“Homeowners Discover A Hangover Settling In”
The Daily Bulletin reports from California. “The number of homes entering the first stage of the foreclosure process in San Bernardino County jumped 140 percent in the October-to-December period last year to 3,538, compared with 1,473 in the fourth quarter of 2005. It was even worse in Riverside County, where the number of default notices nearly tripled from 1,607 in the last quarter of 2005 to 4,528 last quarter, according to DataQuick.”
“Since the intoxication of the real estate boom and easy loans has passed, many homeowners have discovered a hangover of sorts settling in. ‘In the next couple of months, I’m going to be forced out of this home,’ said Eastvale resident Hector Gomez, who had a notice of default filed against him last month. ‘I’m a first-time home buyer, and these people know the system and they’ve taken me for a ride.’”
“As prices soared, lenders were all too willing to offer 100 percent financing or other creative loans. But the urge to get in before it was too late was overwhelming for many.”
“‘Buyers got nervous things would get out of reach,’ said Bobbie Kay Forbes, a Realtor in Grand Terrace. First-timers with no down payments were offered 100 percent financing, reserved in the past for high-income families only, she said.”
“Gomez said his mortgage payments turned out to be much more than his income and certainly higher than he and his loan officer had agreed upon. When Gomez contested the amount, he was directed to the contract, which he had signed.”
“‘It’s in the documents, but it’s hidden. … They used my ignorance against me, and they abused my trust,’ said Gomez, who said he also lost his job due to the stressful ordeal. ‘They take advantage of people hungry for their own home,’ he said.”
“Bill Velto, manager of Tarbell Realtors in Upland, said he attributes the climb in homeowners defaulting on payments to ‘unscrupulous lenders’ over the past several years. ‘You don’t even have to be licensed to do loans in the state of California,’ Velto said. ‘The banking industry got too loose with their guidelines and let people use 50 or 60 percent of their income on house payments,’ Velto said.”
“Gomez said he is busy trying to keep his family’s dream house. The idealism he felt when purchasing his house less than a year ago has since given way to frustration. ‘I’m trying to say I can’t pay this amount and I need you to give me options,’ Gomez said. ‘The only way the bank will help me is if I come up with large amounts of money or I’ll get no equity out of the home.”
“‘If a person is not able to afford a home, they shouldn’t have gotten it in the first place,’ he said.”
“Nearly half of all Americans believe the housing market is poised to go from bad to worse over the next few years, according to a new survey.”
“Leo Nordine, a Redondo Beach, Calif., real estate agent specializing in bank-owned properties, says the sentiment jibes with what he’s seeing in Southern California’s once-scorching real estate market. ‘I’ve been through a couple of these cycles already,’ Nordine says. ‘And I think this next one will actually be worse. The buyers are controlling the market now.’”
“Nordine thinks the Southern California market will decline over the next few years, with prices eroding about 10% each year. As prices have softened, he says, many sellers are already pulling their houses off the market.”
“Meanwhile, another market is heating up: Nordine gets about one new listing a day from banks that are foreclosing on properties. ‘We’ve become a debtor nation,’ he says.”
The Ventura County Star. “Faced with a tough year in the housing market, Countrywide Financial Corp. is striving to find ways to become leaner and more efficient — including continuing to move jobs out of California. The Calabasas-based company is the nation’s largest mortgage company, with about 5,850 employees in Ventura County and Westlake Village.”
“‘We’ve been very diligently working on moving employees out of California,’ CEO Angelo Mozilo said.”
“The company made significant job cuts this year as the housing market slowed. Countrywide spokesman Rick Simon said after the earnings call that he could not comment on job movements. ‘Certainly, the company’s long-known policy of focusing its growth at corporate facilities outside of California is still in force,’ he wrote.”
The Recordnet. “Dolly Cruz, a Bay Area investor who a year ago bought a single-family home in Lathrop’s Mossdale Landing development for $625,000, figures if she had to sell now, she would lose $100,000.”
“The house is rented out at $1,500 per month - not even enough to cover the mortgage payment, she said, but she is still confident in the long-term real estate market and isn’t upset about the slowdown.”
“‘Even though the price is down, you’re not losing anything if you’re not selling it, is the way I look at it,’ Cruz said.”
A slightly different version of the first article:
‘Steve Johnson, director of Metrostudy, said he expects to see even more homeowners struggling to pay off their loans. ‘For the past several years, a lot of people have been buying homes priced more than they can afford and they’ve used substandard loans,’ Johnson said.’
‘Al Rodriguez, Eastvale resident and a Realtor with Inland Empire Group, said he is working with several homeowners to save their properties, and he warns buyers to beware. ‘Some of these people shouldn’t be in their houses in the first place, and these homeowners are signing contracts they don’t understand,’ Rodriguez said. ‘Lenders are salespeople, and they’re trying to make the maximum amount of money and move on.’
‘The first half of 2007 could be a good time to purchase a home, at least from the standpoint of getting a mortgage. That’s the word from the California Association of Mortgage Brokers, which polled 400 of its members recently and got their opinions. ‘The first six months of 2007 will probably be the ideal time for consumers to purchase a home,’ said Jack Williams, CAMB president. ‘There will be fewer buyers … and more motivated sellers.’
‘Regional economist Jack Kyser said recently that with the market stagnant, this really isn’t the time for buyers to be gambling on their loans. ‘People take interest-only loans because they think the value of their home will increase,’ he said. ‘The way the market is right now, buyers ought to be concentrating on getting fixed-rate mortgages or switching to them if they’re currently in adjustables.’
‘Predatory lenders have been a big part of the market lately, getting people to buy homes who can’t really afford them. That’s one reason foreclosure rates have gone way up, and the state Senate will be holding a hearing in Sacramento today to investigate the practice.’
the blame the other person for my stupidity begins……
“They used my ignorance against me, and they abused my trust,’ said Gomez
Gomez then says he is so upset he lost his job. What a liar. It is never my fault and always the other guy. Poor Gomez just another victim.
If there is a RE downturn, you’re going to hear a lot of stories like this, because most of the buyers in large areas of the IE and LA are Latinos, English not being their first language, who are relatively unsophisticated about financial transactions. If they can afford the monthly payment, they’ll jump in. Apparently this character didn’t even confirm that much. Wonder how political correctness will mesh with hundreds of thousands of immigrants being thrown out of their homes?
If they are illegals they should be thrown out of the country.
You mean with so many things being printed in Spanish these days, including ballots (in NM anyway), there is nothing in Spanish for these folks to read?
This guy Gomez is a perfect example of a guy who should at best have been a renter…assuming he’s legal.He has presumably no skin in the game, and is whining that he can’t get any equity out of the house. And he lost his job because of “stress”. BS. He knew what his salary was, was he had saved for a “downpayment” (not) and he supposedly wants to be treated like an adult since he probably would have sued if a broker refused the loan because he was too dumb to understand the paperwork. His “victim” rant is learned behavior–or he’s been coached by a lawyer.
The Darwin Award winner deserves a cardboard box.
“If there is a RE downturn,”
What planet are you on?
We sold our 1st house in Texas to a family who spoke Spanish (never met them) and we had to close at a title company which was bilingual!! No excuses there!! Everything nowadays is BILINGUAL!! They make me feel like I am out of the loop since I don’t speak Spanish. I speak English, Japanese and French. No Spanish here!
We sold our Maryland house to a family who spoke Korean. Our Realtor finally got fed up with their agent and told her that if they refused to communicate in English, she would call for a translator at their expense! They got the message, and things proceeded much more smoothly from that moment on.
The bank is going to take a large financial hit from this loan. They’ll never be able to collect any deficiency judgment against him. He’s pretty much judgment proof. No assets, no work, no skills, no prospect for any high paying future job…
He may not even need to file bankruptcy; He’s simply judgment proof.
That is the real moral to this story.
I think the language of “stupid” is universal. And Gomez has mastered the tongue.
lol nyc you have been on a roll the last few days
Thank you. We should probably get together at a bar with all of the New Yorkers on this blog and have some drinks. We can laugh at the FBs and have a good time. My wife would go. We could find a place in the Village or Midtown. That would be fun.
I don’t think that Gomez is going to be the one who really loses his shirt in this one. Who is stupider, Gomez or the JP Morgans who loaned the sub prime lenders money? I don’t think I will be making any “investments” with these firms.
hmm Jpmorgan doesn’t really participate in mortgage lending that much. I think their exposure to mortgages is 6% or so maybe lower. They mostly use their balance sheet to underwrite debt (corporate/soveregn/municipal etc.)
“I don’t think that Gomez is going to be the one who really loses his shirt in this one.”
You are right on with that comment. It’s like going into a casino and they supply the money to gamble with. If house prices had continued up, then Senior Gomez would have made a bunch of money. If prices go down, he has no skin in the game and simply walks. Somebody else takes the loss. Geez, it sounds like all these Gomez types ARE the smart ones after all. It’s a no-lose situation when you are starting with nothing.
“It’s in the documents, but it’s hidden.”
Is there a trap door in the document? A hidden passageway? Clearly the provision about your interest rate adjusting was written in invisible ink, only visible in moonlight.
We are going to have a country full of victims, more than 1 in some cases. Lenders ar victims of originators and the borrower. Expect a lot of legislation that achieves something other than the “stated” purpose. There will be a get-rich-quick scheme that is behind any legislation. Just pay attention to who sponsors the legislation to find who will benefit.
Oh yeah, your scenario is being telegraphed so clearly it isn’t funny. I don’t know what’s worse - having to pay for it or having to listen to it?
exactly, I am sure there are plenty of lawsuits to be seen, “but I DIDN”T UNDERSTAND… help me. Sadly there are real victims out there (identity theft etc) who will not get help because of these guys clogging up the legal system/airwaves etc.
I’d like to see someone from the MSM do a Dateline interview with Gomez’s family, workers, neighbors, etc and ask what Gomez was telling them over a year ago. I’m sure it was about how much money he was making and I’m sure someone told him that he couldn’t afford the house.
Exactly. Everybody is a victim now that the market’s turned. But if it was still going up, these people would be going around gloating about how much money they made flipping houses.
I believe in personal responsibility. Whatever victim status these people might feel is warranted, it doesn’t mean they can get out from under the debt they took on, keep their house, and avoid bankruptcy. Tough $hit.
That being said, a certain amount of Mr. Gomez’s statement is true. Most people are not experts in real estate, and you need to be able to trust the people involved to some degree. Imagine if you could not believe your doctor, or if you had to check the nurse before she gave you a shot. You have to rely on professionals in areas which are not your expertise.
I really don’t know where that leaves us because the whole financial services and real estate industries are so corrupt, but something needs to change. Laws, ethics, morals: I don’t know, but something needs to change.
In a politically correct society victims are all you can have.
“In a politically correct society victims are all you can have.”
Including those angry housing bubble victims who found themselves priced out of the market.
Right?
Let me be the first to say this. “I am in no way a victim of these housing mania.” I might have to help clean up the mess of all these dipshits but 1) I was smart enough not to participate. 2) Great opportunities will be created for me when this thing melts down. 3) Life isn’t always easy. That is fact. Challenges build our character. That is all this is. It is just another really big challenge.
I was priced out of this market but I always knew that was temporary. Two years ago people laughed at me. Two years from now I will be laughing at them. Plus, I will be laughing with a decent bank account, decent 401k balance and a fundamental understanding that owning a McMansion in no way would ever fulfill my life. They will be broke and still not understand that life is not about material objects.
They really are the victims. F— all the victims.
OT and not knowing people’s sense of humor, I can’t get out of my mind the Sam Kinison bit where he talks about Jessica Hahn being a victim. It’s pretty rude, but funny (to me anyway).
“Two years ago people laughed at me. Two years from now I will be laughing at them.”
Why wait two years? I am laughing at them right now.
How about the “something for nothing” mentality? So he got himself into a house he couldn’t afford and figured to coast to unearned riches. He lost the bet. It’s a financial dealing–caveat emptor. We are all adults here.
I just know a lot of the guys are pretty simple about this stuff
A guy talks to MB1 says “Well, you can get this house and the payments will be 3600 per month”
MB2 says “Well, I can get you that house and your payment will only be 2100 a month for the first year”
Guy calls MB1 and says “You trying to play me homey?, I oughta bust a cap in yo a**”
MB1 calls security and hopes he doesn’t get sued.
MB2 get a nice check.
Its stupid but people go pretty blythly and with out research into this stuff. My current wife’s eyes glaze over when I want to talk about retirement savings, 529 plans or mortgage rates and market conditions. My friends wives are pretty similar… one of them always asks a realtor’s (family member) opinion on the market.
I don’t know what to say. I have to agree with the Democrats about preventing people from doing something dumb. They just walk right in to it.
My current wife’s eyes glaze over when I want to talk about retirement savings, 529 plans or mortgage rates and market conditions. My friends wives are pretty similar… one of them always asks a realtor’s (family member) opinion on the market.
I’ve been called a traitor to my sex when I opine about how stupid women can be. An incident that occurred the other night only confirmed some of my worst thoughts about female dimwittedness.
Setting: phillygal taking advantage of some deep discounts at local “shoppe” strip mall. Off night, no one in store - perfect!
Bring purchases to register. One saleslady confirming spelling of the word “than” to colleague. (there was some confusion - is it “then” or “than”). Confirmee gushes her thanks, saying, “I’m helpless without spellcheck”. The other lady agrees, saying how she wouldn’t know what to do without spell check, and how she can’t compose any letter, etc. without it.
Me: you can get stung by spellcheck, though. There are some words that are spelled correctly but not used in the right context.
Saleschick: Oh, I don’t care, as long as I don’t have to use my brain. The less I have to use my brain, the better.
Me: Yeah, who needs a brain anyway…
OK this is not the point of the little story. While this exchange is occurring, other sales chick is ringing my sale. She gives me the total, and it sounds about 30% too high. I asked her about the total, and after she doublechecked, she realized she’d overcharged me.
Sux at spelling, can’t do simple math even though job depends on it…
… and the folks on HBB wonder why the average citizen can’t comprehend the obligations of a neg am I/O loan. Or how an ARM works. Are you people crazy…Do you really want Joe6P or Jane WhiteZin to have to use their brains…?!?!
You are all so cruel and mean-spirited. You all engage in, in…BRAIN ABUSE!!!!!!!! Bailouts for the brain-abused, immediately! Somebody call Senator Dodd!
THEN!
THAN!
WTF?!?
Where does that leave us? Should people who are that stupid be given half a million dollar loans and the keys to a house?
Phillygal that is too funny. While many pundits continue to say w are getting smarter, I think they mistake electronic gadgets/toys for intelligence. Many many oldtimers could build their own homes from scratch. In 1969, we put a man on the moon with stuff we would now consider junk. Heck, look at all that aluminum foil on the moon lander. But hey, we are smarter! BS, I call! It is a slippery slope that will be hard to turn around. Most people want the path of least/easiest resistance. Most don’t want to work too hard or think too much. Just gimme gimme gimme, all for nothing and no effort. Well, as has been said, “There is no free lunch in the universe.”
Where does that leave us? Should people who are that stupid be given half a million dollar loans and the keys to a house?
Sure, just try and deny these nitwits their piece of the American Dream…you will be slapped with a nouveau retro jacked-up lawsuit so fast your highly educated commonsensical head will do a 360.
LMAO,
Two examples of EXTREME SCARRY IGNORANCE (ECI).
1. Years ago I was in a WalMart late at night. Several youngsters stocking the shelves laughing and having a grand time. Made me feel warm and good for a second, UNTIL I heard what they were laughing at.
They were trying to make it through the multiplication tables and couldn’t do it from memory!!!! One said “Come on guys, we should be able to do this”. Don’t they make peeche folders anymore?
What use is a populace that can not do simple math.
2. Years ago the wife and I pulled into a McDonalds off the highway. They were trying a new system where they would call your name when your order was ready. A girl of about 16 took my order and spelled my name as RICKERD!!! If I had a somewhat unusual name it wouldn’t have been bad, but my name is RICHARD… How the f$%k can you get through High School and not have read/spelled the name Richard many, many times?
As a previous supervisor in a factory I was amazed at the incompetance of people that seem bright (not stupid) when your talking with them. When it comes time for them to use any judgment at all they either freeze up (doing nothing) or do the most ignorant things.
By no means do I consider myself the sharpest knife in the drawer, but the vast majority of sheeple in the US are scarry stupid.
Probably true. BTW, that story was great.
I guess it all goes back to the lenders. Someone has to say no.
I wanted to clear this up… My wife isn’t dumb either. She just shows this indifference to all things financial and doesn’t want to hear about it. Its frustrating as hell.
And Irvine,
I’m guessing that about 40% of the loans from 04, 05 and 06 should not have happened. Similar a substantial portion of the 02 and 03 loans.
Sales should have dropped more like 60% instead of 30%.
i’d just like to let this play out but in this case the sheer number of fools is so large… a bailout will probably occur.
Phillygal,
that’s funny.
LMAO.
Awhile back my wife and I went to a $3.00 movie matinee and I handed the ticket seller $21.00 and she had to break out the calculator, to figure out how much to give us back…
There are oh so many people in this country as dumb as a box of rocks~
James,
Don’t let it frustrate you. I have the situation in reverse, but I just appreciate the fact that I get enjoyment out of financial blogs, etc., and doing things right. My husband praises me for it, and goes his merry way. I appreciate the other things he does for his family, like working hard on the job.
We don’t need spouses that are mirrors of ourselves. It’s really ok.
No bailout! All the FBs were laughing at those saying that prices were unreal and would fall. Why should the rest of us bail them out? The FBs were not forced to get in over their heads. They played, they took a chance, and now they have to deal with the results.
AHAHHAHHA,
Mortal FOOL!!~!!!
The bailout won’t be for J6P, it will be for fannie mae/freddie mac and for the loans they guaranteed.
Speaking of bailouts, anyone noticed the price of metals…silver up well over $14/ounce.
There should be a rule that says if you write a post complaining about other people’s spelling, you should at least proofread it to make sure you don’t make ironic blunders such as “scarry” and “incompetance.”
And your for you’re.
“you need to be able to trust the people involved to some degree”
The problem is that everyone involved has a financial interest in making tranactions. Any transaction that will make them money will do. Even if their setting up some fool to take the fall.
I believe in personal responsibility.
The owner’s of the dogs who bit me while working as a UPS XMas season drivers helper sure don’t.
ICON field armor
You obviouslly don’t deal with the medical community much. Most medical professionals make motgage brokers look like saints.
I think the whole thing could be improved by removing the Mtg brokers and Re sales people from the whole process.Both sides should have a Lawyer to go over the whole document process.The banks should get no commision as they make money off the interest,Re agents should get a small listing fee say 1% for their involvement.
Great ideas, bottomfeeder!
In NY both sides (buyer/seller) do have a lawyer. If you have a mortgage, the buyer even needs to pay for the *bank* to have a lawyer.
Hey that’s life. If you are prudent, you shouldn’t fully trust anyone…and that includes family. If there is a stranger involved (i.e. a realtor, etc.) don’t trust them at all. You have to assume that they are all out to screw you and then work up from there. Do you own research, etc.
Agreed.
Keep in mind that the more transactions we take out of the “caveat emptor” rule, the greater the share of the economy we hand over to lawyers.
That would help me, personally (being one), up to a point — but after a point, we risk sending the economy into gridlock if literally every economic disappointment becomes the basis for a legal claim. Sometimes people bet wrong and lose, and that has to be allowed, at least to some extent, if the economic wagers that drive economic growth can be expected to continue.
It’s a sad comment on our society, but I WOULD double-check my doctor or nurse before they gave me a shot. I can’t count how many times I’ve called tech support at some computer company, or realtors, gov’t. officials, etc., and ended up finding I knew more than THEY knew! Not a sign of brilliance on my part, but sheer incompetence/stupidity on theirs.
You need to be able to trust the people involved. Imagine if you couldn’t trust the person who sold you your car?
Oh wait - you can’t.
Don’t be an idiot, like Gomez.
He should have confided more with Mortica. She always seemed like the smarter of the two.
A fool and his money got separated.
The guy obviously should have stayed a renter- but I doubt the realtor and the loan broker told him that he had a snowball’s chance in hell of keeping the house.
I despise crooked flippers like Casey. I feel bad though for someone having to explain to his kids why they are going to lose their house.
I’ve spoken to elderly folks losing their home of 40 years because they didn’t understand the finer points of 6-month LIBOR when they signed their refi docs with what they didn’t know was a teaser rate.
Lenders should be required to disclose, in huge print, what their payment will be upon the expiration of the teaser rate- and qualify them using that number.
Fraud is despicable no matter who pratices it- whether first time home-buyers trying to buy a house- or real estate professionals lying through their teeth about loans that they are selling. I think that fraud by real estate professionals is most despicable, because ignorant people do trust them. I know someone who quit the mortgage industry last year because he couldn’t stand lying to people about these junk loans.
Welcome to the new service economy!
KNX radio in LA is running advertisements for a law firm soliciting people who were “duped or mislead” on their Option ARM mortgages. The ad implies that the law firm will help these suckers, er, victims keep their houses free and clear.
If I could do it all over again, I would have bought the biggest mansion I could find, tape record my mortgage broker as I told him how badly I was exaggerating my stated income, and show up at the closing drunk out of my mind. Then I’d turn around and sue them for misleading me, and get to keep my mansion for free! Isn’t that how America works now?
I heard an ad on the radio this morning, I can’t remember where or from what company, but I do remember their catch phrase: “Turn debt into wealth”. Pretty sick. I’m sure they’ll ask you to buy their $200 booklet for starters. Maybe it’s titled “Turn your debt into our wealth”?
Yeah the Scotia Bank in Canada has about the same stupid slogan of that type. “You are richer than you think. Let us show you how.” Naturally it’s about borrowing and getting poorer. Fu-ken vampires with their corny folksy stupid adds. But it works with the average dumbo bird brain consumer.
With due respect, Marc, how many people on this blog do you think have any clue about Scotia Bank, or CIBC, RBC, BoM or any other Canadian bank?
However it is is way bettter than you are musing about how inadequate US and GWB are. This thread is about California (with an economy probably double than Canada).
Give him a break, at least he’s talking about spomething real estate related.
I care about it! I have savings in one of them
I listen in to talk radio occasionally…
The one common bond both hard right and left have is the commercials tend to be oriented towards people in trouble, financially.
Those are the people tuning in, trying to figure out who to blame for their situation.
“The one common bond both hard right and left have is the commercials tend to be oriented towards people in trouble, financially.”
Today, that would be the middleclass family.
KNX1070 turned into a junk radio station a few years ago. I’ve heard some really obnoxious advertisments on that station having to do with mortgages.
posted from thread ““Bill Velto, manager of Tarbell Realtors in Upland, said he attributes the climb in homeowners defaulting on payments to ‘unscrupulous lenders’ over the past several years.”
Good God almighty! That was rich! LOL… Tarbell is a local power house realtor in that area spreading into the IE. two and a half years ago I was looking to buy the area and did sign two faild contracts….My! oh my, how the times have changed. I would go to new home developments …. not even be given the time of day…. to late all sold out, now beat it…. somethimes I would be told to sign a looser’s list and wait from a call from the Housing Gods!….LOL…
AS I would wait with my hat in hand some jerk-off would blow in and ask what “his” modle was going for? The sales person would stroke him about how smart he was to have bought in fase one and loosers like me could not get into fase five….Quite the headdy time!
good thing he didnt say it was my “twin brother”
LOL Realtors and Mtg brokers seperated at birth…
“Regional economist Jack Kyser said recently that with the market stagnant”
Hey, Jack A**, what did you tell us in Jan 2006 about the buying opportunity of a lifetime. Another full of s*** economist who talks out of both sides of his mouth after bad mouthing anyone who warned of this crises 12 months ago. Go Home Jack!!!
Good ol’ Jack what a shrill!! As a former ex-pat of the IE (west valley area Claremont/Upland) I listened as that moron touted that area would never see a downturn like the early nineties again. He sighted the aerospace downturn as being the difference. Velto also spewing his BS about how values are going to stay high for years they knew it would short lived but everyone was getting rich off these marginal buyers. Believe me there are plenty of players in the RE ponzi game. Oh my God that area is so over priced even Fontucky (remember when nobody would live there at any price?) has homes for 500K! I move out of State for a year or two while the economy in LA implodes and all the idiots who will lose their asses for over extending themselves leave in droves.
L.A. is nice, But not at the current prices! One has to remember it took five years for this disaster to build and it will take some years to return to sanity. I figure with tough anti-Illegal immigrations laws to come and the housing bubble shakeout California should be rife with opportunity in a few years for those who have saved and have a high fico and little debt. Until then I’ll watch from the southeast. The keeping up with the Jone’s crowd will be packing up their U-haul Trucks in a steady stream over the next two years.
“Tough anti-illegal immigration laws to come?”
That was really funny.
Lots of new stories on MSN on the downturn. Way more than normal.
We are passing the softlanding going to bottom.
http://realestate.msn.com/default.aspx
Talk about it: Give us your 2007 market predictions
Video on MSN Money: Has the housing market hit bottom?
Foreclosures up 35% in December
MSN Money: Bill Fleckenstein shares consumers’ pessimism
How to rent out your house
How I lost my home: 3 stories
When mortgage firms don’t play fair
MSN Money: 9 options if you’re facing foreclosure
Talk about it: Are you afraid of losing your home?
3 scary mortgage scams
MSN Money: 5 tips for tapping your home equity
8 cheap places you’d want to live
“‘Even though the price is down, you’re not losing anything if you’re not selling it, is the way I look at it,’ Cruz said.”
Sure… besides the negative cash flow and headaches if the tenant of your abode decides to run a meth production facility from it.
I think above 50 plants of MJ or some quantity of meth the feds confiscate the house under the zero tolerance policy for drug trafficking.
That’s exactly what people say about the stock market too when it start crashing.
Nearly half of all Americans believe the housing market is poised to go from bad to worse over the next few years, according to a new survey, despite assurances from many real estate forecasters that the market has hit bottom.
If you have a home and read this blog you are convinced the crash will be the mother of all crashes. On the other hand if you are a renter waiting to buy you see the bullish stories about correction being over in a few months and look for imperical evidence to guage if this is true.
What I would like to see is home building stocks come down with reduced earnings.
half?!?
I didn’t realize Ben had that large an audience.
This will be the worst recession of our lifetime.
Buy? I’ll watch the ratios:
Price to rent
Price to income
Inventory to monthly sales (wait for this to get below 6 months)
I can afford to rent forever.
Can the sellers wait forever? I don’t think so…
The earliest bottom possible is summer 2008. (Yes, it will probably be later… but I think we can agree its not possibly earlier.) I stick with my prediction that fall of 2008 will be the absolute earliest it would be wise to buy.
Got popcorn?
Neil
Neil,
The bottom in new housing may be as early as the end of 08′. The resale market will suffer for many years after that.
I’m predicting (actually hoping) for a freefall from ‘08 till AT LEAST 2018. And why stop at real estate? I’m predicting that the entire world’s economy will tank in ‘08 and (hopefully) remain under water for at least a decade.
Maybe then all the brainless wonders out there will finally notice that Rockefellers, Rothschilds, et al (who have NEVER, EVER invented a useful product or service) are all welfare queens who must be forced to give up a few hundred vacation homes and get JOBS. The useless, non-productive rentier class sponges entirely off of the working class.
Rich,
You’re probably right on the timeframe. Notice I said “earliest possible.”
As to teh non-productive sponges getting their due… last time was the October revolution. I really hope that doesn’t happen again.
Neil
Maybe then all the brainless wonders out there will finally notice that Rockefellers, Rothschilds, et al (who have NEVER, EVER invented a useful product or service) are all welfare queens who must be forced to give up a few hundred vacation homes and get JOBS. The useless, non-productive rentier class sponges entirely off of the working class.
Yes, I’m sure that will happen. I’m also sure I’m Marie of Roumania.
posted “Nearly half of all Americans believe the housing market is poised to go from bad to worse over the next few years”
70% beleive GWBush will do the same…. very hard trick to do but I have faith in the moron…. he will pull it out, a final “Mission Accomplished”
Here is the link. LOL! This is great news. More power to the Bears…. Da Bears!
http://realestate.msn.com/buying/Article2.aspx?cp-documentid=2727041
Nearly half of all Americans believe the housing market is poised to go from bad to worse over the next few years, according to a new survey, despite assurances from many real estate forecasters that the market has hit bottom.
The glum outlook, reported in the Experian-Gallup Personal Credit Index, says 47% of consumers surveyed at the end of the year believe that the housing bubble is bursting and that real estate prices in their area will likely collapse over the next three years. Though 51% don’t expect a collapse, the pessimistic crowd has increased from 42% in April 2006 and 37% the year before.
“The housing market has been in a downturn for some time now,” says Dennis Jacobe, Gallup’s chief economist. “People are seeing more for-sale signs out there longer . . . and people are taking their houses off the market. As people talk to each other, the negative psychology builds.”
Some real estate analysts and agents downplayed the Experian-Gallup results, saying the findings are just more doom and gloom based on media reports.
But Leo Nordine, a Redondo Beach, Calif., real estate agent specializing in bank-owned properties, says the sentiment jibes with what he’s seeing in Southern California’s once-scorching real estate market.
“I’ve been through a couple of these cycles already,” Nordine says. “And I think this next one will actually be worse. The buyers are controlling the market now.”
Yep…how many times did you hear, “well it’s only PAPER loses”! Even my own wife would say that to console me. No, the loss is REAL…the assest is only currently worth whatever it is currently worth (did that make sense?).
“‘Even though the price is down, you’re not losing anything if you’re not selling it, is the way I look at it,’ Cruz said.”
Did Cruz ever hear about unrealized capital gains? I guess he is still holding on to those shares of Pets.com that he bought back in 1999, since he doesn’t think he will lose anything as long as he never sells.
Ok I’m going to start an investment firm and call it Buy and Forget. Our company slogan: Never sell never lose! I’ll have idiots tripping over each other at the doors to buy my investments due to my strait forward logical arguments. My first investor: Cruz!
I lost my @ss on a pharma stock about 7 years ago, and about the only thing I get out of it is my little $3,000 a year capital loss write-off.
“‘Even though the price is down, you’re not losing anything if you’re not selling it, is the way I look at it,’ Cruz said.”
Exactly! She doesn’t seem to grasp the concept that monthly negative cash flow is a loss in and of itself.”
She should plug that in to Quicken and see what it tells her.
Net Worth = “You’re screwed” is what she will see.
she still has the cash or the toysfrom the home equity loans, and she doesnt intend to pay any of it back, so technically she hasnt lost anything.
“‘Even though the price is down, you’re not losing anything if you’re not selling it, is the way I look at it,’ Cruz said.”
That is just plain REtarded!
To paraphrase: “As long as I ignore it, then there can be no problem.”
What about the carrying costs, you retard! Perhaps Ford and GM could benefit from this technique????
Perhaps they do…
I’ve heard people say the same thing about stocks. Wonder how many people out there haven’t “taken a loss” on the stocks they bought in the tech boom?
Except with stocks your not making a monthly interest payment, a yearly insurance premium, a quarterly tax payment, and constant maintainance costs. With stocks you can watch your investment crash but still hang on to the money in your wallet. When you’re an investor in a housing bust, you get to pay to watch your asset decline. And still nobody gets it.
Jingle mail all around.
Her name is Dolly. Now I’m going around with “Hello Dolly!” playing in my head the rest of the day.
Thanks a lot, now I do too.
New anecdote from az_lender. Apropos of negative cash flow and so forth. Woman from CT called just now. Interested in buying an AZ lot and tiny mobile (400 sqft) plus “Arizona room” in a condo-ized RV park. The most I am owed on any similar item is $77K, and I’m a little nervous about that. This lady wanted to pay the $115K as an “investment” — wanted me to finance 90% of it. I told her it was a crappy investment, that she couldn’t possibly break even on it if she were trying to be a landlady, not even if she got a loan from the 6% sources. And they all know I’m a NINE percent source. She said her friends were just “looking out for her” in recommending this POS. (She didn’t call it a POS.) I kept haranguing her about what a bad idea it was, but she was calling from work and had to hang up. She mentioned being “pre-approved” for a $250K loan (on WHAT!?!?!) egad, don’t you wish I were the only lender in the USA?
I think my accountant would strangle me for ignoring opporitunity cost again.
“‘Even though the price is down, you’re not losing anything if you’re not selling it, is the way I look at it,’ Cruz said.”
Ah, uh, it think it’s “you are not losing anything if you don’t buy it”
“if you don’t sell, you are losing holding cost, such as mortgage minus rent, hoa, property taxes, Agent Sale %, and upkeep……..even if prices go back to what you paid originally”
Geez
Right, and somebody loaned this lady over $600K!
Even if she put 20% down (doubtful), and secured a 6% loan, her monthly P&I payments are $3000/month. Add $500 in taxes and $100 insurance and this lady is losing $2100/month.
omg
“‘Even though the price is down, you’re not losing anything if you’re not selling it, is the way I look at it,’ Cruz said.”
You are paying someone to live in your house you dumba$$.
I just can’t believe their are this many stupid people in the world. I should not have to pay taxes for schools if they can’t even teach morons like this to use something as simple as a calculator and a pencil.
Well, part of the problem is, they DID teach them to use a calculator (but not a pencil), and they didn’t teach them “word problems” because it was culturally biased.
Some banker gave this lady $600,000 dollars. Why?
Because RE won’t go down?
They aren’t building anymore land?
Actually they are building more land and more jobs - just not in California.
Look at Countrywide:
‘Certainly, the company’s long-known policy of focusing its growth at corporate facilities outside of California is still in force,’ he wrote.”
At the outset, I will state that I am a renter waiting for prices to fall, and my views on the FB mentality is well expressed in my few, previous posts. This is not a trollish question.
I can understand the fact that if you dont have the cash flow, you can lose the house. But what if you do have the cash flow?
Property already down 100K from 625K.
If you write off the loss, then property is already at 525K. Taking the calculations in 2benevolent’s post the nut is $2100/month
So shouldn’t the question of whether to sell or not be based on whether you want to keep on paying $2100 or not for something that is $525K?
The choices at this point are
Sell the property, take 100K losss, and potentially do one of
(a)invest that monthly nut $2100 elsewhere.
(b)buy back at 525K, for $2100 monthly nut.
Which would be a better choice - (a) or (b)?
(Even if the price goes down further, my guess is that the size of the further loss will affect the answer - it would be different based on whether further loss would be 5K, 20K, or 50K)
Unquestionably, not buying at 625K would have been best. But that’s not an option now.
I guess the real question I am asking is this - how do you decide which is better when faced with this choice? Is there some formula or tool to do that?
(I AM NOT THE GUY who posts as “bubba”, but as “bubbagump”.)
LMAO,
This displays how crazy the publics perception of lending has become. If you allready hosed the bank for $100k (much more considering they now own your POS home that even you don’t want) what makes you think they will loan you another $500k =).
All this money that has fueled the sub prime crap is over. With 2.5% of all subprimes not making the first payment it is over! It was crazy enough when the lenders (not the mort. cos., the real lenders-those with the cash) paid no attention to the risk of thier purchases, but now that these loans are blowing up before even the mort. broker can get rid of them nobody will buy this crap as now priced.
How much does a 1.5% (was 1%) instant decrease in a bonds face value change it’s real worth? At a 2.5% default rate it will take no time at all to drive these MBS to worthlessness. Not only will they yield no interest, but they will cost much money in dealing with foreclosing on the property secured within the MBS.
LMAO,
These bond holders are going to go through the same situation at the FB. Asset not worth the price paid coupled with rising cost to adminster this asset. The money guys allways take it to the wall and stop. Guess what, we hit the wall. The only question is how long it will take the end of this train to stop moving, the engine has allready stopped and is in a million pieces engulfed in flames.
I don’t think you understand the question. The question is not about what is going to happen to this buyer or loan or whatever.
The question is about how to make the decision. To fairly evaluate the choices, it is necessary to *consider* the property as being sold and bought back as I put in (b). To makes things clear, (b) is what happens when you hold on without selling, (a) is what happens if you sell.
I understand your question clearly. I don’t agree that your choices are valid.
A)
Who will you sell to?
It will cost you a bunch to sell the home. No equity=you pay when you sell. Where will this money come from?
So the answer to A is, you will have to pay out the ass to sell (if you can) and it it will prove much cheaper (and easier) to just walk.
B) If they don’t sell and hold on, it will cost $20-30,000/year to keep the home as a rental. They will now be a real landlord (not an easy job). This situation may persist for 15 years before the property is worth enough so they won’t have to pay when selling it.
So answer to B) is to live in hell for 15 years voluntarily.
I understand your question clearly. I don’t agree that your choices are valid.
I don’t think you do.
The question is about financial accounting. In _both_ cases you assume the same loss at this point. (That 100 K loss is for a sale of 525K. If it sells for $500K now, then the loss is $125K and so on, but it the same loss in both cases.
As I stated clearly, this is not a subjective question about this house and this lady - I was asking if there is a formula/calculation/tool/rule to decide, what’s the best to do , assuming that you have the cash flow to hold on or the means to eat the loss now.
I could’nt care less about what happens to this lady and this house, whether she can take the loss now, hold on etc.
Let’s see, which is a better investment: one that actually earns a positive return or one that earns a negative return? I think I’ll go with the positive return, which in this case is option (A), taking the $2100/month and putting it into an investment that actually appreciates and/or generates interest income. Pretty easy to do - savings accounts, CDs, bonds, etc.
Option (B), on the other hand, is to continue paying $2100 month for god knows how long in the hopes that the house will eventually appreciate. But to make option (B) better than option (A), the house must appreciate more than the principal and compounding interest on the $2100/month. And, unless someone has enough cash that they know that they can continue paying that $2100/month indefinitely, they need to factor in the risk of ultimately having the bank foreclose on the house and losing all of that $2100/month.
Ultimately, it comes down to doing the math and making certain assumptions (such as, how low will the price of the house go, how long until the house is back to even money, what rate of appreciation will there be after it hits even money, what rate of return will you get on your $2100/month if you invest it, how consistent will that $2100/month figure be - given the volatility of rents, vacancies, deadbeat tenants, etc.). You could run all of the numbers using all sorts of figures, but at this point it seems that common sense says that option (B) is by far the better financial avenue to take.
Assuming you refinanced for the current market value (whatever they would refi for) which would most likely require $100k payment to pay off the poriginal loan? Just use an online mortgage calculator to figure the new payments. The payments would drop unless the interest rate had risen too much since the original loan. Of course, you are losing the investment income you would have been earning of the $100k.
Just calculate it the two or three ways and see what is better. (Third would be selling to someone else at 525k and renting at somewhere less than the mortgage on 525k and investing the difference.)
Thanks for the replies.
I foresee this as increasing the stickiness of prices. If all these people had some easy calculators, it would bring about an adjustment faster. At least that’s what I’m thinking. Some idiots will chase the market down, but I think that at least a few can be convinced by numbers. That is, those who really have the options to either hold on or get out.
There are thousands of rent-vs-buy calculators on the net. But there is none that lets you find out where you stand after you bought. If the appreciation numbers that you plugged in before you bought do not pan out, there is no way to figure out your current standing, other than a vague feeling of “prices will come back”.
If at least a few can be convinced that selling now is better for them than hanging on, this whole thing would proceed a little bit faster.
Thanks again.
Those that have the option to hold on are so few as to make their contribution to “downward stickyness” negligible.
Your options disregard the obvious option of walking on the house, screwing the bank and then investing the $2,100/mo. If the original loan is on the home it is most likely non-recourse, ie. the lender can’t go after your other assets.
Within you paramaters walking on the property is the most obvious and sensible thing to do. That $2,100/mo invested should conseratively be enough to by a home for cash in 5-10 years. This would make the major strike on your credit painless. A short sale (if possible) will leave you with a huge tax bill that the Gov will not let go. I would rather suffer the foreclosure and bad credit than suffer a $30k tax bill =).
LMAO,
Sure am glad I don’t have to choose an option off of this menu from hell.
Why do people call monthly financial obligations a “nut”? What is the metaphor attempting to convey? It seems vaguely disgusting.
Related to squirrels.
These critters have intricate connections to finance. “Squirrel away” for retirement. Whats the ‘monthly nut’ on this place?
Squirrels are supposed to save nuts for winter, all the while eating some of it for sustenance.
Of course, the RE bubble has created new terms- “feed the squirrels” - if you hang out here long enough, you’ll find that out.
If this lady never sells then she will be making the delightful transition from the “gaining overnight wealth in RE with OPM (Other People’s Money)” mantra to “slowly losing your a$$ SOPH (Subsidizing Other People’s Housing).”
Neil, pass the bowl around!
I think Mozillo is one smart cookie that will come out of this debacle richer than ever. Hate his company but respect his street smarts. That being said, his comment about moving jobs/facilities out of CA is further proof that this state could be looking at a bleak future. Ten years from now, what will be the appeal of being here?
“‘We’ve been very diligently working on moving employees out of California,’ CEO Angelo Mozilo said.”
The last company I worked for bought a company that was based in San Diego. When I left they were doing everything they could to move jobs out of California. The workmens comp insurance is outrageous. The overtime laws are outrageous. Oh yeah, and the fact that the Californians wanted 5 guys to do the job of what 2 people outside of California were doing didn’t help either.
I know you Californians won’t like to hear it but those guys were worthless. It’s kind of like how it is here in NYC. If you can find somebody that will actually work a 40-hour week and not think it’s the world’s greatest accomplishment, you have really found something. The bar isn’t very high. Those Wall St. bonuses don’t hear that. All the Johnny Hammer Swingers hear about those bonuses and think they should be making the same money. It’s ugly all over with this sense of entitlement but California seems to be the capital of the world for that feeling.
Workman’s comp is killing the state. Yes, the entitlement mentality isn’t helping either.
I cannot turn around without finding out about another employer at least thinking about people moving out.
Since most people move in the summer… we could have a long boring “spring wait” and then see price changes in the summer and fall. Oh… we’ll see it by fall.
Got popcorn?
Neil
The overtime laws are not out of line,i believe if you work overtime you should be compensated.People in California work damn hard and drive in gridlock every day.I’m getting sick of all the cali bashers.i am a cali native and long for days of 40 years ago of orange groves, open land,no New Yorkers enjoying our sunshine and English as the first language.
posted “i am a cali native and long for days of 40 years ago of orange groves, open land,no New Yorkers enjoying our sunshine and English as the first language”
Treasure it, those times are gone for good. I know how you feel.
Ditto, Bottomfeeder.
I’m not a native (originally from Chicago) but I’ve lived in Northern Calif (Bay Area) for 33 years. I remember when even then there was such a thing as a “Sunday drive”, or packing up the kiddies and driving to Brentwood to pick fruit and veggies at the farms out there. Now there is no easy traffic, and the farms have been replaced by overpriced houses and development. Sad.
Damn. This sounds like a scene from Charleton Heston’s “Soylent Green”….which was released in 1973…interesting.
BayQT~
I wonder how long before FBs start going postal, especially if they convince themselves that it’s all the fault of someone else.
As long as they never sell their homes, they will never realize how much money they have lost.
I think Dolly willl realize it once her teaser rate option ARM resets. She bought her investment a year ago, so maybe it’ll be the February statement that breaks the news? “But, but! I thought the interest rate was 2.4%????”
And now it’s 5,5 ….. KAPUT.
NOT,
More like “thought it was no intrest”, but it was really 7% rising fast along with a $10,000 prepaymnet penalty if you ever try to refinance.
Wonder how many of these prepayment penalties will ever be paid? I can see the vast majority of these people saying “F$%k the bank I’ll live here for free untill the Sheriff comes”. May actually end up costing lenders money when the FB find that even if they could refi it will cost them the pp penalty along with all the new fees.
Taking this even further, how many will even refi (if possible) when they find the terms of the new loan. They didn’t look at the terms on the first loan, but will most likely do so on the new one after the original hosing they got. If they look at a 30yr fixed (or even a non toxic adjustable) they will find the payments MUCH MUCH (double?) higher than the initial payments on the first loan they got.
For all the lender ads about refying out of that bad loan I can’t see many taking that bait. Someday debt will again be seen as an obligation and not wealth.
More like all live for free, file a law suit, then rip out all the fixtures and sell them on ebay.
Maybe John Meloncamp will have an aid concert.
oh, of course I’ll have time to establish a fake identity and SSN to restart my life…
At least they won’t be driving tractors through the reflecting pool, like the farm crisis. (Which was arguably about land prices and mortgages, go figure)
“‘We’ve been very diligently working on moving employees out of California,’ CEO Angelo Mozilo said.”
Angelo isn’t alone. This was a trend that contributed to the declines of the early ’90s as the cost of doing business in CA soared. Expect this to be the theme going forward, adding job losses and employment opportunity declines to the woes in CA.
Dollar losses (equity and hard lender $ losses) in CA will make history. Gonna be ground ZERO!
The cost of doing what business? One of the nation’s largest mortage lending company is suddenly cutting costs and moving because of CA’s imfamous high business costs.
Hello - we’re in a housing bust so I’d attribute the cost cutting to a busting national housing market and bad loan practices rather than accept the guy’s excuse. “It’s California’s fault. ” Nope.
But weren’t the bad lending practices most rampant in Cali? And isn’t the cost of doing business very high in Cali? And certainly the state income tax in Cali prevents those of us with liquid assets from actually living here.
Sure there’s a bust. That’s the nature of business, you need to spend like hell to grow and keep market share and shrink like hell and slash costs when business dries up.
Angelo’s trying to make a little lemonade out of lemons. To do that he needs to CUT COSTS TO THE BONE. I am certain he can do the same work from a much cheaper location. That’s what he’s gonna do…
“Angelo’s trying to make a little lemonade out of lemons. To do that he needs to CUT COSTS TO THE BONE.”
Kindas what Mulally ($35 million signing bonus) is trying to do at Ford.
Some of the fault is goverment and some is its peoples own stupidity and greed that drive business out of Caifornia!!!
Silicon Valley leaders to lobby lawmakers
Survey says housing prices, red tape threaten economy
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2005/04/22/BUG41CCUCL1.DTL
It’s pretty funny that the lenders who were instrumental in creating the high costs can no longer stand it either.
Leo Nordine - that’s an opinion I can respect…that guy sells tons of REOs for lenders around here, at least going back to the mid/late 90s when I started following RE. I guess if he says this thing’s going down, it’s going down.
Either that, or he’s just starving for REO business.
Lagirl, Here’s a quote from Nordines’ site..
” Amateur economist - has precisely predicted where the market’s
going for 20 years (2005 forecast: worst recession since 1929
starts in ‘07. Prices will drop 50% in California over the next
5 years, 25% nationwide).”
http://www.nordine.com
I’d say Nordine is much too optimistic.
That’s funny, the last picture I saw of him, he looked like a 28 year old surfer guy. Must have been dated. Anyway, you’d never know a downturn was coming from his website, he has listings deep in the hood for well over 400K. I suppose this is an improvement, because about a year ago, he barely even had listings on his website.
I love visiting California. I’d be willing to live there if it made financial sense. But even if prices dropped 50%, I’d still think its overpriced.
If prices dropped 50% with today’s interest rates, I’d buy in a second. I’m currently renting and socking away a fair bit of cash each month. If the home I’m renting dropped 50% in value, with a 10% down payment, my pre-tax house payment would be approximately equal to my rent.
Yes, I would have maintenance, taxes, insurance, etc., but I would also have a tax deduction.
In the NY Times today:
The economy gained speed in the final three months of 2006, as Americans shrugged off the slump in the real estate market by spending more money on everything from computers to food.
http://www.nytimes.com/2007/01/31/business/31cnd-econ.html?hp&ex=1170306000&en=7d0d53dc81268a4d&ei=5094&partner=homepage
“The economy gained speed in the final three months of 2006, as Americans shrugged off the slump in the real estate market by spending more money on everything from computers to food.”
It is great to hear that we are still able to spend ourselves into perpetual prosperity, despite the real estate slump.
Biggest losers are first time buyers who bought in the last 2 to 3 years. People who have seen corrections are probably more philosophical about lost equity and continue to spend knowing downturn in RE will one day end.
“The economy gained speed in the final three months of 2006, as Americans shrugged off the slump in the real estate market by spending more money on everything from computers to food.”
Looks like the editor at the Times missed this article. I’ll fix it.
The economy wobbled along like a wounded animal in the final three months of 2006, as ignorant FBs, completely oblivious to the impending crash in the real estate market, fell further into debt by running up their credit cards and using up the last bit of equity in their homes on a bunch or crap they don’t need.
There, that’s better!
Yeah, but this has happened just the same for the last ten years! What would happen one day if everyone had to pay for stuff with cash? What would the GNP look like on that day??? What a joke of a borrower nation we have become. We are complete losers you know…
“What would happen one day if everyone had to pay for stuff with cash?”
i imagine the line at starbucks would be really short
And faster, as long as the cashier can still count.
We are seeing the last of the HELOC money.
Now that price ain’t going up no more, no more HELOC.
From now on, it’s the Notice Of Default’s show.
Whee, where’s Neil Redenbacher?
ROTFL.
I doubt we’ll ever go back to pure cash. Heck, my next credit card bill will be a doozie (I paid for airfare for my upcomming honeymoon). But then again, I always pay it off in full…
Heck, many of my bills are now paid automatically as long as they don’t cross above predetermined thresholds (gas, electricity, cell phone…).
Heck, even my quicken is updated automatically.
But then again, I’m saving more per year than the books say I should.
Got popcorn?
Neil
“‘I’m trying to say I can’t pay this amount and I need you to give me options,’ Gomez said. ‘The only way the bank will help me is if I come up with large amounts of money or I’ll get no equity out of the home.”
To me, there’s little difference between someone who borrows money and refuses to pay it back as agreed and someone who simply stole it. I’m starting to agree with those want a return of debtor’s prisons.
Why does he assume he has any equity in the home at all after only 1 year and why does he think he is entitled to it ?
That was exactly what jumped out at me. Stunning.
The difference is that many recent borrowers don’t know they will never pay the money back as agreed, and in fact will not be able to do so. If you don’t understand the moral distinction between this and stealing, I suggest you join the nearest church.
No, but broadly they do deserve what they will get. They will get “their” house taken away from them, and they will have to live without credit in the future. Imagine living within their means while paying for their past profligacy. And the banks will have to write off alot of loans that they stuck these idiots with.
“and they will have to live without credit in the future”
If married they will detach, and attach to
new partners with credit. It’s the American way.
“I need you to give me options,’ Gomez said.”
Builder, OK, give sign here. OK, now I own the house and you are responsible for my land options…..
Thanks
“I need you to give me options,’ Gomez said.”
You’re fresh out of options, loser. Go find a job.
“We’ve become a debtor nation”
Whoa, really? When did this happen?
85249, you crack me up. Spot on with this one! I read that I thought my 4 yearold daughter could’ve said that! Also, Ben, the more you post, the more I realize I should never UNDERESTIMATE the intelligence of the human race. People blame others for their mistakes. They don’t realize that 600K is actually a lot of money until they have and option increase payment. I respectfully admit I am no Einstein, but how these people are able to do anything is beyond me. Did you actually think that 600K mortgage was only going to cost a grand a month. Heck, multiply a grand by 360 and see what you get. These fools, er, I mean people are just dupes. I agree that debtors’ prisons should come back. Also, some people should never be allowed to reproduce. I know that might be gov’t intrusion, but in that case, I will make an exception. Too many fools, too little common sense.
Just imagine how all those Chinese, and Japanese investors are going to feel when they find out that all their hard earned savings were invested in MBS’s…We are going to have nary on a billion angry people wanting recompensation,never mind the cummulative effect of this unwinding on our economy.
We’ve become a debtor nation… When did this happen?
In fact it was under Ronald Reagan, the president who made America stand strong again.
Yep.
The house is rented out at $1,500 per month - not even enough to cover the mortgage payment
…
‘Even though the price is down, you’re not losing anything if you’re not selling it, is the way I look at it,’ Cruz said.
Uhhhh?
LOL, I thought the exact same thing!
Dolly, you are seeing things “inverted” and “murky”.
Pull your head out of your a$$ and you will be amazed at how much clearer your “vision” will become.
“Leo Nordine, a Redondo Beach, Calif., real estate agent specializing in bank-owned properties, says the sentiment jibes with what he’s seeing in Southern California’s once-scorching real estate market. ‘I’ve been through a couple of these cycles already,’ Nordine says. ‘And I think this next one will actually be worse. The buyers are controlling the market now.’”
How can a bunch of individual households, acting with no coercion, collusion or deliberate plan to boycott, possibly be controlling the market?
This claim really flies in the face of reason.
I think what he meant to say was that “Sane, Logical, and responsible people have taken over the market, and until a median income can purchase a median priced home, they are not buying” Which is really a non-buyer(ing) market…
geez, took them long enough!
How about, “Even the nearly illiterate have heard the rumors that making money in real estate is no longer a Sure Thing, so fewer of them are willing to mortgage their souls to the devil to pay the unsupportable prices now being asked by last year’s fools.”
Many of my friends and coworkers (and myself) are future buyers, and we have a deliberate plan to boycott. No one I know is going to touch housing until it becomes more affordable. Period.
“Nordine thinks the Southern California market will decline over the next few years, with prices eroding about 10% each year. As prices have softened, he says, many sellers are already pulling their houses off the market.”
10% down each year for five years sounds roughly in line with last time.
P.S. 10% off for five years = 40% off total: (1-0.5^9) X 100%
…Nominal. Add inflation and the total decline may be in the 55% range. But he’s drawing a parallel to the 90s.
I am thinking this time really may be different, with all the defaults piling up and the alarming rate at which defaults are going to foreclosure. This may all happen in a far more compressed time frame, say in the next 2 years…
“This may all happen in a far more compressed time frame, say in the next 2 years…”
That depends on how effective certain media voices are at keeping up the hopes for a soft landing, followed by a near-term resumption of high rates of real estate price appreciation. I personally don’t go so far as to say that this is impossible, just don’t see it as very likely…
you guys are nuts… laINVESTEDgirl already assured us this won’t happen.
Especially anywhere near the garden spot corner of Normandie and Melrose
rotfl
I too think this time will be much faster. Where is the corporate reluctance to lay off? Where is the 3+years of savings? Oh yea, its all that equity in the home.
How much of a decline is still in debate. I stick by my 30% to 60% nominal price decline. I believe the faster the decline higher the bottom. We’ll see.
Got popcorn?
Neil
Here’s my thinking…
Odd drops here and there for now. Bigger, faster decline when the “Oh Shit!” moment hits the masses. Long, slow deterioration for years thereafter.
As history shows, the bottom won’t be in until ever everyone absolutely hates housing. Unfortunately, that can’t happen quickly.
“the garden spot corner of Normandie and Melrose”
You mean laINVESTEDgirl owns the mexican joint that sells all those sweet used tires? That’s the hottest location for a bald tire shop in all of LA. The west side may crash and burn, but no way she’ll lose a penny on that one.
I always manage to get a flat tire when I park in front of that joint.
(1-0.5^9) X 100% = 99.8%
(1-0.9^5) X 100% = 41.0%
GS, I said that around my coworkers and I almost touched off WWIII. I work with one person who was talked into an ARM by a family member. She didn’t even want to hear about any decline at all ever. She said we just have to lilve with the fact that homes will now start at 600K. Long story short, I just nodded my head. I also will not rub it in when everyone’s 600K dream home is surrounded by multitudes of homes selling for 300K, thus making theirs only 300K and upside down. Note to self, do not rub it in. Always nod head. Let them think they know it all. Same rubes who are 750K in debt with toys, mortgages, vacations, HELOCs, and CCs know it all. Sadly, assuming everything does always go up I guess that means so does your debt. D’oh! Remember, don’t say anything!
“She said we just have to lilve with the fact that homes will now start at 600K.”
Maybe so — in 2015 dollars.
“She said we just have to live with the fact that homes will now start at 600K.”
SHE”S the one that decided to try and live with 600K as a fact. We don’t have to live with that fact, or it’s consequences at all.
So what if we are “forced” to rent the same house for 60% of her costs…
I was smiling and nodding while my coworker was telling me about the house her early 20s daughter is buying. She assures me that she’s getting a fixed rate mortgage. Of course I was wondering “fixed for how long?” I just can’t say much because she’s so proud, and she already knows what I think of the current real estate market.
A friend tried telling me it was a fixed loan. It took another ten minutes to get him to fess up to it being fixed for 5 years then he would refi. Of coarse his wife is talking new kitchen with the equity. Not saving money for a new kitchen, using equity. 23 yrs old and no clue that you need to save for what you want. I always thought the goal was to payoff loans, funny I must be one of those old econ guys that the 20 somethings are talking about.
I have a co-worker whose only comments on the housing markets are angry quips about how well the market is doing. You get a sense from the anger in her voice that she needs the market to do well. Probably HELOCed or sees her house as her only retirement savings. Sad.
My cousin on Long Island the same. “Angry quips” a perfect description of how she speaks when she tells me LI RE is doing just fine. Plenty of posts from Ben Jones say it isn’t. I don’t bring up this subject with my cousin any more. She’s not HELOC’d. She and her NYC lawyer husband have plenty of dough, but unfortunately for them, their biggest investments are their LI house and their upper Manhattan apt. Good thing he makes plenty of money, he can go on paying the taxes forever.
If you want to drive them up a wall, do this:
Take a piece of paper
Take black Sharpie
Make notes on paper as if jotting down bullet points
Scribble List Price Was….Selling For…..and other stuff
Last note is More to come on market soon!
Leave paper in plain sight on desk
Say nothing
Watch for choking/fainting/heart attack
Enjoy!
Yep, or just print out a zip realty listing with 3-5 price reductions and leave it out.
Less work.
Good idea. I think I will just print out my spreadsheet on D.R. Horton’s Elan project here in Dublin, CA, with $100K cuts on many models. I even read their BMR (below market rate) offering, and they are having a “lottery” for 26 units starting at $110,000!
If I could be a fly on the wall and watch the faces as they read.
http://www.drhorton.com/corp/GetCommunity.do?dv=Y9&pr=41936
Click “Special Offers” on the left side; next page scroll down to the green “Dublin” button.
BayQT~
Dan,
You will get sweet revenge. When you do buy a home for $300k in their hood make a BFD about it. Throw a house warming party and invite all those smug pricks that thought you were stupid and priced out forever. Go through the tax records and invite all those underwater/foreclosed upon FB that you know to your party. Just when your party gets going start gushing about what a GREAT TIME IT IS TO BUY!!, THEY ARE NOT MAKING ANYMORE LAND!!, RE ONLY GOES UP!!, THE KEY IS TO BUY WHEN INTEREST RATES ARE HIGH AND REFINANCING WHEN THEY GO DOWN, WHICH THE NOW ARE!!
LMAO,
Have a bakery make you fantastic house shaped cake with dollar bills flying everywhere. Leave a bunch of RE brochures, lender estimates and papers scribbled with possible rental property that will make you rich.
Oh, also lock up your firearms so as to not be killed with your own toys.
Better yet. just casually leave the purchase contract magneted to the refrigerator.
Pulte Homes swings to quarterly loss; revenue falls 15%
By Katherine Hunt
Last Update: 5:50 PM ET Jan 31, 2007
SAN FRANCISCO (MarketWatch) — Pulte Homes Inc. (PHM)
late Wednesday reported a fourth-quarter net loss of $8.41 million, or 3 cents a share. During the same period a year ago, the company posted net earnings of $574.5 million, or $2.19 a share. The loss from continuing operations was $8.3 million, or 3 cents a share. Revenue at the Bloomfield Hills, Mich.-based home builder fell 15% to $4.39 billion from $5.13 billion. Analysts polled by Thomson Financial had forecast a fourth-quarter loss of a penny a share on revenue of $4.18 billion. Net new home orders for the quarter were valued at $2.1 billion. The company’s backlog as of Dec. 31 was valued at $3.6 billion, compared with $6.3 billion last year. Additionally, Pulte Homes said it expects first-quarter results to range from breakeven on a per-share basis to loss of 10 cents a share.
Additionally, Pulte Homes said it expects first-quarter results to range from breakeven on a per-share basis to loss of 10 cents a share.
Way to nail it down! Can I play? I predict Pulte will go bankrupt in Q1′07. Or not.
So go the home buliders, so go the home debtors.
Yea… but Pulte will probably survive 1Q2007.
Notice I didn’t say 2007… just 1Q2007.
Got popcorn?
Neil
See the last paragraph about cancellations improving everyday:
Pulte Homes (PHM - Cramer’s Take - Stockpickr - Rating) swung to a fourth-quarter loss, as results were pulled down by $350 million in land-related charges.
The homebuilder also guided to an unprofitable first quarter, and said the “fluid” housing market prevents it from giving full guidance for 2007.
Pulte reported a quarterly loss from continuing operations of $8.3 million, or 3 cents a share, compared with profit of $532 million, or $2.03 a share, a year earlier. Analysts expected a loss of 1 cent per share, according to Thomson Financial.
Pulte’s revenues fell 14% to $4.4 billion. New home orders fell 34% to 6,446 units.
Gross margins slid to 11% in the quarter from 22% a year earlier, dragged down by $350 million, or 88 cents per share, of write-offs and write-downs associated with land inventory.
For the first quarter, Pulte forecast results ranging from break-even to a loss of 10 cents 1 share — exclusive of any additional land charges.
Wall Street currently expects a first-quarter profit of 15 cents a share.
“Pulte made meaningful progress during the fourth quarter by improving our house and land inventory positions, adjusting our SG&A levels and positioning ourselves for success in the future,” CEO Richard J. Dugas said in a statement.
“In addition, we witnessed some promising signs of stabilization at the conclusion of the quarter, and into the first month of 2007, although it’s too early to tell how strong and sustainable this may prove to be in the months ahead,” he said.
The company said its cancellation rate on orders declined to 34.7% in the fourth quarter from 35.8% in the third quarter and continued to improve into January 2007.
Wow, what an improvement in cancellations. Why, if this trend continues next quarter will only have a 33.6% cancellation rate. At this trend, we’ll be at a normal cancellation rate in about… oh… 2010.
Got popcorn?
Neil
What’s up at KBHome? No 3rd qtr. (08/06) earnings announcement and no year end (11/06) earnings announcement. I did not realize how important I was to KB. Since I was laid off, KB has not been able to report their earnings. BTW, I was in field operations.
Truth be told, most of these FBs got themselves into these situations, but we all know most of them should never been lent the kind of money they were lent.
The first time I bought, I was dumbfounded by the amount of money I was prequalified for. I could have easily gotten myself into a house I couldn’t have afforded because verybody was pushing me that way. But I resisted and took out a 30 year fixed rate mortgage with a payment I was comfortable with. Even though I figured I had done the right thing, I found myself in a bit of a fix the 2nd year into things when I got my tax bill and it was twice what it was the first year. I didn’t do enough research and nobody disclosed to me that the first years taxes on a just built house were only on the land and the following year the house would be factored into things.
I could have found myself in worse shape after seeing my insurance go up $2000 a year (I was in South Florida) and then getting laid off from my job. I quickly realized that things could get really and and I sold the place and walked away with a nice chunk of money (bought in 2001 and sold in 2005). Had I gotten laid off a month or two later after Wilma hit, I’d probably would gotten into a huge mess because I wouldn’t have been able to sell.
Anyway, there are huge amounts of blame to throw around, but if banks and mortage companies weren’t handing out loans like candy on Halloween most of this wouldn’t be happening. The problem is that it’s not only the FBs who are going to get hurt. Plenty of people will lose their jobs, will be sitting in houses worth half what they paid for them and get stuck when life hands them a bad hand. We’re all going to end up being affected by this. The FBs are just feeling it first/
All true, but if you have cash, crisis=opportunity.
Yes! Crisi-tunity!
We’re all going to end up being affected by this. The FBs are just feeling it first.
True, but by the time this whole thing finishes playing out we will have forgotten how it started…
“‘Buyers got nervous things would get out of reach,’ said Bobbie Kay Forbes, a Realtor in Grand Terrace. ”
I wonder why they felt that way. Couldn’t have been Realtors such as Ms. Forbes telling them “Buy now, or be priced out forever!” and “Real estate always goes up!”
I actually don’t think that the realtors are to blame for this. The very real effect of finding out that a house is already under contract when you bid a couple of times will tend to make you quick on the draw.
““‘Even though the price is down, you’re not losing anything if you’re not selling it, is the way I look at it,’ Cruz said.”
She must be banking on a reversal of the trend in a year or so. If she can afford the mortgage (excess of rent revenue) and hold it for 5 years…maybe she can break even? If she sells now..she will lose $100K, she said.
Many new landlords have no idea what they are in for.
posted ” Many new landlords have no idea what they are in for.”
If the “new landlord” is taking a fall-back position due to poor market conditions today. My friend you are correct. Most will not only lose the the money, they fear to lose…. but will recive a fearfull beating to top it off!
Ben you never cease to amaze me with these articles. How the heck can so many people see the wreck AFTER the fact? Where were all these noodleheaded lender, CEOs, FBs, etc. before. Too busy drinking the Kool-Aid. Now they all want everyone else, dummies and the smart ones like us to see how smart they are. Geez, do they really think the smart ones are that dopey? We all saw this years ago in the making. The brilliance of these so-called experts is mindboggling!
Greater than 50% is higher than I would have thought, but maybe the question was phrased in the usual statistical fashion, something like: “Do you think the housing market is going to get worse in everyone elses neighborhood?”
OC Dan:
You are absolutely correct and Ben owns the archive of the actuals comments since early 2005.
I hope to see a book highlighting and shaming these knuckleheads.
As Dean Baker has challenged economists to hold themselves accountable just as they describe the benefits of accountability for janitors.
I.E. getting fired when they screw up!
I read this article about Redlands, part of IE.
“According to Steve Smith, a licensed real estate appraiser with years of professional experience, Redlands real estate can be expected to fall in price by 25 to 50 percent over the next three to five years.”
“Remember the Y2K scare? Remember the Ebola Virus scare? Don’t let fearmongers change the way you think. Sure, real estate prices may dip for a while - but they aren’t making any more land. so you know the prices will eventually increase. Enjoy your home. Plant a tree.”
Daniel C. Ashley lives in Redlands and is an adjunct faculty member at UC Riverside. He has a doctorates in business administration and management.
http://www.redlandsdailyfacts.com/business/ci_5118710
I wrote this jokester:
Daniel,
I read your article today and as a University of Redlands MBA graduate I am disappointed. I would hope someone with your credentials and stature could write an article based on fact. Let me correct all of your talking points:
1. If you are at all similar to me, you enjoy living indoors. To live indoors I must either buy a house or pay rent. If I sold my house, I would need to buy another one (or pay rent). So, unless I decide to move to another part of the country, I will keep my home here in Redlands. I urge you to do the same. Redlands is the most congenial city in all of Southern California.
1a. Rental prices are 1/3 of mortgage costs right now and the government will not even tax you on 250k of your profit if you sell your home. Why on God’s green earth would you hold on to a home when the prices are over inflated and dropping as we speak. Is it not clear that homebuilders will continue to build and undercut home values buy cancelling land contracts and rebuying property for much less than before? Yes we all need a home, but as businessmen we buy high and sell low. We make profit so we can retire and fish. We do not work to put 70% of our income into an overpriced home in the middle of the desert.
2. They aren’t making any more land. Land close to the largest retail market in the world - Southern California - is in increasingly short supply. Even if the prices drop now, they will not stay down for long. The pursuit of the American dream is pushing people to Banning, Beaumont, Indio and even further. Prices will ultimately increase - however, they will probably increase at a slower rate than they did over the last five years.
2a. This is the oldest myth in the book.
1. Build vertically
2. The island of Japan operated under this EXACT SAME ASSUMPTION until their housing market collapsed and has been down for 15 consecutive years. See the graph that is attached.
3. There is a TON of land out there near Redlands. Take a look next time you are landing at an airport. There are miles and miles of desert that look just like Redlands.
4. Builders are cancelling contract options and GIVING AWAY land as we speak! They actually are making more land!!
3. The real estate prices that are the most vulnerable are those for undeveloped land - and the more remote the land, the more the prices are vulnerable. So unless your home is in the bottom of the San Timoteo Canyon, across the rail road tracks, the negative impact to the value of your home may be minimal.
3a. This is absolutely false. All real estate is VERY VULNERABLE right now because of the relaxed lending standards and low interest rates over the last 4 years. ~60% of the loans in your neighborhood over the last 4 years were Interest-only ARM loans. Do your neighbors all realize their mortgage payment will LITERALLY DOUBLE when the ARM resets? How will your home value be affected when 60% of your new neighbors all have to sell at once? How about 60% of Southern California all at once? You are screwed too, I don’t care where you live.
4. Remember the Y2K scare? Remember the Ebola Virus scare? Don’t let fearmongers change the way you think. Sure, real estate prices may dip for a while - but they aren’t making any more land. so you know the prices will eventually increase. Enjoy your home. Plant a tree.
4a. Are you really drawing a reference to Y2k and the housing bubble? The fix to y2k was easily seen, reprogram a few microchips and we are in good shape. The fix to the housing bubble? Everyone is priced out. ARMs are all about to reset and slam 60% of your neighbors into foreclosure. We have speculators all over the place. The ONLY fair comparison is the stock market in 2000 or the great depression. In fact, almost every quote out of David Learah’s mouth was made before the great depression. I suggest you go to youtube an search housing bubble an watch the video.
Challenge: Give me your best 3 reasons why there is not a bubble and I will give you my best 3 reason why there is a bubble and we each rebut each other. If you want to write and article do it correctly and make your alumni proud.
A very disappointed,
Mark
please post his reply if he does………..and i”ll watch out for a response on the newspaper
Brilliant!
I’d personally buy low and sell high but that’s me.
“There is a TON of land out there near Redlands. Take a look next time you are landing at an airport. There are miles and miles of desert that look just like Redlands”
Mark,That was a good rebuttle to Mr Daniel, who obvously has a direct interest in Redlands RE Prices, assuming he owns a property in Redlands. I will add that there are vast,vast acreages/ square miles of relatively flat or gently rolling undeveloped terrain stretching south from Redlands all way to temecula. Most of it useless for anything but development in to more housing tracts/shopping centers/commercial lots, ect. There is no agricultural land use at all in SW Riverside county, just lots of short-stubble grassland or scrub. All this useless enpty scrub-grassland, wilted and barren 8 months of the year, has been/is still furiously being graded-bulldozed into megatracts of housing. Pan from redlands south to Moreno Valley/ southeast riverside (south of the 91.215/60 fwys). There are vast acreages sprouting home tracts. Southeast from redlands to Calimesa, beaumont/banning more empty spaces for more tracts. Go further south to perris/hemet/canyon lake/LEsinore,menifee, romoland: more idle empty flat land being converted to more housing tratcs. This part of sw riverside is over 1000 sq miles, 2x the area of city of LA, and virtually all of it is open flat useless buildable acreage.
Mr Daniel’s said they’re not making any more land?
A much bigger problem than land is water. In the West, I think water shortages will begin to constrain development much, much before land constrains it.
dcashley@dslextreme.com
We should all email this guy and ask him if he truly believes the nonsense he writes. He isn’t doing the credibility of academia any favors.
Builders stocks having another banner day. Lets all just walk head first into a bullet train why don’t we.
“We’ve become a debtor nation”
I was going to comment on this quote, but I need to go outside and get the free money the Fed keeps dropping on my front lawn.
“Nearly half of all Americans believe the housing market is poised to go from bad to worse over the next few years, according to a new survey.”
I’m looking at moving across the country to Ogden Utah this summer. I
keep a “half eye” on Realty Times website and what RE Agents have to say about local conditions. So, I just check the Ogden area again today. From what I read from two different RE Agents on the site, Ogden Utah is currently a “Buyers-Sellers Market” or a “Sellers-Buyers Market”. I guess the Ogden market really is different.
Agent 1 wrote: “All of Weber County is currently in a sellers market. There are becoming fewer properties available, and prices are increasing. It has been projected that this trend should continue for at least the next 5 years. Buyers can still take advantage of lowering interest rates, and the oppurtunity to gain fast equity. Sellers are benifiting from the quick apprectiation by obtaining top dollar for their home. If you are considering buying or selling in Weber County now is the time to do it! To find out more information about available homes and prices in this area visit me”(posted 19 Jan 2007)
Agent 2 wrote: Ogden is one of the few communities along the Wasatch Front that is a buyer’s market. With the widespread availability of modestly priced homes and prices remaining steady, Ogden continues to attract first-time buyers and investors. (posted 18 Jan 2007)
So is this a Buyers-Sellers Market, A Sellers-Buyers Market or do some RE Agents sometimes stretch the truth? I’m thinking one of these RE Agents are not telling the whole truth!
WHO SHOULD I BELIEVE????? No answer needed on this question.
‘Ogden Utah is currently a “Buyers-Sellers Market” or a “Sellers-Buyers Market”.’
Translation: It is always a good time for both buyers and sellers to trade houses in Ogden, provided the Realtor gets 6% of the proceeds.
Do you really want to use a real estate agent who 1) believes it is a sellers market, and 2) thinks that would motivate you to use them more than calling it a buyers market?
As a resident of Utah I think I can help answer your question. Utah has been 1 - 1 1/2 years behind some of the other bubble markets in terms of outrageous appreciation. While most of the bubble cities were peaking the summer of 2005 the Wasatch front didn’t peak until last summer. Over the last 8 the market has gone from an extreme sellers market (with about a 45 day supply of houses) to a more neutral market (with around 4-5 month supply). Over the last couple of years there has been a lot of specuvester activity here that has more than doubled prices in the more desireable areas. Right now prices are still below what some other bubble markets are and therefore the investors are still thinking there is still a possiblity to make money. The reason why you are getting conflicting answers from RE agents is because the market is just now (the last 5-6 months) starting to slow down.
Historically Utah has had fairly affordable housing and high rates of bankruptcy. The last two years housing has gotten unaffordable and bankruptcys have gone down (due to homeowners being able to pull equity out). Since Utah was late to the appriciation game I believe it will lose its value faster than other areas. Since house values haven’t been outragous for as long as other places there are more people that can afford to sell for less. Once the funny money is gone there will be more people that can afford to take less for there house.
I hope that helps
The Recordnet. “Dolly Cruz, a Bay Area investor who a year ago bought a single-family home in Lathrop’s Mossdale Landing development for $625,000, figures if she had to sell now, she would lose $100,000.”
Remember everybody,you read it here first on Ben’s Blog that seller’s would be bringing six-figures to closing in order bail from this bubble debacle.
This begs the question, how much is good credit worth? Rent an apartment and then throw the keys on the roof is the check at closing is > $200k (IMHO) tax penalty or not.
I believe in being responsible. But too many people are going to be owing far too much to recover.
Bummer if their in a field like mine where the employer pulls my credit report every 6 months… (ouch!). Far too many high paying industries do that too: banking, pharmacuticals, certain engineering, etc. But if the person isn’t in a field like that (real estate, used car sales, etc.)… run.
Got popcorn?
Neil
Also pull credit report for a security clearance.
Is there anyone is the US who is concerned that a private business, which is accountable to nobody, can concoct a number which can determine whether you can get a job or not? My God, at least to have a criminal record you have to go through the justice system.
Sounds like something out of “The Prisoner”. Land of the free? What a joke.
Im not a number Im a free man!
By hook by crook we will !
Scary stuff… just found my name on Google Search from Spoke.com local software company has lists of peoples names selling to anyone…
“The Recordnet. “Dolly Cruz, a Bay Area investor who a year ago bought a single-family home in Lathrop’s Mossdale Landing development for $625,000, figures if she had to sell now, she would lose $100,000.”
LATHROP?? $600K….I di not even think that was possible….lady, that place is worth half if you are lucky!
I was surprised to see that high figure for a home in Lathop, CA. Lathrop is beyond Tracy on the ACE commuter train line that ends in San Jose. That’s about all it has going for it, access to ACE so you don’t have to burn out a car with a 60+ mile commute.
Description:
* 1-and 2-story homes with
* 10 unique floor plans
* 1,780-3,413 square feet
* 3-7 bedrooms, 2-4 baths
I was in Tracy one time. It is all farmland out there. How could prices be that high?
I remember there was a place that did a hamburger that was 3 pounds, or something like that. What is the name of that place and has anybody on this blog ever eaten a full one?
Lathrop/Tracy, Morgan Hill/Gilroy, and maybe Brentwood are just within the realm of believability that you can buy a McMansion and commute to San Jose/Oakland/San Francisco. Plus, there is still enough open space in these areas, that the McMansions come “super sized”.
$500-600K in Lathrop = probably 2500 sq ft+
$500-600K in San Jose = 1 maybe 2 bedroom condo, 1200 sq ft.
…And it is still not worth it to live in central Valley, IMHO.
Brentwood homes were going for around 175K-200 for +2000 sq ft some. That edged up to 350K in 2003-03…
So now their going for $600K… Nearly 200% increase. I see a 50% haircut soon.
Hard to imagine NYC being cheaper than San Jose CA… LOL! Oh this is going to be bloody!
The 10 most overpriced places in the U.S.
Rank
City Cost-of-living rank Median home price
1
Essex County, Mass. 102 $373,750
2
San Francisco 112 $720,400
3
San Jose, Calif. 111 $746,800
4
Honolulu 95 $625,000
5
Cambridge, Mass. 104 $390,400
6
New York 109 $528,700
7
Tucson, Ariz. 74 $248,600
8
Oakland, Calif. 108 $720,400
9
Boston 106 $390,400
10
Los Angeles 98 $563,900
Interesting … and the ten cheapest are in Texas, Michigan and uh … Ohio?
Haven’t tried the 3 pounder. I always try to grab a “Jimboy’s taco” when around Sac.
The commute from Tracy to San Jose would take you about 1 hour 25 mins or so…IF there in NO TRAFFIC….hardy har har…
Look, last year I went to Lathrop to look at a used truck, and correct me if I am wrong, but this is the same Lathrop that is right off of I-5 no?
The place was a pit….and I mean a real white trash Sh*thole…the house across the street from the guy I went to see about the truck looked abandoned…but wasnt…There is NO WAY IN HELL anything in that cesspool could be worth $625K….its just insane!!
Folks, I have been reading and following this blog for one year next month…I allways thought the bubble burst would be bad, I cheered with the rest of you on July 1st when we could all see the change in media and attitudes…but now, I am actually a little worried that this sucker is going to do some SERIOUS damage to the country and CA in paticular….
August,
Yes this is the same $hit hole you speak of. Mossdale Landing is the MASSIVE sea of homes along the west side of I5. From my understanding, this land was underwater (literally) several years ago, as the delta likes to take control once in a while. It truly is insane that people think its worth $600K. Same can be said for anywhere in San Jaoquin County. 50% haircut? I’d say it’s in the bag! Mossdale Landing is a perfect example of what is wrong with residential development in this day and age.
- “‘I’m a first-time home buyer, and these people know the system and they’ve taken me for a ride.’”
Hector, my friend …the media took you for the ride.
posted - “‘I’m a first-time home buyer, and these people know the system and they’ve taken me for a ride.’”
If you passed out and found your pants around your ankles and a pile of quarters by your head…. that is a good indcation, you were the ride!
Concorde Acceptance DOWN?
http://bakersfieldbubble.blogspot.com
The implode-o-meter must be fed.
Nice find.
Got popcorn?
Neil
Neil, looks like they are feeding this implode-o-meter day and night now.
Hungry little monster. hehehe
I hope this things gets fed once a week for the next few months!!
Keep ‘em coming, Crispers!
From a real estate message board, a cry for help. Let’s see…..the proper steps for investing in real estate are……LOL
1) Buy property
2)Then begin to think
“Advice needed asap. My husband purchased an “investment property” in the Lakewood from a company called RealNet last year. he was provided with comps and what I feel to be bogus numbers in order to convince him that he could resell the property with minimal fixups. We have had this property for the past 6 months and since we purchased it, it has been broken into and completely trashed. We have just completed the repair work and need to unload this thing before it ruins us. We have had one hassle after another trying to rent it to Section 8 tenants and are getting conflicting advice regarding selling it to an investor without a tenant in it. How do you know when to rent or sell and are there resources that could help us? Thanks”
“We have had one hassle after another trying to rent it to Section 8 tenants ”
No shitt? Nobody could have ever seen that coming.
Notice how she says “My Husband purchased” ,like she had nothing to do with it and no idea it was going to be purchased.
No problem about the break in - just call your home owner’s insurance. Oh yeah, the house was vacant. Oops.
Another great catch Crispy!
Thanks!!
“The number of homes entering the first stage of the foreclosure process in San Bernardino County jumped 140 percent in the October-to-December period last year to 3,538″
I have had my eye on the nicer parts of Rancho Cucamonga for a while. Still not seeing any price drops. What I’ve seen is realtors listing homes at about 50-70k above comps, then slowly incrementally dropping the price (to make it look like a deal) and sure enough within 6-9 months there is a buyer paying above last year’s prices. It will be a while before we see any significant prce drops in desirable areas like this in the IE.
Oh but you will. Probably right around summer when all the LA and OC smog is pushed up against the mountains with no way to escape. Everytime I drive the 15 on my way out of town I feel I need an oxygen mask just to get thru that area during the summer. Come to think of it, that is how the area got so expensive, All the derilicts from Santa Ana and Compton when the rents went up they got pushed to the Inland Empire and discovered they could buy with 125% stated. Think I am lying, half the houses in my area have been broken into and when they were caught, it was a new renter from LA in a flippers house.
You must live in Fontana. The inventory there is double what it is in RC and there are deals to be had (because no one wants to live there). A newer 3100 s.f. home, 3 car garage, pool/spa, etc, goes for about 800k in Rancho, but can be had for 600k in Fontana, one zip code over. There’s a reason for that, it’s called transplanted low-life South Cebtral neighbors.
Keep your money dry and don’t pull the trigger until you can see the whites of their eyes..I think they may try and rush us REAL soon !
“‘Even though the price is down, you’re not losing anything if you’re not selling it, is the way I look at it,’ Cruz said.”
I guess he actually says: “If your are not selling now, you can’t loose anything in a few years”. The way I look at it.
The Law Of Substitution is a economic concept that if people cannot afford one product they will substitute that product for one they can afford .
For example, when people cannot afford steak ,they will substitute and buy hamburger .
When the real estate prices went beyond affordable ,the buyers would usually start to substitute ,( like renting instead,moving out of state, refusing to buy ,submitting lower offers,moving into parents house , staging a revolt , pitching a tent ,buying a trailer instead ,buying a smaller house ,etc.,giving up ).
The Lenders and the myths from the REIC messed with the natural forces of “substitution “,and made people believe they could afford steak when they really could only afford hamburger .
The media didn’t challenge this nutty mania either and many TV shows and commercials were real estate related for a number of years now . This Nation became ” real estate focused”.
Because this mania happened right after 911 and the war that followed , and people loss all their financial common sense ,Im wondering what hidden forces were in play besides greed that made people get so nutty ? I know many people were brain-washed with the hype.
Lathrop CA is a truly shitty place. Most people don’t know it is also BELOW the level of the nearby rivers and are in a high danger of flooding if any 100 yr old levee gives way. While I was still in Castro Valley (10 miles south of OAK) a neighbor moved to buy a home in Lathrop. I told him he would regret that (around Jan 2005). He was the sole earner with wife/3 kids, deep in debt, no savings, etc. His job was in Berkely. He told me they would be fine and he could hack the commute. I saw him about one yr later and he lamented the move and was trying to come back in. I guess 2 hr commutes are for everybody.
“‘We’ve been very diligently working on moving employees out of California,’ CEO Angelo Mozilo said.”
I was at Countrywide for 2.5 years and spent most of it hoping to be laid off, but finally had to quit. Now I see enormous new buildings on the north side of the 101 in Westlake Village with the Countrywide logo (the one they had on the southside of the 101 still seems packed to capacity and Corp HQ is still lacking employee parking). Angelo has been saying he won’t add jobs in CA and wants to move jobs to AZ and TX for years, but I haven’t seen meaningful cuts here. I predicted last year that half the jobs in Simi would be gone by now. What gives? Does anybody have any insights?
The Economist:
Reasons to be cheerful
Jan 31st 2007 | NEW YORK
From Economist.com
A year into his job, Ben Bernanke of the Fed may feel cautiously optimistic about America’s economy
Reuters
THIS week Ben Bernanke, the chairman of the Federal Reserve, marks the end of his first year as America’s central banker. After a slightly rocky start, when several remarks startled the markets, Mr Bernanke seems to be coming into his own. His pronouncements have grown more measured (if also more bland) and he has gained credibility with the markets.
He settled into office at a slightly tricky time. He bore responsibility for deciding when to pause the long series of quarter-point rises in interest rates, at a time of rising inflation, high energy prices and a deflating bubble in the housing market. His decision to do so in August now seems vindicated by events. Until recently the economics scene was grim with talk of just 1% growth, or perhaps outright recession. Now, suddenly, things seem sunnier. On Wednesday January 31st new figures for the last quarter of last year showed the economy grew at a stronger than expected annual pace of 3.5%.
This was despite dramatic softening in the housing market. Construction spending has made a sizeable contribution to GDP in recent years, but the fourth quarter continued a marked decline; residential fixed investment fell by almost 20%. In a separate announcement on Wednesday, the Commerce Department indicated that residential construction spending in December was 12.5% lower than the level a year earlier, with the decline concentrated in single-family homes. The drop in residential fixed investment cut 1.2% from GDP.
Even more than a drop in construction, however, economists have worried about the effects of falling housing prices on consumer spending. For years now, consumers have tapped home equity to sustain spending, and even those who have not may be spending more freely because their rising home values make them feel wealthier. It was expected that when the bubble deflated and the process reversed itself, the result might be a recession.
The bubble has certainly deflated—the latest data show a fall of 0.8% in December existing home sales, more than economists had expected. But it is not as bad as feared. Thanks, it is believed, to price adjustments, the sales of new homes are surprisingly strong. Consensus estimates had predicted a rise of a little over 1.2% for these in December; instead, they surged by almost 5%, after a healthy rise in November. But consumers remain cheerful. On January 30th the Conference Board, a private research group in New York, said that its confidence index, which had been expected to remain flat, had edged up slightly.
Much of the movement came from a significant shift in consumer perceptions of the job market. Although George Bush’s government has been touting low rates of unemployment for years, beneath the headline figures conditions have long looked less rosy for the average worker, with shrinking labour-force participation and stagnant real wages. The figure for average weekly hours worked is still dropping slightly, indicating further slack in the labour market. But both hourly and weekly earnings started to rise in the second half of last year, and a jobs report to be published on Friday is likely to show these trends continuing.
In particular, some of the structural conditions that have plagued the labour market may be improving. The low labour-force participation rate (it is still almost a full percentage point below its peak) and the lengthening duration of unemployment, which rose from just over 12 weeks in 2001 to more than 20 weeks in 2004, have lent credence to the idea of “jobless economic recoveries”. This suggests that unemployment is increasingly caused not by cyclical factors—when workers are temporarily laid off as aggregate demand drops—but by structural changes, when whole job categories and industries suffered permanent reversal. Workers displaced by the latter sort of shock take longer to find jobs, and may struggle to transfer skills and get the same level of pay.
Recently, however, those indicators have started to improve. Average hours worked are creeping back towards their historical averages, while the duration of unemployment has fallen sharply. The economy also appears to be creating jobs more quickly today. And consumers may be cheered by other factors, such as declining energy costs: oil is trading at around $56 a barrel, and petrol prices are flirting with $2 a gallon.
Not that this makes Mr Bernanke’s job easy. He will be watching labour costs for signs of inflationary pressure. And those pleasant indicators could easily become less attractive. Many still fear for the housing market. Some OPEC members may try to push up oil prices again. Mr Bernanke has weathered his first difficult passage, but it is unlikely to be his last.
“Saleschick: Oh, I don’t care, as long as I don’t have to use my brain. The less I have to use my brain, the better.”
This would be funny if it weren’t so utterly sad.
And we wonder why all the tech jobs are outsourced. The stupid mentality quoted by a salesclerk above is one reason to justify being paid under $6 an hr. Even if it were a figure of speech, her failure to learn basic grammar and spelling is compounded by her attitude. Cannot compose a letter in English —-when much of the rest of the competitive marketplace is bilingual. They (Indians,Chinese) probably understand the mechanics of English better than the nit wit quoted above. And they are certainly way ahead in science and math. What excuse is there for such blatant ignorance?
It’s true, maybe they don’t understand the mortgage contracts and interest rates, etc…if they can’t understand basic grammar.
I would take this type of attitude with a grain of salt. Yes, she may rejoice in being a bubble headed idiot. But she may also be very bright and putting herself down in an attempt to make others feel better. Women do this all the time. (I know I do although I am trying to fight the habit.)
Also, I am highly intelligent but my typing and spelling leave something to be desired. I am grateful to spell check so that I can fill my brain with things more important to me than how to spell certain words. My hard drive is full folks. Got to watch what I put into it.
I think this blog is more concerned with common sense than intelligence. As many often say - common sense isn’t so common anymore.
Comment by Been There:
Truth be told, most of these FBs got themselves into these situations, but we all know most of them should never been lent the kind of money they were lent.
I live in Boston. I considered buying about 2 years ago..but decided not to because I don’t want to stay here.
I am frugal and managed to save with an average income. But Countrywide had approved me for about $130K more than what I felt comfortable borrowing. (I had nice downpayment, good credit and the loan was fixed 30 yr.) I certainly was not looking at homes in the $400K and up range.
I couldn’t get serious about buying because I felt something was off. When I talked to the agent about how much I had qualified for, she said “these are new loan products.” I suppose $130K is not a lot of money to some people…but I worked hard for a long time for my downpayment and didn’t think it was a good risk.
In one regard, I was happy to have it on paper –what I qualified for and take that with me if I needed to show it. But on the other hand, now I feel I was just another person who qualified for more that I could have handled.
In my case it was a fine line, because I had the fundamentals from my side, downpayment, good credit, steady income, etc. and I wasn’t going way over my head. But I know others did not have that financial sense and some companies, perhaps even Countrywide were just selling a “product” to any sucker without caring about the fundamentals or the outcome.
So, the point of this thread is:
Jose took a hosing in housing.
I don’t think it’s fair just to blame it on Gomez. Granted, you should most definitely read the contract and understand it fully. But let’s be honest, sitting there reading contracts while dealing with bastards for brokers isn’t easy…and it is intimidating.
Alot of you people are talking big but when it comes time to buying something that you have only dreamed about all your life, emotions, etc take hold. I blame him AND the brokers as well…they are both to blame one as equally as the other.
NOW…I want to see the same things happen in the Glendale/Burbank/Arcadia/San Fernando/San Gabriel areas….WHY are the homes still so expensive here? I live here but I will not pay $439K for a POS condo in Glendale.