Setting Folks Up For A Fall
The US News and World Report looks at Colorado. “In pursuing the American dream, Hector Garcia figured he was doing everything right. He bought his first house 4 1/2 years ago in Denver’s Montbello neighborhood. Garcia took out a 30-year, fixed-rate mortgage at 6.5 percent interest, bought a three-bedroom home for $207,000, and began fixing it up.”
“But two years ago, interest rates reversed course, sales slowed, and developers began discounting the homes they’d built nearby. Buyers with adjustable-rate loans saw their monthly payments rise. Some fell behind and were forced to sell or face foreclosure.”
“The worst result is the sort of vicious cycle of ‘for sale’ signs, foreclosures, then more ‘for sale’ signs that is all but devastating Montbello. Bank-owned properties now represent more than 80 percent of all homes on the market there, putting even seemingly stable homeowners like Garcia up against a financial wall.”
“‘I just can’t take it anymore,’ he says of his street’s overgrown yards, abandoned houses, and declining property values. ‘I put so much into this house and this community, but I don’t have no equity.’”
“Garcia’s house two years ago ‘would have gone for $210,000, maybe more,’ says David Cabrera, the real-estate agent whom Garcia hired last fall to sell the home, now priced at $195,500. ‘But nobody’s buying now with all the foreclosures.’”
“Denver City Council President Michael Hancock Hancock is considering a ’second chance’ program in which an investor group would buy foreclosed properties in bulk, rent them back, and eventually sell them to those who have been foreclosed on.”
“Some worry, however, that such a plan would only set folks up for another fall. ‘Homeownership has been sold to many people as the equivalent of a Powerball ticket,’ says Jacky Morales-Ferrand, who directs the city’s housing development division. ‘But the truth is that not everyone can afford a home when the roof needs to be fixed or the plumbing breaks. Most of us won’t win that Powerball ticket.’”
“Some expect things to turn around eventually. That’s not likely to be soon enough for Garcia, who has yet to receive an offer. ‘”I feel bad,’ he says. ‘Everyone thinks they want to get a house to get money for the family. But I need to have a life, too.’”
A report from from the Arizona Republic. “Regulators have shut down Mesa-based Eagle First Mortgage and its more than 75 Valley branches, citing illegal lending practices. The Arizona Department of Financial Institutions pulled the license of the mortgage firm and its broker, David Sanchez, last week. Regulators described more than 100 illegal money transactions, loan activities and hiring practices.”
“A wave of mortgage fraud started spreading across the Valley last year that could cost lenders millions of dollars and erode values and confidence in Arizona’s real estate market and economy.”
“Most of the fraud is coming from cash-back deals that involve obtaining a mortgage for more than a home is worth and pocketing the extra money. But there are other types of fraud such as faking and forging documents and lying about income and other personal information for loans.”
“Chris Mozilo, president of the Arizona Mortgage Lenders Association, could not comment on the Eagle First case because he did not know the details. But he said the Department of Financial Institutions is doing a good job with limited resources ‘cleaning out the bad actors’ in the mortgage business.”
“As part of the department’s investigation, Eagle First agreed last month not to take on new business. A statement on the firm’s Web site, last updated in January, said nothing of its closing. The site says, ‘We successfully finance 98 percent of our applicants.’”
“A consent order from the Arizona Department of Financial Institutions cites reasons for shutting down Eagle First including: It made almost $2.5 million in payments to unlicensed mortgage firms and contractors that were owned by its own branch managers, which is against the rules for licensed mortgage brokerages.”
“For example, it paid $418,646 to CM Vermex mortgage owned by the manager of one of its branches and $373,100 to Casa Latino Mortgage owned by the manager of another branch.”
“A $19,000 payment was made to an employee of Scottsdale Title, but there was no invoice for it. Employees were paid as both real estate agents and mortgage brokers without disclosing their dual roles and multiple commissions.”
“Failed to check to see if 95 employees had felony convictions. Such a check is required by licensed mortgage brokers. The brokerage let borrowers sign documents when key information and disclosures were blank.”
“A false statement or misrepresentation was made. For example, a manager of an Eagle First branch took a loan application last February that listed the borrower’s monthly salary at $2,860. A month later, she took another loan application from the same person and listed the salary at $4,959.”
everything is going to be just fine - Greenspan say a recession is coming and pushing long term bond yields down so we can have another great refi boom and get all the losers that are over their heads in to better fixed lower rates - all is well
\”everything is going to be just fine - Greenspan say a recession is coming and pushing long term bond yields down so we can have another great refi boom and get all the losers that are over their heads in to better fixed lower rates\”
Rates could go to zero and it wouldn’t help now. It’s too late for rate fix bromides. Just ask our Japanese brothers half way round the globe.
Can we get paid to borrow? negative interest rates?
Only if the Chinese et.al. will loan us (as in buy Treasuries) at negative interest rates. Cutting Fed rates will send the money into euros; will send gold to the moon; and make us wonder about the good ol’ days of $3 gas. ‘Rock and a Hard Place’ Bernanke is outa room.
the euro (or yen) is no alternative; the ECB banksters are idiots just like the FED, they do a bit more ‘tough talk’ but real rates in Europe are at least as low as in the US and M3 money supply growth has on average been even higher in Europe over the last five years (just recently US is a bit higher). As soon as the ECB starts to really tighten, the gangsters in the European Parliament will vote them out of their jobs. As for the BOJ: ‘highest rate in 10 years … at 0.50%’; that says it all I guess.
at this rate they will hit 1% in another decade…
Ben Bernanke has suggested a few years ago that the FED could use negative rates to prevent a ’savings glut’. One way they could do this is impose a 1% monthly tax on all savings accounts; I’m sure almost everyone will scramble to put their last money into overpriced housing and stocks if they do that
it’s not very different from the -5% or so real rates on savings accounts that we have now in the US and Europe, but with an official tax on savings even the blind sheeple will take notice.
That is why I have a foreign bank account - maybe I should open more - good excuse for a trip
If you want people to abandon fiat currency, the surest way to do it is to impose a tax on holding it. People would find a liquid alternative to hold their savings. Something like say gold or silver.
Bernanke’s proposed holding tax is already dead in the water.
DC, how about giving the rest of us some tips on how to do that? Last year, I asked a financial planner acquaintance how I could open a foreign account. I assured her strenuously that this was not, and would never be, an attempt to conceal anything from the IRS, but I think I still freaked her out a little bit.
Offshore accounts:
http://www.sovereignsociety.com/
Alan Greenspan is the contemporary Adolph Hitler of US banking and finance.
Not only has his policies resulted in the financial decimation and orderliness of US housing, but he has also ruined the interest returns of millions of conservative savers, those being mostly the elderly who have neither the financial savy nor speculative will to go outside the realm of insured deposits.
His speaking engagements should be met with scorn and ridicule.
but of course he only speaks for the people that made huge profits from his policies …
Uncle Al finally opened his mail box and read the memo from the REIC marked urgent! It reads: We need a rate cut!
There was probably some of that $40 million ad campaign money in the envelope as well.
the yahoo marquee has a subprime- me no worry” video in case you’re nervous
Yes, the oft-recited interest rate cut may never happen because it would scare away the foreigners who are currently bankrolling our various deficits. And the ingrateful foreigners are already getting skittish having only invested a net $15B in treasuries in December. Any cut in interest rates will tank the dollar and result in a large amount of M&A activity in U.S. companies and assets. Might as well get something tangible for your pile of depreciating greenbacks.
“‘Homeownership has been sold to many people as the equivalent of a Powerball ticket,’”
The most expensive Powerball ticket anybody will ever buy in a lifetime. I hope the thrill of the gamble was worth it to ‘em.
Not if you lied on your application and took cash back at signing. You can walk away with 100K and never spend a cent.
All of these Arizona mortgage/real estate people will now run to Mexico with their hidden profits and live the good life they made off this scam. Who is going to go after them? Our government?
Well, Mexico IS an extradition country. If they’re going to prosecute, they wouldn’t have to look very hard to find us “gringos”.
If you 100K$ out, yet did not have to sign the disclosures (Thanks, Eagle First!), your lawyer will pretty damn happy. The prosecutor will have a bitch of a time convicting you.
Yeah- that has been my thought. We know the lenders are/will be sued for fraud but will some of the more sophisticated borowers get their comeupance? Literally take the money and run. Refi and walk away with your dough.
“‘Homeownership has been sold to many people as the equivalent of a Powerball ticket,’”
LOL! That really got me.
‘Homeownership has been sold to many people as the equivalent of a Powerball ticket,’ says Jacky Morales-Ferrand
Thank you Jacky - you’ve summed up the housing bubble mentality for millions of Americans. In Austin, all the water cooler buzz is about property values, who’s buying what, how much they have spent on improvements, etc…. It’s the same mentality as when the lottery pot is large - everyone rushes out and buys a ticket.
Hey guys, when the water cooler buzz at work changes gear over to the stock market, please post and let us know.
Is Chris Mozilo related to the Mozilo that runs CountryWide?
I noticed that as well……betcha he is related.
“Keepin’ it in the family”
Bank-owned properties now represent more than 80 percent of all homes on the market there, putting even seemingly stable homeowners like Garcia up against a financial wall. “I put so much into this house and this community, but I don’t have no equity.”
Here’s a thought…..why don’t you just LIVE in your house!
probably because his neighborhood is quickly becoming a slump & breeding ground for criminals. I would move out of there quickly also if my house is in the middle of an abandon neighborhood.
Even if you wanted to just live in your house, sounds like the neighborhood isn’t looking so good.
I’ve posted this link to a Tom Tole cartoon before - it makes it clear that even if you’re just an owner-occupier with a responsible mtg. the housing bubble may affect you anyway.
http://www.washingtonpost.com/wp-srv/opinion/tolesv1.html?name=Toles&date=20050725
Right, this is how people react when the home is worth less than the house and the situation is looking bleak. Same thing with needing to move for a job, etc. Being underwater changes how people look at it, IMO.
If he didn’t build equity with 4.5 years of mortgage payments, something is wrong. It’s gone from 205K to 195K, that’s only 10K drop in four years. According to my amortization table, he should have at least $100 bucks in equity! It is amazing how his monthly nut is almost exactly equal to the decline in property value…
Why, it’s like he’s throwing money away!! Something only renters do.
According to my amortization table, he should have at least $100 bucks in equity!
According to conventional financing rules, he paid a downpayment of 20% of $207k, or $41.4k, which means he should still have nearly $30k of equity even after the value drop.
What? He didn’t make a downpayment? Sucks to be him. There’s a reason that the conventional rules are conventional rules.
Don’t forget all the money he put in for repairs and upgrades - then the property taxes and higher utility bills.
I totally get that and can almost sympathize with this man but in all honesty when purchasing your home (especially your first home) using a traditional 30-year fixed, I’d think you should allow for the possibility that maybe your home’s value will not appreciate at the double-digit rate you thought was the norm. Otherwise, you would have used an I/O or ARM and taken a gamble. 30 year fixed tells me that you’re in it for the long haul because you like the home and area you’re buying into. Because 80% of the homes in the neighborhood are REO, it’s glaringly obvious that the location of his home is shady at best and that he probably should have passed on buying in the first place.
Is it unfortunate? Yes.
Was he forced into this situation? I’d think not.
Could it be worse? Definitely if he was stuck with the home with a growing mortgage payment.
We’ll be hearing a whole lot more of these types of stories over the next 2-3 years. Believe me, we’re just starting the previews right now. The main attraction is still gonna be a while.
Garcia did nothing wrong. He bought to stay and improve the neighborhood. And even if he did finance 100%, he still bought with a 30yr fixed and he’s not complaining about not making his payments.
I’d love to live next to a guy like this.
Even if you’re planning to move, a 30yr at 6.5% means you have the option to stay longer than planned - say if there is a down turn or you change your mind or get sick.
If we see a lot more of this in the next few years than we are ALL screwed.
If we see a lot more of this in the next few years than we are ALL screwed.
JTZ, just spoke to a a realtor friend who said the ONLY way to buy a house in LA’s Westside is with an IO. When I asked him further, he said practically all the transactions in this area are IO, and that his recommendation as a realtor is you have to stay in a house at least 10 years to make it work and ride any lows in the market.
I was suprised because to him it seemed like stating an obvious truth. I didn’t know it was the norm in wealthier areas too.
This current market is similar to 1990-91 when I arrived in Bay-Area CA. Homes had peaked and we had a recession. Prices dropped and people lost value, some were negative. It recovered in 1996.
Now have a larger price bubble and extensive use of ARMs but no recession thank goodness. It will take years (5-10) for wages to catch up to home prices.
Garcia’s problem is the whole neighborhood is going south and that’s bad for everyone including renters. If there are widespread problems with housing like this in the USA then owners and renters will suffer.
Today’s NYTimes has an article on rapidly rising rents and low vacancy in Manhatten due to many buyers wanting to rent and too many people chasing too few desirable apts.
JTZ- you’re I believe assumption is incorrect. With “real” inflation it will take the housing market about 5-10 years to drop to wages. . . .
Cass,
I have an acquaintance that bought a condo in west LA about 1.5 years ago 2BR-2BA for 550k. She got an I/O loan - working in finance too! Unbelievable! Right now there are two houses for sale and every weekend (both sat & sun) are open houses. Both are listed at 10% above the market. I asked the realtor if they were worth that and he said they hoped they would get the asking price $640k. So to answer your question - yes indeed it is a wealthly area but only the ones with stars in their eyes, but subprime or Alt-A the most, want to own the condos and live there. So the bubble is still brewing there. IMO it will be another year of price stagnation before the bubble catches up. Once it catches up in LA it will be like a raging fire and nothing can stop it. Not even “they are not building any more land” thingy.
shendi bhatta
As soon as there is offically a recession, a lot of people will feel free to leave their underwater POSes. After all, it is not their fault that we all came upon hard times, was it?
There may be legal repercussions for these folks, but it will soon be OK by standard mores to walk out. The banks are going to own a LOT of real estate, then the government will own it.
Sucks when you can’t sell at your stucco price.
Need to start refering to these frozen wishing prices as
‘the stucko price’.
I have some sympathy for a guy like Garcia. He tried to do the right thing with a fixed mortgage his family could probably afford and than everything around him goes to crap. He is not part of the problem,he is more like collateral damage.
Yes, and there will be much more collateral damage. I think we’ll see it most in the HOAs.
Yeah, but a 20% down payment would let him get out alive. Had he put down 41K, he would now owe approx. 150-160K. He could price below comps and still get out with some of his down payment (not a lot, but some).
“but I don’t have no equity.’”
hmmmmm
Almost inexplicable. Seems he vastly overpaid for the house? How come the 2002 price did not move up? Agent Cabrera’s hypothetical 2005 price is virtually unchanged. Just a bad area? The “no equity” part may be due to a HELOC they’re not telling us about.
Or Colorado was just ahead of everyone in the boom. I think it was.
Montbello was a afro-american neighborhood.
He don’t have no English either.
Another snippy from the article:
“It’s estimated there are as many as 18,000 unlicensed people taking mortgage applications, negotiating rates and getting loan commissions statewide.”
That’s in one state. There are fifty states at last count, and Arizona isn’t even one of the most populous, so there are probably a minimum of 900,000 unlicensed people taking applications, negotiating rates and getting commissions nationwide.
Now who still thinks there has only been $1 billion of fraud in the mortgage industry?
What?! The market didn’t regulate itself? I’m shocked…absolutely shocked! I must tell Dr. Pangloss…
Rgeulation only makes it’s easier for crooks to blend in. Which is worse? Going to get a loan from someone who looks and acts like a “licensed” broker, or going to get a loan from someone you know for sure is an unlicensed and untrained used car salesman?
Who is going to pull the wool over your eyes?
So we would have been better off if the govt. didn’t even pretend to regulate RE? Hmm, interesting…
Hey SF I’m as “shocked” as you are
but in my everyday experience, most regulation is just another level of crap I have to decipher which I also have the pleasure of paying for.
Wouldn’t it be easier and cheaper for everyone to regulate themselves?
Self regulation has a long history of failure. Try doing business in China, or Mexico, or Argentina. You’ll quickly learn that there are advantages to working in societies which have at least a veneer of regulation. It’s not perfect, I’ll grant, but I like knowing that there are laws protecting me from fraud. At least it means that the bad guys have to be a bit more careful.
You have a point, in that a lot of people assume a “regulated” business is safe. But this is more about after the fact than before. If the profession is unlicensed, what can you do about scam artists? Prosecute them for fraud? Good luck, those cases can be tough to prove unless you have rock solid evidence. You really don’t have a lot of recourse.
On the other hand, if a license is required, you have some more options. You can prosecute someone for not having a license. You can prosecute them for violating the conditions of the license. You can revoke the license, which then becomes a matter of public record. And you can put pressure on an industry association of license holders (assuming there is one) to clean up their act. All of these act as a deterrent compared to a completely unlicensed profession.
I’m not a huge fan of gov’t regulation, but hell, even the girl who cuts my hair has to have a license. People involved in brokering 6-7 figure transactions should have one too.
Totally disagree but I have a baby on my lap. Have to get back to you.
And quickly, any kind of license costs just puts the honest guys at a further disadvantage to the dishonest guys.
Some practicing professions need to avoid error. Pilots have well rehearsed procedures for preflight inspection and executing all the manuvers that might be required. Where risk can be tolerated practices become informal and lack rigor and enforcement. Many die every year because of drug conflicts or incorrect dosage. If doctors practiced with the same level of methodology as pilots then that rate of error would be far lower. Oddly enough, when it comes to money almost anything goes. The key to making licensing and enforcement work would be generating rigorous definitions of all relevent processes. Health care is starting to see some progress in this regard and eventually the markets will demand more foolproof money handling practices.
I’m a CFI. It is not uncommon for pilots to met experience requirements for certain licenses / insurance by giving themselves “pencil hours”.
“But this is more about after the fact than before.”
SUA,
There would be no after the fact if the fact didn’t happen in the first place.
All your punishment scenerios don’t matter because whether you screwed yourself, or got screwed, your not going to get made whole, as the licensed crooks will long since be belly up with there limited liability cards and the unlicensed crooks will be judgement proof.
Look around you and read the quotes in these articles. All the regulation and licensing in place has done is to give the “victims” someone to blame for their stupidity, as in the typical “But I trusted him” quote.
I suppose the punishment for unlicensed mortgage brokers will be some scatter gun thing that requires your friend az_lender to get a license too, even though I never get a commission and never sell a note. Oh well, it was fun while it lasted. Actually I don’t “negotiate” rates either. I state my rates and let those who think they are too high call me back two weeks later when they find out about all the hidden charges the conventional lenders didn’t tell them about. Neither do I take “mortgage applications”. All I take is the property address and my seat-of-pants idea of what the property is worth. Tell them what the payment is and let them decide if it’s something they can do. This works fine so long as their down payment is significant to them.
I would not be surprised if many of these 900,000 unlicensed people are also illegal. The mortage fraud has to be in the 100’s of billions. I know people who used to pride themselves of being on the straight and narrow but apparently could not avoid the temptation of duping the banks with multiplie loan applicaitons at the same time.
Get 10 houses with 100K cash back each, an easy 1 million. Even at 20K cash back, it’s 200K tax free earning. The frauds are rampant.
4.5 years ago ?
you mean CO is back to 2002 pricing ???
I was thinking 04
Even less than 2002 values, apparently. He bought for $207,000 4 1/2 years ago, made improvements, and now it won’t sell at $195,500.
But who knows what really happened here. Perhaps he paid more than typical market value when he first bought 4 1/2 years ago.
It could be that he is rubbish at improvements.
Doors open wrong way, shelves are at angles etc..
Heh - propping up property prices is definitely something politicians are interested in. NAR is not the biggest political contributer ( http://www.oklahomarealtors.com/news/view_article.asp?article=355 ) for nothing. From the article:
“Denver City Council President Michael Hancock Hancock is considering a ’second chance’ program in which an investor group would buy foreclosed properties in bulk, rent them back, and eventually sell them to those who have been foreclosed on.”
then we get a ‘third chance’ etc… what if they can’t pay rent? is it negatively amortized into the new sales price…
I have a great idea it involves those investors just life insuring the people with negatively amortized loans and upping the life insurance with every negative monthly payment until they die, then they get their money back…
‘But the truth is that not everyone can afford a home when the roof needs to be fixed or the plumbing breaks. Most of us won’t win that Powerball ticket.’”
Truer words have never been spoken. However, most people in the REIC will never tell you the real “hidden” costs of home ownership. Renting is so nice. When works needs to be done, I call the office and within an hour is taken care of. Menawhile, I am swimming in the pool or working out in the gym downstairs.
Yeah, I’ve done the home owner thing. I put new tiles on my old Fontucky home after fighting 50-60 MPH winds for 3-4 days. Yeah, we’ve replaced the water heater, too.
People don’t realize those costs add up. I guess that’s why HELOCs and Home Depot/Lowes CCs are so in demand. What, you don’t have 3 grand in the bank? No problem, just sign here for a CC. No interest until 2009. See what happens if you don’t pay if off before then as most don’t. Go aheasd, aske those people who didn’t make the past deadlines. You are gonna get socked.
Ahhhhhhhh. Home ownership. The American Dream!
As of Friday there are not enough buyers of subprime risk to cover loans recently closed or in process. In panicky conditions, no buyers at any price. Subprime loans this week from time to time may be unobtainable until their rates move high enough and credit standards tighten enough. Trash, like other things, rolls downhill: Alt-A loans are closer to junk than trash, but high loan-to-value-ratio Alt-A loans are still trash. By next week there will be few buyers of Alt-A risk, and that market may lock up just like subprime.
A sudden withdrawal of mortgage credit is a new hazard to vulnerable housing markets, but I think (hope) the damage will no more than prolong the correction. One leading reason: the price of good, mainstream loans may well improve in this rapidly flapping flight to quality.
Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.
http://www.inman.com/inmannews.aspx?ID=62310
Colorado is right up there with Ca and Fl.
Actually its far worse, CO’s economy is on much shakier ground, never having really recovered from the dot com bubble.
Josh
Does anyone here have any info on the Durango, CO area with regard to RE trends, prices, etc? Thanks in advance!
I’d be very interested in the same kind of data,but for Colorado Springs. Thanks!
And for Grand Junction?
Durango: small town mostly tourism or local services.
Grand Junction: larger town, agriculture, toursim and local services.
Colorado springs: Fort Carson, high tech remote design centers, more balanced economy, close enough to Denver for determined commuters.
I’ve lived in Colorado off and on since 94. The “natives” tell me the economy here has always been cyclical. If you can’t afford some really lean years you may not last in high tech or manufacturing. Those fortunate enough to have tenured positions or low level government jobs have more security (scads of Federal employees here too - Military, Park, Forest, USDA, NOAA).
Aspen, Vail (maybe Durango to some extent) are playgrounds for the ultra wealthy they work off a different cycle. If conspicuous consumption falls out “style” they could see a big crash, there is nothing to support property values in ski areas once the outside money stops. The tourism jobs don’t pay all that well.
“Alt-A loans are closer to junk than trash, but high loan-to-value-ratio Alt-A loans are still trash. By next week there will be few buyers of Alt-A risk…”
My understanding of Alt-A is that’s is high credit score piggyback loans, little or no downpayment. If these in fact go away or get harder to find, say goodbye to California RE. And say goodbye to entry level in most U.S. markets. Who has 20% saved up for a downpayment?
Well, ’save’ is so old fashion. Most people roll over ‘equity’ at greater than 20% anyway. I don’t think there are many 1st time buyers left, except for middle schoolers. What will be even more fun to watch is when prices are officially down 20% and the rungs on the property ladder are gone for the great SoCal move-up buyers.
Just had an email from my alltime favorite investment advisor (the one who said in 1999 that the Nasdaq was going to 2000, and who said a couple of years ago that RE was toast). What he’s saying now is that it’s perfectly fine to go ahead and make offers on RE provided you offer no more than 60% of peak. Hmm, I wonder if he hasn’t turned a bit too bullish for my taste …
az_l, not that you’re buying now, of course, but what areas do you find interesting?
azlender, who’s that? I need more of that “bullish” view to keep me sane here in LA.
Good question - 20% is $100,000 in my (relative ghetto) ‘hood. I’ve often wondered where people get that kind of scratch and why they’d fork it over for 1,000 square feet that’s a century old - and waive a home inspection to boot. Madness I tell you.
“I’ve often wondered where people get that kind of scratch”
Simple answer - They don’t.
That has been the rocket fuel for RE prices over the past 3 years, at least. Take that fuel away and the market runs out of propellant, and that will result in a “soft landing” or perhaps some “Air coming out of the souffle”.
CR is predicting 1% decline nationally in RE prices for ‘07. I don’t get it…
A 1% decline with 10% cashback sounds more like it
I do - but I’m gonna let the little piggies bleed for a while before I even think about it.
Lisa-
You’re not getting it. While it’s true that very few Americans have 20% downpayments for these stratospheric prices, the assumption is that home prices will plunge far enough to where a combination of regular old income and savings will enable people to once again make 20% downpayments.
For years now “affordability” has been based on the monthly payment on a toxic loan. Once “affordability” goes back to meaning “in line with incomes” the market will get healthy again. People will have their downpayments.
I’ll add: There are plenty of people out there sitting on $120,000 downpayments, enough for a 600K house.
However, a lot of them would like to put that money down on a REAL 600K house, not a 250 K house dressed up as 600K for this insane market. Or a 75K condo dressed up as a 600K condo. You get my drift.
These prices have to fall a LOT. Then, eventually everything will be fine.
Amen, there are some of us out there waiting for sanity in the market
I do.
“Denver City Council President Michael Hancock Hancock is considering a ’second chance’ program in which an investor group would buy foreclosed properties in bulk, rent them back, and eventually sell them to those who have been foreclosed on.”
Where do I sign up to be an investor in this can’t-miss plan?
Yes, and just wait for the great press for the city when these same people who couldn’t pay a mortgage miss rent and the “investors” throws them out anyway.
Imagine ‘investing’ in a government-oversited scheme that involves foreclosured renters. Can’t refuse ‘em, can’t kick ‘em out. Section 8 for bubbleheads.
That should really help property values in the neighborhood.
Does anyone understand how such a “program” could actually work? Unless the investors were getting these properties at enormous discounts (say 60-70% off current market values), I don’t see how this could work and (1) give the investors a return on their money and (2) allow them to sell the houses back to their former owners at a price they could actually afford. Are lenders going to let some “investor group” buy properties at such a discount? Seems like Hancock wants these lenders to take a huge hit for the FBs. Plus, there’s the little problem of how the foreclosed FBs are going to secure affordable mortgages in the future, what with that pesky foreclosure on their credit report and the taxes owed to the IRS from the debt forgiveness from the foreclosures. Nope, there just seem to be way too many problems for something like this to actually work (I’m not saying the govt won’t still try it, just that it has no chance of success). But, here is one of the first plans that government has floated to help rescue the FBs - more (just as likely to fail) plans will be floated in the future.
In that it has no chance to succeed, it is surely going to be tried.
“We will now attempt the impossible with your money.” seems to be the current government mindset.
It can’t work, it is just a different form of denial. If they can’t afford the properties at the current prices now, there is little reason to believe that they will be able to afford them later. Especially once you factor in the transaction costs and a reasonable return on investment that the ‘investors’ will be expecting.
Why is it so hard to face the facts: The current price levels of residential real estate are just out of proportion with incomes.
Brilliant!
“The worst result is the sort of vicious cycle of ‘for sale’ signs, foreclosures, then more ‘for sale’ signs that is all but devastating Montbello. Bank-owned properties now represent more than 80 percent of all homes on the market there, putting even seemingly stable homeowners like Garcia up against a financial wall.”
Coming Soon to neighborhoods all across America! Rated R for obvious reasons.
From their website:
“Market News
February 16, 2007: As most people know I have agreed to shut down Eagle First Mortgage. The Department of Financial Institutions was gracious in allowing loans not yet closed to continue closing so as to not hurt the borrowers. We will be officially closed on March 14, 2007.
I want to thank the thousands of clients that have done business with Eagle First Mortgage over the years.
Sincerely,
David Sanchez
CEO Eagle First Mortgage
_______________________________________________________
No problem Dave, anytime we can help you out, let us know.
Where can I sign up to buy those last un-closed loans. With such a great track record, they’ll be a sweet addition to anyone’s MBS pool.
It’s kinda like walking in on someone screwing your wife and the dude says “just let me finish….”
Polite of him to ask.
Oh man, that’s the funniest thing I’ve read on the blog for months.
Yep, they created thousands of FB’s over the years and made money doing it. Capital markets working for those at the top.
This is a little OT for this thread, but thought you might enjoy:
“For the first time since the Depression, more Americans ages 75 and older have been leaving the South than moving there, according to a New York Times analysis of Census Bureau data.”
– http://tinyurl.com/2z4qou (NY Times - Free subscription required)
(So much for that wave of retirees moving down to Florida to save the day!)
I think once the RE boom was underway the only ones noticing the increased RE taxation by the local gov’t were those people that bought it dirt cheap for retirement. Once the RE taxes and insurance went past 1k or so incentive to leave was in place… Thats my rationalization of the article at least.
“Denver City Council President Michael Hancock Hancock is considering a ’second chance’ program in which an investor group would buy foreclosed properties in bulk, rent them back, and eventually sell them to those who have been foreclosed on.”
Wow, talk about Serfdom. My guess is that in the “Fine Print” there’s some reference to your immortal Soul. But who needs that when ya got the Pride of Home-ownership.
“We are now well into the contraction period and so far we have not had any major, significant spillover effects on the American economy from the contraction in housing,” Greenspan said.
Well Alan, that is actually bad for housing. When the economy does contract, how much further will prices go?
Yeah, corporations are so good at lying, the spill-overs can be hidden for years — WorldCon, Enron, etc.
It might be jet lag from spending too much time abroad because he is certainly not talking about this American economy. How can you lower rates and stimulate the economy by creating the biggest housing boom and credit expansion ever and then turn around and say a downturn in housing is not going to affect the economy.
Nice point. Reminds me of marketers saying violence on TV has no impact on viewers, while spending $4 mil a minute for Super Bowl ads. Right.
“Everyone thinks they want to get a house to get money for the family.”
WRONG!. Fools thought of “getting a house to get money”.
Normal people (I hear there’s about 7 left) used to buy homes just TO LIVE IN THEM. But that was BEFORE asswipes starting “investing” in homes as if they were stocks, thereby driving-up prices INSANELY.
Now the damage is done and I -for one- REFUSE to even CONSIDER buying anything until prices drop by at least 50%. I WILL NOT become an indentured servant who only works to pay an outrageous mortgage, PLUS property taxes PLUS repairs PLUS upkeep.
Until prices come down I’m renting (and enjoying my freedom) and if prices DON’T come down I’m moving to Argentina.
Don’t pack just yet, Dan. They have to come down. It’s really that simple.
Dan,
If ONLY people had invested in housing as if it were stocks! They would have rationally demanded to see an ROI ! Instead, they irrationally SPECULATED on the appreciation of a non-liquid asset. There is nothing wrong with INVESTING in housing. It is actually a respectable BUSINESS to provide decent housing to the renting market, and takes a good bit of hard work, management skill, and dedication to the business to get a return on your money.
In a stable economy, you also have people who want to pay off free and clear a home for themselves to live in. Unfortuneately, what was lost was teaching of the work ethic that showed the path from hard work and income to ownership and investment. People already walking down that path wil be fine(as they always have). The people starting out in life, and trying to walk the straight and narrow, just happen to have gotten (temporarily) screwed by this speculation mania. I happen to be one of those people.
But here’s the thing. Hard working people tend to remember their hard work. And the time I lost having to wait out this damn bubble is not lost on my time value conscious self. Therefore, I am not going to simply wait until I can “squeeze” myself into something financially. I am going to wait until it is good and painful for all those speculators, and my “waiting time” is fully utilized with ROCK BOTTOM prices. My waiting was(is) hard work, and now once again, I am going to make it PAY OFF. Just like most of the other hard workers I know. And that is why prices will not just “land softly” but CRASH into the ground flaming. F–k those grasshoppers. These ants are SET FOR WINTER!
Well stated! We have all the time in the word, the FB however is almost out of time.
Yes, well said–hang in there.
But I think you’re being too kind to the stock market. Speculation is rife there as well, and some speculators and “momentum investors” pay no attention to the fundamentals. Whatever the asset class, if market conditions don’t make sense to you, it’s best to stay out.
holy crap I hadn’t realized it was ALL CAP day.
I missed the frickin memo.
lol
At least it’s easy to tell what I’m emphasizing, right ?
Normal people (I hear there’s about 7 left)…
Me and what other 6?…
I’m with you (tho’ not the Argentina thing). And my hope is that I’ll have enough saved up that I only have to use half of it on a 20% downpayment. Imagine that…buying a house AND still having money in savings!
“Garcia’s house two years ago ‘would have gone for $210,000, maybe more,’ says David Cabrera, the real-estate agent whom Garcia hired last fall to sell the home, now priced at $195,500. ‘But nobody’s buying now with all the foreclosures.’”
What is it with the girlymen in Colorado who whine about a $200k mortgage burden when even a secretary or waiter/actor in California can easily afford houses costing $600k to $800k and up?
Speaking of waiters, check out this add in Craigslist - the waiter/owner claims the house is “north of..the ghetto,” when in actuality this house is in the same block as one of the nastiest housing projects in DC. $950 for the basement! ROTFLMA!
http://washingtondc.craigslist.org/doc/apa/284933445.html
Yeah - that’s a dicey section. A lot of rehabbing going near there - and you might actually make some money in 5 to 10 years if gentrification continues in that area (an iffy bet in my opinion, but who knows) — but you would be nuts to rent in a neighborhood like that — much better idea to pay a little more or take a smaller place in a better neighborhood, and not worry about getting jumped on the way home from the metro (and the walk to the metro from there is through the worst part of that ‘hood)
They can afford the 600k-800k for about 3 years and then the home will go into foreclosure in CA. The downward spiral has not hit CA yet for another 2-3 years.
Too bad Garcia did not buy in SD, LA or anywhere in CA. He would have a lot of equity right now or at least a Hummer, nice vacations, and a 60 inch plasma. Luck is better than skill.
Or he’d be living in Ariz who 250K in the bank and a bigger house paid off. We focus on the losers here, but there are plenty of ex-Calif. who did just that.
“Most of the fraud is coming from cash-back deals that involve obtaining a mortgage for more than a home is worth and pocketing the extra money. But there are other types of fraud such as faking and forging documents and lying about income and other personal information for loans”
I’m sure this type of fraud was not limited to Arizona. I would guess California is king in this respect. The regulators need to start hitting California; they will probably find fraud heaven there.
WARNING WILL ROBINSON….MORTGAGE FRAUD COMITTED BY MORONS
It so easy to commit fraud in America……….the first thing is to hire the dumbest people you can find. NO KIDDING
Clueless stupid kids, and airhead aults, who have no critical thinking skills what-so-ever
It is in the front line that the fraud happens, smart people would not be there in the first place.
Its the way we do things in America,, like gee whiz i didnt know it was wrong to put down any number for his income, my boss said its ok…..he said the banks have all this money to give us and we need to give them all this paperwork, and when i get paid you get paid…then you can buy that new $800 purse you were eyeing the other day.
OT: wonder what TXU and other debtball 06-07 companies will be resold for ? this looks as loony as subprime mortgages
“…but I don’t got no equity”. Equity? You don’t need no stinkin’ equity.
So there it is.
Back On The Dark Side Of The Homies
Fil Zucchi
Feb 26, 2007 9:45 am
The risk/reward of shorting the homebuilders seems to be back in Boo’s favor.
On Friday I buzzed that I had once again put on a short position in the homies. Long time Minyans know my odyssey with this group, which included getting scorched by the 2004 rally, and a more successful - if far more limited in size – trade in the first half of last year. Since then I have been on the sidelines, suggesting that (i) the fundies in housing have just started to deteriorate; (ii) that when this chapter in the history of financial manias will be written, many homebuilders shares will best be used as wallpaper; but (iii) that I had no desire to fight a stock rally seemingly based on hope and liquidity, a bear’s worst nightmare.
As of Thursday however, enough pieces had come together to suggest that the risk/reward of shorting the StreetTracker Homebuilders (XHB) was good enough to jump back in the fray. Here is why in no particular order of relevance:
For the last eight months virtually every piece of bad news from any homebuilder was met with a rise in the price of the stocks. However, the reaction to Toll Bros. (TOL) quarterly report, which was touted as being better than consensus, resulted in a decent drop in the stock on very hefty volume.
Other homebuilders followed suit and the XHB is again nearing a test of the uptrend with meaningfully deteriorating signals under the hood.
The weekly mortgage application index for purchases has taken a drastic turn for the worse since January and the 12 week moving average trend is now negative, not what Hoofy was hoping for as we get close to the all-important spring selling season.
While rising interest rates in January probably contributed to the fall off in mortgage apps., the fall in rates since the beginning of February is being attributed to the meltdown in the sub-prime mortgage market, which is now spreading to higher grade mortgage derivatives, if not the underlying paper itself. Not only does the housing market require continued low rates and “dumb and dumber” credit standards just to run in place, but a tightening of credit could quickly lead to a death spiral of foreclosures and plunging home values.
When Pimco’s Bill Gross is this explicitly bearish on credit spreads, I am going to pay attention, and the consequences for lending in general cannot be good.
Around the Washington DC area, “For Sale” signs are popping up like mushrooms. Even assuming a marginally healthy spring selling season, if inventory for sale jumps, prices are likely to take a much worse hit than what has been seen in the broad statistics so far, with the corresponding damage to the psyche (and wallet) of American homeowners.
In defending the financial position of his company, Robert Toll pointedly highlighted that by the end of 2007, TOL expects to earn roughly the same net income as it did in 2003. Indeed, indeed: TOL stock price ended 2003 at $20, thanks to the most ebullient sentiment in the history of the housing market, and the prospects of ever rising profit margins. Right now net margins are getting crunched with every sale, and yet the Philly Housing Index (HGX) sits 25% above where it was at the end of 2003.
I suppose that my costly shorting mistake in 2004 was to anticipate a collapse of housing without actually seeing any signs of it. I’ll categorize this short position as an effort to avoid missing a potential plunge when all the signs seem to point to it.
Position in XHB
txchick57, you short the HB’s or the market?
Got a few index puts spread out through the summer. No on the HBs, might try it again though.
Here’s a funny. Spend uber bux on a new house to avoid getting hit on at the gym. Yeah, I’ll run right out and do that!
http://www.stanleymartin.com/SMCWEB/LifeStyle3.asp
Hey, this builder has a project in Maryland–in a town named California! Makes sense, right?
txchick, where do you get this stuff? You are the queen of quirky, RE-related pop-culture.
it developed so late I closed several shorts w tiny profits- never seen that before, so slow to develope
OT but I’ll add anyway since it relates to some coments above. ONe of the reasons for this mess is also the fact that reserve banking and the lack of money tied to anything like gold is in place.
Before I get labeled a gold bug hear me out. On a thread this past weekend Ben started an ask Paul Volcker thread. One of the comments I read and keep reading about on this site is that there is so much money to be lent. Well, that is true if all you need to do is type the number 750,000.00 into a computer.
However, if that money actually had to be in the bank and tied to something like gold or silver, it just might make things a little harder.
It was also asked about making everyone a debt serf. I truly believe that is part of it. Again however, it becomes difficult to do that when the money actually has to be accounted for to start the whole process of say, buying a car with 33% down and financing the rest.
Of course, I am not talking about those dealerships or companies that want to self finance their customers. That is their business and their monetary losses if the crap hits the rotating blades.
What I am saying is that WaMu writes all these crap mortgages because they don’t even have to have the money in their bank sitting physically in the vault. They can just keep adding more and more serfs to the rolls.
In addition, until recently, they have been able to package these crap loans to WS for sale.
See, in the end it is the process that must be stopped. I don’t feel sorry for too many involoved in this whole mess. However, if the way banking was done in this country was changed, many of the ills would be prevented. The problem is everyone wants a little action of the bank.
WHatever, happened to banks actually having the money on hand. I realize they would lend to make money, but if they actually built up reserves and/or had it tied to silver/gold, I think many of the debt ills in this country would go away with time.
why tie it to gold? why not something else? really don’t understand this love affair with gold.
money is a representation of the value of your work to someone. differences between currencies are risks, cost of living etc taken into account between countries. we can go to a worldwide money standard and nothing will change since some parts of the world are more advanced and will attract more capital.
only reason gold had value is because you couldn’t fake it like you could paper money. now with computers there is no reason for gold since there are accurate records of all transactions and who has how much. gold is also a poor choice for a currency is because there are always more people coming into the world and so you need more money. unless they find more gold in the right amounts, you get it. the problem now is creating money too fast or too slow. former you get inflation. latter a slowdown.
It doesn’t have to be gold. My point is that when money is just printed or typed into a computer you get a lot of crap going on. However, if you said, I’ll back the 1,000,000 in paper with say 5,000,000 books, it could still work. The point is don’t just create money out of thin air.
As for more people coming into the world that means nothing, except all the more reason to tie money to something. Isn’t it strange that despite all the people, poverty and debt and social programs and entitlements combined are far, far, far greater than all the actual FIAT wealth of the world. What? The national debt is 9 trillion, but we have what 300 billion in currency? We have only 3.3% cash actually available for the debt. On top of that, every dollar printed is charge interest. Nice! No real bank would ever let something get that outta whack!
what if whatever you tie money to suddenly increases in supply?
i remember greenspan even saying that he doesn’t know how money is created. it’s a pretty good system and like every human system there are peaks and valleys in the cycle.
when was the debt higher as a percentage of GDP? now or back in ww2?
one other thing to note is that only 1/2 the debt is owned to people. the other half is inter-government agency debt.
we also have a lot of money lent out around the world so the net debt isn’t that high
That takes us back to gold, silver, or precious stones. You always tie it to something that is hard to get to or hard to make.
The point I am trying to make is that when it is tied to something else of value, it makes it harder to just willy-nilly plug numbers into a keyboard as sure as I am typing this. Why do we have so much inflation? Everyone says too much capital chasing to little “stuff.” Poppycock! You have inflation because of the too much capital, but also because of the fact that people don’t regard money with any value. Once everyone thinks that crap crackerboxes here in the “OC” are worth 800K, then that is exactly what the sheeple believe.
If money becomes harder to come by then prices have to come down and naturally you get more for your money. Heck, when anyone who can fog a mirror can get a cool mil for a refrigerator box, then what do think most people think about their money? That’s right, not real valuable.
Heck, when anyone who can fog a mirror can get a cool mil for a refrigerator box, then what do think most people think about their money? That’s right, not real valuable.
Well, it’s not their money. But as many of the FB’ers are dimly coming to realize, it *IS* their debt, and it has to be paid back.
what if whatever you tie money to suddenly increases in supply?
Did you suddenly create the Philosopher’s Stone or something?
This cannot be done because it cannot work. How will the money supply be increased? By buying up other nations and using their money? By digging it out of the ground? This kind of linked asset currency is enherently deflationary, and deflation is ultimately even worse than inflation. If a fiat currency blows out then you can always make another one.
Sure, and destroy whatever savings people have. Look, the gold standard worked for what, almost 140 years. Same as no federal income tax except for those times like the Civil War. It is amazing how all these relatively new schems have wrought so much unpleasantness on the country and its citizens. Sure, give the fed to make money out of thin air. Sure tax people to death, literally, the inheritors. It is so amazing that this country survived as long as it did without such things.
gold standard didn’t work and there were always fights about it because the farmers wanted silver to cheapen their debts to the NYC bankers. there were also constant booms and busts, or panics as they called them back in the day.
wizard of oz was even originally an allegory about this. the book came out long before the movie and by the time the movie came out the political battles were a distant memory.
does china have any gold? what if china or some other no gold country wants to modernize? do they buy gold first? how do they attract capital to modernize with a gold standard.
our financial system is built on the ability to get work done and capital moves from country to country that offers the best return.
and we do have a base of money. money is based because countries hold reserves of other countries’ currency. the yuan is worth so many dollars because china holds dollar assets. in japan’s case there is the yen carry trade that is attracting capital.
if you want money you have to attract it by offering something.
Mole Man,
You seem to know a lot about why deflation is such a bad thing. Why don’t you explain that to us. Or are you simply parroting what you’ve heard from the Keynsians? My challenge to you is simple: explain why deflation is worse than inflation as you asserted.
Once you have a stable money supply, there is no reason to EVER increase the supply of money. So what if prices start to fall (not dramatically, but slowly) or if your wages decrease every year? The important point is that your buying power is constant.
There are very good reasons why gold has been the money of choice for thousands of years. It’s impossible to counterfeit (unlike paper). It’s durable (unlike paper). It’s scarce (unlike paper). It’s divisible. It doesn’t tarnish (like silver). And it’s arguably the most beautiful element or compound in existance. The free market has selected gold as its money of choice for as long as modern economies have existed. Of course, Keynesians know better.
And therein lies the problem. You are fixing money to other like money, i.e. fiat. You have countries manipulating currency. Also, even though I should now, why should I ever care about China and the rest of Asia’s currencies? The US is what we need to worry about first and foremost, not what the yuan or yen is doing.
However, like offshoring work at a dollar a day to some people in Asia or South America, that is what our currency has become, cheap and worthless. We have tied so much to other countries, so now our fates are all tied together.
In the end, I would prefer to have my money fate tied to a dollar that has been provided for by the constitution and backed by something other than the “full faith and credit of the United States’ ability to repay its debts.”
does china have any gold?
You’re arguing against the validity of a modern, gold-based monetary system, and you don’t even know the answer to this question?
I think you need to go study a bit more…
Bizzare
Before Mao’s PLA conquered China in1949 the Soong’s “shipped out” the Chinese central bank gold reserves to the USA. Decades later when the Red Chinese bought gold for their central bank the arrival of the gold carrying airplane was broadcast on film and TV as a sign that the country was returning from it’s depth of poverty…it was considered a significant occasion.
Gold can be counterfeited, for example drilling gold ingots out and filling the center with lead, or more simply lowering the actual gold content versus that of other alloyed metals in a coin, and then purporting a higher gold carat content. Most people would not have access to the lab equipment to assay gold content or even accurately determine density of a piece. However, the true value of gold is that it cannot be declared into existence. Remember, all gold existing in the world was trapped and condensed from space matter at the time of the earth’s formation, or else introduced from meteor impacts. There is simply no other source of gold, and no known method to convert atoms of any other element into gold, despite the dreams of centuries of alchemists. It is my understanding that there are tremendous quantities of gold dissolved in the world’s oceans, but at such dilute levels that it would cost significantly more than the value of an ounce of gold to recover one. But I digress . . .
I would like to challenge the idea that “deflation is bad”. Like almost everything else, “good” or “bad” depends on your situation. If you have little or no debt and a lot of cash, deflation is very, very good. You get to buy more stuff for your money. Deflation is only bad if you have a lot of debt because the debt is harder to pay off. I don’t have a lot of debt so I say “bring on deflation”.
Just heard on CNBC that federal regulators are looking at banks to “clarify” their reserves to make sure they’re adequate. Article was in the context of subprime, but did mention the possibility of “overall” credit tightening if banks really start to get hit with defaults. And of course the broader tightening would wack the economy.
Yeah, close the barn door after the horses have run out! Typical present-day America. No prevention strategy, just a reaction strategy!
But even the “reserves” are abstract data stored in computers–not hard assets.
And if you as a bank can sell mortgages that you’ve originated to a non-bank, you can keep on lending regardless of reserve requirements–if “investors” don’t wise up and stop buying your loans.
That’s the problem. No real reserves in the bank vault. I am sure I would get a lot of dirty looks and questions if tomorrow I went to my bank and asked for 25K in small bills from my account. How sad that our banking system has become like this.
Actually, your bank would be required to report your withdrawal to the Feds (IIRC the IRS) since it’s a currency transaction >$10k. To detect the dreaded money-laundering, you know…
It is sad. When I joined a highly-respected bank in the late ’70’s, we still took our responsibilities seriously. But even then there were no “real” reserves. I’m happy to be out of banking now.
You’d be electronically labled a drug dealer and probable terrorists if you wanted 25k in small bills.
I’m puzzled. Do you want a bank to have cash and gold in the vault and do you want these physical assets shipped with transactions ?
It’s the way the system works. Banks don’t count on their customers being smart thinking the bank has their cash available at any given time. Think the FDIC has enough reserves? You got to be nuts.
Lisa, Thanks for posting…I don’t mean to be snide.
I just want to point out that in “modern” financial regimes, banks are more like factories than warehouses; their charters allow them to create money. And the Fed (or Treasury) is the lender of last resort. So if there’s a “run” on a bank, i.e., most depositors withdraw their “money”, the Treasury can simply print some more paper. Which would probably have a negligible effect on the economy, since the paper is equivalent to the computer balances in terms of purchasing power. The bank which had the run (pun intended) might be in trouble reserve-wise, but the Fed would bail it out. Now if many major banks had the runs, that would be more interesting…
Hector, aren’t you glad you got experience the American dream?
I rent in Anaheim, CA. When I moved here in 2001 from NYC the median home price was around $170.000. Now they’re going for over $600.000. What changed?. Lemme tell you:
Now, my neighborhood is FULL of Mexicans (nothing wrong with that …well, maybe there is .. read on..) who bought up most homes and started cramming in tenants. Right now I have about 14 people living in the house to my left and 10 in the house to my right. Garbage sprung up everywhere. Street-cart vendors selling all sorts of crappy ethnic food items walk up & down my street plying their ‘trade’ from stolen supermarket carts. The street is FULL of parked, shitty cars. Noisy kids yelling in Spanish run across my front lawn constantly. People mysteriously come and go at all hours of the day and night or hang-out for HOURS in parked cars having sex or drinking alcohol. Mexican music blares at all hours. My 4th of July American Flag is routinely stolen from my frontyard every year to the point that now I don’t even bother anymore. Instead, Mexican flags wave proudly all over the place. Most of my new neighbors seem to work at fast food joints or landscaping jobs. Most are illegally here and have no drivers license or insurance (I know because I speak perfect Spanish and talk to some).
Is this the famous freakin’ “American dream”? Well, I guess it is for them. I have nothing against Mexicans except I DON’T WANNA LIVE IN MEXICO.I feel like I’m paying First World rates to live in a ThirdWorld shithole. Like I’m an alien in my own fuckin country.
In NYC I would hear every conceivable language in the world yet it made the place feel cosmopolitan. This place on the other hand feels like 100% freakin Mexico because there is NO diversity at all.
So, to end my rant: who the fuck gave these people credit to buy a home while responsible people like myself and many others are holding-off, even while we pull in 3 times as much income as they do?.
the oom-pah of norteño music grows on you after a while . . .
I know. I like to load my AK 47 to the rythm of it.
Hector’s situation is classic.
This is the type of neighborhood that takes the worst beating.
Better to buy a small house in a top location than a bigger house in Risky-ville. This is one reason you pay a premium to get into the top places.
dan, you have my empathy… but have you been to NYC recently?.. and I don’t mean Manhattan south of 96th Street, but the real New York that only true New Yorkers identify with, (actually, USED to identify with). Queens, the Bronx, Brooklyn, upper Manhattan, and even parts of Staten Island have radically changed over the past 10 years and much more rapidly the past 5. Bluntly, they’ve been transformed to overcramped, overpriced, ghettos , home to a tsumani of the “undeterminables”, a depressing horror show of third world proportions similar to your Anaheim circus, but a higher level freak show because you can’t tell where these people are from! At least you can communicate in Spanish, but in the NY I experienced, language is hardly a form of communication anymore as the true Babel has taken hold. After spending a good part of my life there, short a pressing real emergency, I will never go back again. NYC was never really the cosmopolitan metropolis it boasted it was, and less so now. I’ll take a European city, except Londonstan, anytime.
What is up with London, anyway? I was there last year and … it sucked. Some good sides, but … really.
“Queens, the Bronx, Brooklyn, upper Manhattan, and even parts of Staten Island have radically changed over the past 10 years and much more rapidly the past 5. Bluntly, they’ve been transformed to overcramped, overpriced, ghettos , home to a tsumani of the “undeterminables”, a depressing horror show of third world proportions similar to your Anaheim circus”
And this finally drove us out. First to Westchester, and then to Maine. We could never go back. The difference in quality of life cannot be measured from where we stand.
I’ve been lurking here (otherwise known as reading without commenting) for about a year. I generally find that anytime I am tempted to comment, one of the regulars has already made essentially the same point. This time is probably no different in that respect, but I’ve had perhaps just a little too much tequilla to once again bite my tongue.
I cannot for the life of me understand what Hector Garcia’s problem is. So he bought a home to live in 4 1/2 years and he hasn’t made a killing on it. Did I miss something? When exactly did the American dream of owning a home to live in and raise one’s family in get perverted (like everything else it seems) into an obsession with getting rich quickly for doing nothing?
From Ben’s excerpt (I have, I confess, not yet read the linked article in its entirety as I usually do), it appears the reason Mr. Garcia is upset is that he’s decided to sell and there are no buyers willing to take him out at a profit after a staggering 4 1/2 years. It seems the reason he wants out is that he’s living in something of a ghost town, and while I’ve never been in that situation, it seems to me that a dearth of neighbors (and their attendant barking dogs) would not be the worst possible thing in the world.
My parents, both children of The Great Depression, bought their first (and only) house a few years after their fifth (and last) child was born, by which time they had been married for close to 20 years and the oldest child was already in his late teens.
My father, whose family had only survived The Great Depression as well as they had because his mother was a securely employed school teacher, was deathly afraid of taking on a mortgage, despite the fact that he was by then a tenured professor at a well-respected university (albeit in a field that did not command high salaries). But my mother insisted, and they plunked down their life savings for a down payment on a $25,000 house (one did not say K back then - it was 1961 after all). 35 years later, my mother already long in the grave and the house in a state of disrepair (the professor was a true intellectual and didn’t notice the house falling down around him), I moved my father out of there and sold the place for $175K as is (or was anyway) to a friend of the family who rehabbed it and resold it for $350K. (The place was built in 1887, and the rehab it needed was rather extensive - our family friend worked really hard for the profit he made on it. He wasn’t trying to get something for nothing; he was trying to make a decent return on his hard work - oh what a quaint concept.)
My father is now 92. His concerns are his loss of independence which came with declining health, but he has no financial concerns. He invested in TIAA-CREF his entire teaching career, and, of course, he has social security (and more important Medicare) as well as the interest on the proceeds of his house sale.
He has lived a good life. He was never rich, and he never really cared about money because he was too busy doing what he loved (teaching) and raising a family to be concerned about what he didn’t have in the way of useless crap.
Now everyone MUST get rich immediately, and God forbid they should have to actually work at something to attain those riches. People mistakenly think they can achieve security by being rich, so rather than focusing on finding useful and gratifying life pursuits, they chase the not-so-almighty-anymore dollar.
Mr, Hector Garcia, here’s my advice to you: try living in your home and going about your life instead of worrying about every up and down tick in the fantasy market value of it. It says you took out a 30 year fixed mortgage 4 1/2 years ago. That means you hit the jackpot by nailing the exact bottom of the interest rate cycle, so what the hell are you worried about? Your dumbass neighbors are the ones who took out option ARMs at the bottom of the rate cycle in order to buy houses they couldn’t afford. Get on with your life and quit whining (at least until such time in the near future when there’s something to really whine about). Borrow a copy of The Grapes of Wrath from your local library, and read about the future of America. Then you’ll have earned the right to cry.
That’s all well and good, except, that Montbello used to be one of those neighborhoods that saw a lot of drive by shootings, drug activity and such. I don’t know what it’s like nowdays, but if it reverts back it would be prudent to leave.
Some places being poor isn’t so bad, I grew up well off, but took a detour through the poor house when my parents split up. My wife started out poor. Being poor in a small town is way better than being poor in a big city.
Yes, I’d also be afraid of living in a half-empty neighborhood adjacent to a bad one. I don’t think Mr. Garcia made a mistake by assuming that the houses around him would be bought and occupied. I have a friend in CA who is living on a culdesac with 10 houses and only one other is occupied; four have been sold to investors and are empty, and the rest are still with the builder. Sure it was a mistake for her to buy at the peak, but dammit, she’s terrified in her own house.
I don’t blame Mr. Garcia for wanting out, and it looks like he’s willing to take a loss (albeit a small one) to do so. Y’all are being a bit harsh on him, don’t you think?
We have the actual print copy here, and the bars in the window are much more visible - which speaks loudly about the sorry state of this particular neighborhood
As for the homeowner, the statement: “I don’t have no equity.” - tells us where’s he operating from
Article s/b renamed: SETTING UP DUMB FOLKS
dan, what part of Anaheim are you in? I can still remember when that city was part of America. Now a lot of neighborhoods west of the 57 freeway are turning into third world slums. And the RE is still priced unbelievably high- but with an entire Mexican village living in one house it becomes affordable.
I’m in the “Platinum Triangle” area. Or, as it SHOULD be called; “el triangulo de platino”.