buying our bonds.”
Maybe they will take all their money out of the bank and hide it in a jar in the yard and claim their broke. The bank might figure well we take this thing back at a loss via short sale or have to take more time and money foreclosing on it. I’m sure they have some calculations to figure out the breakeven point on a situation like this. In a falling market maybe they are just better off to take their losses in a short sale and sell the pig quick.
If he does, that the bank records will show it.
They will come after him, particularly if it is over $10K.
I think before they give this guy a short sale they should require a showing of his bank account for the last 12 months or so even prior to the purchase . That would give a clearer picture on his financial ability as well , if he took a cash kickback on that sale to begin with etc. If this guy is still employed I don’t know that he should get a short sale .
Don’t get me wrong ,the people that made the loan and sold him the property took advantage of him, but he
signed those loans docs ,might of lied on his application ,or he does qualify and he just wants to get out of a bad investment .
I get nervous when real estate people start to hold seminars on “short sales “.
This is what I like about reading here ….. excellent questions are generally answered by the end of all comments on a thread (topic; short sales).
A few posts down, ‘Sensible Lender’ describes issues in the short sale being possible at all. So that, “At the end of the Day” ……
you grasp a better understanding of the situation people are in.
ISTM that a decision to accept a short sale has nothing to do with the past and everyting to do with the future. Does the assets that the bank can go after that are worth more than the costs (especially the inderect costs) of foreclosure. There’s little point in seizing a $1245 checking account furniture and personal belongings that will net $562 at auction (his car is probably upside down or leased anyway) when the process of foreclosing, preparing the house for sale, and selling it will cost much more.
“early signs of credit distress” in financial institutions’ holdings of so-called “subprime” mortgages, especially in California.
2 or 3 weeks ago you didn’t hear anything about MBS holders in the news. Now it is a daily occurrence.
http://biz.yahoo.com/ap/061211/home_mortgages.html?.v=2
Mortgage credit is going to/ HAS TO tighten significantly now. This will be the start of the real bubble bursting. What we have had thus far is just a precursor to what is to come.
Will Dems or repubs want to own that piece of legislation, since, it will appear to the dumb voter as though the last person holding the bill was responsible for the housing collapse by interfering in the free market.
you betcha
When I tried to short sell my house in 1997, the lender would not even entertain the proposal. The bank said they would rather foreclose on the house so I had to pony up some cash at the closing table. The banks will go after your last penny or maybe it’s different this time.
How many months of not paying did it take before the bank actually decided to foreclose on you?
There may be many more REO homes on the market this time around though.
Probably many more at this rate. I wonder how these effect the comps in an area?
If there are more than a couple, they are the new comps. OTOH, there is one foreclosure in my Zip and they want more than other, better houses on the market for!
I have to borrow money (~$10,000) from my girlfriend (now wife) to bring to closing so I can get rid of the house and buy another one together. Noticed I used “get rid of the house” phrase. It was a bad feeling paying for a house that is worth less than the mortgage. I’m sure these people are feeling the same emotions.
I’m intimately familiar with this from 1986-1990. Even on a 15 year loan…I was counting the principal decrease every month with every check noting how many years till I got back to even! Luckily, it was an FHA assumable and found someone to assume with 11 years left at about 20% underwater still.
With a change in BK law do you think it will be better or worst?
I don’t think most people are even aware of the changes in the BK law - that the banks can go after the debtor if they refinanced the mortgage. Maybe somebody more familiar can explain this.
If you’re referring to the refinance landmine in California’s antideficiency statute, that’s not part of the BK law changes. It’s actually been in place since the beginning. The antideficiency statutes only apply to purchase money loans, which refinance loans aren’t.
When I tried to short sell my house in 1997, the lender would not even entertain the proposal.
That is probably because short sales comprised about 00000001 % of all transactions in 1997. Today with tons of them on the horizon they may be more apt to agree to some sort of loss to save some cash.
Give it 2 years…
I tried to short sell my girlfriend’s house with Wells Fargo. I told them she would go BK if they didn’t accept… they didn’t accept the short sale and let her go BK. She also got a 1099 but the IRS backed off after I sent them the discharge. Wonder if Wells Fargo is more reasonable these days?
“She also got a 1099 but the IRS backed off after I sent them the discharge.”
So she got off the hook?
Yes, after numerous phone calls and letters. Of course her credit was ruined, but then so was the house, after her son got through with it. I’ll never understand why Wells didn’t agree to the short sell they lost 50K on that deal.
“California leads the nation in the number of homes going into the foreclosure process with 136,444 so far this year, up 68.5 percent from 80,989 in all of 2005″
We’re number one! We still have a ways to go to catch up on Florida and Texas in percentage terms, but that is only a matter of time as an earlier article noted that California has more than 50% of all neg am loans (over 580,000 of them). Let’s see how long it takes First American to revise their projections for the number of foreclosures arising from exotic loans.
What would happen if a major subprime lender goes under before the mass of sheeple can get foreclosed upon ?
then the MBS owners are left holding the bag…
Would that just delay the foreclosing whilst Bankrupt lender get reorganized ?
No
What would probably happen is that the MBS holder (a hedge or pension fund or similar) would sell the defaulted paper to a collection company at a discount to par, rather than going to the trouble of hacking through the foreclosure thickets itself. There would be virtually no delay at all — the bad paper gets sold and the collection firm — a specialist — goes to work right away.
“Sir, I’m calling from Finnance Collection Specialists. We’ve bought your mortgage and it is our mission to make your life hell untill you pay us back.”
“Don’t I recognize your voice? Hey, you’re the vulture who convinced me to buy a neg-am mortgage with a 20k prepay!”
“Will I did used to work for Crapgar Mortgage but they went belly up in ‘07. I was lucky to find this job working collections. Now about your loan….”
“
The State should lead the nation in total foreclosures - it leads in population.
The comment that short sales are “new” is not true: There were many of them in the last cycle.
The lender will ask for a financial statement to make sure the borrower does not have the income to make the payment or assets to cover the shortage. the statement is part of a legal contract, so lying has consequences. If the person can make the payment, but does not want to because of negative/decreasing equity, too bad. If there are other assets, the person is expected to use them. The lender approves the sale and price and terms.
The person’s credit report will take a big hit as described in the article when reported as a settled debt. The person may have to answer yes in the declarations section of the uniform home loan application (when it is a deed in lieu.) The person will get a 1099 for forgiveness of debt and pay taxes on it. The person will pay high subprime rates and fees for future home loans.
There is no free lunch. I am seeing more listings here in coastal Los Angeles with Short sale wording. And even
They gouged this guy for 11k in loan fees ,(god knows what the agents made on the real estate deal ),and now its going to cost them 60K or more .This guy couldn’t even last a year . Somehow I think that the realtors and mortgage broker knew this guy was in over his head ,but it’s all about commissions isn’t it .
Sure this guy was in it to make a profit ,but a zero down loan on a guy who couldn’t even last a year .
I hear a lot of these folks don’t even make it to the first payment. The lender and broker probably had some nice dinners and drinks on this dude.
and the worst part is that he was led to believe it is a zero down transaction!
Where in Coastal LA are you referring to?
Everyone is saying that prices have bottomed out, and in the South Bay at least, I haven’t even seen prices move a bit. Inventory is up a bit from last year, but it is all selling albeit slower.
I’m beginning to think that it will take years for the South Bay to see a major correction. It’s a complete joke.
jj, I’m seeing the same; the South Bay beaches are different, but are not bulletproof. When inventory swells this spring, it will be the sellers, not the buyers, who blink first.
Loss of population in CA not true, we have more entering from South of the border than are leaving in an Easterly direction.
AG speak: Avoid dollar
http://today.reuters.com/news/articleinvesting.aspx?type=hotStocksNews&storyID=2006-12-11T184752Z_01_NYJ000182_RTRUKOC_0_US-MARKETS-FOREX.xml&WTmodLoc=NewsHome-C3-hotStocksNews-2
They probably mean loss of officially counted population; probably going by statistics that the illegal population is not part of.
“Loss of population in CA not true, we have more entering from South of the border than are leaving in an Easterly direction.”
Let’s call it “loss of McMansion purchasing power” then.
Loss of interest in buying McMansions.
“throwing money away on rent” is such a bargain now… and it’s absurd. for a month’s rent the cat and I get a nice place to live. how is that “throwing money away”? I’ve never understood this expression as anything other than a booga-booga scare tactic from RE shills.
Seriously. If I were to try to buy here in Cali, I’d have to settle for a complete pos, use a suicide loan, and still be struggling. Renting, I pay a fraction of that, can move whenever I want, and have money left over to save and to spend.
exactly! I save like 70% of my income as we speak, renting an entire house, with a yard, garage, garden, and a safe neighborhood. Buying would mean an almost total stark opposite situation. If I bought NOW, 75% of my income would go to the mortage, the rest to food and bare survival supplies. The house would also be in a crime-ridden neighborhood and likely be about half the size of the one I rent. ironic isn’t it?
Renting is better, no doubt. I like what people say when asked where they live and they say I do not live anywhere I rent in “blank blank”. Plus if they ever need to move they can just get up and go. Renting has so many advantages. It is way cheaper to rent than own. I think people who say they are wasting a house payment on rent are the real fools. I ask well how much was that new kitchen refurb, or landscaping, or how much did it cost you when your punk kid trashed your stucco crap box with that six keg party he had when you were out of town.
I’ve owned since ‘84. Got out in late ‘04. Renting is fine, I’m quite enjoying it, but there are true benefits to owning in a rational market. We are looking to own again.
One benefit is selling when the sheeple are paying top dollar.
That being said, I wouldn’t buy in this market, even if the house was 20% below comps. In a few years it’ll be 30% to 40% below, and I’ll have my pick.
oh jetson but you will never build any “equity”
the next person that says that to me i think i will puke on them
Hey mgnyc….If you don’t own, you’ll never build any equity!
(HA, now you need a new keyboard);)
Blogs are fun when you can pull practical jokes.
“I save like 70% of my income as we speak, …”
Beware of helicopters dropping freshly-printed greenbacks…
Many years ago there was a financial guru on PBS named Venita Van Caspel. In one of her books she compared rent vs own figures for housing. In her example, the renter saved and invested the difference between ownership expenses and rent. Final analysis? A wash, with the renter ahead by a nose.
“Many years ago…”
Years ago Joe Sixpack could count on a steady job and a defined pension retirement. Joe Sixpack Jr., on the other hand, will likely be forced to move several times in his career introducing family friction while his income growth will likely suffer due to illegal immigration and offshoring. Joe Sixpack Jr. will probably be better off renting until the GSE(s) are layed to rest.
I think you’re right on the money about J6PCK Jr. That has been my experience since the mid nineties.
That’s right rms. What is befuddling is that those changes you mentioned started decades ago, and yet so many people still buy into the defunct “American Dream” crap dished out by the RE industry this past decade. How else could we have had this bubble unless so many remained so convinced that they would have Joe Senior’s lifestyle. How else can one explain McMansions and $300k one bedroom condos? There’s only one explanation that fits - the sheeple’s sense of entitlement to a lifelong career and ever escalating wages.
History began before 1945.
“One of those people was José Padilla, who used an adjustable loan to become a first-time homeowner last year. He recently decided he no longer could afford to pay his mortgage or the homeowner fees on his three-bedroom condo in Paradise Hills. Facing foreclosure, he views a short sale as his ‘best option.’ ‘I do know it will impact my credit score,’ Padilla said.”
At least his mortgage broker and RE broker did fine, like they say 2 of 3 isn’t bad unless you aren’t one of the two.
‘It is like a chain letter. The last one in loses.’
sounds so much nicer than
‘Ponzi scheme. The last ones in lose.’
Hey. Housing bubble gets a mention in the “Ponzi scheme” wiki entry.
‘It is like a pyramid scheme. The last ones in lose.’
Fixed it.
“Padilla purchased his Paradise Hills condo in April 2005. Tired of ‘throwing my money away’ on rent,”
There is another “throwing my money away” on rent guy.
Where did this throwing my money away on rent stuff originate? I am 41 years old, and everyone I have ever known has parroted this saying as long as I can recall.
People accept this throwing my money away on rent stuff like it was the 11th commandment brought down from the mountain by Moses or something.
And one of the saddest things is, if he had kept “throwing his money away” he’d still have had a place to live but they wouldn’t be able to say “that’s $60,000 less than he owes”
Captain Jack said: Where did this throwing my money away on rent stuff originate?
I think it goes back to the time when you could buy a house for just a little more than rent. The idea was that if you put your rent money into buying, you were at least acquiring something. That is presuming you were paying part of your principal every month. At some point “throwing money away on rent” became in reality “throwing money away on mortgage”, but we kept using the old mantra as if it were still true. It is one of those truths that stop being truthful but everybody keeps using them because it is convenient or because they are lazy. Actually, I had not realized how skewed the numbers were until I started reading these blogs. Then I found out that the people who bought in my condo building in the past 2 years are paying as much as three times what I am paying for renting an identical unit.
hey cassiopeia
at least they “own it”
we here are mostly just bitter renters who continually throw
money away but at least in my case and many others i’m sure in a bank or some investment vehicle is where we “throw our money”
call me crazy but shouldn’t that also be called equity
I think the statement “throwing away your money on rent” is true only in this very specific set of conditions:
- A house payment is the about same or less than rent
- You plan to actually pay off the mortgage to experience as many years as low cost living as possible. A paid off house that requires only maintenance and taxes is almost always lower cost than renting.
Other than that situation homeowners are “throwing their money away” on: interest payments, transactions costs with each move, and maintenance costs. A few moments with amortization table would show most people that on high $ mortgages, the interest payment alone equals the rent.
And how many people today pay off their mortgages? They move on average every 5 years and use their house like an ATM. Buying a house in this market is a surefire way to life long mortgage slavery.
Exactly,
@cassiopeia: It is one of those truths that stop being truthful but everybody keeps using them because it is convenient or because they are lazy.
Another one is to buy as much house as you can afford. That held true for a 30 yr. loan at 30% of income with a 20% downpayment in a normal market. Over time your income will increase and inflation will erode your debt, so it makes sense to stretch for a few years so you won’t have to move later on.
For today’s toxic loans, this is the kiss of death. Yet, the adage remains.
Well you actually don’t have to pay off the house completely to benefit from ownership in a normal market. After say, 20 years of payments you’re paying almost as much principal as interest. If you assume that equivalent rents go up by 3% a year, the rental equivalent value has gon up ~80%, but you’re still paying the same total P+I. In a normal market, it isn’t worth buying if you’re only going to live there for a few years. When it evens out is determined by interest rates and inflation.
re: throwing money away on rent.
Unfortunately, most people aren’t rational about the rent v. own decision. They think they are “throwing money away” by renting because it’s sounds smart, and a RE agent said it to them once. The reality is that both renting and owning entail big cash outlays to a third party. In the case of renting, you pay the landlord. In the case of owning you pay interest to the bank (assuming there is a mortgage), taxes to the local government, maintenance to the roofer, electrician, plumber, landscaper, etc. and insurance to State Farm or whomever. Both renting and owning involve “throwing money away”; the question is how are you going to throw LESS money away….
In a normal, rational market, with a normal, rational loan, at the end of 30 years, you own the house, where as you don’t at the end of 30 years wiht renting.
For the normal Joe, buying (in a normal market) is kind of an enforces savings plan. Were it not for the principal payment, they would probably not save anything.
But, not that the gubmint has the hands so deeply in homeowner’s pockets, a lot of that concept is not true any longer. I think the outcome of the bubble may give a whole new shine to renting vs. owning.
“People accept this throwing my money away on rent stuff like it was the 11th commandment brought down from the mountain by Moses or something.”
If you are a RE agent, this is the FIRST commandment! Looking forward to the Realtor handle being equivalent to a scarlet letter.
A little historical perspective. Those of us whose grandparents lived in this country, half of them lived on a farm before World War II. That’s less than 70 years ago. You live on a farm, you work a farm, you’re gonna be a lot better off owning that farm. When it comes to providing skilled labor in cities, the results vary. Compare Buffalo and Los Angeles, today and a century ago.
of ‘throwing my money away’ on rent, he visited a mortgage broker to see if he could qualify for a home loan.
YEP, he sure was throwing money away on rent. He probably could have paid rent for at least 6 mos to 1 yr on that $11K he invested in the MB commission.
of ‘throwing my money away’ on rent, he visited a mortgage broker to see if he could qualify for a home loan.
My family is proud to be counted in the 29K that left CA due to high housing costs. Hope the folks from ’south of the border’ can pay the $1M for some tract house POS in the LA, SD, SF, and Sac areas.
Because throwing it away on intrest is soo much better.
I am an underwriter who moved from San Diego to Dallas 2 years ago. I worked in Wells Fargo’s short pay and hardship mod department from 94-97. This is turning out to be a repeat of what happened before…
The cute trick will show up in the future. When prices drop by 40% then people will buy a better home in a better area for 30-40 percent of what they owe on their present home and then walk from their present home. They will try for a short pay but will be OK with the F/C. Oh and they usually buy new cars right after they buy the new home but before they walk from the old one….
I saw it far too many times…they just laugh on the phone and tell you: “What are you going to do to me….”
I would say: “Karma man, Karma”
If you’re in Dallas now, you’ll see plenty of that there too. Maybe more.
“Karma man, Karma”
So could this be Karma for the greedy mortgage cmpanies who put people into homes they couldn’t afford, without checking their ability to pay?
Couldn’t you just sue for the balance, get your judgment, the judgment gets recorded, it’s a lien, and if they ever sell the second home, you get paid? No dice in CA? It works in PA.
He’s probably talking about “purchase-money” loans: In California, if the lender is loaning you the money to purchase your residence, all it can do at foreclosure is to take back the security. It doesn’t get to go after the borrower for the deficiency — the difference between the value of the security and the amount of the debt. If it’s a refi loan, though, that safety net is not there for the borrower, so all these people with toxic HELOCs and refis aren’t going to be able to play that game this time around.
you still believe in that karma thing? how many people have screwed up others throughouthistory and in the end they and their descendants came out ahead and still scewing up the other guys. just look at those rich families today.
Yeah, I’ve always thought “karma” is less realistic than “God sends the rain on the just and the unjust.”
In other words, don’t expect the bad guys to consistently get what’s coming to them, in this life at least. The meek may inherit the earth, but the cutthroats have a life estate.
California is LOSING population? Ironic, since a builder I know recently told me that housing prices in California will be fine because California’s population is rising! Kool-aid, anyone?
tl, you hit the nail on the head there. All the Realtors ™ and the homebuilders are sure the market is going to bounce back, because we will have another 500,000 people moving into the state. SURPRISE! Now imagine what happens when the jobs start disapearing in construction and related industries, which created 50% of the jobs in the last 5 years. When wage earners start leaving so they can live in cheaper states, it will be a repeat of 1990-1995. Population losses in all those years. Imagine, CA lost population in 2005 and the economy and housing were strong. What happened in 2006 and think about 2007, with all the layoffs.
I am seeing serious signs of too many retail stores in Sacramento and not enough people. It is the Christmas season and they stores sure look empty to me.
This is why I was really startled when the UCLA Anderson people came out last week saying that there is no recession in the horizon. As I remember, last year they had debunked precisely the myth you mention, the one about added population sustaining the real estate market. They explained very clearly that the kind of immigrants we are getting have no way of sustaining such an inflated market (unless you hook them with toxic loans, although they didn’t say that). Now they are saying that things are OK. Does anyone know what happened to them?
They said the models point to recession but the mind doesn’t. They went with the mind.
Well, last year Christopher Thornburg was with them; now he’s left to do his prognosticating for a fee. And, he’s still being quoted by the media, but his quotes are pretty bearish.
” Now they are saying that things are OK. Does anyone know what happened to them?”
as someone posted the other day, they had a mile long list of contributers of which the top ones were Re, and mortgage,and banking related…Seems even our institutions of higher learning are just a shill for big biz…..truth? Who’s your daddy?
“I am seeing serious signs of too many retail stores in Sacramento and not enough people.”
Same thing all over, IMO. I think the housing bubble worked its way into a retail bubble as well. Had to have lots of places to spend all that “liberated” equity! I think we’ll see alot of empty commercial space by end of 2007! But the UCLA guys are probably right. After all, the models they use don’t paint a pretty picture. Just throw those reports away! All those guys at Anderson should be fired.
This kindas reminds me of the mid-western electronics retail chain (now defunct) that I once visited to buy a room air conditioner. There was more sales people than customers. They literally had me surrounded (encircled) while they made their sales pitches for the A/C unit.
‘lenders had to Mickey Mouse the financing, liberalize the financing,’ he said. ‘It’s gotten to the point of no money down, interest-only payments, negative amortization.’”
Now we know who is really behind this evil scheme:
Mickey Mouse.
i prefer the term Frankenstein Financing
Was trying out the new features on Zillow in my neighborhood when I came across this listing for a condo:
http://www.zillow.com/Charts.htm?chartDuration=5years&zpid=16923109
Even if they bought the whole building, which the sale does not appear to be, there is no way this is worth $14 million. In fact, in 1995 this only sold for $288k and the most recent sale, 2003, was for $950k. While still overpriced (rent would be about $2-3k tops) that is still at least in line with the run-up.
oh please tell me that that is a typo….maybe 1.4 mil$?
Had time to check the county records today. Slipped a decimal. Actual price $1.4 million.
Homeowners have greater status in our society. A renter may have more money in the bank, take nice vacations and sleep at night but at the office party he/she is a 2nd rate citizen compared to the homeowner.
Agree, and there always seems to be that innocent little check box on credit apps, insurance apps, etc…. “Rent Home” or “Own Home.”
Perhaps soon we will see a third check box: “The home owns you”.
For the first time in a decade, the number of residents who left California for another state in 2005 exceeded newcomers who moved here, according to the newest figures from the state Department of Finance.”
This seems either grossly understated or including the numbers of immigrants from across the border in the mix. What’s likely true is that a huge number of middle and even upper middle income residents are leaving while a poverty stricken immigrant base is replacing them. I wouldn’t be surprised is the number of middle income residents who left last year was over 100,000.
I took a trip to NC and much of the Southeast a few months back. In NC, the number of California plates was astounding. Some cities like Raleigh might as well have been a Cali suburb.
Now the real question will be what will happen once CA loses all of it’s younger and middle income residents? You CANNOT continue to lose your working base and expect to keep your economy too, let you want to have to pay all your taxes to retired people.
Now the real question will be what will happen once CA loses all of it’s younger and middle income residents?
For the answer to that, read Victor Davis Hanson’s Mexifornia. Not a pretty picture.
Hmm, that’s interesting, my Spanish-speaking contacts tell me that the Carolinas and FL are their new destination points as they, too, escape sky-high inner-city Los Angeles rents. Apparently, you can get a three bedroom house “for real cheap”, and have guaranteed construction work every time there’s a hurricane.
Out Migration. Hmmm, there is a new term for the masses. Sort of like….Cash-In Refinancing. Lots of people are going to be speaking of this new superstantial truthiness, the next time they list with an agent or talk with their banker. It happened to me in 1994…. I added more $’s to replace equity that disappeared in the prior four years, because out migration created a void of buyers. The bank would not lower my interest rate otherwise. Brutal…
History, repeat thyself.
Amen brother paladin…..
“This seems either grossly understated”
There has been a net outflow of US born residents from CA for at least the past two years. I’ve posted numerous times with sources and a reference to the U-haul index (ratio of one way price from LA to Kansas City to the price from KC to LA, or Dallas or just about anyplace), which rises steadily as the outflow increases. I’ve also posted numerous times about declining school district enrollments around the state. In my own daughter’s class, 10-15% of families are leaving each year for the simple reason that they can have a reasonable lifestyle on ONE income AND own a home with access to better schools in flyover country.
Pardon me but what do you really mean by “losing your working base?” The “poverty stricken immigrant base” is a very hard working population and it pays all the regressive sales taxes.
As for less income, I think the average income per capita in CA beats the pants off NC.
When I lived in Northen Idaho, the racists Nazi asses in Hayden Lake were mostly California transplants. Now I live in CA and realize we do not always export our best and brightest.
So I have no problem with my Mexican born neighbor and don’t see the CA tanking under the weight of poverty or immigrants such that NC or elsewhere is “better”.
Makes sense to me. Ship all the programmers, nurses, and civil engineers to Canada. Who needs ‘em? We got guys who will wash 80 cars a day - by HAND!
I’m a CA civil engineer who sold and moved this year to Ohio (is that close enough to Canada?). But no one here will wash my car by hand. No hand car washes and the weather is not as good, other than that absolutely everything is better than the OC.
“As for less income, I think the average income per capita in CA beats the pants off NC.”
-Yes, the incomes in CA might be higher, but only somewhat. The median income in Raleigh NC is 63k. The median income in SF,CA is 80k,-a 20k difference. Considering that the median house in Raleigh is anywhere from 150-230k versus the close to 800k in SF… well it doesn’t take a rocket scientist to see that compared on a point to point basis, Raleigh absolutely beats the living hell out of any California city you could possibly name on the sheer fact that the cost of living is 5 times as much here with wages only going about 1/4 the distance while the equation in NC is in the totally reverse position.
NC, TN, TX, AL, and others have been having record population and economic growth. California is losing population and a workforce with more and more outsourcing. Why I even have to bring this up is a mystery. What’s going on is amazingly obvious: California is pricing it’s own population out of house and home while many other states are rapidly accelerating in real economic growth.
do you really believe what you are saying that a huge number of middle class and upper middle income residents are leaving and *only* being replaced by poverty stricken immigrants? both counts are most likely just drop in the bucket. and the people leaving are most likely getting replaced. just think of it this way, the high paying job left behind is most likely to go to the next guy in line.
““Stephen Gallant moved to Michigan this summer after nearly three years in the posh Silicon Valley suburb of Los Gatos, trading a $2 million house for one in a Detroit suburb that was about half the cost and double the size. ‘If I’m going to spend $1 million on a house as opposed to $2 million, that opens up a lot of purchasing power, the ability to go out and do other things,’ he said.”
Just laughable… I live in Los Gatos … Tyical home was around $500K in 1999… rather high for the SV… That same home is now around $2M. Any reason for that. Not really! Really horrible tinker shacks are now over $1M. Any reason for that. Not really!
Lots of stock options fueled the buying frenzy… what I ment to say the fools that got stock options over spent like mad men and women. …. Its like this… Some idiot back in 1999 goes up to a realtor and tell them” im rich because i worked at Yahoo and my stock is worth 2.5Million… what can I get in Los Gatos”…
The realtor replies ” Sure I have this nice beauty for $2Million.
Note : It was only $500K on the market. One madness creates another. Now days there are no salaries to cover similar homes with mortgages. And stock options due to scandels are as dead as they can be.
I love Los Gatos. It has a fun little downtown and great schools. Also, prices were higher than 500k in 1999 - at least near the downtown area.
Stock options and the wealth they create does drive up prices but don’t forget that people move out tyo SV for “the gold rush” opportunity of high tech companies.
You can live cheaper elsewhere but I don’t know of many opportunities to earn stock options in MI or the Detriot area.
And if you have the stock option money, you rebuild and remodel the shack.
Mortgage delinquency and foreclosure rates are on the rise, and the impact could be greatest on low-income families that took out higher-interest loans for risky borrowers, some experts said Monday. Treasury Secretary Henry Paulson said the government wants to issue guidelines to banks and savings and loans that will allow people to get home loans “without taking unnecessary risks.”
Dude I think your a few years too late. Oh well better luck next time.
Fox to henhouse: “I’m here to help.”
I like to take this time, get into season, and say we should feel something for these poor unfortunate people and send them some money so they wont loose their homes….
LMAO ! Yea ! Right that will be the day!
Jetboy -
Actually other stories point out that most high paid workers are leaving the state and not so much middle class. Employers too are feeling the pinch and are moving higher paying jobs (Hi-Cost to them) to other states to maintain competitive edge.
Each week Ben posts something that I don’t think he can top. Well this one is the topper for this week so far.
How many more people are going to be underwater before this unravels? The way home debtorship is going and my renting is working out, I don’t know if I ever want to buy again, esp. here in Clownifornia!
The number of foreclosures is astonishing. Next year is gonna be serious pain. I see a lot of vacant houses from the border to the Bay Area. This state is gonna hurt like nothing any of us have ever seen.
The magnitude alone is going to cause a lot of distress throughout the country, esp. when Florida and Texas are added to the mix. When all is said and done, there will not be an adjective for this bust.
I continue to hope that a deep recession is all that will occur. However, since many believe we are already in a recession, I can’t help but think depression is where we are headed. On some earler threads today we talked a lot about debt and I can’t seem to escape thinking about the impact it will have on this country and Asia in the coming years.
Someone mentioned that you cannot continue to consume more than you spend. However, when you look at all the numbers and the fact that the US exceeds its budget, the end is surely near.
I don’t think there are going to be anymore bubbles for a long time, several years at best. People are going to be in a downsize mode for those years. No more get rich quick schemes because cash will be king and many will nothave the cash to buy. Credit is going to be very hard to get as no one will want to lend, esp. to those who wrecked their credit.
Bottom line, things are not going to be pretty during the next several years.
The worst part about all these people getting up to their eyeballs in mortgage and other consumer debt is, they are skimping on important things such as, oh, HEALTH INSURANCE, which many go without. They have money for big screen TVs and new cars, but when they get sick, the rest of us are supposed to cover it. Then we have to listen to all these left-wing Californai politicians tell us how the “ranks of the uninsured have grown”. Next step, socialized medicine for all.
Actually we (Californians) are more conservative than many believe. Look at the number of Republican governers we had. Lets not forget Reagan was from California. Most of Bay Area business are run by very conservative leaders.
Schwarzenegger notwithstanding, we are a one-party state.
There have been studies on this phenomenon. The Assembly and Senate are districted along census population figures. The census counts everyone. Let’s say a district has 400,000 people. Now, in one instance, all persons in that district are eligible voters. These districts tend to vote Republican. In the other district, fewer than 100k are eligible voters. These Districts tend to vote Democratic. So even though Democratic voters only outweigh Republican voters on a small scale statewide, when the districts are tallied for the Assembly, it looks like a blowout for the Democrats. Something about this smells a little unconstitutional to me, perhaps a violation of one man-one vote.
Districts have been gerrymandered to the point where conservos like me might as well not bother voting.
Next step, socialized medicine for all.
Well it’s a hell of a lot cheaper than what you have now - France and Germany spend only 2/3 as much as the US does.
But of course, because they have socialized medicine, the French don’t take care of their health and have way more overweight people than the US.
Very funny!
I never did understand how the French do it - smoke Gauloises, eat Foie Gras & Brie, drink lots of red wine and still have fantastic health. Perhaps someone should write “The French Diet” book. I might consider doing that one!
Loafer
Totally off topic - The French enjoy good health in part because what you think “know” about nutrition is almost completely wrong. What’s pushed in the US as good nutrition has alot more to do with what’s profitable for big food/big pharma than what’s good for you.
As you may have guessed, ;), I eat low carb. The “French paradox” doesn’t exist when you look at their diet through the lens of portion controlled carbs and recognize that high fat/high protein foods are actually pretty good for you.
No, no, no, no! Your argument makes exactly the opposite point than the one you’re trying to make.
America has socialized health care for the elderly (Medicare) and the poor (Medicaid). We spend more money per capita providing free health care just to those sectors of the population than France, Germany, etc. spend to provide it to everyone. Increasing state-provided health care coverage would obviously increase total expenditures, not decrease them — with the result than instead of paying 150% of what European governments spend, we’d pay 200% or more.
Never think that we could just switch to another country’s system and get similar results. France’s medical system operates the way it does in large part because France is full of French people, whose culture, genetics, and institutions are vastly different from ours in many ways. For one thing, the U.S. has something like uptillion more plaintiff’s lawyers than France does, and the legal institutions that make this blossoming of barnacles possible. For another, we pay doctors a lot more, thanks in part to the AMA’s restricting the supply of newly-minted doctors.
I could go on and on, but the point is, you couldn’t import the French system lock, stock and barrel. We’d either have a fall in our standard of care or a vast increase in cost. There’s no free lunch.
I work in pharma, and never understand why the American taxpayer doesn’t get mad about the fact that they are subsidizing the European health care system. Because of European price controls on medication, these are not profitable markets for drug companies - they have to make all their money in the US, and so the US consumer ends up paying all the enormous costs of drug development. We could end this by passing a law stating that drug pprices in the US can’t be higher than the average of what Canada,France and Germany pay for them. The drug companies would stop selling in Europe so fast! And then health care costs could be distributed more equally globally….
“Next step, socialized medicine for all.”
why not? look at canada, ever wonder why car manufaturers loves building manufacturing plants there?
“I don’t think there are going to be anymore bubbles for a long time.”
don’t bet on that, it is already happening. don’t forget that more than half of the wealth of this nation is held by less than 10% of the our population.
““Padilla said he recently was offered $295,000 for the condo, but that’s $60,000 less than he owes. To make the sale work, the lender has been asked to forgive the difference.”
This is way too much! What a flake!
I’m sure he would have shared his profits with the lender if only the price had gone up. Hell, maybe that’s what lenders should demand from now on to help offset all the goatf–ks like this.
does anyone know how the Rosedale developement is selling in Azusa? My wife and I sold our place 3 years ago and thinking we were slick to time the market and saw the insanity wipe out our gains. We can afford to buy right now but I just have a real problem with spending $800K on a 3 bedroom ranch house. Now we feel like we are stuck as renters if we choose to stay in California,these blogs give us some comfort that are not insane to wait it out. I tell my friends that they really are not owners, but renters with equity participation.
i really have no sympathy for these people.
my wife and i did not buy and we actually do have cash
good credit and secure jobs.
after looking at over 80 properties in like 6 months
and lowballing on 3 with no takers i was convinced
that we were just not wealthy enough for homeownership
and now looking back it was a blessing in disquise
my wife was giving me grief but now she has turned the corner
and i am pressuring her to read this blog
she thinks i am nutjob as day after day i sit here and read
the blog every night and occasionally burst out in laughter
or stare in disbelief at the sheer greed and stupidity of the average citizen
i feel vindicated now and will wait for reality to set in
btw i got here mind off the marktet by taking her out west on
sweet vacation, something that was paid for in cash and was
absolutely not doable if we had purchased a home
The only possible downside may be like my own special hell where my wife has started to notice my bouts of swearing and laughing (similar to what you related) and has taken to saying “Oh no! You’re reading that Bubble Bubble again!”. So I had tended to pass out a few incredible tidbits now and again when I get frustrated with this.
Now, however, my currently homemaking wife has become vaguely worried too at the uncertain future, and has decided to “help” us… by joining the Herbalife cult!
My mortgage agent from 5 years ago just sent me a Christmas card. I’m tempted to call him up and scream at him
I take a perverse pride in renting right now especially when some bonehead brays the “you’re throwing money away” line. I have zero debt, go on lots of vacations, and do not worry about retirement.
I also get a big kick out of how people view one’s social status once they discover you rent. Like I tell my kids, if someone is making the decision to be your friend based on what you own, then they’re not worth being friends with.
I wear the renter’s badge of honor in the OC, with pride.
There is a couple we socalize with occasionally that has made derogatory comments about renters. We like them, so we ignore the comments, but when you start to believe your “friends” look down on you because you don’t rent from the bank (they are on an interest-only mortgage), it can be quite annoying.
I think much of the shadenfruede comes from the attitude of superiority you get from “owners” who ATM their house to live beyond their means and look down on us lowly renters who were too poor or too foolish to buy when we had the chance. Not just don’t they realize how stupid they have been, they actually look down on us renters as rubes who were not sophisticated enough to utilize exotic financing to live like they do.
If Mr. Padilla’s lender agrees to the $60,000 foregiveness, then the IRS will treat the $60,000 as income!!! That is TAXABLE!!! Check it out. Losses over $3000 are not allowed.
Why would lender be so forgiving? they will stick it to him. If by the time the ink dries on my comment and if he doesn’t hear form the lender he knows the answer. (He he he …) get it.
If market was rising they would have no problem with this kind of behavior, but when market is sinking get real.
Top three stories on Y!
DuPont Cuts 1,500 Jobs in Restructuring AP
Mortgage Delinquencies a Rising Threat AP
UPS Seeks More Cuts, Offers Severance AP
You’d think they were trying to precipitate a hard landing…
This has probably already been posted but here it is again:
http://www.latimes.com/business/la-fi-option11dec11,0,4921051,full.story?coll=la-home-headlines
between the lines: don’t look now, but 250,000 or so foreclosures are coming in CA in the next couple of years.
Yeah, Ben posted that. It’s got about 300 replies by now
“Brown and his wife, Teresa, sold two Bay Area homes and happily settled in a suburb of Kansas City. They have never looked back.”
I wish these morons stayed in CA and not spreading the desease in healhty parts.
What gives? What did they do to become morons? They did the smart thing - they got out of Cali, which frankly I’m seriously thinking of doing.
Great, now Mr. Padilla is whining about his credit score. Hey clown, your credit score SHOULD be bad. It’s supposed to reflect whether or not you’ve made bad credit decisions. And you’ve made at least one whopper of a bad one.
Voo-doo economics….translation …you voo as wee doo…
she thinks i am nutjob as day after day i sit here and read
the blog every night and occasionally burst out in laughter
I laugh so hard so often while reading these funny stories about clowns, idiots, GFs etc. My wife thinks I am nuts for it too. But I am happy to be one of the ones that left CA. Lots of former CA folks here in ABQ also. I think CA will become the ultra rich, and ultra poor hangout place. The ultra rich will figure out how to shelter most of their money from taxes. It was the folks like me that were paying the taxes, and we are the ones leaving. I see a state BK here in the future. Why else is everything else being paid for with bonds? Does Arnold have some magic pill plan? I think not.
The most significant thing is that Sr. Padilla was not allowed to refi. Take away the cash out refi and foreclosures go parabolic. I hear all over the place that appraisals are getting more “conservative” over the last few weeks.
he is probably not of hispanic origin.
Don’t forget to pay those property taxes folks!
O.C. property tax early collections up 11%
O.C.’s tax collector is besting last year’s collection rate on real estate property taxes as the deadline approaches for the first installment for the 2006-2007 bill.
Through last Friday, O.C.’s tax collector had received payments on 665,035 bills worth $1.54 billion for the first installment, due today. That’s up 11 percent from the $1.39 billion collected on 657,647 bills at the same time last year. It’s also a slightly faster growth rate that the 10 percent year-over-year hike in total taxes due.
As for the second installment, O.C.’s tax collector took in through Friday $186 million on 135,015 bills for this current tax year. Last year, in the same period, $184 million came in from 135,611 bills. The second installment is due in April, but some property owners choose to pay it early to reap an extra income-tax break.
One key property-tax figure to watch will be how many taxpayers failed to make the first installment. Late payments rose last years.
For those who haven’t yet paid up … and, hey, a 10 percent penalty will apply to late payments …
• Those who prefer to pay by mail at the last minute can drop off their payments at the Santa Ana Processing Center post office at 3101 W. Sunflower Ave., Santa Ana, until 11 p.m. today (Monday).
• By mail: Orange County Tax Collector; P.O. Box 1438, Santa Ana, CA 92702-1438
• In person: Tax collector’s office at 12 Civic Center Plaza, Suite G58, Santa Ana, CA 8 a.m.-6 p.m. today
• By phone: 714-834-3411
• By Internet: http://www.ttc.ocgov.com
This is interesting…
Mortgage insurance gets a tax break
Private mortgage insurance, the tool that helps folks buy homes without 20 percent down, will get a tax break come 2007.
Folks who make less than $100,000 will be able to write off their private mortgage insurance (PMI) premiums starting next year. A smaller tax break will be available to those making between $100,000 and $110,000.
This law puts PMI deals on an equal footing, tax-wise, with “piggyback mortgages” to get the double deductibility of interest expense. Congressional staffers estimate the cost of the new tax break at $90 million for 2007.
Unfortunately, the tax break — passed by Congress in the wee hours of Saturday morning — will be more helpful in markets other than O.C. While I can’t easily estimate how many O.C. borrowers could be helped by this break, 2005 census data shows 30 percent of our households with income above $100,000, vs. 16 percent nationwide.
You might wonder if this is the first of a series of government efforts to prop up the wobbly housing market.
Not likely. The rise in piggyback lending was due to the tax and cost benefits. This change levels the playing field. IMHO, it was likely more due to lobbying by the mortgage insurance industry in an attempt to regain lost market share.
jb
I’m not so sure. Tanta over at calculated risk http://calculatedrisk.blogspot.com/ pointed out that this is simply the MBS market in secondary mortgages pricing risk differently than the mortgage insurance business. After all, in a fundamental way, they deal with risk in the same way, by aggregation. The Insurance business sell many policies, and the ones that don’t result in payoffs pay for the percentage that do. The mortgage business bundles the mortgages in tranches and sells them to investors, who are paid a premium based on their perception of the underlying risks. Does it seem likely that they’re vastly more efficient at assesing risk than the insurance business? Doubtful IMHO.
“Skilling won’t have to report to prison: WSJ 4 minutes ago
HOUSTON (Reuters) - A U.S. appeals court will allow ex-Enron Chief Executive Jeffrey Skilling to stay out of prison while it considers granting him bail, according to a report published on the Wall Street Journal’s Web site on Monday.
Skilling was scheduled to report to a federal prison in Minnesota on Tuesday to begin a 24-year sentence for his role in hiding Enron’s financial condition from investors as the company’s fortunes eroded prior to its 2001 collapse.
Skilling attorney Daniel Petrocelli told the paper he found out Monday evening the Fifth U.S. Circuit Court of Appeals would allow Skilling to remain under house arrest while it considers granting him bail during his appeals of fraud and conspiracy convictions.
A Houston jury convicted Skilling in May.
Since being sentenced in October, Skilling has been under house arrest in Houston and required to wear an electronic monitoring device on his ankle.”
Damn, damn, damn, damn, damn, excuse the foul language, and damn. So will there really be a real estate perp walk? We can’t even get the already convicted into Club Fed.
the wheels grind slow, but they grind…
as i mentioned in earlier post. what karma? that is just one fud.
4.3% of O.C. homesellers lost money last month
While most O.C. homesellers are making big profits, a noteworthy slice are selling at a loss. First American found 4.3% of sellers last month got less than they originally paid for a home, vs. 2.4% in the previous month.
First American’s different view of home resales in the region looks at the profit made by the sellers, a significant driver of the housing market.
This chart looks at sales of all residences, median profit made, months home was owned by typical buyer, the implied annualized rate of that profit and the percent of sellers who lost money on the property. For the month ended Nov. 22, here’s the SoCal view:
County Median profit Mos. owned Profit rate Lost Money
San Berdoo $196,000 46 22.2% 2.0%
L.A. $271,000 52 18.5% 2.1%
Riverside $172,000 42 17.1% 5.3%
O.C. $315,500 55 16.9% 4.3%
San Diego $220,000 63 11.7% 7.6%
California economy seen overcoming housing slump
http://tinyurl.com/yb455u
That’s right, rubes, things are just groovy here in the golden state. Now how about buyin’ some of these nice new bonds we’ve had engraved just for you?
Chelsea MA is history more on this Tuesday Afternoon..
sounds interesting…. no hints?
None other than Fitch Ratings is saying that the slump is likely to continue - and they’re now suggesting that most RMBS will perform poorly in 2007.
Like that won’t hurt the economy….
Short sales are not new! This guy specializes in foreclosures? Short sales have a big history. They are more common place now. That’s the difference.
“California recorded a domestic net loss of about 29,000 people last year, the first negative flow of residents since the mid-1990s. Anecdotal evidence suggests the high cost of housing was the primary reason people fled the nation’s most populous state.”
Those who leave California normally buy high and sell low and go out bitter, swearing they will never return. I’m a native Californian living in Arizona for now. I swore after the O.J. Simpson verdict and Rodney King riots I would never live in Los Angeles. But I did for three years ending this April. I will return to California. Eventually I will return as a buyer, but most likely I will return as a renter. The jobs pay very well. The climate is the best in the nation. I get great tax breaks as a permanent resident more than 50 miles from where I work that make it very well worth paying California taxes. I know several engineers who commute from other states to great paying California jobs. The smart money knows you don’t follow the herd.
Huh?? Great paying jobs?? Maybe for engineers, but not for finance and accounting that’s for damn sure. I could make more in my native Chicago than here in San Diego and the cost of living is much lower. I’m not sure what you’re talking about frankly.
Engineers. You got it. You’re in a different field and it seems that you would do very well in Chicago. Ever consider going back there? In my field, I can do well in California and on the eastern seaboard, and can do okay in Chicago, but not okay in Michigan or Ohio. We are traveling software engineer consultants. Many of the ones I know have families - some with grown kids and some with young children. My buddy in New Mexico lives in Phoenix and his wife likes the money he brings home. They have a 4 year old. With overtime he earns between $150,000 and $200,000 per year.
I came from another state to Cali, thus I’m not a ‘native’. I lived all over the place before coming here and thus have a pretty good idea of what large swaths of the country is like.
I guess if you were born in Cali, then you would naturally have a desire to want to stay no matter bad things got or how expensive things became.I on the other hand can’t help but feel that many Californians are a bit naive and not that aware of most of the country. Perhaps that can be said about most people in most states though. Anyhow, what is also puzzling to me is that I see very few people here who can put two seemingly obvious thoughts together.
For example: Yes, jobs pay more in this state. But those higher wages don’t mean a thing if you plan on buying a house and staying here. Your 100k salary will take you about as far as a 30k salary elsewhere, meaning you will likely struggle on making payments, and probably not retire until much later since your money will be tied up in a house.
But let’s suppose that rents stayed at their same ridiculous cost-savings rate and were 1/4th the cost of buying. In that case you could just save your higher wages for 5-10 years, invest wisely and then when your time is up- go elsewhere and buy your house outright, put the rest in savings, investments, and simply live for the most part free and clear. Even if your job then paid less than half of what you made in CA, you would still be decades ahead if you had stayed and bought a home.Your job would not be such a part of your financial survival. Put simply, it is a power move and places you in a position where you can override the prevailing local economies of any given region by removing major costs from your living expenses by simply not having any at all, except of course things like cars, food, vacations, crap, etc.You would in essence be paying the same amount to live as a retired person.
I never hear anyone with this plan. Most have a very stark black and white outlook: ” I can’t move because the jobs don’t pay as much” or- “I’ll buy a house here and after 30 years… sell it and use the money as retirement!” or-” I’m moving now so I can pay a cheaper mortgage” -The last one not taking advantage of the power-move idea I mentioned.
This idea seems like such a no-brainer yet nobody seems to have thought of it.
I have. I’ve lived & worked in the bay area for 4 years and have spent a grand total of 10% of my income on housing. Ask Me How ™.
“Wayne Brown gave up $40,000 in income to move from the Bay Area to Kansas. And he feels great. It got to be too much last year: the commute to downtown San Francisco that sometimes took two hours, the housing-price spiral, and the high-wire borrowing that paid for it.”
“‘I would find myself sitting in traffic,’ Brown recalled, ’screaming at people.’”
Thank you Mr. Brown, for explaining so much of the bad behavior I see on the streets everyday. Oh, those poor folks in Kansas, you’ll be screaming at them too soon I suppose, on your way to ruining their affrodable lives with your CA ambitions.
Out migration? Send your California girls our way please.
No….Will send you Casey though….