“Real Estate Is Achilles’ Heel Of The California Economy”
The Daily Bulletin reports from California. “They may be locking the barn door after the horse has been stolen, but California lawmakers want everyone to know they’re very unhappy about these risky mortgages that are starting to go bad. So Wednesday in Sacramento, the Senate Banking, Finance and Insurance Committee held hearings on less-than-traditional mortgages, including adjustable rates, interest only and sub-prime lending.”
“It has become clear that many of those marginal buyers were banking strongly on a continued runup in the housing market. ‘A lot of people got talked into loans they should not have taken,’ said regional economist John Husing. ‘Adjustable rates, big balloon payments, large jumps in interest rates. Housing was sold to them as an investment, and now some of them are losing their houses.’”
“Husing pointed out that whenever there is a period of ’speculative craziness,’ people look at all the money being made and want to get in on it. ‘A lot of people got into loans and didn’t have a clue what they were really signing,’ he said.”
The Sacramento Bee. “People finally are coming to realize the pitfalls of crazy loans that allow them to borrow more money and buy more house than they can afford. It’s easy to see why. Foreclosures are rising fast, as are notices of late mortgage payments.”
“One key issue was not discussed at all at the hearing: the role of nontraditional mortgages in artificially driving up home prices, feeding the affordability crisis rather than abating it.”
“One broker pleaded with senators not to do anything that might ‘take away the dream of home ownership.’ But as Paul Leonard of the Center for Responsible Lending testified, the issue is sustainable home ownership, not just the dream.”
“If people can only afford initial low payments for a couple of years but then lose the home, how does that promote the dream of home ownership?”
The Press Democrat.”Parts of the state are continuing to slump, the real estate industry’s top economist in California predicted Thursday. Sonoma County will take longer to recover because of a recent exodus of jobs in the county, said Leslie Appleton-Young, chief economist for the California Association of Realtors.”
“She forecast economic growth in California will be moderate in 2007, dragged down by the slumping housing market. ‘Real estate is the Achilles’ heel of the California economy,’ Appleton-Young said.”
“‘People are spending more of their incomes,’ she said. ‘Budgets are stretched.’ The result is a surge in foreclosure activity, which almost doubled in 2006. Lenders sent default notices to 913 Sonoma County homeowners who fell behind on their mortgages last year, up from 540 in 2005.”
“Much of the foreclosure activity is concentrated among first-time buyers who purchased homes priced at the lower end of the market, said Michael Madsen, senior loan consultant with The Madsen-Shaw Home Loans Group.”
“Appleton-Young agreed that foreclosures will continue to rise. But she predicted foreclosure rates will not reach the high levels of the early 1980s or mid-1990s when slumping economies and job losses roiled the state. ‘We have a growing economy,’ she said.”
The Orange County Register. “A ’sudden and swift’ decline in new-home demand caused profits for Standard Pacific Homesto plummet 72 percent in 2006, with the company racking up $98 million in losses during the final three months of the year, the Irvine homebuilder reported Thursday.”
“‘The sudden and swift decline in demand in most of the major housing markets across the country last year gave rise to significant price reductions and incentives to move inventory,’ CEO Stephen Scarborough said in a company statement.”
“Standard Pacific built 10,763 homes last year in eight states across the southern half of the nation, from Florida to California, the company reported.”
“Last year was ‘clearly a year of transition from the robust growth of the first half of this decade,’ Scarborough said, adding that it’s too early to predict when the housing market will improve. ‘We believe many prospective homebuyers are waiting on the sidelines for signs of stabilized pricing,’ he said.”
From CBS 13.com. “It’s hard to believe a house that’s only three-years-old has a cracked wall (that) makes it look like an ancient ruin. And the owners of this home won’t go inside with us, because of worries about their health. What could cause this kind of dread and damage?”
“‘The wind!’ said Bill Thomas, a construction consultant living in El Dorado County. He says he’s seeing that damage across El Dorado County.”
“El Dorado Hills and much of the county below Lake Tahoe are zoned for what’s called ‘Wind Exposure B.’ Thomas says exposure ‘C’ should be the standard here, but that would require stiffer materials and stronger design and drive up the cost of homes.”
“‘If it costs you $10,000 less to build it and you just built 400 homes in the subdivision, then now, you’re talking about real money,’ said Thomas.”
“‘The builders call it ‘value engineering.’ Before they start building homes, they get all their engineers together, and say, hey, how can we save money on these houses? Where could we, cut corners–if you want to look at it that way,’ said Dave Crozier.”
“The Crozier’s two-year-old home is laced with cracks, like one running the entire length of the east-facing wall. And they have the loose windows, rust and mold. But there’re other problems, problems not related to the wind. The Crozier home has a, rippling roof line, and anchor bolts that aren’t secure enough to stabilize the house.”
“Dave and Vickie Crozier paid more than $700,000 for their home on the edge of Stonebriar. They’re now living with their two-kids in an apartment paid for by the builder.”
“Bob Yeadon believes Thomas is onto something big, and he points to his former home as exhibit ‘A.’ ‘Its one of those things where you work all your life, and you get, you know, your dream home,’ said Yeadon.”
“The Yeadon family moved out of their million-dollar home in the Serrano Country Club area on the advice of their doctors.”
“When the family bought this home, brand new three and a half years ago, they paid just more than $800,000, and then put in $100,000 more in upgrades like this pool. They just sold this house. The highest bid they could get–$425,000.”
‘The sliding Vallejo real estate market may be leveling out, although it’s still near the bottom of the Bay Area curve for lost value and sales figures, local Realtors said. Mary Morrongiello-Amos, real estate investor and owner of Vallejo’s Public Car Mart, said there likely will be one more downturn before the real estate roller-coaster heads back up. ‘We haven’t seen the bottom of the trough, yet,’ Morrongiello-Amos said. ‘As the banks get the foreclosure properties back, they have to dump them back on the market, to sell for whatever they can get. That drives prices down.’
‘In any case, anyone expecting to make huge profits in a short time ‘flipping’ houses in Solano County will likely be disappointed, at least for the foreseeable future, Dennis said. ‘Real estate’s always been a long-term investment,’ he said. ‘The huge, 20-plus percent price increases in ‘04 and ‘05 were anomalies. A fluky thing. Sellers have gotten more realistic. They’ve come back to earth from the stratospheric appreciation.’
-”‘As the banks get the foreclosure properties back, they have to dump them back on the market”.
She talks like this will only be a 4-6 month thing!
She is getting her economic analysis from the same RE economists who believe this uptick in home sales is the bottom!
”‘As the banks get the foreclosure properties back, they have to dump them back on the market”.
In my experience the best buying opportunity will have a window of about 4-6 months. Do you feel lucky?
I wonder if the properties described in the CBS 13 link,
if they go to foreclose, could even be
legally re-sold by a bank?
It might be cheaper (from a legal liablity point of view)
to just tear them down and re-sell the empty lots.
These structures wouldn’t even pass muster as a crack-house!
So far, many REO’s are going above the comps. I saw one REO listed 33% above comps. The lender must have really been screwed on that one or they’re smoking some weed
Jerry, you say “…REO’s are going above the comps…”. I assume you mean listed, not sold? Please clarify.
Yes, I meant listed. I think it will be the builders setting the comps, not the REO’s or FB’s. RTC II will be handling the REO’s because the lenders are also in denial.
This did happen back in 1990-91. Lots of property held by banks, which they didnt want to do, hit the market all at once.
I hope many on Bens Blog write the Governor and their Senators/Assembly members in Sactromento and tell them to move forward with this legislation. If you dont the Real Estate PAC (CAR) and the mortgage Industry will make a move to kill off any new laws. Call, Write, Email today before its too late.
Not a chance. The foreclosure storm is just dark clouds in the distance right now. We have a hurricane katrina heading our way and these morons are like — there all better now things will start to pick up again and we can get back to the party.
“…Sellers have gotten more realistic. They’ve come back to earth from the stratospheric appreciation.”
Uh, I don’t think so. Still major dreams built into their fantasy pricing.
Really? Have sellers become comfortable with eating a 30-50% loss?
More like they are still delusional from the lack of oxygen at high altitudes. Lots of people suffer delirium when you go over 4 figures.
‘As the banks get the foreclosure properties back, they have to dump them back on the market, to sell for whatever they can get. That drives prices down.’
Sounds like a worst-last storm on tap…
http://www.amazon.com/Under-Whirlwind-Everything-About-Tornadoes/dp/0968153704
“They may be locking the barn door after the horse has been stolen, but California lawmakers want everyone to know they’re very unhappy about these risky mortgages that are starting to go bad. So Wednesday in Sacramento, the Senate Banking, Finance and Insurance Committee held hearings on less-than-traditional mortgages, including adjustable rates, interest only and sub-prime lending.”
when politicians start to hold hearings, you know that the sh’t just hit the fan. take cover everyone.
Start of hearnings etc. Nothing they can do now but “talk on tv” as the damage has been done. Good drama/entertainment for those who like to watch, much like a good murder trial but its over!
Yep, they’re just in time to sort through the rubble.
I wonder, how many of the lawmakers are seeing their wishful profits evaporate and THAT is why they are now unhapppy? If it didn’t hit their pocketbooks, would they care?
Brilliant! and exactly right. I bet both sides are wailing before too long.
Nah! they are politicians. They want attention and re-election. All are clamoring to be the Nancy Pelosi of the California state legislative level. I really respect California senators and assembly “people” (barf, politically correct speak, but I’m facetious).
“Nah! they are politicians. They want attention and re-election. All are clamoring to be the Nancy Pelosi of the California state legislative level. I really respect California senators and assembly “people” (barf, politically correct speak, but I’m facetious).”
The California Legislature is the most useless set of political hacks on the planet. They legislate on silly stupid irrelevant stuff like banning spanking of 3-year olds, banning cell phone use while driving,ect. Meanwhile the real problems and issues in Cal such as overpopulation and deteriorating environment due to impact of massive illegal immigration are completely ignored. Businesses and middle class families leaving the state due to above problems as well as overpriced housing and high taxes are some other issues which the liliputian cal legislature ignores.
The dog s*it which i occasionally step on in my back yard, and have to scrape off, is about how the Cal legislature affects my life.
“‘People are spending more of their incomes,’ she said.
This is an environment with very low interest rates imagine if inflation picks up and the Fed is forced to raise rates.
People are spending more of their incomes on housing? No way?!?!?
Gotta love these ‘experts’.
I did a NEW post about this last night.
SoCalMtgGuy
http://www.housingbubblecasualty.com
Imagine if people lose their jobs. If we are in a great economic environment and they are one payment away from losing their house, imagine where things go if the economy slows down.
Imagine it? I’m bracing for it.
Amen!
Add me ot the list. I’m saving up every penny I can find.
Not a bad idea, that Penny is worth about a nickel. Course they lock ya up if you get cought melting it.
I am also in that camp. My company announced a 5% RIF recently, I have friends who are also saying as high as 10% in other companies. Batten down the hatches.
I think the economy will start showing visible signs of slowing by the second half of this year. We are in for interesting times, that is for sure.
So can anyone explain why the homebuilder stocks are soaring? CFC also at a 52-week high due to BofA rumor, but really folks. What do the insiders know that we don’t?
What, there isn’t enough business for the 500,000+ RE agents in California???
Not to mention all the mortgage, title reps, and construction people. And lets not forget that maybe 1-2 people have refinanced their home and spent the money on ‘home improvements’ and/or consumer items.
SoCalMtgGuy
http://www.housingbubblecasualty.com
“One broker pleaded with senators not to do anything that might ‘take away the dream of home ownership.’
Any broker worht their weight wouldn’t be arguing against proposals such as these. Loose lending has slaughtered our industry. Sure, it’s piled a lot of money into pockets in the short term, but the end result is a long term disaster. So either this guy is as dumb as rock, or he’s a shytster con-artist looking to serve his own interests. The “dream of home ownership”…please spare me. i wish I’d been there to heckle him.
As I’ve said before, what is wrong with boom and bust cycles? Where in the Constitution does it give the gov’t the power to ban stupidity? Let’s keep the gov’t out of this. Anyway, they’re already occupied with ruining healthcare out here in CA.
I say national health-plan for everyone. It’s so Fu@ked up now that the only people that CAN’T afford it is the working Middle class. That or Fu@k it! NOBODY GETS NOTHING! Cause this situation is Completely FU@ked UP!
It is easier to work under the table and get free health benefits than to try and Make something out of yourself. If you do try, you end up paying for all the illegals WORKING THE SYSTEM! AND THEY’RE LAUGHING ABOUT IT!!!! COME ON, THEY’RE NOT STUPID.
Wouldn’t you rather deny the illegals health benefits unless they pay for them, rather than ruining the system for everyone? By the way, you are an emotional wreck.
Imploder is not an emotional wreck. Imploder is one of the smartest guys on this blog. Evidence: he’s witty and is not saddled with any real estate “investments”. Can you say the same?
“By the way, you are an emotional wreck.”
lainvested…. you hit like a girl…..
Gee, thanks Spike….
Yep, count me as another imploder fan!
~Misstrial
La investorgirl,
The U.S. is the only western country that does not provide health care for its people. What the hell is wealth for if not to provide at least the fundamental needs for everyone? As I recall Hillary Clinton was lambasted attempting this in the past. It is the right thing. I cannot fathom why people get so alarmed by a broader system.
I was an exchange student in Sweden in 1990. I developed a benign tumor on my foot during my stay. I called a doctor and they removed it. No charge, no bullsh#%t! It was the right thing to do. You seem to be so infatuated with the prospect of your own investment (i.e., do nothing) windfalls that you chafe at any oversight. This country is currently run by the basest instincts and vilest people; it should be run by higher goals and higher quality people. Your notion that corporations could do things better is shown in textbook form by this administration. Deceitful,corrupt, swine.
But au contraire, Cut the doctors and nurses salaries and the HMO and hospital costs and I might be with you. Not a one payer system where NO one has any care of what things cost. Rant is over for now.Might be some Dr’s houses in Los Altos Reod. hehehehehehehe
Uncle fester, tell me again why i should be taxed to provide health care for my neighbor. Tell me where in our constitution this occurs. I’m sick and tired of people in the US wanting to model ourselves after drab grey 11% unemployment Europe! Why don’t you all move over there? Please? I’d rather be responsible for my own self and NOT FOR ANY STRANGER!. Good Grief!
Yikes!
Sorry - f0rg0t to end the bold.
When the government is buying up MBS and is responsible for keeping the banks solvent with OUR tax dollars, then the government has a duty to stop the insanity.
If you want the government to stay out, then first shut down Fannie, Freddie and FDIC.
If you want the government to stay out, then first shut down Fannie, Freddie and FDIC.
That would be a damn good start!
Comment by Bill in Phoenix
2007-02-02 19:39:30
Uncle fester, tell me again why i should be taxed to provide health care for my neighbor. Tell me where in our constitution this occurs. I’m sick and tired of people in the US wanting to model ourselves after drab grey 11% unemployment Europe! Why don’t you all move over there? Please? I’d rather be responsible for my own self and NOT FOR ANY STRANGER!. Good Grief!
——————————–
Bill,
Allow me to answer that for Mr. Fester.
The reason YOU want to pay for someone else’s healthcare is because **YOU benefit** from their better health.
A productive society requires healthy workers who can focus on something other than basic survival.
If we had things your way, nobody would be vaccinated, and diseases would spread like wildfire. There would be two classes in your world: the sick (middle-class/poor) and the healthy (wealthy).
As much as the “capitalists” like to deny it, it’s the poor and middle classes who do most of the productive work (the wealthy tend to be concentrated in administrative jobs, and the TRULY wealthy just live off of passive income).
BTW, much (most?) of the R&D in medicine is publicly sponsored — either in universities or at institutions like the NIH. Even private (for-profit) companies are often issued publicly-funded grants for research. It’s often **after** a product is initially developed that the private sector moves in to manufacture (large-scale), distribute and market the product — and make a tremendous profit from it.
If socialized medicine is so bad, why do countries with socialized medicine fare better than we do — both in terms of infant mortality and life expectancy?
http://www.infoplease.com/ipa/A0004393.html
“If socialized medicine is so bad, why do countries with socialized medicine fare better than we do — both in terms of infant mortality and life expectancy?”
Cherry-picked numbers. We have a lot of illegals, gang problems and other ills that misrepresent what the survey is after. Cure those problems and the stats get fixed.
We have a meritocracy in the USA. You work hard, study, take risks (with reasonable prospects for a good outcome) and you should live comfortably. Remove that incentive and we slide into mediocrity.
Canada’s heath care system is a joke. Make an appointment and wait forever along with the unproductive members of society that have all day to sit on their ass, allow the government to decide what you can have done, what equipment they purchase… Then pay 60%+ of your income in taxes to get poor medical treatment. That should help motivate you to be productive!
Canada’s heath care system is a joke. Make an appointment and wait forever along with the unproductive members of society…
—————————
We have HMO coverage, and I guarantee it’s no better than the socialist system. Have to wait months to see our doctor.
Although I strongly advocate a “nationalized” healthcare system, I also believe we should have the ability to use private care providers and pay for it out-of-pocket. That’s what we do if we want better service with our HMO.
Nice reply Ca Guy,
I was off duty last night. I’ll admit this is a contentious issue, but the notion that the U.S will slide into mediocrity over national health care is too funny. This country has been flirting with mediocrity from Plymouth Rock to Ford Motor Co. I love this country, but there is great room for improvement everywhere I look. When folks are so sure that their society is perfect, they cannot entertain new ideas, they slide toward mediocrity. I am sure the Romans felt superior to the Barbarians too. With respect to medicine, the current corporate dominance by insurance companies and HMOs has hamstrung the system so that many other countries do better with preventative medicine than we do.
CA renter
There are a lot of things that others in society can do to benefit me as well. Heck, I’d like everyone to stop eating meat and dairy and get less diabetes and heart attacks and cancer. I’d like everyone to walk their dogs more, because it makes me sad if they don’t. I’d like everyone to drive high mileage cars.
But see, just because something is better for society as a whole doesn’t mean we force people to do it. Further, I take excellent care of my health. I’ll be damned if I have to pay MORE insurance (and I do not have a high income) for people who eat crappy food, eat tons of dairy, refuse to exercise or take responsibility for their health. A big fat NO to that. The minute something becomes free, people become careless and that is exactly what would happen if health care was “free”.
Soliel,
I’ve brought this up many times in other posts, but what about when **you** end up with a terminal disease? Do you have enough of your own money saved up for the necessary treatments? Mind you, a bout with cancer can easily cost hundreds of thousands to over a million for treatments.
Too many people assume that “taking care of their health” will prevent terminal or debilitating diseases. I highly advocate that you sit in the parking lot of a cancer treatment center and watch who walks in and out.
You’ll find a surprising number of young, thin and fit people who took excellent care of their health.
When you eat right, don’t drink, smoke, do drugs, etc…you tend to increase the length of your life (i.e.: you’ll likely live into your late 70s and beyond, as opposed to dying in your late 50s through early 70s). You’ll also likely increase your quality of life in both youth and old age.
That being said, it does not mean you are less prone to getting cancer, or other horrific diseases, in your early years. Genetics play a much larger role there.
Of all the people we know who died early (other than accidents & overdoses — which are very highly correlated to lifestyle choices), **every single one** lived and **extremely** healthy lifestyle. Many ate only organic foods, exercised A LOT on a daily basis, never drank, did drugs or smoked. In every case we know where a young person got cancer (and, unfortunately, we know too many), they were very healthy right before diagnosis.
Contrary to popular opinion (because humans like to believe we control our destine), we largely DO NOT have control over our bodies/health, especially where the worst diseases are concerned.
hey;
imagine housing without foreclosures
imagine selling without realtors
imagine loans without points
where is john lennon when you need him?
We hear so much talk now about our “strong economy”. The theory being that the housing bust will not cause widespread harm because the overall economy is “booming” and “strong”
But how is it strong? The only thing I can see that looks strong are corporate profits and the stock market. And this is because big multinationals have become very adept at squeezing both their employees and their customers for short term gains.
Every single person I know is A) making barely more than they made 3 years ago, B) more worried than ever about long term employment and retirement security, C) struggling to pay ever increasing utility, food, education and other bills, D) laboring under mounting debt that built up as they tried to be part of the glittering “American lifestyle” that is sold to them by the corporate media.
If you are already wealthy the economy looks great. You are part of the in-crowd that buys the laws and rigs the statistics and determines the media stories of the day. If you are not rich then you are probably starting to feel a growing sense of dread.
Personally I think our “booming” economy is a huge house of cards with a huge cartoon bubble over it’s head saying “boom” just as it about to collapse.
It’s interesting you bring this up. I was talking to a friend the other day about the state of the economy. He argued that what he was hearing was that everything was great. So, like your comment, I asked him, if you set aside real estate, how many people he knew were doing any better than they were 5 years ago. It was like a light bulb moment for the dude.
One thing that I think is really squeezing people is the effects of price inflation on day-to-day purchases. The government publishes ridiculous inflation statistics like “2.1% year over year” but have you noticed how little $100 buys at the grocery store these days. When I stop at the ATM with my kids in the car and they ask me how much I’m taking out and I tell them “$100″, they seem to think it is a lot of money - and it was when I was a kid 30 years ago. Not any more.
On some other blog a few weeks ago I read about an economist who tries to calculate real world inflation as a hobby. He uses real world items that average people actually buy and doesn’t apply all the nonsensical adjustments. He claims that real world inflation is currently running at just over 7%.
I do my husband’s book keeping with Quicken, which brings up the amount of your last payment of the same item when you enter the latest check. The price hikes really jump up to me, especially when it’s the type of payment you only make once a year. Medical journals going from $154 to $185, license from $600 to $805, insurance going up 15% although there hasn’t been any claim, etc.etc. Inflation is a lot more than 3%.
casiopeia… seeing that your husband is a doc and all I was wondering if he could take a look at this weird “bump” on imploder’s…… oh never mind……
Binko: you stated it perfectly. With wage arbitrage, mergers and acquisitions, and reduced benefits for employees, the top of the heap are the only ones really getting ahead (generally speaking).
I definitely agree with your points A and B, but I can’t empathize with C and D. People are wasting money on utilities because they bought a large home with vaulted ceilings and poor construction, they are dining out like Hollywood celebs, they borrow all their education money rather than perhaps getting a job and paying as they go, and they are just plain stupid to be buying $300 handbags that cost pennies to manufacture. Not to mention driving inefficient vehicles. All people who fit this description can only blame themselves. I left college with zero debt and just started grad school with the same idea. Most restaurants leave me feeling cheated as far as cost and quality, and I have never been that into fashion fads.
In short, I agree with you that our economy is a house of cards, but when it collapses and people start crying they should really look in the mirror first, IMO they’ve probably put themselves in the poor house.
Well there are certainly plenty of spoiled kids out there, but working your way through college IS harder now than say, 30 years ago. Tuition, like RE prices has risen MUCH faste than inflation. A much larger percentage of the funds for public universities comes from tuition instead of taxes than was the case years ago. It’s all nice and fine to say “Well in MY day we worked our way through college,” but you have to realize that there was a much greater taxpayer subsidy to “enormous state university” in those days.
I’ve got to second CA Guy, too many people think “what kind of lifestyle do I want?” instead of “What kind of lifestyle can I afford?” I know someone who ran up $22K on her credit cards. I thought “what did you spend that money on?”. She wasn’t driving around in a sports car or wearing a fur coat or anything. The answer was she spent it in bits and pieces over time - Starbucks lattes, a triathalon road bike, a new outfit for the Xmas party, and so on. The minimum payment on her cards consumes 25% of her monthly take-home pay. I think her story is quite common in the US of A today.
Oh, give me a break. A/B/C wouldn’t be problems if not for D. And “glittering American lifestyle that is sold to them by the corporate media?” Puh-leeze. No one forced people to buy into the glittering lifestyle, any more than they forced them to buy homes.
And as for the broader economy, I find your complaints to be lacking in substance. Employment has been “full” (around 5% unemployment) for, I dunno, 3 years now? Anyone who wants a job can find one, and anyone with any skills can find a better job. Anecdotally, I can attest to the number of 20 and 30-something friends who work full time and have started their own businesses (Web sites, consulting companies) specifically to provide extra income, and some of them have been so successful that they quit their day jobs. Perhaps most telling is the fact that despite major cuts in tax rates 4 years ago, federal tax receipts have soared (up 30% or so), and I don’t think that’s entirely because of the housing boom.
The housing market may be screwed, and that may take down the broader economy with it; I won’t dispute that. But to say the rest of the economy is already in bad shape strains credulity.
You, me and the rest of the people posting on this blog are pretty smart and literate. But out there in the real world where 80% of the public did not read a book last year most people are pretty dumb. Virtually all of the average american’s world view comes from the big media which is now 100% multi-national corporate owned.
If we want to build a functional society there is a limit to how far we can go with the “they were dumb so they deserve what they get” mentality. We are never going to have a society of all smart people who are educated and mentally adept enough to look out for themselves in a complex society. Most people bought homes in the bubble simply because that was what everybody else was doing. Most people will always do things for this reason.
It used to be widely accepted that the role of government was to regulate the sharks so they don’t prey voraciously on the simple fish. Now it seems that many people believe the role of government is to clear the way so that the sharks can feed more efficiently.
I’m glad that you and your young friends are doing so well with your websites and consulting companies. But I’m sad that you are willing to accept a society where the great mass of the not-so-smart, the illiterate and the easily manipulated are consigned to be shark food.
Bingo Binko. Thanks.
“I’m sad that you are willing to accept a society where the great mass of the not-so-smart, the illiterate and the easily manipulated are consigned to be shark food.”
Not really fair. These folks voted in great numbers for bush and his “ownership society” and his promise to end “government interference” especially regards credit. People whose parents might have excercised restraint, heeded the call to “go shopping”. The piled up cc debt and then added more cards. The Fed Reserve dropped interest rates to 1%, loosened lending standards and greenspan encouraged the unsophisticated to use ARMS. The saw an easy way to make money without lifting a finger and jumped on the bandwagon, buying and flipping homes. They and their endless greed fed the mania. Did they plan on hard work and productive endeavors to get ahead…naw, it was all speculation and greed. So, now the party is over and the piper is here demanding to be paid. And, they are what…
innocent lambs, vitimized by their own greed. Well, life is a hard school.
Many of the posters here are middle class, hard-working, frugal folks who insist on saving, budgeting and keeping a sober eye on their finances. What used to be known as the backbone of the country. I am sure you’d like to demonize us because we demonstrate that it was entirely possible for ordinary folks to bypass the parade to debt servitude.
Spike,
You’re right — many people had a hand in sealing their own fate as chum, and yes they are responsible for the consequences of their idiotic decisions. But I don’t think Binko’s point was to demonize “middle class, hard working, frugal folks”. To me, his post suggests it’s sad that as a culture we’re so distracted, driven by unarticulated fear and rage, and lacking in the ability to think critically that many can’t even act in their own self interest anymore. Perhaps it’s naive or backward looking to imagine government can save people from themselves or from con-artists, but as a country I do believe we’re more clueless about basic things like what’s up or down, right or wrong, important or trivial than ever before. Who or what can plug that gaping hole in our national psyche, I can’t say.
Read Mein Kampf.
Hitler knew very well that most people could be manipulated by emotion,not reason. Yes, most folks can be easily manipulated to do things against their best interest, but it is low class, even evil, to do so.
Sorry I don’t want to read mein kampf, and I’m not sure what Nazi propaganda has to do with this at all. But if your point is that a large part of america is “low class, even evil”, I disagree.
An education isn’t complete without a reading of “mein kampf”, “the communist manifesto”, the bible, and “the rise and fall of the roman empire”.
You don’t need to agree with a creed to learn from it.
Add to that list “Metaphysics,” by Aristotle.
Hey, dude, thanks for the awesome college syllabus. Are you blogging from the student union right now? Before pontificating on what a complete education is you might try reading the thread so your statement vaguely relates to the topic. If you like fester believe the American public is brainwashed in the same way as the german public was before wwII, pass the medical marijuana dude, cause I’m not stoned enough to get the connection. Rock on.
An education isn’t complete without a reading of “mein kampf”, “the communist manifesto”, the bible, and “the rise and fall of the roman empire”.
LOL. Period pieces which had differing degrees of impact on broader society, arguably much more than they deserved, but hardly required reading for a “complete education”.
Manraygun,
I never implied most American are low class, or evil. The relevant connection was no society is so full of rational, intellectual people that they are immune from propaganda. The germans were arguable among the most intellectual people in the western world when Hitler hoodwinked them. Americans can certainly be deceived, and are. And in a democracy, this can be very dangerous, because the majority can be easily deceived, and do bad things. But more commonly they hust themselves. Is it their fault? Of course. Is it ok to stand by and allow folks sell smallpox-laden blankets to their fellow citizens? You decide.
But to say the rest of the economy is already in bad shape strains credulity.
Oh man, are you in for an education.
But to say the rest of the economy is already in bad shape strains credulity.
Damn, TJ, you beat me to the punch. I laughed so hard when I read that! simishag should real around a bit more. It’ll give him a more balanced view.
Try calculated risk, itulip, nouriel roubini, russ winter, mish, prudent bear, bill fleckenstein, bill gross. These can be gloom and doom sounding. But they are better reasoned than most of the fluffy news cycle driven prognosticators.
Read them then follow up with a reasoned reply. Until then, I agree with TJ.
“D) laboring under mounting debt that built up as they tried to be part of the glittering “American lifestyle” that is sold to them by the corporate media.”
This is entirely voluntary. Those who sell their futures to pile up glittery trash have made their own choices.
Those who think for themselves, and many are on this blog, have no debt at all, plenty of savings, and a willingess and ability to shape their own lives without being swayed by “society”.
To paraphrase, Americans are born free, but watch how many can’t wait to throw chains on themselves and their families.
“Every single person I know is A) making barely more than they made 3 years ago”
You probably don’t know that many people. My income varies. And last year was lower than the previous year, but both years over $200,000. And I’m an engineer. Ain’t overtime great? I hate to come across as negative on your post, but in my opinion, people have themselves to blame if they don’t like their incomes. If they burdened themselves with a house, spouse and children, they limit themselves. They need to think outside the box and start their own businesses. No whining for others, please!
Manraygun,
I read your post and gave it some time and thought about it. I have a tripwire watching folks sell their future for junk, and it’s my shortcoming. But Binko also has a point, and a valid one. Most states used to have usury laws that capped interest rates–cc companies with massive political contributions were able to get those knocked out. But realistically, anyone saddled with 29% interest rates, even without a mortgage,is going to find it hard to dig out. Wages are stagnant, and inflation is deliberately underreported. Folks with children, many also with aging parents, even with good incomes, are stretched. The cc companies have a smooth talking babe who does a good pr job as the “reasonable” face of the debt industry…but they’re charging rates that 2-fingered Louie on the corner wouldn’t sneeze at.
My best hope is the coming correction will force a shift in priorities and values–with the cc and RE shills hung out to dry.
Yes, the cc companies seem to me to be a perfect symbol of the greed-gone-wild ethic that’s taken us over. I blame some of it on the CEO-in-chief and his ass kissing of big business. He’s institiutionalized and made it acceptable to not have a conscience. I hope the correction forces a shift in priorities too.
Nice post Spike. Well said.
And that’s the reason for bankrupcy laws. There will always be people willing to borrow their way to the poor house. The idea of bankrupcy laws was to discourage anyone from lending them the money to do it. Some people DID abuse the old bankrupcy law. But if ANYONE should have been familiar with the bankrupcy law it was the cc companies. Reducing people’s ability to default their existing debts was a HUGE benefit for the cc companies.
“Reducing people’s ability to default their existing debts was a HUGE benefit for the cc companies.”
True, but capping the interest rates on CCs via usuary laws, would give the cc companies a real incentive to tighten their lending standards, just as the mortgage industry needs to tighten theirs.
How about a little responsibilty on both sides of the equation.
‘Personally I think our “booming” economy is a huge house of cards with a huge cartoon bubble over it’s head saying “boom” just as it about to collapse. ‘
I was inclined to agree with you about eight months ago, and then I reentered the job market by choice and found myself bombarded with very well paying opportunities. I need to be in CA because I have shared custody of my kids, but it seems that most workers with experience and analytical skills have moved to a more affordible state faster than their corporate masters can follow them.
At its root, I believe that the “booming” is the corporate equivalent of credit card spending. Asset prices in almost all classes have been pumped up by cheap money from the Fed, the BoJ, the Chinese investing their surplus dollars. As these asset prices go up, there is a stock and bond bubble on Wall Street to match the RE bubble on main street. Unfortunately, less and less of this money actualy gets spent on the sort of productivity improvements and plant investment that leads to real economic growth. Instead it incestously circles around Wall street, enabling stock buybacks and buyout deals.
The fed bankers aren’t FORCED to do anything — they are the ones who DO all the forcing. The international bankers who pull the strings of their willing puppet ‘governors’ of the fed (and all the central banks in the world) started by fattening up the sacrificial lamb, so who do you suppose is behind this slaughter?
“They may be locking the barn door after the horse has been stolen,…” some is reading this blog!
“Housing was sold to them as an investment, and now some of them are losing their houses.’” replace with “Stocks were sold to them as an investment, and now some of them are losing their money.” An investment is what it is, some are good and some are bad.
“Husing pointed out that whenever there is a period of ’speculative craziness,’ people look at all the money being made and want to get in on it. ‘A lot of people got into loans and didn’t have a clue what they were really signing,’ he said.”
You cant have it both ways. I am getting tired of the woes is me talk. They wanted to make money and failed. Happens to everybody in this country. Honestly who here has never failed at an investment or business venture at one point or another in their lives. Welcome to the real world FB’s
“A lot of people got into loans and didn’t have a clue what they were really signing,’ he said.”
Biggest purchase of their lives and they don’t bother studying what they are signing? I always know what I’m signing….. and I’M IMPLODER FOR CRYIN’ OUT LOUD!!!!!!
Lol. Nuff said.
I’m laughing with you, imploder!
Housing was sold to them as an investment, and now some of them are losing their houses
No it wasn’t. An investment is something that makes money - in other words yields income higher than its carrying costs. In the case of housing, it’s an investment if it’s cash flow positive for rental with conventional financing.
These people were sold a lottery ticket with a promise of winning. That’s not an investment.
800k and you have to bolt it down ? wtf
that’s engineering for ya
Right, to save $10k. Many posters here have commented on the poor construction during the boom. Sure looks like they nailed it. Homes blowing apart in three years!
You’ve got that one right, Ben! I’ve been appalled at what I’ve been seeing.
Oh, and since we’re talking about shoddy construction, a family friend used to work for Toll Brothers. His time there inspired him to create a new Toll Brothers company slogan:
Guaranteed for Five Years. Then They Fall Apart.
In the future don’t buy homes built during bubble years. Quality was not an issue
Buy homes built in 2007/2008/2009
Better to buy homes built in the 1920s, 1930s and 1940s. Back then people believed in craftmanship and quality construction.
Honestly, I would so much rather live in a smallish, well-built older house near a nice town center than in a soulless enclave of mini-mansions out in the middle of nowhere.
Bingo. I won’t even look at anything built after about 1970 unless it’s was custom and by that, I mean architect designed and built.
Yep, nothing for me that was built post 1960s, thank you very much. Having lived in a Toll house, yes they are built to fall apart just like the others. What makes them “America’s Luxury Builder?” You will definitely get some granite counter tops, maybe the plumbing fixtures are one step above standard grade, but otherwise all the so called luxury is faux finish. I honestly cannot see much difference in any of the builders’ products. Toll is to houses what shiny chrome rims are to Escalades: nothing but bling. When you get right down to it all you really have is a Chevrolet.
I think your right. Try taking one apart to remodel or add a dishwasher, etc., sometime. Just like 1920’s fans and toasters and Model Ts …. built to work forever.
Yup, my dream home would have to have been built btw 1930 and 1970.
My only issue with 1920s architecture is: It’s 80 years ago, by golly! I like living in the modern times. I don’t want to imagine myself living 80 years ago! Think Copenhagen Furniture. Okay, the earliest I’d go is 1959, the year I was born! Scottsdale has some houses built by some designer that are easily identified and look so 1960s. Those are what I’d go for. and I hate antiques! Always a futurist, but that’s me. The distant past is so boring. Lifespans were shorter.
For the price, I want this one.
I just read about its features — Why did they put vinyl siding on a Victorian?
I hate antiques, too, but…
My grandfather built some of the finest homes in Oregon, and I don’t think you could find that combination of materials, quality and workmanship these days anywhere at virtually any price. Everything wood was custom-built in his shop — floors, doors, railings, cabinets, trim… everything. Built like Fort Knox, too.
His modest personal residence had some of the finest woodwork I’ve ever seen, period; the fit & finish were incredible, and that place was well over 40 years old the last time I visited.
Auntie Christina -
Ever been to Bluefield? Wonder why the town is 4 blocks wide and 40 blocks long? Really lovely country…but what ‘cha going to do?
I know what you mean — It would probably be a nice quiet place to retire to, but I need to work at least another 20 years — unless I win a lottery jackpot. I’m not sure what kind of work I could find in West Virginia. Being a 5′ 4″ tall 110 lb. female will not make me a good candidate for coal mine worker.
this is from a tornado, and Florida should have higher wind design requirements but it looks like a newer home was heavily damaged here
not to mention, this is the Villages as seen on TV incessantly
http://www.cnn.com/2007/US/02/02/florida.destroy/index.html
Only Idiots buy in the Villages.
I disagree. My genius, world-famous psychologist uncle, and aunt, and another uncle have homes there, and love it. They’ve lived all over the world. Don’t make sweeping generalizations that are simply not true.
“Only Idiots buy in the Villages.”
So I guess that makes them the “Village Idiots”
Tornados can scour paving right off the ground. Homes are likely to be nearly or totally destroyed if directly struck. Even hurricane resistance is mostly for the homes on the fringe that escape the worst violence of the storm.
I love that these particular homes got mentioned since I drive by them almost every day and am completely blown away with how fast they grew to infest the once serene house-less hillsides near where I live. During boom times, you can pretty much expect that such rapid growth will result in crap quality, particularly when building on challenging terrain such as the rocky hillsides where these homes are.
The video attached to that link was unbelievable… looking at how fast the teardowns / top-ups go up in my neighbourhood, I often wonder about the strength and longevity of stucco as a building material. Watching the cracks running end-to-end on that house didn’t exactly put my suspicions to rest…
I have a friend that lives in that Stonebriar development. He went with the William Lyon subdivision when WL was first getting their feet wet in Sacramento. This would be around late 2001, early 2002. $315K for 3500 sq ft for the early phases, then WL wised up and started charging much more in later phases. I think that development ended up $800-900K for the largest models in the late phases.
California lawmakers want everyone to know they’re very unhappy about these risky mortgages that are starting to go bad.
BFD! These “lawmakers” are very unhappy, isn’t that special. Risky loans to folks with poor cedit go sour 99% of the time. This kind of tripe is to let all of the people that threw themselves under the bus know that big Gubment is on their side and will legislate them to safety. At taxpayer exspence of course!
All we need is the lawmakers to come in and f@ck everything up. How about some personal responsibility here? These people will learn a hard life lesson just as a lot of people blogging here have probably done at one time in their lives, myself included.
I was just in sacramento yesterday and prices are still way too high.Let the market work itself out.
But all that assumes a level playing field and that people have access to and are getting good information.
Personally, I wouldn’t mind seeing tighter oversight of the mortgage industry, seeing as how when left to its own devices, this is what we get–people who live paycheck-to-paycheck being approved for interest-only loans and falsifying people’s incomes to get them into something the lender KNOWS they can’t afford.
Anybody else remember when loans were predicated on creditworthiness, and not how much they could f*** you?
There was/is an undergound music label called “Sympathy for the Record Industry.” Replace that with “Mortgage Lenders” and it pretty much sums up how I feel about it these days.
What makes you think the gov’t would do any better regarding mortgages than the bankers? Have you seen the balance sheet of the state of Californika, or of the federal gov’t, lately? Let’s just stand back and let the chips fall where they may. More fun than watching poker on cable.
LaInvestorGirl, I think the government would only do worse. I’m tired of people thinking government is the solution to every problem. Here’s one vote for personal accountability.
Personal accountability is great, but so is corporate accountability. People have a responsibility to be informed and deal with the consequences of their decisions, but if a person or company deliberately cheats or scams somebody, call me old fashioned, but I think there ought to be consequences for them too.
And lainvestorgirl, I don’t really think the gov’t would inherently be better at it, but the gov’t has two things going for it that the private sector doesn’t — a certain amount of transparency and if we the people don’t like their actions, we can throw the bums out.
I’m all for deregulation WHEN IT WORKS. The RE/Lending industry in this country is not an example of that.
Not saying that anyone should get bailed out.
However, I will say that the mortgage industry needs to be much more consumer friendly and regulated much more tightly. As they currently stand, loan documents have so much legal jargon in them that NOBODY should ever sign a mortgage without an attorney, which I would guess 99% people do not. There is absolutely no reason that they can’t cut the paperwork in half or less, standardize the language to be more consumer-friendly, and require full disclosure on a standardized form for comparison shopping.
That, and yes everyone that chooses an exotic loan should be required to qualify for the worst-case scenario. And stated income loans should be outlawed.
“However, I will say that the mortgage industry needs to be much more consumer friendly and regulated much more tightly.”
No. People just have to get smarter. Anybody who fancies themselves a victim of the mortgage industry is much like a fish that jumps into the fisherman’s boat. There is not much in the way of legislation that is going to protect them from themselves.
The problem is that it is responsible people like YOU and ME who are the biggest victims of irresponsible lending. Clowns without two nickels to rub together have been able to bid up the price of housing to the point where people can’t buy with 20% down and 30 year fixed.
And when the avalanche of foreclosures gets rolling it’s going to hurt whole communities, including the responsible people.
Get the point?
What are you talking about, half the the contents of the loan packages are gov’t mandated crap.
jjinla,
Very well said! If these lenders can’t regulate themselves, it’s time for someone else to do it.
Agree that the loan docs are designed to fool the borrowers (including the sheer volume of paper!). All the necessary info could easily be printed on about 5 pages — **with** the worst-case scenario printed in big, bold letters.
Well alot of them are getting bitch-slapped by the invisible hand right now.
Typical Gubment “Lick and a promise”…..
Rabbit already done died….
Gawd. I thought I’d never see stories like this again. I’m channeling 1990 big time! This has it all, the foreclosures, blame game, gassy windbag legislators trying to make hay out of it, finger pointing, crappy construction surfacing, lawyers, suicides, arson, maybe even the heartbreak of psoriasis
Except in the 80’s debacle it seemed like it was all Texas - This is nationwide and a lot larger (10 factor?)
No, it wasn’t. It was everywhere it is now. Plenty of bad stuff in Fla, AZ and California. I know, we did work for the RTC on those “assets.”
Txchick, do you think the feds will come up with something like Son of RTC?
They’re gonna have to if banks fail.
txchick57-
still have that 4% body fat and an orgasmitron to boot?
Cut me some slack. It’s winter. Even snowed here today.
“Cut me some slack. It’s winter.”
Translation:
4% body fat: negative (but not too far off)…
Orgasmitron: Hell Yes!,….I get bored when it snows!
They’re gonna have to if banks fail.
IF??? You’re kidding, right?
Yep TC me too here in Florida. A lot of work and the aholes who caused the mess were hired by the RTC to do the workout. What a country!
TxChick-
The really crazy thing about all this is how soon it happened AGAIN!!. After all that you mentioned you would have thought there would never be a repeat performance and to think this time around it’s actually going to be 10 times worse.
I started to look for it in 1999. I’m amazed it has taken this long.
I do wonder if this is why some of the worst hit by RE madness seem to be 20 something (Casey!)first time buyers. Back in the medieval/renaissance period, it wasn’t uncommon for the plage to return after ~5 years and hit mostly children: they weren’t alive the first time and had no resistance.
Except in 1990 the savings rate nationwide was 4 or 5% or more instead of the current -1%. People also carried vastly less debt than they do now. California ran a balanced budget instead of being billions in the red year after year. The national debt was one quarter of what it is now. The Trade Deficit was about 50 billion instead of half a trillion now. And so on and so forth.
The point is that we don’t have any reserves whatsoever. None. I’m not sure how we as a nation will weather a major economic crisis. Hell, we don’t even manufacture much of anything anymore, mostly we just shuffle paper around and provide services to each other. So we have little wealth creation to fall back on.
And, if you think all this looks bleak, just wait until the Chinese and Japanese see our economy start to wobble and decide to stop buying our bonds. It could be like the Argentine economic crisis of 1999 only 100 times bigger.
Bigger, because our economy is bigger, but less deep IMHO. I could easily imagine the dollar falling to 50% of its current value relative to other currencies. And somebody will make butloads of money as the Chinese try to maintain the dollar. But I can’t see the dollar going to say, 10%. The simple fact is that our debts are denominated in dollars. Currency revalution/inflation makes paying off old debts easier even as it makes getting new loans more difficult. This is what will tend to prevent a devaluation from reaching Weimar levels.
““Appleton-Young agreed that foreclosures will continue to rise. But she predicted foreclosure rates will not reach the high levels of the early 1980s or mid-1990s when slumping economies and job losses roiled the state. ‘We have a growing economy,’ she said.”
Les-lie…Those jobs of this ‘Growing Economy” are not the high paying jobs needed here in So Ca. They might work in Georgia or somewhere else.
Words of wisdom from the same person, who a year ago, predicted prices were going to continue to go higher and you better buy now or be priced out forever. Yeah, like I believe her now.
‘We have a growing economy,’ she said.
I actually LOL’d at this one. Rising foreclosures indicate incipient economic problems, regardless of past performance.
In a distorted and twisted sense she is right. The economy is growing foreclosures are good business believe it or not. Contractors go from building them to repairing them. Agents have to sell them. Mortgage brokers have to find someone to lend money on them, Title people have to write policies, escrow companies have to escrow.
In a distorted and twisted sense she is right.
Yes, we have a distorted and twisted economy.
“When the family bought this home, brand new three and a half years ago, they paid just more than $800,000, and then put in $100,000 more in upgrades like this pool.”
When we bought our first home 5 years ago, one of the rooms was unfurnished, and several others were underfurnished…because we didn’t have the money for new furniture. 3 years ago we re-did the kitchen and used (get this) cash.
How can these people *ahem* afford to pay $800,000 for a house and then another $100,000 for a pool and landscaping?
People from outside the high-priced bubble areas are probably having a heart attack reading numbers like these!
They can’t afford any of it. That’s the whole point.
They most likely bought the $800,000 house using a toxic loan with a two year teaser rate of 1% or 2%. After a few months they had their home appraised for $1,000,000 and took out a $200,000 home equity line of credit. Then they bought a couple of beemers, took a trip to Europe and put a pool in the backyard. It’s possible that they didn’t actually spend ANY money out of pocket for all of this.
Sounds like a bad joke. But that’s what people have been doing. And the banks have been giving them the money to do it.
Now they owe a cool million bucks against a crumbling asset worth less than half that.
Yea, I just had a potential client call me with that exact same scenario almost to the letter. Now they are trying to sell and pawn off material gains, work overtime and liquidate retirement accounts to build up enough money to pay back payments and pay down their equity about 5% so they can refi. I really don’t think they are going to be successful. The funny thing about their situation is that they have 2 cars they bought brand new for cash which probably cost approx 180 to 200k combined if sold today they could probaly get roughly 100 to 110k. When it was suggested that one of cars be sold to assist them in their quest. Their collective response was then “what am I going to drive to work”. Hopefully they’ll shake out of their stupor before they lose their house. We will see.
This from my local paper:
Seadoo 06 Jet Ski 217 hp super charged $10,000., Phillips projection 60 TV $1000., Sundance hot tub paid $7000. will take $1000., 100 gal fish tank w/stand & all equip. $100., free dogs (2 Chihuahuas, 1 Papillion)
Somebody hit a brick wall.
Don’t sell the dogs ….
What’s the difference between a wife and a dog?
When you come home at 3 A.M, drunk and wearing someone else’s clothes, your dog is glad to see you.
Amazing how that tiny ad tells the whole story. You should submit it to The New Yorker magazine as poem called “Somebody Hit a Brick Wall”.
“She forecast economic growth in California will be moderate in 2007, dragged down by the slumping housing market. ‘Real estate is the Achilles’ heel of the California economy,’ Appleton-Young said.”
——————————————————————————-
I always love how the REIC tries to backpeddle to save their credibility after the fact. Wasn’t it Leslie Appleton-Young who was crowing about the vibrant California RE economy just a few short months ago?…and how this would result in the “soft landing”?
I read this more as a threat than a statement of fact. “You’d better do something to ‘help’ the housing market or the economy will suffer.”
Housing wasn’t the Achilles’ Heel of California until the bubble happened.
There are plenty of CEO’s in Silicon Valley that dislike her comments. Due to high cost of employees many are moving jobs outside of state.
You can tell Leslie is lying through her teeth. First she says
And then she says,
Housing is suffering, people are stretched thin, and it is the Achilles’ heel of the California economy.
Then she says everything will be ok because the California economy is growing.
Did she also come up with the marketing idea of “It’s a good time to buy or sell a home!” slogan?
She’s an oxyMORON. Maybe I should be a moron and the California Association of Realtors might hire me as an economist with a high salary.
“You can tell Leslie is lying through her teeth.”
Or that she is not bright enough to recognize the blatant contradictions in her explanation.
I’m constantly amazed at the lack of knowledge by those given positions that should require insight.
Why? I mean really think about it. All they have to do is meet the resume requirements and give good interview. Sort of like a chimp with square pegs and a board. Fill all the holes you pass if not next candidate
I think they believe that just because they say it, it is so. kind of like the utilities and cable companies who say they are laying off people ‘to improve service’.
That should have been “People are spending more than their incomes.”
The CBS 13 link contains a video of the report. Cross El Dorado County off your list to buy not matter what the price–damn place must be the dust bowl of California. Who would build $800K houses in a dust bowl?
And how do you get mold developing in the desert? Florida with 100% humidity is one thing but in dry California? Those houses must be a marvel of engineering.
Eldorado Hills is located east of Sacramento on Highway 50 at the foot of the Sierra’s. It is attmpting to be the high-end housing enclave for the Sacramento area but the wind blows up from the valley and there are no trees or barriers to slow it down. It’s also really foggy during the winter and hotter than hell in the summer….but it’s in California and EVERYBODY wants to live here!
El Dorado County isn’t a dust bowl and it isn’t the desert. It’s actually foothills/mountains, although the houses they are referring to are in the foothills only. It’s a very nice area to live, if you don’t mind being a bit isolated from the city. Most of California has a mediterranean climate. We get most of our rain between october and june, with very little rainfall in the summer. There are some deserts in Southern California, but none in the central valley. Mold can grow in any house that is poorly constructed. The flexing of the house can cause pipe fittings to loosen, and water from the plumbing can seep into the walls. Even if the house doesn’t flex, poor insulation and weather sealing can allow rainwater to seep into the walls, where it isn’t exposed to enough air to dry. The external humidity doesn’t matter as much as the construction quality.
What do you mean there’s no deserts in the Central Valley? The whole Central Valley is one giant desert - yes, it used to be swampland, but that was before the large dams got put in and the water diverted. When we moved to Bakersfield in 1975, that year or a year later we had a giant duststorm that lasted for 4 days and closed the schools for 2 weeks for clean-up.6 foot tumbleweeds routinely roll down the streets - don’t tell me the central valley isn’t desert.
El Dorado County is not in the central valley: it is where Lake Tahoe is located :http://www.co.el-dorado.ca.us/
The top of the link you posted does have a pretty landscape with mountains, rolling hills, and pine/red wood trees which is in direct contrast with the barren look of the countryside in the news video.
Maybe Hurwitz and Pacific Lumber chopped down all the trees shown in the link and now the area looks like the dust bowl presented in the news video?
I still say the area of Eldordado Hills shown on the video looks like a dust bowl and an arm pit.
It is a pit, of sorts. It’s the Sierra foothills, elevation about 1000′, hot as Hades in summer, but above the tule fog in winter, which makes it popular. Actually there is lumbering up hill somewhat, but it’s largely done as well.
Sounds like California is not a desirable area. I think you should all stay away. We already have more than enough people here.
Pacific Lumber certainly is good at clear-cutting - that must be what gave you that impression of the area as a dust bowl. I didn’t see the video.
Not to worry bedub. Check the U-Haul rates. You will find the problem of too many people is taking care of itself in a sense.
Those arriving, from all sorts of undesirable places, are coming empty handed and without a dime to their name or any insurance. Those leaving, at least according to u-haul, are doing so in droves… and taking a lot of stuff with them, leaving a pothole called DEBT behind for the FB that takes their place. Called capital drain. You’re gonna love it!
You had better write a second posting in Spanish or you are just wasting your time.
US citizens are staying away. It’s Mexico that’s moving into Cali. Pretty soon it will be Mexifornia and then finally another Mexican state like Chiappas. Enjoy it while you can. I’m waiting for the kidnappings and cop killings to start.
I remember the duststorm like it was yesterday. The Bak TV stations went out and I had to drive to Gorman to watch the Rams get their butt kicked in the play offs or could have been a super bowl. Was living in a 60K house sold it for 250k in 81 with a wrap of a 6% loan. Used to get calls from Home wanting me to pay it off. As the yield was over 19% to me I would tell them to discount the paper significantly as well as discounting because of the tax hit. They would chuckle and hang up.I love F’d lenders.
In my meteorology and climate text book, it did not indicate that areas with average rainfall totals of 10 inches or more were deserts. More like steppes. Kind of in between. Fresno gets an average of over 10 inches of rainfall per year, mostly September through April. Places north of that, such as Sacramento, get more rainfail. I lived in Fresno nearly 20 years. I lived in the Mojave desert nearly 11 years. I know which one was a desert and which was not.
To clarify, El Dorado Hills is mostly pretty nice a good amount of trees, etc. The one particular area where these homes were built is the barren eastern hillside area where there are really no trees. So when you plow up the hill to build thousands of houses what’s left is basically a hilly dustbowl. Although this new area sucks and anyone who buys there probably shuold have thought twice, the majority of El Dorado Hills is a different story and is quite nice.
http://www.supportdownpaymentassistance.org/Documents/SanBern-CA-Resolution.pdf
Maybe state legislators are starting to wake up to crazy lending, but the local govt. in San Bernardino is still in favor of down payment assistance scams.
“to make homeownership possible for families who desire to won homes”
I love that “won” typo. They are closer than they think. This was like a great big f—ing lottery in California. All of these people thought they had won something huge. I hope they don’t correct their mistake.
“They may be locking the barn door after the horse has been stolen, but California lawmakers want everyone to know they’re very unhappy about these risky mortgages that are starting to go bad. So Wednesday in Sacramento, the Senate Banking, Finance and Insurance Committee held hearings on less-than-traditional mortgages, including adjustable rates, interest only and sub-prime lending.”
That is a blaphemous misquote of one of this blog’s most popular cliche’s. The horse was not stolen — it simply ran away, which is what horses normally do when the barn door is left wide open for a protracted period of time. The misquote is understandable, as it was the legistlators who collectively left the door wide open…
‘We have a growing economy,’
Only if you believe larry goldilocks kuntlow, neil and maria.
“Think of innocent Icarus who is
doing quite well:
larger than a sail, over the fog
and the blast
of the plushy ocean, he goes.
Admire his wings!”
Source: Anne Sexton
“We have a growing economy,
Only if you believe larry goldilocks kuntlow, neil and maria.”
So the Dow Jones is NOT at a record high? The stock market has NOT gone up a lot since last summer? Federal tax receipts are NOT up in the last few quarters? Payrolls and factory hours worked are NOT up? Railroads are NOT starting to worry about inadequate capacity?
Closer to home, the restaurant we went to on Wednesday (middle of the week) was NOT crowded?
Nobody knows what the economy will be like in six months. But it’s doing just fine right now, thank you.
Doing fine? So were ZZZZBest, Enron, WorldCom, Adelphia… appearances can be deceiving.
I find it amazing that certain avid housing bubble watchers can be so ignorant of the larger asset bubble. Switch around a few descriptors in Bill’s diatribe and you have something very akin to the realtorspeak of a six months ago.
Zoom out enough and we’re all Joe Sixpacks, I guess.
I think the main point people like myself are trying to iterate is that everything you mentioned as rising, and being deemed as growth, has been fueled by debt expansion. To me that is like calling a cancerous growth the first step to immortality.
I can tell you honestly with the amount of cheap credit that I have at my disposal I could live like a celebutant for the next two years and only then have to worry about whether I need to pay it back. The savings rate is in conjunction with the expansion of credit is key. If we keep seeing a negative savings rate with the contraction of credit going forward I guarantee you that will not have to wait in line at your favorite restaurant.
I don’t know where you get factory hours being up as I saw manufacturing lost 16,000 jobs the seventh straight month of manufacturing losses. Don’t forget that most of the job growth is occuring in health care (economic albatross) and in restaurants (fries with that?).
I apologize for the maroon comment on an earlier thread. That was uncalled for on my part.
All of this easy money has pumped up the stock market. When the FBs defaults hit record levels, (maybe ‘08) all that disapearing money will hammer the stock market. Once bad loans become bad business again, there will be little that the fed can do IMHO.
To Bill in NC: No. We are all imagining it, just like I imagined I made $800 today in my equities.
To naysayers: Yes, it’s all on paper and it’s there until I sell, but note my basis is significantly lower than my buy: Basis of VFINX: $108.66 And my UL stock is selling now at 23% above where I purchased it last summer.
To be fair, he’s right, it’s just that the wealth divide is growing just as fast so we have a median wage/homeprice conundrum. I’ve heard it referred to as a “bifurcated” economy.
I have a feeling the housing bubble was due, in part, to a wealth divide backlash. The “priced out forever” mindset was largely a reaction to the ever growing wealth divide. Of course you can’t fix something like a structural divide by extending credit to the poor. It’s a band aid that’s about to be torn off.
“It’s a band aid that’s about to be torn off…”
of their nuts.
I thought I would finish that one for you.
by a blind man?
Or maybe an arthritic crone who will need a dozen tries.
“‘People are spending more of their incomes,’ she said. ‘Budgets are stretched.’
If LAY had even a nodding acquaintance with the truth, she would’ve said: “People are spending MORE than their incomes.” Therein lies the cause and guage of the imploding debt-and-credit-fueled Ponzi scheme known as the housing bubble.
According to the negative savings rate these “growth” idiots keep ignoring we’re spending ALL of our incomes and extra to boot !
and now the goldilocks people can’t say that people don’t need to save because their homes are going up.
“It has become clear that many of those marginal buyers were banking strongly on a continued runup in the housing market.”
The marginal buyers were fools of randomness. Little did they realize that their collective willingness to use exotic lending was the reason for the continued runup in the housing market. Many probably did not even recognize that what was offered to them as affordability loans actually increased their risk of future foreclosure.
“Many probably did not even recognize that what was offered to them as affordability loans actually increased their risk of future foreclosure. ”
Yes, this is probably one of the most ironic aspects of this whole mess. A paradox of sorts that is only now beginning to reach its inflection point.
Bingo GS …no truer words said . Had I know that the people that were buying were low-down uqualified borrowers and a high % of short term speculators , I could of told you that a housing crash was certain .
I have a kid that was priced out of the market ,and I tell him to just keep waiting for a complete market correction .
Also a friend of mind just told me that they want to invest now that the market is down . I guess the NAR/Realtors are starting a rumor of “urgency “that you got to buy now while the market is down because the prices will never go this low again .My friend was convinced that this opportunity to buy at a low in the market was not one to miss . My friend went on to say in essence that one could get a really good deal from a builder and only hold for 5 years and make a good profit .
So the spin keeps on coming from the REIC ,but it’s getting to the point that if some realtor spins this cr-p at me, I’m going to take it as a personal attempt to rip me off . I had to talk for a hour to de-program my friend .
“I have a kid that was priced out of the market ,…”
So’s my dad
“Appleton-Young agreed that foreclosures will continue to rise. But she predicted foreclosure rates will not reach the high levels of the early 1980s or mid-1990s when slumping economies and job losses roiled the state. ‘We have a growing economy,’ she said.”
“We have a growing economy,”
..what she refuses to realize, that people with ARMs or IOs have a growing MTGE pmt, tax bill, insurance bill, etc….without a growing income…
Hmm..I guess it is different now…
“Appleton-Young agreed that foreclosures will continue to rise. But she predicted foreclosure rates will not reach the high levels of the early 1980s or mid-1990s when slumping economies and job losses roiled the state.”
LAY, WHat will happen to the foreclosures? Do they just quietly go away, or do they reappear on the market as a liability on some lender’s books draining cash every they they remain unclaimed?
How about the default numbers? They seem to be escalating rapidly, taking the REIC by *surprise* (surprise my ass)? Since you didn’t see them coming how can you see when they’ll slow down?
I have a lot of questions for you, LAY darling.
“Dark Housing” coming to a neighborhood near you.
El Dorado Hills (where Serrano is located) used to be a nice area many years ago. But this is THE place where many (including my dad) SPECULATE in million dollar properties (zip 95762). Many houses there are stagnating. My in-laws already lost $200K in equity.
There was also a house for $1.875 million. The realtor told the guy to not accept an offer for $1.850. He later sold for $1.5 million.
And the house next door to my in-laws was for sale at $1.1 mill. The realtor told us that the owner would not sell for less than a million. He missed the boat and sold at $875K.
As for shoddy construction, there were many illegals that worked in construction during the boom, and there is a huge difference in construction methods between Mexico and the US. You did not have any really experienced people building these houses and I imagine that there are plenty of hidden problems.
“There was also a house for $1.875 million. The realtor told the guy to not accept an offer for $1.850. He later sold for $1.5 million.”
But I’m sure the Realtor reimbursed him for his troubles. They always do that.
‘We believe many prospective homebuyers are waiting on the sidelines for signs of stabilized pricing,’ he said.”
No Steve, we’re waiting for the inevitable 30-40% crash in prices.
“When the family bought this home, brand new three and a half years ago, they paid just more than $800,000, and then put in $100,000 more in upgrades like this pool. They just sold this house. The highest bid they could get–$425,000.”
If I’m reading this correctly, that sounds like a half-million dollar haircut. Oh wait–”Stop throwing money away on rent!”
Signed,
Jealous, bitter renter;-)
Also, I wonder if these people BK’d out or if they’re paying the bank nearly a half-mil for a house they don’t even own anymore…
“Also, I wonder if these people BK’d out or if they’re paying the bank nearly a half-mil for a house they don’t even own anymore…”
LOL Oh… it doesn’t take a PH’D to figure that one out.
Remind me not to buy anything build during any real estate frenzies. 1980s, 2000-2007.
The sh#t really did get tossed up by sub par workmen. I’ve been told the repeatedly. All the corners were cut… materials, craftsmanship, design, and engineering.
I wonder if buildings built in the 1930’s were better cause guys were milking the job for as long as they could?
I remember an architecture prof in college saying in passing that houses built in the 30s were some of the best ever–because the only guys who could get work were the best.
“It has become clear that many of those marginal buyers were banking strongly on a continued runup in the housing market. ‘A lot of people got talked into loans they should not have taken,’ said regional economistJohn Husing. ‘Adjustable rates, big balloon payments, large jumps in interest rates. Housing was sold to them as an investment, and now some of them are losing their houses.”
“Husing pointed out that whenever there is a period of ’speculative craziness,’ people look at all the money being made and want to get in on it. ‘A lot of people got into loans and didn’t have a clue what they were really signing,’ he said.”
Which was it?? people either got “talked into it” or “people look at all the money being made and want to get in on it”.
I really don’t see how they could have been both, either they were totally ignorant to what they were signing OR they wanted to make money. I really do not believe that people are that dumb, they knew how much they had to pay, they thought they were going to make their fortunes.
I just cringe at this victim mentality being spouted, the real victims are people like you and me. People that refused to pay for something that didn’t have any real value and didn’t want to get in over their heads with a big a@@ mortgage regardless if money MAY have been there to be had. The risks just seemed to high, I just couldn’t see myself paying double for what I knew was NOT real.
Now the real victims are still waiting on the sidelines hoping this will sort itself out. We will be looking at lower prices yes, but at what cost to us? Higher building impact fees, higher taxes, maybe Florida will start a State tax over this who knows. In the end we all are going to suffer in one way or another.
When I do buy my home, I will not feel like I got a “deal” paying half, I will feel that I am paying for what the home was really worth all along.
Had to vent a bit,
SKB
I do not feel like when the prices go back down to historical norms that I will be “getting a good deal”. I will feel that I am not getting ripped off anymore.
Anyone that did make money during this and bought another house will lose a lot of what they made anyways. If they paid cash for a 500,000 home and half of that was ” made money” when the prices go down 50% and their home is now worth 250,000 what did they really accomplish?
Funny how Husing has changed his tune a bit. Check out these quotes from him from July 2006:
“There’s just too strong an economy and too much job growth for much other than the “soft landing” Husing and other economists have been predicting for the end of the five-year housing boom.”
“‘We are right on the cusp of a very powerful period in job growth,’ Husing said. ‘Local [Inland Empire, San Bernardino/Riverside area] unemployment in May was 4.2 percent, and that’s the lowest I have seen for May in 42 years of studying the local economy.’”
“‘Is the housing market vulnerable?’ he asked. ‘Yes, it is. But is a bubble likely to happen? No, it is not. The underlying strength of our economy is too great.’”
The quotes are here:
http://tinyurl.com/2qybau
Seems that not too long Husing didn’t see the problems with the exotic loans and speculation. Apparently, he has finally started to see (or publicly acknowledge, depending on your viewpoint) what was clear to us long ago.
…the real victims are people like you and me.
Personally, I feel like a person holding a winning lottery ticket, only I’m not exactly sure when I’ll be able to cash it or how much it’ll be worth (i.e., six or seven figures).
Why? Because my money’s positioned to profit greatly from the coming crash -and- I’ll be able to buy a home a lot nicer than I could’ve even before the boom. Not to mention all the great deals I’ll get buying FB’s almost-new toys at pennies on the dollar.
Let’s be honest, people were not talked in to these exotic loans. They were part of the herd and wanted a piece of the action.
I think alot of people did get fooled into taking on loans they couldn’t afford. Since the government is backing the securities and banks, the government should have stopped these loans.
If you are talking about buyers who have parent(s) who lived in the last bubble or buyers who were mature enough to know about the last bubble, I agree with you. I think very few people naively walked into the loan office without any plan on making a fortune and flipping it. This is why I want the government completely out of this bubble burst. And it’s going to get worse and worse. Bottom in 2012. Let Darwinism take its course. Otherwise stupidity will surely repeat.
“Kyser said a lot of what was happening in Sacramento was basically political grandstanding.
“Look at all the hullaballoo over the minimum wage,” he said. “When they discuss these things, you would think the world was coming to an end.”
Ummmm….well….yeah if you’re an FB
If you compare it to international standards, the construction of a new home in California is not more worth than $100/sqft (those nailed plywood boxes which can easily burn and rot completely away in less than 100 years). The real estate bubble attracted a lot of people from the construction industry to charge the home buyers additionally. They pay not only for the speculative price for the dirt a house is erected on. One can argue that California has much higher wages. But there are countries in the world where they have much higher labor cost but they build houses at much higher standard and at a much lower price.
Aside from all the other issues facing housing, eventually there is going to be widespread acceptance that pre-fabricated housing is better than site-built, and once that happens, it opens the door to mass-production and productivity gains and eventually a collapse in the cost per sqft of building housing. Who’s going to want a vintage 2005 site-built piece of cr*p costing a million bucks when you can get a much higher quality modular-house in 2015 costing maybe half that amount?
Not to mention all the plywood used now is that cheap wood that’s made of ground-up particles…I forget what they call it, but you’ve got a big problem if it gets wet.
I’m an electrical engineer, and see cheapness in every home I get a chance to look at that was built since the early 1990’s. They use the cheap compression wire nuts you squeeze, instead of the better quality twist-nuts. The compression nuts will probably become loose after a few years, and cause arcing. Cheap circuit breakers are used that might not last 10 years.
My sister’s house built in June 1999 split from roof to foundation right down the middle in October 2005 - a month after she closed on it.
Grand Homes. It was a hell home from the beginning. Doors wouldn’t close. The plumbing sounded like a raging river. The driveway flooded everytime it rained. It was built like a cheap apartment.
“Here’s an example of a $180,000 mortgage presented at the hearing. With a traditional 30-year fixed mortgage at a 6.7 percent interest rate, payments would be $1,162 for the life of the loan — a reasonable amount for a family with income of $42,000 a year.”
I doubt this “family math” from the SAC-BEE article. How about a PITI calculation? $42k/yr is a Taco Bell night shift MGR paycheck, not a family supporting bread-winner and home-owner income. Hell, my friend’s stacked sister makes more than that in tips per year in a bowling alley bar!
“The federal government is concerned that borrowers “may not fully understand the risks of these products” and has adopted “guidance” for federally regulated lenders. That covers about two-thirds of lenders but does not cover the one-third of lenders regulated at the state level. California needs to join the states that have adopted the federal guidelines.”
I bet these same borrowers will fully understand the stupidity of making payments on a home that is upside down by $100k or more. They will likely teach government leaders a lesson or two about lending risk!
‘Real estate is the Achilles’ heel of the California economy,’ Appleton-Young said.”
OK, correct me if I’m wrong, but isn’t this the same RE HO that said this was gonna’ be a soft landing?
UN EFFING BELIEVABLE…at what point do you just quit making public statements, aside from the last one that should, in her case go something like this: hey fellas/folks, sorry, in fact, I truly am a complete dumbass…end quote
crush
“…at what point do you just quit making public statements,…”
What else should she do? Her job as ministress of propaganda for the CAR requires her to make public statements.
QUIT
Prices will likely stay flat in the Bay Area for the next 18 months, she said. Statewide, prices will decline 2 percent next year, [Leslie Appleton-Young] said.
I’m not sure I entirely agree, unless she meant to say 2% per month.
As long as the the realtors continue to use unconfirmable “there are multiple bids, will you go higher” tactic with buyers this market will continue to go higher.
just stopping the i/o loans will slow prices or make it flat.
there is lots of fraud out there understand wherre it comes from.