“Subject To Change” In California
The Auburn Journal reports from California. “There you are, living in the house of your dreams. It cost you $500,000, but you’re only paying $1,100 a month after you 100-percent financed your home with an interest-only pay-option adjustable rate mortgage, known as an ARM. Then the market changes.”
“Your completely financed home, after the market has cooled, is now going to cost you almost $4,000 a month for your mortgage. Welcome to the world of some of Placer County’s residents.”
“According to DataQuicks’ latest report, default notices have risen 262.4 percent in the fourth quarter of 2006 in the county, exploding from 149 notices in the fourth quarter of 2005 to 540 in 2006.”
“To combine with the default notices, median home prices in the region continued a downward trend according to the Placer County Association of Realtors. The median home price for the county in December 2006 was $439,700. The median sales dropped 9.3 percent from 2005 when the median price was $485,000.”
“‘I see a decline for Placer County. One of the things lenders are doing, because Placer County was one of the fastest-growing markets appreciation wise, is they put a review on the appraisals,’ said (broker) Mark Champlin in Auburn. ‘Almost every lender is putting a second review on the appraisals because Placer County went up so fast and it’s subject to change fast.’”
“‘Mortgage defaults have definitely increased. I used to look at the paper and see one every once in a while, now I look and I see three or four,’ said Kathy King, a mortgage broker in Auburn. ‘It’s kind of scary because Auburn hasn’t historically been a big area for foreclosures.’”
“The reason for the increase is because interest rates were low for a long period of time and consumers were getting loans that normally would be out of their reach, King said. Consumers who got 100 percent financing on negative amortization loans and other adjustable-rate mortgages are starting to feel some discomfort, and more could be on the way.”
“So what to do for those whose monthly mortgage payments have gone up? ‘Anybody who bought a home in the last two years cannot refinance, they have to ride that storm out,’ said Champlin, a licensed real estate and mortgage broker since 1979. ‘I can’t refinance anybody, I get calls all the time. They are coming out of a 4.75 (interest rate), it had a three-year window on it, and the reality is they’re looking at a 6.5 (rate).’”
The Times Herald. “Foreclosure ‘is a scary, nasty process,’ said Joe Nemec of Benicia’s SkyValley Financial, Inc. And he should know because it happened to him in 1999.”
“Medical problems and job loss used to be the main reasons people lost their homes to foreclosure, Nemec and other local financial and real estate experts say. But a growing number of homeowners are finding it’s not their health but their mortgage type that’s costing them their homes.”
“Some experts blame the same ‘creative financing’ or ‘predatory loans,’ that got many relatively recent home buyers into their first homes, for a spike in the number of home foreclosures statewide.”
“And in few places is the problem worse than in Solano County, which ranked second only to Stanislaus County for foreclosures in October among California’s 58 counties, according to RealtyTrac.”
“And about 500 more mortgage default notices went out to Solano County mailboxes recently, signaling the highest rate of foreclosure activity in eight years, a service reported. Defaults rose by 484, or 163 percent, in Solano County, the report showed.”
“‘Sometimes when they come in, many of them are OK, but some are really angry, and blaming the lender,’ said SkyValley Financial president Mitchell Chernock. Chernock said he expects to see more angry people in coming months as more homeowners with ‘creative’ mortgage loans, find themselves in trouble.”
“Sinking real estate values also have driven up foreclosures. ‘Some of these adjustable loans have gotten some people in over their heads, and with the real estate slowdown, the equity isn’t what they’d planned on,’ said said Jeff Dennis, president of the Solano Association of Realtors. ‘It becomes an issue of continuing to throw money away on a lost cause.’”
“One man who said he has shopped for foreclosed homes around the Bay Area for more than 20 years, called the recent housing market ’shocking.’ He said he ‘hasn’t bought anything in months’ because most properties sold at auction are too deeply leveraged to be worth buying.”
“Attending the same recent foreclosure auction, Realtor David Barker said he’s also noticed that most homes being foreclosed on are recent purchases. ‘They probably had 100 percent financing and have now come to grief,’ Barker said. ‘There’s no equity.’”
Inside Bay Area. “The ‘For Sale’ sign on the house next door has been up three months. Home sales have clearly declined and home price appreciation has slowed. Should Bay Area homeowners be worried? Experts say no.”
“‘If the economy holds up and we keep creating new jobs, then we should weather this (slowdown) fine,’ said Delores Conway, director of the Casden Real Estate Economics Forecast at the Lusk Center.”
“‘People like me and my friends, whose property figures into their retirement plans and net worth, don’t care if there is seven months of inventory on the real estate market,’ said Berkeley homeowner Robert Marsh. ‘Even if it goes down for several years, it will go up in the long term,’ Marsh said.”
“The losers are homeowners who are forced to sell and folks who can’t afford their mortgage payments. The latter group is in the worst position. When the market was red hot, a number of people bought homes with ‘creative’ mortgages, which made it possible to buy with no down payment or pay extremely low interest for a couple of years, among other options.”
“The expectation was that prices would continue to rise and the homeowners could sell the homes and make a profit. But then the market slowed, the payments went up and these individuals can’t afford their mortgage payments, said Geoffrey Craighead, president of the San Mateo County Association of Realtors. ‘That’s why we’re seeing so many foreclosures now.’”
“If you’re in this position, get rid of your house right now, economist Christopher Thornberg advises. ‘Get it on the market now, before prices soften even more,’ he said.”
“Renter Rachel Luxemburg of San Mateo said the slowdown hasn’t tempted her to buy. ‘When you can find something on the Peninsula that isn’t a crack house for under $500,000, then I’ll consider buying. But not now,’ Luxemburg said. ‘An approximately five percent drop off the top of the market is no great deal, especially in the already-overpriced Bay Area.’”
‘The expectation was that prices would continue to rise and the homeowners could sell the homes and make a profit. But then the market slowed, the payments went up and these individuals can’t afford their mortgage payments, said Geoffrey Craighead, president of the San Mateo County Association of Realtors. ‘That’s why we’re seeing so many foreclosures now.’
I wonder where they got those expectations, GC? Maybe from people like you.
‘People like me and my friends, whose property figures into their retirement plans and net worth, don’t care if there is seven months of inventory on the real estate market,’ said Berkeley homeowner Robert Marsh. ‘Even if it goes down for several years, it will go up in the long term,’ Marsh said.’
Geez, the arrogance is dripping out of this guys ears. How do people put up with that?
What Marsh can’t see is if ‘goes down for several years,’ foreclosures will explode further. IMO, much of the runup was because of the crazy loans and the default sales should become the new comps.
Here is the latest on the North County fraud case: ‘Long before clients accused them of multimillion-dollar real estate fraud, defendants in a Riverside County lawsuit had locked horns with family members, investment managers, employees and financial authorities, according to legal documents filed in three states.’
‘A 25-year-old Washington woman, referred to Duncan by a mutual acquaintance, sent him a $68,000 check, to be invested in a ‘no-risk, high-yield investment fund’ in January 2001. But Duncan never provided financial statements or other paperwork from the fund and eventually refused to return the woman’s money, the Washington agency alleged.’
‘As a regulatory body, the agency has no authority to file criminal charges. Other state and local agencies in Washington, as in Iowa, also appear not to have filed criminal charges, said Martin Cordell, enforcement chief for its securities division.’
‘We can’t throw everyone who violates the securities laws in jail,’ Cordell said. ‘It takes anywhere from two to four years to investigate and prosecute even a small securities case. It’s kind of a cost-benefit analysis.’
WTF!!! It’s OK to steal a little…we don’t have the desire to put in jail be cause it will cost too much and take too long.
This guy’s head should roll. If a politician said this they would be resigning from office the next day.
I vote Cordell should be prosecuted for dereliction of duty.
These are the worthless government drones who get paid out of our ever increasing taxes. The very reason any government exists is to protect life and property. Maybe there’s so many violators because worthless scum like Cordell won’t do anything about it.
Governments build roads because citizens demand them. You need to modify your political bent or give up driving on public roads. Seriously, if people started refusing to use public roadways then taxes would begin to drop quite significantly.
I never said government should not build roads. My point is the number one reason governments came into being is to protect people and property. If a government cannot do that, things fall to anarchy and there will be no taxes to collect for roads.
Government can’t protect us against stupidity and voting for George Bush.
–
“I wonder where they got those expectations, GC? Maybe from people like you.”
And people like Ben Bernanke. He said in his CongressioanalTestimony that home prices will not fall, they will flatten out and the increase would be moderate.
There are so many ways for those in power to mislead the pubilc — give them a false hope, a hope on which they could make important decisions.
Jas
I don’t think most of these folks are worrying too much about housing prices. I think most can ride it out.
This is the Executive Branch, you can look at Congress as well. Ben B is a small potato.
http://tinyurl.com/3yd4h2
Pop quiz. Find the Democrat on that list. Hint: he resigned after his 9-11 commission testimony was publicised.
Um - that’s because it’s the Executive branch list??
The top three richest in Congress all have D’s by their name, I noticed.
“The top three richest in Congress all have D’s by their name, I noticed.”
That’s just camouflage.
I am a 20 plus year resident of placer county and I can tell you first hand that prices are out of control there.The housing ponzi scheme has totally dominated the area for the past 5 years.If you are a first time buyer you are screwed.The economy has been totally based on equity extraction as most of the rest of the country.
“Geez, the arrogance dripping out of this guy’s ears. How do people put up with that?”
The answer is a reasonable person cannot. It’s difficult for any person who has never lived in California to comprehend the egocentric nature of the people who live here. Just imagine a state filled with little Donald Trump wannabees. This may help explain why people will pay $500,000 for a house in Fresno, Watts or Riverside. It somehow makes them feel avant garde.
Not really. The reality is that people just don’t know any better. Housing prices in California have always been way outside the norm. A house that cost my friend 60,000 in Little Rock, AR (where I grew up) would have cost me 650,000 here in an equivalent neighborhood.
Salaries are of course far more here, but not 10 times as much! It’s unfortunately really because quality of life in the short and long run is being compromised.
People do know better. Plano, Texas has a higher per capita and a higher household income than Santa Barbara, which is where I live. A brand new brick home in Plano, Allen or Frisco is maybe 1/3 the cost of a crap chicken wire-stucco box here. The crime rate is lower in Plano-Allen-Frisco. I point these facts out to my friends and customers. Their responses range from “They hate Jews in Texas” to “Texas has no art’s scene”. You see, Californians are tolerant, superior beings. They’re elite. People move here so they can feel important, rub elbows with Hef and Rob Lowe and Jay Leno. I grew up with all that hype, so maybe that’s why I don’t care for it. After you’ve seen some movie star like Mel Gibson puke his drunken guts up all over PCH the shine from the “Golden State” begins to fade.
I think the shoulder-rubbers are a minority, really. Things have changed a bit, but if one looks back over the past 150 years or so of California history, the main reason people have moved there is for genuine economic opportunities.
Personal example: both sides of my father’s family — his grandparents — moved out to the Riverside/Pomona area in the 1890s from Iowa. They were the offspring of farmers, who’d found a way to go to college and become professionals, and California had a shortage of doctors/lawyers/etc. (One of my great-grandfathers went to CA after a year or two of college, and was in an early Stanford Medical School graduating class.) There were also some younger sons of farmers, who moved because good farmland was relatively inexpensive.
There were also people who moved to the dry climates for their health, people with TB, asthma etc. The warm dry air is good for people with lung problems, though less so now that it’s more polluted.
Then there were the Dust Bowl denizens, the “Okies” and “Arkies”, who ended up in California because they had no reason to stay where they were, and the Central Valley farming economy was growing, so their skills were needed. Though they tend to be pretty quiet about it, you’ll find a lot of folks in their 80s who came to California as Dustbowl children.
WW2 brought a huge influx of African-Americans who liked the climate, both meteorologic and racial. Veterans from the new integrated military found it easy to get good jobs in the defense plants. Plenty of white military guys also passed through California on their way to Japan, and they often remembered it as a “paradise” to move to after the war was done.
Then there were people who just wanted to get as far away as possible from their families of origin, and again, the relatively good economy made California an easy place to go to. My mom was one of these.
Now today, the booming economy is a thing of the past, but now we see immigrants, legal and not, for whom California represents more opportunity than they could get at home. Agriculture and sevice industries still need a huge workforce willing to work for low wages, and these are the folks who will do it.
None of the above are “shoulder-rubbers.”
I appreciate your points, however you have to admit that there are a lot of stuck up people in California, which reminds me of a joke: What’s the difference between a porcupine and a BMW? With a porcupine the pricks are on the outside.
CA’s money oriented but it’s a far superior model for stratifying a culture than race or family heritage. Yale vs Stanford. I’d take Stanford.
No, no, no! That’s not the BMW joke. The joke is: What’s the difference between a BMW and hemorrhoids? There is no difference. Sooner or later every a**hole gets one.
We live in SoCal and have 2 BMWs in the garage (a 1999 528 and a 2001 540, both wagons) and we love them.
I wish there was an American made equivalent, but there isn’t.
As for the real estate market, I told my wife there’s no way anyone’s ever going to talk me into buying a house or anything else we can’t afford. EVER. We have two very strong personalities between us and we’re quite capable of making our own decisions.
Americans use to make the equivalent of BMW’s, but Ford stopped producing the Pinto a long time ago (I’m teasing).
Partially correct there. Salaries have in the past always gone up. However once you cross break even its no longer profitable to maintain business in California. My area is Silicon Valley. Once we could not compete with our asian competitors back in the 80’s due to declining market prices we had to ship those jobs to other states and Asia. We saw all manufacturing leave SV by 1990-92. Today, we have software and admin shipping to other states and overseas due to the help of the internet.
Your typical high paying engineer or accountant can easily do their job in Montana Texas or Georgia. In fact you have other states giving tax and other incentives to California companies to expand into their state to provide jobs. Google recently set up shop in North Carolina with 250 jobs. There is nothing that can be done in California that cant be done cheaper in elsewhere. More the perception or actually costs in California will increase employers have a way to shift to lower cost and business friendly states.
That is only partly true. The people with the skills have congregated in California, and face to face contact still drives business. If meeting in person were not critical for business deals, then why is business travel such a large segment of the airline market? California has some issues to deal with and some tough times ahead, but really this is the same kind of chopping that all markets are in for with the difference that the boom started higher and went as high as anyplace else in California.
Not anymore! No need for face to face meeting.. for one sales has migrated out of state and is local in region and closer to customer who are out state. Development centers are no longer bound locally…I mean why? Take a look at SV companies setting up engineering in Or, Tx NM, India Germany China etc etc…Hire them anywhere! Can be done and is being done….
Face to face? LMAO you haven’t worked the past few years? Have you ever heard of outsourcing? They don’t even speak the same language, much less work face to face. I wolrk for one of the largest companies in the world, and there’s hardly any groups that have all their team members in one building, much less the same state.
I’m launching a new website in a week or so and my engineering team, who I have never met in person, is in the SF Bay Area (I’m now in the midwest). I did all of the product requirements, product definition, testing, content and QA. The project manager and engineers were all in CA but often not physically together when working or during meetings. Yeah, this is kind of outsourcing in the wrong direction but the point is that this effort has been very successful without a single in person meeting at all. I’ve worked with people remotely before but never at this level where we did everything virtually and have never met in person even to do the business deal. I am finally going to San Jose in March and am looking forward to meeting them!
We have used tools such as freeconference.com and WebEx and a Yahoo Group (for storing shared files).
The hardest part is finding the talent you need without already knowing them and having worked with them.
I work on a large project that spans continents and have never met many of the people I work with. We have regular teleconferences and web meetings and it seems to be the way IT development/implementation is done now. Face to face is useful, once a quarter or so, but not required. The notion that people need to live in CA to work in CA is no longer true. I have two team members who come to CA regularly but live in TX (where they can have a mansion for the price of a studio condo here) and this phenom will only grow as broadband penetration and technology improve. Absurd CA housing prices will not be sustained by the notion that people need to work face to face, as this really only applies to the the cheaper hands on work that has largely been sent elsewhere.
Thank you all… you made my point.
Once you cross over say 100K salary your job and your coworkers job moves out of state. I expect in the future some great things comming from SV, It will be dirt cheap for people to use….but not enough to keep 100K jobs here. We wont see the stock option madness were anyone with a pulse got 20,000 shares.
“The reality is that people just don’t know any better. Housing prices in California have always been way outside the norm.”
This is just not true. I lived in California for 40 years and other than the late 80’s run-up in prices I don’t recall a big affordability problem in that time. Compared to Little Rock, maybe there was a ‘weather premium’ but nothing like this mess. I paid $80k for a 3BR 1500sf house with a decent yard in ‘86. Ex got it in the divorce and sold it for 155k two years later. Never checked back to see what it dropped to after the break. Hmm, now my curiosity is piqued.
That attitude of arrogance is typical of the equity holders (or wannabees) of Berkeley, SF or Marin.
I’m getting really sick of it, myself. Because they deem themselves higher beings for making the ridiculous sacrifices to live here - and surviving - they “know everything” about anything, and most of all, about housing and investments.
That’s why so many lost their assess, or nearly so, in the tech downturn.
Another five years or so and a lot of that “smug” factor, hopefully, will be gone.
SFJack-
So few recall how home priced declined 40% in the Bay Area. Had it not been fueled by Stock options we would not seen much of these gains. And yes! WE WILL SEE lots of deflated egos in a short few years.
WHEN did housing prices EVER drop by 40% in the Bay Area? That’s flat-out not true in my experience, living there from 1962-1994 and having relatives there prior and since.
Ive been here since 71… and yes priced did drop by 15% in 1981 and then again 92-93 25-35% adjust for inflation it came to 40%. We do recall howmany business went under do to competition from Japan? We do recall how many manafacturing was been shipped to Texas and Asia? Many employers went bust in 1990-93 time frame…sold or closed shop.
“Geez, the arrogance dripping out of this guy’s ears. How do people put up with that?”
There’s a real entertainment factor in reading remarks from misinformed windbags like this chump. I do love these quotes.
He’s just a smug bastard who’s quick to rationalize–skills he may need when his “retirement plan” caves in on him.
Bravo clearview! Perfect. I don’t think I’ve ever seen a crisper depiction of the CA psyche.
‘A 25-year-old Washington woman, referred to Duncan by a mutual acquaintance, sent him a $68,000 check, to be invested in a ‘no-risk, high-yield investment fund’ in January 2001.
Does such a fund actually exist? Not on this planet.
Nope. The higher the yield generally means the higher the risk.
it was very “high yeild”….
for, Montecastro, McLeod and Duncan
It cost you $500,000, but you’re only paying $1,100 a month…after the market has cooled, [it] is now going to cost you almost $4,000 a month for your mortgage.
- Leslie Appleton Young said:
“Many in California have reached the dream of living in a million-dollar home without moving.”
I say:
“Many in California have reached the nightmare of a $4000 a month mortgage with the same loan.”
I wonder if Arnie will propose a law like the Florida governor.
All that will do is end mortgages with less than a 40% down payment… idiots. You cannot legislate away the cost of ignoring risk.
And… they are driving jobs away. Mostly jobs from the meritocracy (aka, technical jobs). It doesn’t matter if its medical, engineering, architecture, or any other field that requires years of schooling for a decent middle class pay. If that’s your goal… forget the bubble markets. You’ve been priced out.
When they wake up with a $4,000 mortgage payment and no dental hygienist to be found… Then we’ll see panic. Let’s put it this way, I know a doctor who cannot hire a decent medical assistant to save his life. I think he’s on #4 in 18 months… Great doctor, but little good talent out there to choose from. I should say little available talent, at that level, who wants to stay in state.
Got popcorn?
Neil
‘Even if it goes down for several years, it will go up in the long term,’ Marsh said.’
…the rallying cry of speculators losing money…
In SMC and Santa Clara County there is belief we will have a second boom with stock options and huge incomes by 2010 or so. Typical chatter is “SV will come back it always will”. This is typical from recent transplants from east coasters. Some of us who been close to high tech business know better. Stock options game is pretty much over. IPO market in the US is dead due to high cost pf going public. Acquistions and private equity buy is more in vogue. The sale of YouTube for 1B all went to a few handfull at the VCs is prime example.
Its all nonsense and bust will be very painfull in the Bay Area.
Geez, the arrogance
Berzkly! pretty much covers the why! LOL You be surprised how arrogant people from Berzkly and Stanfard are… You should see the ones that cant get a job in Silicon Valley… Oh its riot. I can tell you the grads from San Jose State (like myself) are much more humble and done lots more in business work… and heck alot more financial resposible.
“A 25-year-old Washington woman, referred to Duncan by a mutual acquaintance, sent him a $68,000 check, to be invested in a ‘no-risk, high-yield investment fund’ in January 2001.”
The clue is: “no risk” and “high yield” within the same fund.
My Broker/friend has told me many times about the past RE bubbles and the relationship to other (than cali) states. There are many many reasons CA is more desirable than many other states. The economics of it allways prevail. As we have seen prices out of cali also rocket to prices rivaling cali, watch out when it swings the other way.
Point being that the enormous population and wealth (borrowed or not=) of cali is what drove all other western markets ie.. Nevada, Texas, Oregon, etc..
When this finally crashes those states will suffer much more than cali (not that we in cali will not be drug through hell!). Whatever premium you give for or “Sunshine tax” when prices here collapse you will again see Ma and Pa once again a’ loadin up the pickup and a’ headin for cali!
Not tootin our horn here, but this is what happens every bubble. The smart in Cali see that their POS is selling for more than it’s worth and that they can sell, move and retire. This allways fuels huge bubbles elswhere (CA is 10% of the entire US pop). When the bubbles collapse (and economics return to the norm) many move to Cali for those positive things it does have.
It cracks me up to see new stuff in AZ (no offense ben, but your summers KILL) selling for more than homes here in nor cal were selling for in 02′.
My point is that the demand (or rise in prices) in many cali driven bubble areas out of the state were very artificial (ie. build it and they will come), more so than the demand here in cali.
Trust that I am not suger coating the ass F%^*(#g that owners are gonna take here in cali, 50%+ is my projection, but the areas that were pumped by any exodous of cal equity will suffer more. The expat calis move expecting things to function elswhere like the do here. When they see that there are real reasons that cali is more expensive than elswhere they will have a desire to return.
LMAO, I was shocked years ago while working in Kentucky for my previous employer to see that those fricking hillbillies (limit offense) didn’t have trash service to their homes! They all drove around with bags of trash in their pickups till they were near a dumpster. This “lifestyle?” passed through to many things that I found really weird and hillbilly as compared to cali.
No mistake, CA is doomed!!!, but those that moved from CA to the desert in AZ (TX, etc..) thinking it would be similar are in more doomed! Is more doomed bad grammer?
Things in Bay Area went nuts when you saw Ranch Homes in Cupertino outprice Bel Air or Beverly Hills. Its pretty funny when you saw Malibu beach front property selling for 75% of a 3/2 50 50 year old. We dont get that much sunshine in No than in SoCal. Anyway…
We could wind up toast! You see CA business will decide its easier and cheaper to hire in other states when you typical employee becomes too expensive … We shipped all Mfg out by early 90s. There is such thing as sacred cows in buiness anymore.
The high prices are an incentive to pick up and leave. That hurts homeowners more than renters.
Is ‘more doomed’ bad grammer?
…your GRAMMAR is fine. Spelling, not so much.
LOL, I have been using email since 1988 my spelling and grammer went out the door long ago… In the business world it doesnt matter. The point is to get your message out FAST!
The first thing they teach you about email is forget about grammer or spelling. Run ons are OK! Why? Storage space is too expensive. Therefore if you can mispell or shorten your communication all the better. Do you understand now?
How much money was siphoned off of California real estate in recent years, and went to other states? The equity drain from California into other markets in the country is a permanent loss for California. California is doubly screwed by this, and will suffer a more debilitating blow to its economy from this wanting activity. California will become, just another state in the union, after all is said and done.
Correct. There was a deep hole called debt left behind in the last bust as equity fled the state. This time it’s a crater. CA is ground ZERO for this bust.
And another thing; 1 foreclosures in California equals 3 foreclosures, almost anywhere else in the country. How does California expect to reconcile that fact?
What!! When California went bust in 1991, MILLIONS of people who had come to Cali to take defense and construction jobs left the state and went back home. When the Dot.Com thing went bust in 2001 MILLIONS of people who had tech related jobs left the state and went back home.
I s**t you not, this state has traded millions of white collar Americans for twice the number of minimum wage undocumented workers. These people sleep in the creek next to my shop and crap in my driveway. I wish I had Jed Clampett, Jethro and Granny for neighbors. At least they would build an outhouse and take a dump like a human being.
After 2002 Engineers organized and told Congress they wanted curbs palced on H1b and the jobs went abroad. Once jobs leave CA they never return.
“We can’t throw everyone who violates the securities laws in jail,”
You have to admire the honesty here. Then again, what ELSE does his office have to do BUT file charges against people? Is it that hard to “build” a case for fraud? In these instances?
And what is the message that’s being sent? Scam artists; keep it small time and don’t worry about prosecution….takes too long and not worth the effort.
Would that they’d tell the public that’s their attitude toward crime (and their job).
“‘If the economy holds up and we keep creating new jobs, then we should weather this (slowdown) fine,’ said Delores Conway, director of the Casden Real Estate Economics Forecast at the Lusk Center.”
Are these Lusk people, who frequently get quoted in the press, really as dumb as they seem, or are they just paid to say dumb things?
Paid.
Here’s a link to their boards. Just a little vested interest in keeping the party going:
http://www.usc.edu/schools/sppd/lusk/luskcenter/boards.html
The REIC’s best!
How much time does Mizzlo spend in the tanning room?
I never knew Mozilo was black. Mozilo has got to be one of the most successful black businessmen outside the entertainment industy.
LMAO (TM)
“I never knew Mozilo was black.”
He’s not, he’s an “Orange” Man.
Mozillo looks crispy fried to me.
I would say that’s a herd as opposed to a sloth (or sleuth if you prefer).
I happen to know one of the members of the executive committee. I sold my house in Sept 05 and sometime after that I was telling him that I was thinking about buying again (for a lot less money) but that the property taxes, just by themselves, would be a killer. His answer was “what, you don’t think that the annual appreciation wont at least cover the cost of property taxes?” Nothing I could say would convince him that prices will decline for sometime.
I’ve decided to rent for at least a few years……
Yea, I know a few folks in that collection have done business with one. If you expect that collection to say anything negative about real estate you’re going to come away disappointed every time.
“Renter Rachel Luxemburg of San Mateo said the slowdown hasn’t tempted her to buy. ‘When you can find something on the Peninsula that isn’t a crack house for under $500,000, then I’ll consider buying. But not now,’ Luxemburg said.”
She’s just a bitter renter who’s angry that she is priced out of the market forever.
–
“She’s just a bitter renter who’s angry that she is priced out of the market forever.”
If she is willing to pay 500K she wouldn’t be angry renter for long. She would be an angry homeowner when the same property drops to $250K.
Jas
She also happens to be a member of this board, gang.
*waves*
*hi5* Get the message out
“‘People like me and my friends, whose property figures into their retirement plans and net worth, don’t care if there is seven months of inventory on the real estate market,’ said Berkeley homeowner Robert Marsh. ‘Even if it goes down for several years, it will go up in the long term,’ Marsh said.”
California Real Estate First Article of Faith:
Real estate always goes up in the long run.
If Real estate was a “race” Californians would be the most bias, prejudiced people in the country, god bless em all.
Oh it’s a race alright … but not a group as you see it … rather a race to the finish line. Can we see it from here?
It’s hard not to be biaed. My parents bought a house for $28,000 in the San Francisco Bay area 40 years ago. It’s not worth something like $800,000. I bought a house in a rural area for $73,000 in 1995 (it was a struggle - I was fresh out of college) and sold it for three times the cost 2 years ago. Neither my parents nor I expected windfall’s when we bought homes. I don’t expect my current home to increase like my last one, but I do expect that, over time, it will hold it’s value. My husband watched his grandparents forced into poverty in their old age because they had to pay increasing rents on fixed incomes. He would never dream of renting. Owning a home is about security and stability to a lot of people. It’s not an investment in money - it’s an investment in the future. You buy a home you can afford, take out a fixed rate loan, and have a level of security that renting won’t bring.
Exactly who can afford to buy an $800,000 house with a fixed-rate mortgage? Hint: that leaves out 99+% of the US population.
If you have a $400,000 house to sell and it’s mostly paid off because you took a 15 year fixed loan on it 14 years ago. Or if you are making a high salary, which is common here. People somehow manage. There are a lot of houses that aren’t even close to $800,000 in California. Personally, I wouldn’t pay that much for a house. Heck - my parents wouldn’t have paid that much. But people seem to be willing to pay to live in a premium neighborhood with good schools and lots of parks.
You missed the whole point of her comment. California is unlike the midwest south and other places when it comes to appreciation. Which is why it’s such an easy argument to make that real estate always goes up and why so many people jumped in before they were “priced” out forever. In California you can make a valid argument for it in reality… cycles and numbers be damned. A lot of these folks who jumped into their demise, have been hearing stories since they were young or relocated here that an invidual bought his/her home in the 50’s, 60’s, 70’s or even the 80’s in some cases now look what it’s worth, For whatever the reason you can’t or haven’t realized that type of appreciation anywhere else. Granted the bottom line is greed reared it’s ugly head in a lot of the situations. But it’s hard to be non-biased with California’s record of appreciation.
Exactly. I was shocked when I found out what my house was worth when I sold it 2 years ago. Seriously. We decided to move to a different area, and contacted a mortgage broker to pre-qualify for a loan. When the mortgage broker got the estimate from a realtor, we thought she was nuts. We ended up getting $40,000 more than that estimate 6 months later (although we did do a lot of work on the house to make sure it got top dollar). It’s hard not to be optimistic when every bit of history and all of your personal experience tells you that prices will increase dramatically. I’m more or less a pessimist, so I’m not making my home the center of my retirement portfolio, but I can see how people think that prices will always go up dramatically. They always have. In reality, though, it would make more sense if people were a bit less optimistic. When people start taking out loans they can’t pay on the assumption that home values will go up so they can sell for a profit, then optimism is going too far. It would be nice to get another windfall, but I’m not willing to bet my credit rating or my future economic security on it.
I’d rather bet on California real estate going down than up. In any event, we’ll see soon enough who is right.
Diane,
You’re missing the point about the 400K though. The key is the first time buyer and not the move up buyer. If the first time buyers are priced out then chain breaks. This is why the income to price ratios are so critical in understanding the problem with affordability and then economic causes surrounding the price run ups which were touted as “affordability” products…except they are really anything but that.
The appreciation that has occured in the past several years is truly different than that of past history in California. It’s based on false demand and easy credit perpatrated by the Fed in order to stave off a recession back in 00 and 01. The effects of that excess liquidity are showing up all over the country now. It’s just that in California the effects are more pronounced due to the cyclical nature of real estate here.
The prices are not sustainable and they will fall significantly.
It’s entirely normal for home prices to go up with time — at roughly the rate of inflation plus a percentage point or two. It’s the abnormal, ridiculous 20%+ per year stuff that’s been going on lately that is completely out of whack with history. Truly, house prices went parabolic, and that’s what we need to correct — via a combination of lower nominal home prices, wage/salary “catch up,” normal inflation, etc.
http://interestrateroundup.blogspot.com
Again you’ve missed the point… I don’t think you’d find a credible argument here about prices not going down. As sure as you’re breathing that’s going to happen.
The dialogue was in regards to appreciation in California. Here i’ll give you a real world example. About i’ll say 10-15 years ago I sold a home for someone near the Calabassas area. The Home at the time was valued at and sold for 400k. The client relocated and bought a house in the Dallas area for 250k. Fast Forward 8 years the client contacted me wanting to relocate back to California in or about the same area. Houses in the old neighborhood were roughly valued at 850 to 900k the Home in Texas was valued at $275k with the warning that a penny more in asking would make it sit on the market for months. Needless to say that relocation didn’t happen. The client was actually distraught because they had had quite enough of the Texas region.
Fast Forward to today the California house would be valued at 1.5 mil the house in Texas would sell for roughly 375 to 400k from what I can determine. Now reverse that scenario if the market tanks taking a 50% haircut the House in California would sell for 750k still an equitable position and the home in Texas would revert to 200k or less, meaning any sale in Texas could possibly mean bringing cash to closing.
California property tends to outperform at least 75% of the nation as far as return and thats not even taking into account what Prop 13 brings into the equation.
That’s why the arrogance and why any significant price decreases “ie: more than 20%” will never come from the private sellers but from bankers needing to clear the books and making new records for the bottom as the months go by.
That Calabasas home is going to take a bigger hit than that. If it sold for $400,000 in 1992 (15 years ago), while home prices were sliding (remember 1991-1996?) It probably will be valued at $600,00 in 2009 unless interest rates go back up to 8.5%, then maybe $500,000. There are going to be a lot of bitchy homeowners in this state 2 years from now.
But the problem with the CA home is that if the “homeowner” took out an equity loan or bought at the peak, they OWE hundreds of thousands of dollars more and their salaries are probably similar or no more than 2 times apart.
Mrincomestream: you just laid out what I’ve said on here dozens of times over the past two years. Californians sell their overpriced house, come to TX with $400K in their pocket. Get all excited when they see what that buys. It’s all good. Fast forward three years. California prices are going down and they find they really don’t like Texas (gee, that’s a shock). They want to go back but want their $400K back plus a profit. Oops! That ain’t gonna happen. The question becomes then how much loss they’re going to take and how long it will take to realize it. Could be months if they bought in the wrong exurb. $600K suburban houses are all well and good but the locals here won’t pay that, can’t pay that, don’t have to pay that.
In the long run, presuming you are accurately tracking numbers and not accounting for the fact that you could actually build-out the entire planet, housing should track inflation without any percentage point added. If income = 100 and housing costs equal 35 percent today of total income and inflation is 4 percent and to make the point, let’s say housing appreciates at inflation + 2 percent, then within 64 years the collective costs of housing would exceed the total income of the planet. While certainly the percentage of total income housing will occupy will fluctuate over time, in the long run, housing cannot exceed inflation.
Very interesting point. When your parents bought 40 years ago for $28,000, they could afford the mortgage on a middle income wage. Today, their home costs $800,000. No middle income person or couple could afford such a house. You purchased your home for $73,000 in 1995. In 2005 that house costs $219,000. That’s 300% inflation over 10 years. Wages have gone up maybe 30%.
You made out like a bandit. The generation coming up after you is screwed unless home values deflate to a level that equals 1995 prices + 50% inflation (assuming interest rates stay were they’re at). If home values fall, the people who bought your home in 2005 are screwed. If your parents sell and home values fall, those buyers are really screwed.
This is no way to run an economy.
I think it’s more like a religion than a race - “Real estate always goes up” is a mantra and if you challenge it, be prepared for some serious anger.
GS - RE does go up in the long run. It goes up by about 1% above inflation. Schiller showed us that. But you can get 1% above inflation with many, safer investments. By the way, inflation also goes up in the long run, too.
RE is not an investment that I would bank my retirement on. For most, it’s just an enforced savings plan with a modest return.
Of course they don’t bother to add in the ongoing costs of maintenance and taxes. So what they should really say is “the long term trend for land value is up”.
Well when interest rates go to 1% all kinds of things can happen. The FED does this again and all past RE price apprieciation trends are void.
What if inflation is at 10% instead of the published CPI (commisar price index) how long does it take to get back up to nominal values after a 30% drop?
“RE is not an investment that I would bank my retirement on. For most, it’s just an enforced savings plan with a modest return. ”
“enforced” is the keyword here.
Most folks I know can’t save a dime. Spend, spend and spend some more…it’s crazy!! I’ll bet they’d go nuts having a nice fat CD just sitting there earning interest. They couldn’t stand it. They’d find something they just “had to have” and pull it and spend it.
That’s why I believe these folks think RE is the ONLY vehicle to save any kind of money–however, many of them don’t realize what coming…those that bought with the run-up–believing they were going to retire “swimming in equity” are screwed. They’ll just leave the keys and walk.
DOC
RE is well-modeled as a 1.64% YOY return, after removal of inflation (see main charts on http://www.itulip.com)
So after 5 years in which 100% YOY was accumulated and a reversion to mean scenario upcoming, Mr. Marsh just might find the vase with his retirement fairy tale in it just got dropped.
Let’s be balanced here though, just because we see the train that will pulverize Mr. Marsh doesn’t mean there’s not one for us, cause there is.
People like me and my friends, whose property figures into their retirement plans…
My property figures into my retirement, too. I plan on paying off the mortgage, and having a low-cost place to live in while I galavant all over the country. Sadly, I’ll bet this is another one of those maroons confusing “HELOC” with “401K”.
In the LA Times real estate section this morning they bemoaned the “passing” of the 20% downpayment:
http://tinyurl.com/2xbecy
Here’s my favorite quote:
The jury is still out on how well highly leveraged recent buyers from 2003 to 2006 will handle a period of slow growth in their home values. Can they hang on until appreciation returns and raises their equity holdings? The mortgage and real estate industries — to say nothing of the Wall Street bond investors who’ve financed trillions of dollars worth of these loans — are banking on it.
Can they hang on until appreciation returns and raises their equity holdings?
———————
I can answer that one…NO!
Anecdotally, seeing lots of pain coming…I anticipate foreclosures running the market by Sept/Oct of 2007. That does NOT mean we will have hit the bottom! Just that the power will be taken out of the private sellers’ hands.
“One man who said he has shopped for foreclosed homes around the Bay Area for more than 20 years, called the recent housing market ’shocking.’ He said he ‘hasn’t bought anything in months’ because most properties sold at auction are too deeply leveraged to be worth buying.”
– I don’t understand what he means. Can someone explain why these auction properties are not worth buying?
Say they bought the home a year ago with 100% financing and it was a neg am option arm for 800K. Well now the amount owed on the mortgage is 820K and the market value is 700K. The auction price is 820K. There is negative equity. No reason to buy.
Thanks.
So the seller has a reserve price that doesn’t reflect the current market value. How long can that continue?
Until they actually *need* to sell. Shouldn’t be long…
I guess it depends. For the sellers that dont have to sell, they can continue to try to sell at a high price but usually end up chasing the market down. For the ones that do have to sell (meaning the choice is they either sell and get whatever equity they can out or lose their home) - they will lower the price until it sells. Other option is where there is no equity, the owner leaves the key with the bank, the bank takes the loan over and sells it as an REO at a loss - also where you will see the it sell at the true market price.
In a foreclosure sale, the lender bids: the amount of the loan, interest due and costs. It is a free bid, because if he “wins”, he pays himself and gets the property. Anyone else has to bid over this amount. If the property is not worth the amount of the loan, no one bids.
George, these are not “regular” auctions. These are foreclosure auctions on the courthouse steps. The borrower is in default. Anyone can bid on them, but the lender, who holds the $820,000 mortgage (example above) gets the last bid for the loan amount. If a third party bids $600,000, he might get it, but usually, the lender takes is for the $820,000 outstanding mortgage, then tries to sell it in a more “normal” fashion as an REO (Real Estate Owned by the lender) listing.
There is no point going to the foreclosure auctions these days because the outstanding loan balance exceeds the value and the lenders are taking the houses back, to try and sell for more than a courthouse steps foreclosure will bring. Soon, they will hold so much inventory, they will have to bundle it all up into “regular” auctions for multiple houses. After a year or two of this, you will start finding the bargains, as the banks will capitulate under regulatory pressure of having too many non-producing assets. Patience is your biggest virtue in this market.
Sensible Lender, I see we responded simultaneously with the same answer.
Paladin-
If the lender does this, doesn’t that cost it the right to seek a deficiency? Maybe these are all non-recourse loans under California law. Otherwise, the bank may be well advised to take a loss and pursue the borrower… although that may also be a problem if that requires the bank to mark up the loss immediately on its books. I imagine a few dozen of these could really cause trouble with a bank’s reserve requirements.
CA is a “single action” state. In a courthouse step RE foreclosure, you get no relief from deficiency. You have to do a judicial foreclosure inside the courthouse in front of a judge to get deficiency. Then the cost mushrooms, the borrower has rights of reinstatement for a year, etc.
“foreclosure”, No limit.
Problem here is there are still many RE “INVESTORS” willing to pay to much for property. Renals are worth 10x rents. No more… Any increas in price should be viewed as gravy on the back end and not taken into account when buying investment RE.
If you even calculate appreciation in a RE investment you are an ignorant jackass!!!!! This takes you out of the “INVESTOR” relm straight into the “SPECULATOR” category.
The best thing that you should hope for in investment RE is that in a few years your measly rent increases ($25/mo) will allow you to refinance with a break even situation and get your original down payment back and maybee a little more.
My first rental cost me $8,000 down (I got paid a commission and had seller carry back a 10% note) and the rental broke even. After cost (in 4 years) I was able to refinance at break even (with a 10% projected vacancy + upkeep) and get a check for $15,000. The bank gave me $7,000 more than I had into the property!!!!
This was one of the happiest days of my life!
Seems kinda sad compared to the aspirations of todays “INVESTORS”, but I did sell that rental 9 years latter and pocket (net, after all cost.. taxes, etc.) $100k. It’s rents were then positive $500/mo! Thats what real RE investing is all about, break even till some fool will give you more than it is worth otherwise. When I saw that I could stop dealing with this rental and make the same money in a Gov bond it was a no brainer to sell. I sold over $100k to early, but who could figure how incredibly stupid buyers would get.
The money from my renatals has compounded more than the $100k too early I sold, but even at the 02′ prices the buyers paid they are losing big money month after month. Both buyers have refinanced twice (prolly cost em $10k=) on shitty loans and are now losing more than $1,000/mo!!!!!!
As far as I’m concerned thost rentals are only worth about $140k and these “INVESTORS” (dipshits) owe about $300k each!!!!!
Funniest thing is that both of these buyers actively manage many properties here in Stockton and live in the bay area. The routinely drive 3 hours many times a month to deal with their “INVESTMENTS”….
LMAO, I hated dealing with 2 that were 5 minutes from my home and that was my job to begin with =)
They are sooooooooooo screwwwwwd!!
Rich,
You’re “spot on” regarding your statements above. Especially since it involves STOCKTON!! It’s going to be interesting watching how far prices go down here. Sooo many people purchased that should NEVER have qualified to do so.
I live in Lodi (9 miles North) and had seen a few old-school RE investors liquidate during the run-up. Smart folks. Bet they’ll just wait it out–until the numbers work and buy again at the bottom.
DOC
Anouther sad observation from the SF bay area:
A very close friend, single mom with two kids who was renting a great SFH, then bought a 600K+ town house several years ago. Well her mortgage payment tripled, and now she realizes that she can’t afford a 600K house on her 60k salary. Lets hope her new room mates will help stave off forclosure. I know she misses that roomy rental house.
What this family is going through is awful, Where is Mr Bush and his talk of an ounership society? and Greenspan and his talk of “everyone should have an ARM?
well the Bank owns you thats ownership society. You buy buy buy loads of crap until everything you own is owned by the bank and you are renting from it at 3x+ the original value.
Yep…Chinese manufactured goods are just a vehicle for selling credit to the US consumer. That’s one face of the credit bubble that’s behind the housing bubble.
I am seeing increasing number of cardboard signs in Moreno Valley, CA looking for roommates for ~$400-500 a month.
RE: McMansion room rentals
This phenomenom will be a huge a boon for renters.
Imagine…renting a room in a million dollar neighborhood with all the amenities of single-family detached living for $400.00.
Plus the mortgage owner has do all the maintenance!
This trend will definitely keep a lid on rent levels in formal complexes.
So all renters benefit!!!
LORDY BE!
Ah, ya just gotta luv mobility!!!!
This idea was put forth on this blog long ago. McMansions will be the new Victorians, turned into boarding houses. Personally, my tastes tend more toward Arts and Crafts…
“McMansions will be the new Victorians, turned into boarding houses”
Not fun places to rent a room, though. Had to rent a room when going to school. Roommates and their asshat friends eat your food, call Guatemala on your hard-line phone, no privacy, noise…the list goes on. But, I guess it’s going to be the only way for FB’s to try to hang on.
DOC
Sad story, but NOT Pres Bush fault.
The profits if the Mom scored big on this real estate you would give credit to Pres Bush?
nice try though.
Compassionate conservatism at its best.
at the moment dude I am neither Rep, or Dem… I think they all stink. But I can’t put together a mom opening her check book in CA and some how it is a Washington fault, Oh, Not just Washington but only the Rep. or Pres. in Washington.
Just tried to the linkage of Pres Bush to Real estate evils, true in other areas but not in this forum or in this article.
So give me a break.
When did CA care about what the Rest of the Country is doing anyway, I thought that everything started here, “Its different here” I’ve been told. it the 6th largest economy, bah bah bah
“Its different here”
But CA IS different. Completely unique, just like everywhere else.
But I can’t put together a mom opening her check book in CA and some how it is a Washington fault
Did the Gov create lots of liquidity to compensate for the dot.com burst?
Did the Fed monitize the debt?
Did regulators lower bank reserve requirements?
Did the Fed lower interest rates from ~6% to ~1% and keep them there for too long?
Did regulators loosen lending standard guidelines?
Did the gov talk about a “market will take care of itself” approach, while all the time manipulating the market for the best short-term performance?
Did the Gov’s most visible economist tacitly say that ARMs were OK?
Does the Gov apply hedonics to statistics in its own self-interest?
Did these have anything to do with the bubble?
If you can’t see a connection between the Gov’s actions and the housing bubble, you should read some back issues of Ben’s blog posts.
To be sure, they are not the only cause, but it would not have been possible without them. Our lady friend in SF Bay area does not deserve a bail out. But the politicos in DC don’t deserve a free ride, either.
“To be sure, they are not the only cause, but it would not have been possible without them. Our lady friend in SF Bay area does not deserve a bail out. But the politicos in DC don’t deserve a free ride, either.”
I happen to agree with this and a lot of your post.
Fannie Mae and Freddie Mac bought up most of the garbage mortgages and packaged them into MBS. Remember the homeless guy who bought 12 houses in Tampa? Fannie Mae was the bagholder for those houses. It was the Republicans that tried to reign the GSE’s in and the Democrats stopped it. I’m not a Republican either. Both sides had their hands in this mud pie.
I don’t have pity for the FB either. If the house doubled in value and she made $600K, then she’s a genius. If the goes into foreclosure, then it’s all Bush’s fault.
Was the dotcom bubble all Clinton’s fault? How about all those people who lost their retirement savings on the dotcoms and tech companies? Did you blame him for that? They took the gamble and lost. It’s no different from sitting down at a poker table. Maybe that single mom should have thought about it before she bought the $600K house on a $60K salary. At worst, she can walk away and move to a rental.
People need to start taking responsibility for their own actions. If Bush told you to jump off a bridge, would you do it? Everyone says he’s an idiot, then they do what he says and now it’s all his fault. We all know he isn’t too bright a guy, so ignore the clown. Just wait two years and hope we have less of a loser team in the White House. Maybe this will teach all you people to stop depending on the government for everything.
It was the Republicans that tried to reign the GSE’s in and the Democrats stopped it.
——————————
Actually, no. Barney Frank has been a big propenent of reigning in the GSE’s. He’s a Democrat.
http://jimhamiltonblog.blogspot.com/2007/01/frank-to-produce-gse-legislation-fed.html
A small group of politically connected oligarchs and plutocrats will own everything, and the rest of us will learn to say “Yes, Massa!”
A small group of politically connected oligarchs and plutocrats will own everything, and the rest of us will learn to say “Yes, Massa!”
‘Til the guillotine gets hauled out and Madame DeFarge yells, Off with their heads!
Look up the Thomas Jefferson quote on inflation/deflation and your conclusion isn’t all that earth shattering.
Here it is:
If the American people ever allow private banks to
control the issue of their money, first by inflation
and then by deflation, the banks and corporations
that will grow up around them (around the banks),
will deprive the people of their property until their
children will wake up homeless on the continent
their fathers conquered.
Thomas Jefferson
It’s a nice quote but I don’t think it’s Jefferson’s.
From “The Quote Verifier”
“A spurious Jefferson warning about the power of banks includes the word “deflation,” a term coined long after his death. “
“and Greenspan and his talk of “everyone should have an ARM?”
he didn’t say that. he said in the past some homeowners, do the dgree they could manage interest rate risk, would have benenfited from an ARM. notice he said in the past.
Don’t bother trying to correct people with facts…. I’ve tried to correct such things but people love to pass blame on to others. These are the same folks who can’t decide whether president Bush is a mad evil genius or a blundering idiot.
Of the two choices, which do you consider him to be Austin?
In a Feb 2004 piece; Axel Merk (as in MERKX) quotes him -
In a speech at the Credit Union National Association, Greenspan today said that homeowners “might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade.” He continued: “American consumers might benefit if lenders provided greater mortgage-product alternatives to the traditional fixed-rate mortgage.”
Merk is very critical of this and says:
We very much hope that Greenspan will put his words into perspective. It is our view, however, that Greenspan is indeed desperate and means exactly as he said. Greenspan’s entire monetary policy has been based on wealth creation through higher real estate prices; he is taking this concept to new levels thereby risking an unprecedented real estate bubble, and a subsequent collapse of unprecedented proportions.
Greenspan is the biggest IDIOT that has ever lived on this planet, besides GWB of course.
He’s the one that caused the entire housing mess. You don’t need a PhD to figure out a bubble. He should have raised rates long time ago and we would never have this problem.
I’d be willing to bet not one in a hundred people who got into liar loans, 80/20s and 100% financing deals could tell you a) who Greenspan is and b) what the history of variable mortgages vs fixed rates has been for the last decade or so.
Fact is, variables have been the better bet since rates peaked in the 80s. Those who chose them and took the risks saved tons of money over those who took out fixed rates.
I took out a series of fixed rates. Paid more than I “should” have. Was I “screwed” or did I make a series of thoughtful (yet sub optimal) choices?
The problem today is nature of the products people selected. Many reset quickly and have extreme prepayment penalties.
Who’s fault is it that some INDIVIDUALS chose one, very bad, product? These are adults, no? I’m not absolving the greedy bastards who sold the worst of these loans to the naive or unsophisticated. But the oldest saying in the business world is “Caveat Emptor”, no?
Society has a choice; we can “protect” everyone from “bad” choices by taking away virtually all choices or we can be as “liberal” as possible and let people accept personal responsibility for such things.
Me? I’d rather err on the side of freedom. It is always sad to see “good” people make bad choices but I doubt there is a single person on this site who’s never had a friend or relative (if not themselves) who’s made a particularly horrendous choice at some point in their lives.
You’d think that people, leveraging themselves to the hilt, would be a little more thoughtful about the risks they were taking in RE lately but, sadly, many don’t.
I know about a half dozen, pretty rich, pretty smart people who are going to swallow pretty big, pretty stupid, losses on RE soon. I doubt anyone could have talked them out of their original decisions.
So what is the better choice? If you think having more government control is better then you’d better accept the fact that the more control we give to “the government” over our lives the more (and more and more) they’ll TAKE.
Are the “compassionate” people okay with that trend?
I also get annoyed when people quote Greenspan incorrectly. However, given his position and the fact that his doublespeak (even labeled “Greenspeak”)was so given to interpretation, it’s very fair to say his actual statement encouraged the growth of non-fixed debt - immediately before he began raising rates. I for one, think his statement was INTENDED to have the EFFECT it did, even though he tried to obfuscate. He also said, and this IS an accurate quote, “I would encourage lenders not to be too sensitive to borrower’s qualifications”. If that wasn’t a message to subprime lenders to open the floodgates, I don’t know what else it could be! My hope is that people like Greenspan are held accountable for the mess they made.
Will never happen. He is the ‘maestro’ in their eyes. He lined a lot of his friends pockets along the way…powerful friends…They will covertly protect him.
“powerful friends…”
I believe the correct term would be “employers”
Mr. Greenspan also said:
“I guess I should warn you, if I turn out to be particularly clear, you’ve probably misunderstood what I’ve said”
Look — Alan Greenspan would never come out and say “Get an ARM loan.” But I am indeed one of those people who believe that speech was, essentially, a “call to ARMs.” It came at a time when the overall economy and job growth were relatively lackluster, and the housing market had gone about as far as it could go on fixed rate financing. So Greenspan gently nudged both lenders and borrowers in the direction of ARM financing … at absolutely the worst time in modern financial history (i.e. before a 17-hikes-in-a-row Fed tightening cycle)
Think back to the “irrational exuberance” speech — Greenspan never said: “Investors are demonstrating too much irrational exuberance.” Instead, in December 1996, he said:
“Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? And how do we factor that assessment into monetary policy?”
LINK:
http://www.federalreserve.gov/boarddocs/speeches/1996/19961205.htm
But he never would have written that comment into a speech unless he was trying to send a message. The fact of the matter is, the Fed has been just as bad, if not worse, at economic and interest rate turning points, with advice-giving. Never forget this gem of a speech from January 2000 about how great productivity growth, the tech boom, etc. virtually ensured the economy would remain on a strong growth trajectory…
LINK:
http://www.federalreserve.gov/boarddocs/speeches/2000/200001132.htm
QUOTE:
“We are within weeks of establishing a record for the longest economic expansion in this nation’s history. The 106-month expansion of the 1960s, which was elongated by the Vietnam War, will be surpassed in February. Nonetheless, there remain few evident signs of geriatric strain that typically presage an imminent economic downturn.
Four or five years into this expansion, in the middle of the 1990s, it was unclear whether, going forward, this cycle would differ significantly from the many others that have characterized post-World War II America. More recently, however, it has become increasingly difficult to deny that something profoundly different from the typical postwar business cycle has emerged. Not only is the expansion reaching record length, but it is doing so with far stronger-than-expected economic growth. Most remarkably, inflation has remained subdued in the face of labor markets tighter than any we have experienced in a generation. Analysts are struggling to create a credible conceptual framework to fit a pattern of interrelationships that has defied conventional wisdom based on our economy’s history of the past half century.”
I’m not saying I’m perfect, of course. I’ve miffed plenty of predictions. But to excuse the inexcusable talking up of ARMs at precisely the wrong time is unwise, in my view.
How many J6P do you really think listened to or read that Greenspan speech? Maybe 5% at most. The reason people got greedy was because of the spin from the NAR and their MSM lackeys. Everyone started to believe that houses only increased in value. When they couldn’t afford the FRMs, they went for the ARMs and worse. No J6P sat down and thought about what Greenspan said in that speech before signing up for a loan. The real boogyman was the GREED in every human’s eyes. Some are able to resist it. Some fall prey.
You’re right in that J6 doesn’t likely listen to Greenspan speeches, but the NAR and MSM lackeys do — and it is Greenspan’s words being filtered down to J6 via the MSM and REIC.
There is no doubt in my mind that the RE bubble was intentionally created, and that one could reasonably imply that Greenspand was advocating for the use of ARMs.
(Dublin, CA, Bay Area here) Unfortunately, your friend thought she was “throwing her money away” by renting. She didn’t see the bigger picture. Now, what she’s bought is a lot of heartache, sleepless nights, debt, and probably, ruined credit. I’m just shy of a 6-figure income, kids are grown and on their own, but I wouldn’t dare think of buying or trying to buy a $600k ANYTHING. That’s just assinine. I’m a happy renter driving a 9 yr old (paid in full) car, 6 miles (surface streets) from work.
People really need to change their feelings towards owning versus renting. Just rent, save your money, pay your bills off and live a comfortable life. When the fundamentals line back up, THEN consider buying. How hard is that to learn?
BayQT~
“People really need to change their feelings towards owning versus renting.”
You’ve put your finger on a big part of the problem. There’s been an enormous amount of social pressure the last few years to become a property owner. And I’ve had a few landlords who definitely enjoyed lording over their tenants.
Doesn’t make sense to me… really, I can rent for what amounts to half of one week’s salary…or I can pay 3x that amount to call myself a loan owner?
And for some reason the loan owning class really thinks they are the elite? Good grief… these are the biggest C players. These are the people who are stupid and don’t know it because they hang out with stupid people just like themselves because there are so many of them. Just like C students in school. These idiots are the C players of life. :-/
The A students have good math skills.
I’ve been singing this song for a few years. Now I beginning to hear it sung back to me. Not often, and not loud, but with increasing frequency.
The markets will sort it all, but it takes time, and some people who made bad decisions will get burned in the process.
my landlord rules with an iron fist he’s done so to his own detriment. im mute with terror. i pray he’s got personal problems upcoming.
Me too. Child is in college, comfortable six figure income. No need to make the nightmare of being over-leveraged and in debt up to my eyeballs a reality. When the C players of life get a lesson in basic math and realize they can’t pay their battleship mortgage with their canoe a$$ bank account - the bubble will hit the ground and disintigrate. When the cost of owning is as comfortable as the cost of renting… then I will open my checkbook.
Neil… pass the popcorn.
What, did your kid come home from college with a couple of A’s on their report card? Big deal.
If academics had anything to do with getting ahead, GW would not be President of the United States of America.
Bitter much?
wasn’t saying anything about academics having anything to do with this or anything else. Was responding to a comment about other places to be putting $$$ rather than being an anxiety ridden loan owner. kids in college are expensive. I’d rather have money for that and money left over after paying the rent than be sweating if I’m going to make the hummer payment, or eat my big screen tv after paying the mortgage. It all will revert to the mean, and when buying makes as much sense in terms of % of income and mortgage vs. rent… well then I will buy.
yea, I went to university and all I got was this lousy magna cum laude t-shirt…
…and I have no idea why my comments are all out of order and pretty much one right after the other. Looking like a dufus here. I swear I was replying to specific posts that were a lot farther apart. :-/
“Just like C students in school. These idiots are the C players of life. :-/
The A students have good math skills.”
I guess I misread this. Sorry about that. My reading comprehension skills are probably only “C” level.
ah… ok, was merely making an analogy about the % of people who can be the A students vs. C students.
Sorry… was posting before caffeine. Really wasn’t intending to make a correlation between grades and being smart… was attempting, (poorly) to show the distribution curve.
As for what I really think about grades… I was that compulsive student that had to have the top grade. Was hellbent to figure out the teacher’s standards for the top and get it.
My kid gave me an education that was worth much more. She didn’t give a flying fat rat’s ass about grades and one day she said… “look, they say only a certain % of students are going to get an A and most are going to get a C. Well, the way I figure it a grade is really then the measurement of the quality of the teacher. If I can come to class, do the work assigned, listen to the teacher, read the assigned material and get an A, then that is a measurement of a teacher with good skills in knowledge transfer. If I get less than an A doing all the supposed required work, then that teacher is less skilled at knowledge transfer.” :-/
She figured her grades were a better measurement of the teacher and not much of a measurement of her intelligence.
So here is what I was really thinking… just like in school there are those who take the time to figure out what it will take in order to achieve the so called prize (the top grade), in life there are those who will successfully figure out what it takes to get the brass ring prize they are looking for in life.
In school there will be a large % of students who don’t care, don’t value the grade, or don’t know how to make the grade. For whatever reason they won’t do what it takes to be the top of the class. They pass the class, and the guy who graduates medical school with a C average is still called doctor. The C students are content to just go through the process and get a pass. (for whatever reason)
In life there are those who also show up and take up space, but don’t actually want to do what it takes to really make the grade for the life they want. But many of them still show up and want the entitlement for being there- such as owning a house WORTH 10x their income.
Many people who actually own a house worth that much have owned it for years and years and years. That is what it takes in order to have the kind of “windfalls” people are seeking. It doesn’t come by taking out a mortgage for 10x the income… it comes from buying a house you can afford to hold on to and actually own for 15-30 years. And even then it is NOT a windfall, but just a good savings plan that keeps pace with inflation and maybe just a tad bit more.
So what I am saying is that those who get A’s and C’s in school are not necessarily the same people who end up being A players or C players in life. In fact the smartest couple of people in my life never finished High School. Neither one of my grandfather’s finished High School and I believe neither of them went past the 8th grade. But they were raised during the Depression, and joined the military during WWII and life gave them the lessons that served them well.
Anyway… it was really the distribution of A players and C players in life is similar to the way A’s and C’s are handed out in school, not that grades and success or intelligence are the same.
It is just that C players in general seem to like each other’s company, and make up a large % of the great unwashed, and they don’t really care to know how to play the game they are in… they just want a pass.
I had a 1.2 gpa in HS. I figured that a D meant I didn’t have to take the course again. It’s great to know that at that time in my life I knew just how important HS biology was to my future success.
My college test scores (better than 95% of the school) were high enough to get me into the State U.
i am a c student I take offense to that. Just cause I get Cs dont make me stupid, lazy yes but but not stupid.
Getting C’s DOES mean you’re stupid - if laziness is your excuse. What you’re saying is that you’re not necessarily DUMB. Stupid? Hell yeah.
“Stupid? Hell yeah.”
Oh yea? Well, I’m rubber and your glue,
Bounces off me, and sticks to you!
I win
LOL… I think there is a big difference between someone who got C’s on their report card and the kind of people who are C players in life.
Again… I figure a grade in school measures only two possible things… Competence to do the work or Motivation to do the work. Not always the same thing. However, I think one thing is clear… those lemmings who foolishly indebted themselves believing it only goes up, you can’t lose, and that taking out a mortgage for a house that costs 10x their income and believing that is the same thing as owning a house worth 10x their income have really bad math skills.
They either weren’t competent or weren’t motivated to do the actual math necessary to be an A player in this housing bubble game.
The only correlation I meant to make is that those content with C’s in school and in life are content for reasons of their own. They are not playing for the A. Either thay can’t, or they don’t want to.
Many of today’s FB’s are those C players who want the rewards of an A player- they want credit for just showing up for the great unwashed housing gains hand out. It looked like a good class to take… take out a mortgage for 10x their income and voila… they get to make money on the next fool that shows up.
There are people who think out their investments and what they do with their money, and take responsibility for doing the work, and earn their gains… those who do it the best are the A players… Those of us who do it at an above average level… are likely B players ( I am personally quite alright to be a B student every now and then)
and hey… there are plenty of areas where I may be the C player… but not this time. ;-D
Today’s C players are the guys who are just taking up space in their debtors class and expect a pass for simply being there.
so… if you got C’s in school I am not saying it equates to being a C player in life.
Sometimes there is a difference, sometimes not.
I have a coworker whom is highly motivated NOW and picks up skills quickly. He’s moving up the ladder at a tremendous rate despite barely passing high school. (His drive came late in life.)
I have another coworker, graduated college with honors, who has become a lazy SOB and will probably be asked to leave the company.
So yes, a C player in life isn’t worth much. I’ve seen both sides.
But what I do for a living requires a lot of guys/gals whom earned A’s in school. (Its technical stuff.) Cest la vie. But we also have quite a few managers sans college degrees who found their knack late in life. Cest la vie.
However, that said, I’ve never hear of A’s holding anyone back.
Got popcorn?
Neil
I hear ya, Neil. I put myself through school, was a single parent and worked three jobs while not even coming close to making ends meet. I worked hard for the grades, and was compulsive about it- if there was an A to be had, then I wanted it. However, I had a limited amount of time to put in the effort. Yet there I was at a top 10 school busting my butt to get the reading done, get the writing done and eek out my grade. And you know what PISSED me off? Those kids without a care in the world who would show up to class, tell the professor they had a lot of parties to go to for their club, fraternity, blah blah blah and would need an extension. They would get three extra weeks, no harm, no foul… poof, their grade was worth as much as mine.
LOL… apparently I am still really bitter about it because when I see those kind of people in life that want credit for work not done it sends me on a rant.
That is what chaps my hide about this housing bubble… the number of people who really have a delusion that debt = wealth. This whole pyramid scheme of credit, real estate and mortgage fraud will come crashing down and we are all going to end up paying the price for these idiots. I earn my keep. I budget my money and don’t buy things I can’t afford… yet eventually when this thing implodes the lifestyle of the fat loser C players will not be held against them- and the responsible will pay the price for the foolish. grrr! :-/
I’m with you on that one. I have, as of this year, a six-figure income - single parent/one child - and would never ever ever consider a 600K home. Some people don’t ask enough questions. I don’t understand why people ask more questions about paint color and hardwood flooring than about a 600K mortage with a ton of fine print to go along with it.
I truly believe that these people thought they were the smarter of group of buy vs not buy. I think they knew full well that if the mortage rate went up the payment would be high, otherwise they wouldn’t have jumped at it because it was low. They threw caution to the wind because they though the market would never go down. These borrowers are going to have to tough it out.
QT -
Thanks for putting some sense into this situation.
I feel that just because of lot of Bay Area homeowners drank the Kool-Aid, got in the game too late, and are going to be paying for their actions for years… doesn’t make them blameless. Single moms or not.
“Bitter renters” - my ass.
How about “smart renters; stupid (recent) homeowners”?
And you, too, athena.
I hereby toast every “bitter renter” in the Bay Area!
My 2 cents… Its will be more than recent buyers 2004-2006. Acutal bubble started in 1999. Too much stock option cashing in. For example we had 200K from 1998 selling for 500K in 2000. Today that same home is on the market for 800K.
At very best we should be seeing this home going for 400K… that would take 50% cut off the top.
sfbayqt: if you’re out and about in Dublin today, take a drive over to the east end and check out all the open house signs. Not to mention the several hundred units Toll Brothers still has under construction. Even saw a for rent sign amongst the sale signs. I think people in Dublin and Pleasanton are going to be in for a rude awakening. If you bought here in late ‘05 or 2006, then your house is worth less than you paid. Lots of 100% financing here as well, I’ve checked titles. Noticed that a new Hummer dealership is going in Dublin as well. Pleasanton already has one right across the freeway! People here in the tri-valley really annoy me with their pretentiousness, yourself excluded.
Hey CA Guy….I was out today but didn’t get to the east end. I work out that way so I’m not that excited about “visiting” the area on the weekend if I don’t have to.
What catches my attention on a daily basis, though, is Elan on Dublin Blvd. That’s why I decided to track what’s going on there. Now this will get you: Have you noticed that the Elan sign boasts that the condos start in the mid $400s? Well, they lie…unless, of course, their web site is lying. They have units going for “upper $300s”. They are also beginning to have radio spots with that same (higher)price point (interesting…I didn’t hear these spots before the Superbowl). Why wouldn’t they advertise the lower priced units? Also, according to their site (I posted this stuff about a week ago), they are advertising BMR (below market rate) units starting at $110k (naturally, special qualifications gets you one of these). Models are open, but I have yet to take a tour. I’ve got to practice having my game face on.
I know me, though, I’ll call ‘em on the BS in a heartbeat. It would be best if they let me loose to chuckle on my own while I walk around and check out the beautiful view of the BART station from the units.
100% financing, huh. Can’t say that I’m surprised. Dub is WAY over-priced. And whenever I get a chance, I walk or drive around and collect For Sale flyers. You should see my collection. LOL!! In a year or so, I may just leave one every now and then in the coffee room at work so my co-workers can gasp….I’ll have a huge *BEFORE* lettered at the top. Talk about conversations around the water cooler.
Pretentiousness? I just try to ignore them AND their Hummers.
BayQT~
“Just rent, save your money, pay your bills off and live a comfortable life. When the fundamentals line back up, THEN consider buying. How hard is that to learn?”
Exactly!
Actually, my friend…it’s not hard at all. That’s precisely what my wife and I are doing now.
Two years of college economics and twenty years of growing up down the street from a guy who made his entire fortune in real estate investments after World War II are telling me this can’t continue forever. It just…CAN’T.
I fear for California’s economy, long term. Everything that goes on here is based on some kind of poke-through-Jello illusion…and this midwesterner knows better but no one wants to listen.
The numbers say what they numbers say. I look at them and make my decisions accordingly.
We don’t buy houses or cars or anything else on emotion. I said that to one of these Mexican car salesmen at a Toyota dealership about a year ago and he looked at me like I was nuts.
Ok, so I’m nuts. Fine. I also have a credit score of 800, with two paid off cars and money in the bank.
I’d rather be nuts.
Can’t afford a $600k house on a $60k salary? Gee…. ya think? Why would it take actually making the payments on a $600k mortgage to figure that out?
I don’t understand people.
It’s doubtful that someone making a $60k salary would be able to pay off $600k in their entire lives, even if the mortgage were interest-free.
When did Pres. Bush suggest you buy a home that costs ten times your income?
Exactly.
Too much math for W. anyway.
Is it just me? I can’t think of a time when buying a home for 10x my income would sound like a workable plan.
Sure, it would be very workable, as long as real estate always went up faster than the deferred interest.
And if he didn’t, that means his government’s fiscal policies have had no part in the creation of this bubble? Don’t be simple.
bush is just a tool…. leave the poor fool alone
it’s his “base” that made out like bandits,
…and I ain’t talking about all you guys driving dulleys with GW stickers on the the bumpers…
All your base are belong to us.
/sinister laugh
“All your base are belong to us.”
great youtube video…..funny… they sing this in China no doubt
and now she realizes that she can’t afford a 600K house on her 60k salary.
She should have realized that before she bought. I’m sorry, but I wouldn’t feel comfortable buying a 200K house on a 60K salary and I’m single with no responsibilities.
“”realizes that she can’t afford a 600K house on her 60k salary. “” No one could ever afford a 600K house on 60 K salary. Never have, never will using long term sustainable financing. Short term, she probably could afford it using a loan with short-term unsustainable low payments (below interest only.) Then the rate and payments increase. This is what is happening to many thousands of people right now. Please do not blame the president or government.
Where’s her husband?
Don’t ever expect anything more than “spin” from the RE industry as the bubble bursts. They will NEVER admit to a bubble and “happy times are just around the corner” will be their mantra all the way down.
This was the case in the 89 to 95 CA RE crash when some RE industry shill was quoted monthly predicting a “turnaround”.
It just ain’t gonna happen…
I’ve been looking at property in Gardnerville, NV and get automatic updates on properties that come on the market or have been re-priced. The broker who provides me this service emailed me a couple of weeks ago saying “there is a lot of talk about housing prices beginning to increase this spring and now is probably a really good time to buy (I wonder where she got that?)”.
When I told her I thought this thing was going to get a lot worse before it gets better, she said, “I know what you mean. Even though some are saying it’s getting better, I see things getting worse”. Sheesh!
I see evolution eventually providing RE brokers with a mouth on either side of their face……
Before that happens “evolution” will bless them the same way it did the Dodo and the Dinosaur…
You mean they will evolve into being egg layers and get really big?
“…..and with the real estate slowdown, the equity isn’t what they’d planned on,’ said Jeff Dennis, president of the Solano Association of Realtors. “It becomes an issue of continuing to throw money away on a lost cause…..”
Wait a minute …..did he say throwing money away? Owners!?
“If you’re in this position, get rid of your house right now, economist Christopher Thornberg advises. ‘Get it on the market now, before prices soften even more,’ he said.”
Let the panic selling….BEGIN!
The brown stuff seems to have struck the rotating air circulation device.
Between Thornberg’s statement, and the dawning realization on the part of MBS holders that the game is up (see HSBC etc.), it should be an interesting ride for the rest of this year and perhaps next.
If the heft of the RE listings section of the LATimes this weekend is any indication, inventory is back up and climbing into the Spring.
Me, I’m taking a tip from Neil and buying stock in this company.
ConAgra’s stock has been moving up lately.
Funny I bought some about a year ago? It had hit a 52 week low. It’s up about 20%. Surprised. Like to buy low and hold.
I just don’t know. The subprime market is under a lot of stress but subprime is only a slice slice of the overall market, which up to this point is not showing any spillover effects. The Armageddon scenario is popular with us HB bloggers, but I’m not convinced. The powers-that-be will throw everything at the problem to keep the party going. It will be a daunting task and someday the whole house of cards will fall apart. I’m just not convinced that the collapse is imminent.
The subprime market has been a much bigger slice of the market in the last few years. As a lagging indicator, the foreclosures directly caused by the suicide loans will start multiplying exponentially late this year IMHO.
How much can the powers that be throw at this when the country is $9 trillion in debt and has a $450 billion deficit every year? If they cuts rates, the dollar drops resulting in inflation.
“‘Sometimes when they come in, many of them are OK, but some are really angry, and blaming the lender,’ said SkyValley Financial president Mitchell Chernock. Chernock said he expects to see more angry people in coming months as more homeowners with ‘creative’ mortgage loans, find themselves in trouble.”
“More Angry homeowners”… ABOUT the American Dream here in OUR Hometown? Notify Bush’s Dept. of Homebound Security Immediately…these people MUST pinko liberal Commies or Evil Doers Extrodinaire of SOME KIND!
you left out:
PPT
helicopter money drops
buy gold!
fed FB bailouts
no paranoic post is complete without the above
Tap tap tap: Is this thing on? OK maam, please insert your refinance application into the armored slot.
In the Philippines, banks door guards (2) carry shotguns and automatic rifles and the interior guards enforce the No Cell Phones rules…
Imagine the new job creation. Especially after they start getting applications from former RE agents with actual experience detecting crazed customers. (Or who can recognize them.)
Brad:
3 of the 4 things you mentioned are wishful thinking…
The history of the house i am renting is that he baught the house 1 1/2 years ago as an investment. He owns the house next door. Based on the sale price i know i rent for about 2/3 of what his mortgage is.
So I get a visit from my landlord today. My lease is up in about 2 months so he asks me if i am interested in signing a new lease. I tell him I am. Then he says that he is losng a couple hundred $$$ each month on the house and he is going to have to raise the rent because of this. (Like i feel his pain it is my responsibility to help him out) Tell him i will have to think about it. I know i am paying the going rate for rental houses where i live.
Oh the kicker is he works for the REALY big bank that is having big problems rght now
Have no problem moving if he raises the rent.
Do not cave in! I am in the same position, I am renting from a couple that wanted to get more because of what they paid. The house was for rent for several months though and I gave them a firm offer several hundred below what they were asking-they took it. I guess they figured better to get something than have the house vacant for another 6 months.
I lhad to renew my lease recently. Heard from the neighboor about LL saying the same to her. So, LL walks in, “Are you interested in signing a new lease”. Me, “Well, I was looking around a bit and rents have been coming down a bit with the housing bubble deflating, but I really don’t feel like moving, so I’d think about renewing”. LL goes silent for a minute (rent increase failed), “Ok.”
Deal done…
‘Almost every lender is putting a second review on the appraisals because Placer County went up so fast and it’s subject to change fast.’”
LMAO…
This will help grind the system down to nothing.
Idiot lenders only want to pay $50/$75 for a review which is usually double the work of a regular appraisal.
Because no appraisaser of substance will work for this piddly-azz amount, the work is done by some newbie hacks whose competency is as bad or worse the jokers involved in the original appraisal.
Anyway, a lot lenders are simply lookin’ for a another rubber stamp to to the deal, with the review merely serving as double CYA.
Total and complete disfunction.
‘Almost every lender is putting a second review on the appraisals because Placer County went up so fast and it’s subject to change fast.’”
Is this so they can pick the high one or the low one and if the results are very very different … who is the decision maker?
Just trying to understand the new rules.
Just trying to understand the new rules.
Sometimes when a loan hits a legit underwriter, the deal stinks so bad, the higher powers want to shit can it.
Since a rubber stamper has hit the sales price number for the originator and their blackmailing real estate sales connection,
they use the “review” to stop the deal in it’s tracks and hopefully, the buyer’s with his/her gotta have it right now-”WTF IS WRONG WITH YOU PEOPLE” attitude takes over, so they get pizzed and go somewhere else. Morons never even take into consideration, somebody might just be savin’ their azz.
What can happen though-because of the value discrepancies and the lender not knowing which is the truth both appraiser’s get reported to the state’s appraisal board which is a f*ckin’ bureaucratic hassle.
So even if you’ve done your job to the T, your gonna get dragged down in the mud by the number punchin’ slimebag.
It’s another reason, decent appraiser’s want nothing to do with reviews.
There are so many cash back, mortgage fraud, above market sales in Placer & Sacramento county right now! You must do some very solid work to determine where the “arms length” sale prices happening. Even then, 8 of 10 “real” sales are bought by purchasers using 100% sub prime financing. How can you rely on FICO 600 buyers drunk with purchasing power buying a home they never dreamed they could own, then making a final $750,000 decision whether they can get a 42″ big screen TV?
I know an investment group from out of the area who put 12 houses under contract with a builder in the Sacramenton area. The CFO killed the deal, because there was no way to tell how the true market value. If a group with $100 million in assets comes to that conclusion, we should all listen to them carefully. There is no way to know if you are getting a fair deal anymore: Let the market settle for a few years. Pay rent at 1/3 the cost and bank the difference. You will be hugely rewarded for your patience.
My bank only requests review appraisals in certain situations. We pay $275-325 for field reviews. The situations might be something like cash-out refinances on condos or big loans.
There is also a Desk Review which costs less, typically done when there are issues with the original or Field review.
“Your completely financed home, after the market has cooled, is now going to cost you almost $4,000 a month for your mortgage. Welcome to the world of some of Placer County’s residents.”
Welcome to the world of paying the principal down on your loan. Whether it’s stupidity, ignorance, greed, or whatever, it’s clear that a lot of the FB’s never considered that they would actually have to pay back their loan.
“Appreciation” was suppose to pay for it…
Only if they actually chose to sell. Appreciation doesn’t do crap for your cash flow problems otherwise.
That’s because 15% appreciation was “in the bag” each and every year. If people really thought they had to pay back the loan on that $800K crackhouse in Oakland, do you think they would have signed up?
Dobb and Jackson are working on bailing out the “disadvantaged”, “not always perfect credit” buyers. Jackson was heard on radio saying instead of sending money to rescue Iraq, better to rescue these subprime borrowers, saving them from foreclosure, and saving the US economy too.
I say, don’t send the money to Iraq or the FB’s.
BTW - It’s not Dobb, it’s Chris Dodd.
Song about Pheonix RE market, middle of page. Titled “Defaulting”, Sung to Tom Petties “Free falling”.
http://www.azcentral.com/
Dude, that clip is freaking hilarious! I want to see this played on the nightly news. Whoever that kid is, he’s got talent. The next American Idol? Thanks for sharing and making me lol!
Love it!! Sad to say it affects my equity in AZ. However, renting in CA. Only a little bitter because I am not 55. Just fine for now. Thanks. I forwarded it to family and friends in Walnut Creek, Carson City, Mohave Valley, etc. LMAO.
Priceless!!!
some people should not be allowed to pick up a microphone, let alone sing into it…
That is a friggin classic. That gets forwarded immediately to some folks I know thinking about relocating or buying in Az.
If by classic you mean “most atonal slab of meat croaking to canned backing track ever”, I agree. I blame william hung for this type of assault.
the clip is funny…but it brought flashbacks of when i was a bartender and kareoke nights. PEOPLE, IF YOU CAN’T SING, THEN DON’T DO IT. and if you can’t pay the 30 year fixed instead of an ARM, THEN DON’T DO IT.
“PEOPLE, IF YOU CAN’T SING, THEN DON’T DO IT. and if you can’t pay the 30 year fixed instead of an ARM, THEN DON’T DO IT.”
But if it’s a choice between singing or the ARM. For the love of God, TAKE THE ARM!
http://www.azcentral.com/business/columns/articles/0211biz-catherine0211.html
Everyone says how house prices are way too high. I, of course, agree. Living in OC, CA, I refuse to pay 500K for a 2BR,2Bath 1K Sq.Ft. Condo. However, my question is, how long do you think prices will fall? Going by Japan and history, seems like it could be a long while. Any predictions?
Yes, I have looked Shiller’s graph and also some graphs of the RE bubble and busts of Japan, England, and Australia. I divided the downturns by the boom times and got roughly 1.618, the Golden Ratio, for all of them. As it turns out this is a theory (Elliotwave theory) that states that the Golden Ratio pops up in markets controlled by human behavior because of the evolution of the human brain. Interesting theory but as for me, the numbers don’t lie. Go check them out. If we multiply the current boom times 1.618 we get (boom - 1997 to 2005) 8 x 1.618 = roughly 13 years. Add 13 to 2005 and you get 2018. That’s when the market will bottom out.
Housing ‘freefall’ sends balladeer into default mode
http://www.azcentral.com:80/arizonarepublic/business/articles/0211biz-catherine0211.html
And now for the good news……….
http://www.dfw.com:80/mld/dfw/business/16676064.htm
Texas RE takes 10 years to appreciate and loses 90% of the gains in 1 year. Most of the price increases are due to bigger new homes. The only way a used house appreciates in value is if you buy out in the boonies and the city catches up to you a few years later. That is what happened in surburbs like Frisco.
“There you are, living in the house of your dreams. It cost you $500,000, but you’re only paying $1,100 a month after you 100-percent financed your home with an interest-only pay-option adjustable rate mortgage, known as an ARM.”
Hey, my fellow Californians! Doesn’t this describe most people you know who have bought in the last 2 or 3 years??!! Be afraid. Be very afraid.
How low do you expect prices to go? Looking in Japan and the historical charts, looks like a 40% drop is not out of the question. Any guesses?
Commercial Prime A real estate dropped 99% in Tokyo over 17+ years.
Yes, you read it right, 99% drop.
It’s called “Erectile Dysfuntion” in Real estate.
From Wikipedia…
“Prices were highest in Tokyo’s Ginza district in 1989, with some fetching over US$1.5 million per square meter ($139,000 per square foot), and only slightly less in other areas of Tokyo. By 2004, prime “A” property in Tokyo’s financial districts were less than 1/100th of their peak, and Tokyo’s residential homes were 1/10th of their peak, but still managed to be listed as the most expensive real estate in the world. Some US$20 trillion (1999 dollars) was wiped out with the combined collapse of the real estate market and the Tokyo stock market.”
Raw land in Tokyo is still measured in multiples of $1,000 US per sq ft.
40% in real dollars seems about right to me in bubble markets. Perhaps 25% to 30% off nominally, plus inflation. That’s what happened after the last bi-coastal bubble.
Maybe 25% off in some hyperinflated areas, particularly in certain price brackets.
This is why it is IMPERATIVE to buy in a great town with a great school district. Such places almost never get as affected as the less desirable areas.
Yes, I realize not everyone can afford the top areas. But that is precisely why you should try to get in. The rich get richer. Period.
A home in a top area is a solid investment. A home in a less desirable area is always risky.
You are on crack. Manhattan Beach, CA was off 20% as was Tarzana and other “top areas”. IMHO you are clueless. Please go buy a house tomorrow in a “top area”. I mean in addition to the one you already own.
LOL easy imploder he may not have received the memo
How low will they go? In the SF Bay area, they’ll go to at least ‘97 prices, plus inflation. From there, they’ll probably overshoot, no telling how far.
So, 1997 prices = $300k or so.
Inflation for 10 years, about 35% (3% annual)
Plus inflation = $300k * 1.35 = $405k
Current price = $800k
So that’s what - 40-50%?
My sister bought a Home in auburn in ‘96 for $115k,actually a little north of the city limits and just off luther road. It sits 3/4 acre,nicely landscaped,last spring a couple of speculators dropped a mfg home on a 1/4 acre lot down the street and asked 800k for it.stick built homes around the corner(literally) were selling for $600k.REO. when i visited in august there were 12 for sale signs in a 1/4 mile stretch of dairy rd,and 3-4 houses being built with no signs.
Gold Country (Auburn, Jackson, Angels, Sonora) houses are selling for more than Sacramento. Few jobs up there, unless want to commute for 1-2 hrs.
Great link/article Ben…like i’ve told you folks before I moved out here last year (near lincoln/wheatland/auburn/roseville, ca)…i knew something wasn’t right…now even the local paper is calling it…the last 4 days or so it looks like this whole thing is picking up steam…it won’t be long now…btw it’s known that yuba and sutter county are the poorest counties in all of california, but yet the median is 4ook? un-eff-ing believable…i bet you’re gonna see alot of crack/meth houses spontaneously combusting in the near future
crush
“Compared to the early 1990s, when sales slowed dramatically and prices dropped about 12 percent statewide, today’s slump is relatively mild.”
They’re making it sound like a 12% drop is a lot. The reality is that Real Estate goes up and down and to think it’s the end of the world when prices dip is naiive.
If your goal is to buy and flip, sure you could get screwed on a dip. But you would deserve that. You should have had a real job instead of trying to get something for nothing.
But if you have a long time horizon, there just is not much to worry about.
I remember in the late 80’s doing the math and proving to my wife we’d be better off by staying with our $300 a month rent than buying a $267,000 house with $80,000 down. And I was right. Over time, if I were to save and invest every cent I’d save by renting, we’d have been better off financially. I had spreadsheets with amortization formulas to prove it.
But thank God she didn’t listen to me.
We bought the house and never regretted it. What my formulas did not factor in was quality of life. For example, our apartment was one bedroom one bath and the house was 4 BR/2 baths on half an acre in a beautiful town in a top rated school district. The schools where we had the apartment were horrendous. We’d look out the window and see a fire escape covered with pigeon droppings. In our new town we’d look out the window and see deer and wild turkeys.
The other way I was deluding myself was I NEVER would have saved the money I could have by staying in the rental. It looks good on paper, but in reality, I would have blown a good amount of the money.
I was making only $90,000 at the time and a mortgage double my salary was scary. However, in retrospect I had many years of large pay increases ahead of me and within a couple years I no longer worried about the mortgage payment. In fact, my first raise (I was jumped to $117,000) more than paid for the entire monthly mortgage/tax payment.
Now if you tell me you are on;y making say $100,000 today and you’d be looking at say a $400,000 mortgage - I say get yourself a bigger downpayment. It may take three years, but with some luck, prices will stay flat for a few years. But they won’t wait for you forever. So start saving now and stop whining.
Typical Salary was no were near your number of 90K in 90’s.
You say that as if that’s the typical salary of today. What is the median around 50k
You are right.
On the other hand, I chose to pay $267,000 for a house. I could have easily bought for under $200,000.
Also, I should point out I was in my late 30’s and both my wife and I had been frugal for years, squirreling our money away.
Many of our friends at the time blew their money on fancy vacation, restaurants, cars and clothing. We didn’t. Today, most of these people are F_cked. It was a choice they made.
People in their late 20’s need to get it into their heads that it may take years to get one’s earning and savings high enough to buy a house. I say this because I have run across a good number of people at work in their late 20’s or very early 30’s who are bitching they can’t afford a house. I tell them to save a big downpayment and instead they complain they can’t save and they have huge credit card debt. Meanwhile, they are always doing things like heading off to the Rockies, the Caribbean and Europe and dumping huge amounts to go in on summer home rental shares in the Hamptons. They belong to fancy health clubs, take cabs to work and buy their coffee for about $3.00 at Starbucks. Give me a break guys.
I drink instant coffee and go on one vacation a year, stay in a tent, bring sandwiches to work for lunch and drive a 12 year old car. You don’t see me complaining.
Babies.Irresponsible, whining babies. Grow up.
Woah, easy there stoutmaster … I don’t think it’s necessary to call everyone in their 20s and 30s irresponsible, whining babies. In fact, I think that younger people today, overall, have it much harder these days than their parents and grandparents. Just take a look at salaries vs. what the dollar buys you today as opposed to what it bought you 10, 20, 30 years ago. Young people have it much harder …
I started at $7,000 a year in 1978. I remember my boss bought a modest starter home for $90,000 that year.
In my business, we start people at $35,000 today, five times as much. You can buy a modest starter home in the same area for $450,000, also five times as much.
When I looked for my first career job out of school, it took me a year. I drove a cab 14 hours a day to make ends meet. Today, we hire anyone with a pulse - it is so easy to get hired.
I don’t believe it’s any harder today. It’s just that 20’s and 30’s seem to want it all right away. It takes time and savings.
“I don’t believe it’s any harder today.”
Of course you don’t. It’s so cute!
I call bullsh*t.
In 1977, my father made $6k. Our house cost $21k. In New York. “Starter Homes” were not $100k in Cali then, no way. Kinda, you know, by definition.
Mountain Lakes NJ - cape 1978 - $90,000. My boss made $40,000 at the time.
Also - interest rates were MUCH higher. You guys have it easy with the low rates.
While I don’t agree with much of this post–no one who was not looking for work during that time could understand that experience. Mid-seventies to what? ‘83-’85–nightmare labor market, and I am talking about people with good educations.
Buying anything at inflated bubble prices is a huge mistake, no matter the time horizon. People who bought Cisco stock at $80 might break even after 20 years - not factoring in inflation. With inflation, they might catch up after another 70 years when there is another stock bubble.
you sound like someone that has a stake in preserving your perceived equity
I don’t give a rat’s ass if the “perceived” equity goes up or down. I’m not moving. I’m not dipping into our savings.
that’s legit…sad thing is there’s a ton of people that bought with no intention to ever stay (in their house) for any substantial period of time, if at all
Darwin Award aspirants.
agreed…lemmings, too
“Overthecliff Dwellers”
People don’t seem to understand that each time they move, closing costs and realtor fees cost them tens of thousands.
that was meant for stout
Damn abyone have Paladin’s website handy?
The cash backs are on an upswing in Sacramento
http://sacramento.craigslist.org/rfs/276475083.html
71 listings in Sacramento
“We can get you cash back for your closing costs and reduced sales prices too.”
Adam Okonski
Coldwell Banker
adam@adamokonski.com
916-705-3857
Oh Dude wrong place for that ad unless you like hate mail
That is just CLIP and PASTE from Sacramento craigslist. No ad. Should have left agent’s name out of post.
http://www.kitco.com/ind/Daughty/feb072007.html
From the link above
And to remind you of the horror of the inflation millstone, we just saw that money supplies around the freaking globe are all increasing at 10% or more, meaning that this is opportunity whispering sweetly in your ear to buy gold, which is unlike the piercing screeching and criticizing you will get from your family when they find out that you knew you should have switched to gold, and could have switched to gold, but you did not switch to gold, and now that your precious paper financial assets, especially the stocks and bonds of companies providing “services”, have fallen to intrinsic value (zero), you are all poor, while the people who owned gold and silver and oil and commodities got rich, rich, rich!
wake me when gold gets back to 1982 highs
so you are saying there are people that will take worthless money and give you valuable gold for it? why is gold so valuable? can you eat it when you lose your job and need food? can i take gold bullion to the bank to pay my mortgage?
Gold is valuable because it’s hard to come by.
Don’t confuse the terms of your mortgage contract with wealth. Inflation is how debtors cheat. Deflation is how the creditors get even. Gold gives you limited immunity to both. I hold some gold in my IRA, it’s proven to be better than those precious dollars over long periods of time.
There is no heaven on earth, though. There is no perfect monetary system, just like there is no perfect form of government.
Just like you can eat dollars. Gold is currency, just like the yen, the dollar, or the euro. Been currency for well over 5000 years.
The main difference, is that unlike dollars, and yen, and euros, it’s quite difficult to make more.
If I want to change my euros to dollars, I go to a store where I can do that. If I want to change gold to dollars, I just go to a different store. Why do people not get that?
“If you’re in this position, get rid of your house right now, economist Christopher Thornberg advises. ‘Get it on the market now, before prices soften even more,’ he said.”
Is it that hard to just say before prices GO DOWN even more?