Making The Numbers Work In The “Post-Bubble” Market
The San Francisco Chronicle reports from California. “After a decade of annual, double-digit growth in house prices, the Bay Area now ranks as the nation’s most expensive housing market, sporting a median home price of $749,000 for single-family homes and $600,000 for condos, according to the National Association of Realtors.”
“And, while that explosive growth has stabilized this past year, many first-time home buyers still feel its sting. ‘You need to run the numbers to understand what you can afford,’ said Bob Walters, chief economist at Quicken Loans, a national mortgage lender that conducts a significant amount of business in California. ‘If the numbers say you can’t afford anything, then you shouldn’t buy.’”
“After a slight pause, he adds, ‘Or, you find another way to make the numbers work.’”
“(Realtor) David Reeves in San Francisco, said receiving financial help from family is common for many first-time home buyers, even in today’s ‘post-bubble’ housing market.”
“‘It’s definitely a buyer’s market now. But that hasn’t changed the fact that it’s still very expensive to buy a house here, especially your first one,’ Reeves said. ‘First-time buyers need to consider alternative ways to buy a place, such as getting financial help from relatives.’”
“‘Normalcy has come back to our market,’ pointed out (broker) Ben Coleman. ‘Buyers can now get more concessions when they make an offer on a house, such as including a repair contingency or having the seller cover closing costs. These are ways, which seemed to have disappeared during the real estate boom, that you can lower your overall housing costs.’”
“Coleman said first-time buyers should also look at new construction because sales in some areas have dropped by as much as 50 percent once the market shifted. Developers are now eager to sell off their mounting inventory.”
“But be careful. If you buy in an area that’s been overdeveloped, it may take a long time before you realize any significant gains.”
The Reporter. “Certified Mortgage Planning Specialist Pia Haynes has a seminar called ‘Why It Still Makes Sense to Buy vs. Rent.’ During her March 27 presentation, Haynes will explain how to realize the ultimate dream of owning your own home, and burst a few myths in the process, including the alleged unending doom and gloom of bad credit.”
“‘A home is like a trophy,’ said Haynes, who works for United Mortgage Inc. ‘Once you get it, you feel as if you’ve accomplished something.’ While this will be the first time Haynes has put on her seminar, she has been doling out the same advice for a while.”
“Michelle Perez, a Realtor who has dealt with several renters looking to get into their first home. ‘They didn’t want to throw their money away anymore,’ Perez explained of her clients’ motives.”
“Perez has been busy lately, especially now that it’s a buyer’s market. ‘It’s an exciting time,’ she said. ‘I’m getting calls every day from buyers. I’m getting people to see my homes at any price range.’”
“Three years ago, Haynes helped Valerie Santos say goodbye to an apartment and move into a house in Fairfield. ‘I looked at my finances and told myself that I can do this if I budget and see what I can do without. I knew that investing in a home would be an investment in my future. I knew that I could only gain from it,’ said Santos.”
“It took a bit of scrimping and saving, but Santos has no regrets. In fact, after only a year in her house, she had built up enough equity to refinance and pay off her debts. She actually ended up with extra money at the end of the day.”
The Desert Sun. “After some serious number-crunching, economists on Friday predicted an economic slowdown for the Coachella Valley during 2007.”
“‘The growth rate, mostly measured in terms of job creation, which was extremely strong the last few years, is slowing down,’ Chapman University Economist Esmael Adibi said. ‘We expect residential construction to slow down and since that is such a strong multiplier, it’s going to basically bring down growth in all sectors such as retail and wholesale trade.’”
“Home-price appreciation was 1.48 percent compared with a year ago. It peaked at 33 percent during the home-buying frenzy in the second quarter of 2004. The median home price may dip by as much as 6.7 percent, Adibi predicted.”
“‘The pace was extremely strong and home prices got too high too fast,’ Adibi said. ‘Affordability is a problem.’”
“Adibi said valley residents should expect the economic slowdown to last into early 2008 because housing downturn cycles typically last some 27 months and this one started in about June.”
“At least one economic indicator could point to potential problems, said Jeannie Chariton, who attended the event to shore up her knowledge about the local economy. ‘I think the foreclosure market will probably go up,’ Chariton said.”
“Adibi said more than 25 percent of homeowners in the Inland Empire opted for option-ARM type loans, which ratchet up and can make it tough to refinance or resell.”
‘Sub-prime mortgage lenders are dropping like flies. According to The Wall Street Journal, at least 20 sub-prime lenders have closed or filed for bankruptcy. Solvent lenders are also feeling the pain. Novastar Financial, HSBC Holdings, H&R Block and Accredited Home Lending have reported huge losses on sub-prime loans.’
‘The only mystery is why this comes as a surprise. Inflated incomes were used to shoehorn borrowers into ‘exploding ARMs.’ Combine overstated incomes with rising payments and you have big problems. The delinquency rate on sub-prime mortgages is now above 10 percent.’
‘Thus, the recent Sentinel story regarding increasing local foreclosures could mark the beginning of a trend that might be with us for a long time.’
“Eventually, the CRL projects that 19 percent of sub-prime mortgages originated during the past two years will default ”
Maybe it’s me, but even this number seems wildly optimistic. While, no doubt, some people will be able to pay whatever the loan resets to, the use of these loans increased 10-fold over the past few years (compared to historic levels). That would mean, to me, that 90% of the these loans were made to people who will be over at least somewhat overextended at reset time - and I suspect that 2/3’s of these people are going to walk, rather than attempt to pay the resets (even if they can stretch to make the payments). As far as refi’s - with the SubPrime meltdown, refi’s are gone unless the house appreciates at least 20%, and that ain’t happ’n nowhere.
Sorry - the quote above was from the article that Ben links to in his first posting (the one with “mortgage” underlined).
‘Thus, the recent Sentinel story regarding increasing local foreclosures could mark the beginning of a trend that might be with us for a long time.’
It’s all over except for the weeping, moaning, and gnashing of teeth…..
“It’s all over except for the weeping, moaning, and gnashing of teeth…..”
Try CAPITUALATION
CAPITUALATION? Is that like “ululating capitulation”?
“Maybe it’s me, but even this number seems wildly optimistic.”
Nope, not just you. I think 19% is a fantasy. The end of appreciation spells disaster not only for subprime, but all FB’s. I think we are on the precipice of a complete and total meltdown in the entire lending industry. The number of defaults across the board is going to be mind-blowing. The sheer volume people living off of HELOC and cash out refi money is staggering. I would love to see the data on refi denials. My sense is that those numbers are increasing at an alarming rate.
Maybe CRL was so scared of being laughed at, they chose a much lower number. After all, even in December, most of the country thought things were fine and dandy.
What would be fun would be to look at CRL’s source data for their report and look closely at the 81% of subprime loans that they thought would not default - I think we know what we’ll find.
Finally, the lead time in performing and then publishing studies like their’s is on the order of several months, and they published in December. So if you go back to Sept. 2006, and then go back a couple of more months (as their data took time to collect and go through), you did not have the Subprime meltdown, and we were much closer to the time when you could sell to get out from your loan (and the price free-fall had not begun).
It would be great to have CRL or someone like that do the same study starting now - and see what they get.
If you want to get a foretaste of the panic and regret that’s in store for millions, check out the NFI message boards on Yahoo. The shorts are in a feeding frenzy, while the longs are either deep in denial or deep in abject despair.
The denial is hilarious. They either predict NFI will rise gloriously from the ashes, or they blame management for screwing up.
They see no problem with the business model whatsoever. The fact that 23 other sub-prime lenders have gone out of business in two months seems to have made no impression on the koolaid drinkers. Weird.
Correct! Home buyers are going to walk. Would you be a “debt slave” for years on a upside down loan? They’l take the hit on their credit report, and wait tell some credit card offer arrives again in the mail. Banks can’t get enough of that green stuff. By now everyone knows Bank of America is giving credit to illegals, why not previous home owners? They also have proven they will “sign up” for easy loans. The banks will give them another chance,opportunity to go for the printed green backs.
“They’l take the hit on their credit report, and wait tell some credit card offer arrives again in the mail.”
Got that right; it’s like magic!
I would extend credit to illlegal aliens before under-water homeowners. Mexican illegal aliens live within their means and save money to send home - entitled homeowners have no such sense of responsibility.
I’m guessing the 19% default rate is predicated on the RE market staying steady - a highly doubtful proposition. Any decline will feed on itself as waves of FBs simply leave the keys on the counter and walk away, since they won’t be able to make their payments and won’t have the tens of thousands of dollars they’d have to bring to the table to sell it once it goes underwater.
Even if the market stays steady, consider the situation for example in San Diego, which has already dropped to mid-2004 prices.
Now imagine anyone who bought in 2005 or 2006, who overpaid by 20% or more and is now facing the prospect of paying for that mistake for the duration of the mortgage, and likely losing money if they try to sell.
Regardless of credit rating or even ability to pay, the rational thing to do in that case is to walk away from the mortgage. If I were in that situation, that’s what I would do!
It’s like being able to hit the “reset” button in a video game. Yes, you will go into the credit rating hurt locker for a while, but isn’t that worth $100k or whatever your equity deficiency is?
I suspect that even if the market stays flat, a very large number of people are going to have exactly that realization and conclude that it’s not worth hanging on.
Just to follow that to the rational conclusion - if San Diego mortgage bagholders walk away en masse, which would be the rational thing to do at this point, then the San Diego market is going to tank even harder.
Now, how realistic is it that San Diego prices will tank hard, but Los Angeles and Orange County prices will stay flat? Not very likely at all. If San Diego suddenly became half as expensive as SoCal, plenty of people would simply relocate to San Diego, then bye-bye LA and OC prices!
If given the choice between $100k (conservatively) of crushing debt, or a bad credit record, I think most would choose the bad credit.
Didn’t everyone’s credit take a monster hit the second they went into debt up to their eyeballs?
I know a dude who is about to lose his job due to the stress of a killer adjusting mortgage. He already tried a short sale (the 20% people said “hell no.”) - and I think he hasn’t paid his monthly nut since December.
Yea - and before leaving the keys on the granite, you might as well live there free while the foreclosure process is taking place, so that you can save up a few months rent (which would be helpful as a security deposit, considering the tarnished credit score).
For a lot of FBs, the psychological toll of staying in the Alligator House, even rent-free while awaiting foreclosure, is more stressful than just walking off into the Great Unknown (or a family member’s basement).
Before he gives his second set of keys to the bank, he should give his first set to several illegal rental families, in the meantime collecting first and last and security deposits. The F’d lenders would be really F’d. Racist evictions and sheriffs to get control of the wrecked house from the illegals. Serves them right. Original F’d B could be in Vegas trying to make 8 the hard way. How bout that? Good idea? hehehehehehehe
Walking away isn’t as easy as it may have been in past real estate crashes. Now we have onerous bankruptcy laws that make the debtor into a slave for 5years or so. The BR court decides how much of what he makes he can keep and the rest goes to pay off the criditors. When you walk away from a mortgage, you run the risk that you will be stuck for the difference between the amount due on the mortgage (plus costs incurred in foreclosing it), and what the lender realizes upon selling the foreclosed property.
I believe this time around, many of these FB’s will find themselves beholding to gigantic IRS debts as the 1099 c’s go out en masse. With Tax Liens it will be difficult to hold down any kind of employment and I doubt they will be able to enter the economy again for at least a decade. Given the sheer numbers, the IRS will be as overwhelmed as everyone else in this mess.
Good news here in LA, LA Times posts % change yoy in sales and prices and many negatives in today’s Sunday paper…
Good news here in LA, LA Times posts % change yoy in sales and prices and many negatives in today’s Sunday paper…
That is indeed outstanding news! I haven’t looked yet but I assume OC is behaving similarly. Hoping for some great links in Ben’s California update tomorrow!
Naive question: where the heck do you find that data? Their web site is a complete disaster, I can never find what I’m looking for.
I just don’t understand…. we are hearing so much about increases in foreclosures….. why the hell are the prices not coming down!
Why the heck is the market picking up & prices not coming down??? Who the heck are these people that are buying right now in California & can afford it???
We have a very good income and a large chunk of change in the bank. I think things are expensive and if I think things are expensive…. how the heck are people that are making less than us…. doing it! They can’t all be living on CREDIT! Maybe I am just to cheap or tight with my money… I really just don’t get it!
Sorry… I know… I am always ranting…
Hang tough dude. Banteringbear’s response to me at 1408 pretty much sums it up. No doubt you remember the Roadrunner cartoons when the Coyote is tricked into running off the edge of a cliff - and then for a moment he is suspended in mid-air with this blank look on his face, just before falling.
That’s where we are today, with the Subprime meltdown. There is simply nowhere for these people to go. There is no support for these prices and they must dive (baring something from the gov - but we cannot even figure out what options they have - it’s that bad).
You can also look another way - thanks to the easy money driving prices super-high we have several million more houses and condo units than there is a market for (i.e., builders went wild, well beyond market needs). Something will give.
Bear in mind that wishing prices are not a good indicator of market value right now. Yes, list prices are still in the stratosphere, but pay no mind to them. The latest comps are what to watch. Zillow is a fairly decent source for those.
Yes,
Zillow is improving. It was piss poor last fall because noone was buying and it seems to need a couple months of at least some sales to catch up. I have noticed that zestimates for homes here in Ashland, OR have dropped 10-15% since Jan 1. That fits pretty will with my observations of the market. I think we will see at least as big of a drop this year after the spring / early summer season. I expect everyone who is not desperate will hold steady and keep the bait in the water at fantasy prices until August, then get serious. Of course, the desperate and foreclosures should be ticking upwards by the day, causing a daily increase in blood pressure for the FBs.
The Zestimates, in my opinion, are worthless. Maybe you could call them lagging indicators, but even that’s a stretch. The comps are good though, as they list the most recent sales. If only Zillow were updated more frequently.
I love Zillow’s graphs on San Diego.
Probably true, but they are based on a spatially explicit, quantitative model that seems to be at least as good as the BS appraisals flying around of late. And though I would certainly not use them as a single source of info, they have been reasonable close to valuations here in S. Oregon. As the scientists like to say, “all models are wrong, but some are useful..” So, I do not take it to seriously, but the sales and price history are great resources. Are there any other web models out there that folks like?
Depends how you use it… look at historical prices to calc where the bottom is.
For example look at 10 years of data and see the bubble formation .. This home in Pleasanton, CA
will drop from 900k to 500K…
Use the 10 year trend for your zip or address in question and add appreciation = to inflation.
http://www.zillow.com/Charts.htm?chartDuration=10years&zpid=61236470
Zillow is whacked. The houses in my neighboorhood should be fairly valued at about 85-120k. Most all of them are shown on zillow at bout 200k. Mine is 189. I value it at 125 (pre-bubble). And yet, one 3 doors done sold in 2006 for……….55k. That is probably much too cheap, but closer to the true value. ( I would estimate it at 2001 for 65-80k)/
Yeah, I jsut looked up the Zillow on my the house I used to own in Seattle. $518,000. I couldn’t believe it. I used to live there and know exactly what it is. Sure, 2 baths, but one (the good one) is in the basement (which I half finished) and in the other, you can’t sit on the toilet without touching the tub. And I’m short. You would have to be insane to spend that much for this house. You can’t even get a king or queen bed frame up the stairs. I had to remove a second floor window and lift the damn thing up a ladder. Insulation? I did the best I could, and that wasn’t great; all single pane. Wiring? Most had been replace, but certainly not all. Plumbing? I redid it in copper, so that’s okay. But $518k? The chimney needs repointing, the fake stone exterior (which looks great) was done (1935) by the original owner who was a plasterer, but it’s starting to come off. Pretty good looking house but …. I occasionally drive by to see how it’s going, and no work has been done on it. Crazy
Owners are *very* reluctant to lower their prices. It takes a long time for people to accept that the old market is gone. For example, this house down the street from me was listed for $925,000 for a year and sat on the market that whole time. Now it is listed for $899,000 (”new price!” on their real estate sign, what a joke!). So it will probably sit for another year on the market at this price until the owners realize that they will have to lower it again. And it will continue like this - these particular owners will follow the market all the way down until it hits bottom which I think will be sometime in 2018. That’s just the way the RE market runs …
Everyone is trying to get out at the top. Unfortunately, the top is gone, and these folks just don’t realize it. Like many, they will ride their sh!tbox all the way down. A $26k reduction off a near million dollar price tag is beyond stingy, it’s laughable.
BanteringBear - this the problem with speculating with homes. Buying low and selling high seems logical, but it’s like trying to turn a freighter to avoid a rock - by the time you see the rock, it’s probably too late to turn the ship. The only way to know that the top has hit is when prices start to drop. By then, the buyers are on to the fact that prices are falling, buyers are taking their time, and you’re not likely to get top dollar. The same happens when people try to buy at the bottom. By the time they figure out that the market has bottomed out, prices are rising again and buyers are competing for every house, which makes it harder to buy and raises prices more quickly. Most people are better off selling just before the market peaks, and buying just before the market bottoms - the problem is that it’s hard to know when that is until after it happens.
I’ll agree with that Diane.
It may be difficult to know when the exact top or bottom has arrived but that doesn’t really matter. If you turn on your bull!@#$ detector and listen to your common sense you’ll know when to get in or out.
Even if you sold “prematurely” in 2004, when the silliness really got silly, you would have done better than trying to sell now.
“The only way to know that the top has hit is when prices start to drop.”
When the time frame to sell homes increases it should signal rough seas. Too bad the MLS allows dropping and relisting.
By the time they figure out that the market has bottomed out, prices are rising again and buyers are competing for every house,
No that’s not true. Unlike tops, which tend to turn fairly quickly, RE bottoms last for years. Take SoCal in the 1990’s for a classic example. After an RE bust there just isn’t enough demand to turn the market around quickly. Everyone bought in during the previous boom.
Competition among buyers does not set in until the beginning of the next boom.
Of course you don’t know for sure when the real bottom is in, but if price look good on fundamentals (rent equivalence), it’s a good time to buy.
Not if the flood or defaults come to market. The rate at which foreclosures turn REO is now approaching 50% and going higher. I’ve been over at CR and the finance folks over there seem to think lenders will be trying hard to work out loans with defaulting borrowers. Seems like a losing proposition to me and the FBs will game the system for another few months and eventually end up in foreclosure, which might delay the REO flood.
How would “work outs” show up in financials. Obviously something has to get written down — Income stream and value of notes come to mind…
Once the REOs stack up - look out below. Ain’t gonna be sticky. Look at the subprime stock prices for an indication.
“I’ve been over at CR and the finance folks over there seem to think lenders will be trying hard to work out loans with defaulting borrowers.”
Aside from offering the FB’s a high-paying job, it’s game over. Yeah, it’s that simple!
Melissa is right it can take a long time but prices do drop.
Riding the maket down on Capitol Hill, Washington, DC
http://washingtondc.craigslist.org/doc/rfs/283825563.html
This very cute condo started with the pie in the sky price of ($425K if I remember right) about a year ago. Is now down to $319K.
Still overpriced in my opinion by $50K - $75K. The discounts continue here in Wash, DC. Other observation: inventory does not seem to have gone up post superbowl at least in the NW DC neighborhoods, I track. Also open houses are now either much longer or shorter. Example: 1 - 5 PM or 12 - 1:30 PM. Some open houses are even 1 hr. Are the short ones where agents have multiple locations to cover and/or want to get only the most dedicated shoppers or have an open to appease seller even though open attendance is down?
Interestingly enough, here in New Zealand open houses last … get this…1/2 hour. Right. That’s it. Be there or be square. 1:00 to 1:30. Better plan your time right.
Melissa is right it takes time.
Riding the maket down on Capitol Hill, Washington, DC
http://washingtondc.craigslist.org/doc/rfs/283825563.html
This very cute condo started with the pie in the sky price of ($425K if I remember right) about a year ago. Is now down to $319K.
Still overpriced in my opinion by $50K - $75K. The discounts continue here in Wash, DC. Other observation: inventory does not seem to have gone up post superbowl at least in the NW DC neighborhoods, I track. Also open houses are now either much longer or shorter. Example: 1 - 5 PM or 12 - 1:30 PM. Some open houses are even 1 hr. Are the short ones where agents have multiple locations to cover and/or want to get only the most dedicated shoppers or have an open to appease seller even though open attendance is down?
“…why the hell are the prices not coming down!”
Under-water serfs cannot lower the price.
TRUE - Only people with a equity can lower prices (unless they get their bank to approve a short sale). So most of these people are completely stuck (cannot sell, cannot refi anymore, cannot pay). They have no choice but to simply list their wishing price and wait for the Sheriff to show up.
Sad - but taking out a loan that you cannot pay back is just STUPID.
“Under-water serfs cannot lower the price.”
They can’t surf underwater, without breathing, for long either…… the end is nigh…..
Oh,
they’ll hold on longer than we can believe. Turn blue… green… rot…
Its going to be like weekend at Bernie’s…
But eventually the floor will fall out.
Got popcorn?
Neil
Unfortunately, their uninhabited spec properties will also be discolored and rotten.
I guess the renewal business will be good in a few years — or the scrap business maybe.
Exactly. If you want to buy a house on the cheap, find a seller who didn’t buy within the last five years or so and who didn’t HELOC away their equity. Just tell your real estate agent (if you must use one) that those are the sorts of sellers you want to buy from.
First time buyer in NOVA looking for a deal, when you say ‘If you MUST use one’, how does one go about not using an agent? Are you less likely to get screwed if you use one, any website or pointers or guides. We used an agent to look at roughly 45 houses a couple of weeks ago, she pressured us to make an offer, any offer I proposed was based on fundamentals and she basically refused to present.
Fire that agent. Spend some time looking for an agent in your area that will admit prices are going down and will present “lowball” offers. Better yet, wait a year or two until even the biggest RE idiot out there knows prices are dropping faster than Paris Hilton’s undies.
Are you kind of new to this Ben’s Blog? The long time readers know what is going to ultimately happen. We now know that you will have to hang in there till 2008 or 2009.
No, I am not new. I have been reading it since the beginning. I have only just started posting. I researched RE booms and busts in the past in this country and others and all the RE booms’ timescales are the same - multiply the Golden Ratio times the boom time and you get the down turn. So 2005-1997 = 8 years times 1.618 and you get roughly 13 years, 2005 + 13 = 2018. Keep on eye on the RE graphs for next 15 years and you will see …
In my opinion, regardless of credit rating or interest rate, any mortgage which exceeds the borrower’s income by 5x and more is sub-prime as hell. It’s a junk bond, and I wouldn’t touch it with someone else’s pole. This unfortunately covers a very large percentage of mortgages issued in California in the past few years, whether or not they are officially designated “sub-prime.”
Very good point. I can imagine a few small resort-type places (Santa Barbara, Jackson Hole, WY) could support prices sustainably in that range (5x income), because they are propped up permanently by imported wealth and first time home buyers are essentially trivial-all workers rent or commute in. To think that such ratios could fly in LA, Sacramento, Phoenix,etc. is simply ridiculous. All the talk about a “buyers market” is just criminal, no buyer benefits long-term from purchasing into such a clearly inflated system.
“(Realtor) David Reeves in San Francisco, said receiving financial help from family is common for many first-time home buyers, even in today’s ‘post-bubble’ housing market.”
Just last night I was laughing over a line by Father Guido Sarducci: “Never underestimate the power of your parents’ money.”
That could be one of the mottos of this housing bubble.
Back in ‘79, my (then) FIL helped us out with a $2,000 gift towards our $3,900 downpayment (house was $39k in Berkeley, CA). That’s REAL big difference from asking for a $50k or more shot in the arm that’s needed these days. Someone else here can offer up how the $2k compares (with inflation) to the $50k, but I still say it’s apples to oranges. IMO, a lot of parents would be hard pressed to come up with that huge amount without compromising their retirement nest egg (if they have one).
BTW…noticed that there is another contributor here going by the name *S F Bay*. It’s close to mine, but that ain’t me.
BayQT~
I sure as hell wouldn’t loan anyone $50k toward a downpayment. It illustrates that they are trying to get into a house that they cannot genuinely afford, which is likely to end in foreclosure, with me being the last creditor waiting in line and therefore likely to get squat.
If a bank, which is able to diversify its risk across many thousands of borrowers, won’t lend you $50k, why should I, who will be putting far more of my eggs in one basket with far less recourse, be willing to do so?
And if a bank will loan you the $50k, then get it from them. You don’t need my help.
I think it is more of a “gift” than a “loan”.
Yea,
I never loan any one in my family (or friends) money. Either I say no or it is a gift. Much easier that way.
Precisely! It would have to be just that…a gift…which is what my $2k was, because they (the brokers) don’t (well, they didn’t in 1979)want to add more to your debt service in the package being presented to the lender.
Which brings me back around to a *gift* of $50k or more from parents to first-time buyer (children)that David Reeves was talking about. Unless those parents have money to burn, have really good investments that would replace that money, or are very well off, this seems like a classic case of taking from Peter (retirement funds/savings) to pay Paul (first-time buyer children). I just hope for the parents’ sake that these children show their gratitude when Mom or Dad are looking for assistance from them (in whatever form) in their retirement years.
BayQT~
Seeing as how were family an all, I would never wanna cheat you out of money…..
So I’ll just owe it to ya…..
forever…….
I have no problem giving gifts to family.
I have a big problem giving money to family.
I give socks.
Problem solved.
The key difference between young families I know who have bought nice houses here in LA versus bugging out to TX or some such place in the past three years is basically this: parents’ money. And yes, there are parents who have hundreds of thousands that they are willing to cough up to keep their kids in the area, not many, but how else do you think my neighbors (age 32, 35) bought a 1.3M house across the street from me? The husband’s parents own a bunch of parking garages.
When I had my Townhome up for sale in Cali (moorpark) I had one lady explaining how she wanted to buy it for her daughter. Her daughter was 23 and driving the mother crazy. Same thing down the alley except it was a son. I guess he was about 30 and got a divorce. So parents not only will help with a down payment but will buy grown children a house in Moorpark CA. One has to wonder who is on the deed though, haha I bet its the parent who can then hold the property over there kids head. Nice………….
Acually most people worked pretty hard there and seemed stressed but there was the young couple driving a land rover taking their small children to school. I don’t know what they did for a living? realtors probably?
Spell “Moorpark” backward.
Hahahahahahaha, great observation!
LOL
Someone’s been posting as “Waiting for the fall”, but that ain’t me. Is it that hard to come up with a unique screen name?
I think “*imploder* (I think that’s the correct screen name) had the same problem a while back.
BayQT~
Haven’t seen much from imploder lately - that guy is a riot! I hope he’s just away for vacation and hasn’t gotten bored with us yet.
Very true. Perhaps he’s taking a break. I do that from time to time. And since the blog has grown so much over the last 2 years, it’s becoming increasingly difficult to keep up with all the topics. I don’t post nearly as much as I had in the past either, but I’m always reading. I’m often just here in spirit. Maybe imploder is, too.
BayQT~
The screen names were very similar but not the same. It was imploder and implosion.
i’m still here…..
I go to read other blogs on housing, like Crazy Casey’s, and people post as imploder. They’re probably saying all kinds of intelligent stuff, ruining all of my hard work.
Good to hear from ya, been wind talking lately?
Parents helping their kids buy homes is apparently a growing trend in the UK. The BBC’s website has featured the phenomenon several times in the past year or two. The most recent article to mention it is below:
http://news.bbc.co.uk/2/hi/business/6303237.stm
“It seems the plight of many first-time buyers is so bad that parents are increasingly dipping into savings to help their children onto the property ladder. ”
“One in seven parents interviewed have started a fund to try to help their children buy when they are older.”
That’s what happened in Japan, along with 50-year mortgages - just before the market CRASHED.
When I sold my home, the buyers’ parents came in with $100K.
I guess I was born into the wrong family. On the flip side, my parents are smart enough to know the value of $100K.
HELOC money???
(Realtor) David Reeves in San Francisco:
“‘It’s definitely a buyer’s market now. But that hasn’t changed the fact that it’s still very expensive to buy a house here, especially your first one,’ Reeves said. ‘First-time buyers need to consider alternative ways to buy a place, such as getting financial help from relatives.’”
********
It is definitely *not* a buyer’s market right now.
As a follow-up to “wishing prices”, the above is called “wishing for a trustafarian”. Variants include “wishing for a rich dead uncle”, or “wishing for another Google/YouTube”.
Prices have to come down. Or they can remain flat (nominally) for a long time and combined with wage gains… it will make sense to buy again someday.
But that day is not near.
If I have the option to pay in rent 45% of what it would take to buy, and the market is going to be non-appreciating for years into the future, why would I buy today?
Am I the only one here who is wondering just what the hell a “Certified Mortgage Planning Specialist” is?!?
Yeah…I caught that, too. My guess is that this person (lender) was sitting around one day trying to figure out how to supplement their income and decided to take this course.
http://www.cmpsinstitute.org/
3 days of *intensive training*. I can’t find how much this costs, though.
BayQT~
basically, it works like this. if you take a families income and expenses and what’s left over is enough to make a mortgage payment leaving 2/3rd of what is left over for other expenses and you put 20% down you can afford a mortgage.
If you can do above math you pass course and become a CMPS.
http://www.cmpsinstitute.org/public/why_you_need
They say stupid shit like this-
“‘A home is like a trophy,’ said Haynes, who works for United Mortgage Inc. ‘Once you get it, you feel as if you’ve accomplished something.’
….like a trophy…isn’t that crazy?
Yeah, another huge azz bill where I can paint walls, mow the lawn and pay for repairs that I don’t know how to do myself.
Don’t get me wrong. I’ve owned several houses in my lifetime, and currently own a townhouse (since ‘99) that I rent out with positive cash flow. It *is* very nice to be able to sit in your own back yard and to do all that inside decorating that many renters hesitate to do (or cannot do). But owing to the current market and what’s been happening over the last 7 years or so, it is not a lucrative (or sensible) thing to do and still live a comfy lifestyle and be able to sleep at night without thinking about how I’m going to pay a bill, or if I can hop on a plane to visit friends or family. For your average J6P, it’s financial suicide and the anecdotes are bearing that out.
I know, I know…I (and SO many others on this blog) have said this stuff before, but it doesn’t hurt to repeat it.
It may help a lurker or two to make the logical (sensible) decision, not the emotional one. Patience IS really the key. The tide WILL turn.
BayQT~
“Haynes will explain how to realize the ultimate dream of owning your own home, and burst a few myths in the process, including the alleged unending doom and gloom of bad credit.”
“‘A home is like a trophy,’ said Haynes, who works for United Mortgage Inc. ‘Once you get it, you feel as if you’ve accomplished something.’
“Ultimate dream” (my ultimate dream involves Salma Hayek, not some overpriced money pit) and “A home is like a trophy”??? It’s crap like this that leads people who believe in it to do anything (lie on loan apps, take on neg am loans, overextend themselves, etc) to get into a house. I didn’t feel any special sense of accomplishment when I bought my home. But I sure did when I sold at the top of the market - now I’m a lowly renter with a big chunk of ex-equity earning 5 1/2%, waiting for prices to fall (further) here in San Diego.
It’s like a trophy all right. In today’s market a home is like a crack-whore turned trophy-wife. And she didn’t sign the pre-nup
….like a trophy…isn’t that crazy?
Yeah, that is crazy. I’ve lived in my own homes in the Seattle area (and currently New Zealand) for the last 30 years. Each was bought for a number of different reason. Not all of those reasons were financial. There were other factors involved that sometimes took presidence over straight finances and profits. When my daughter was just about to go to elementary school we made the decision (for a number of reasons) to move out of the Seattle school district; the location and house we chose wasn’t just driven by finances, there was a definite quality of life issue as well. I am living in Napier, New Zealand in our own home. We moved to NZ so I could get a wine making degree (only 8 months to go) and where we chose to buy was driven by what school my daughter would attend. Could we have rented? Sure, but we are really used to having our own home; buying assured us of our location. We will be moving back to the Seattle area next year for job reasons. Will I buy? No chance with the way prices are. Just trying to point out that these decisions are not all driven by finances. There is more to life than the bottom line.
It is indeed stupid, but possibly not quite so stupid as the comment of Realtor Michelle Perez (above): “They didn’t want to throw their money away any more.” Meaning, they didn’t want to pay rent. Right, they’d rather throw their money away on property tax, insurance, interest, and (don’t forget this part) a wasting asset.
Sounds likes someone who has never achieved anything.
She knows it, too. Notice she states “you feel like you’ve accomplished something” and not “you’ve accomplished something.” I feel like I’ve accomplished something when I beat the 11 headed monster at the end of level 13, but it probably won’t help me save for retirement. (Unless I was playing video games so much that I forgot to go with my wife to the meeting with our “Certified Mortgage Specialist”)
Somebody needs to help that lady, she’s confusing this:
http://tinyurl.com/2pofmg
….for a house!
Am I the only one here who is wondering just what the hell a “Certified Mortgage Planning Specialist” is?!?
I saw that from another mortgage broker a few months back and I laughed. One weekend course and you are “Certified”. I am studying to be a Certified Financial Planner. It only takes two years of classes, one 8 hour national examination, and six courses in between. A little bit of a difference there.
italics off?
you probably can’t do that because of the cascading style sheets … attributes are inherited in subclasses (if I had to guess)
I’m pretty sure that anything the css does will be trumped by a <i> tag. For anyone who doesn’t know, you must use a </i> to close off your italics.
Also bear in mind that you can not type those tags in a comment like this without using special escape characters.
This site explains it:
http://www.cmpsinstitute.org/professional/how_to_cmps
Doesn’t seem too hard, I bet my dog could become a CMPS
I considered helping my daughter buy a condo on the SF Peninsula in December, but after crunching the numbers, I agreed with sf jack. Why would I buy today? It’s not a buyer’s market yet.
YOU ARE RIGHT!!!! IT IS NOT A BUYERS MARKET IN CALIFORNIA!
The sad state of home pricing couldn’t be better depicted than by one story from the SF Chronicle article. Some snippets from the article…..
“Amanda Stipe turned to the next best person, her father, when she bought her 800-square-foot, junior one-bedroom condominium in San Francisco’s lower Pacific Heights. After several years of renting in the city, the marketing manager for a global law firm yearned for a place of her own…..Although she had saved up for a down payment, the high cost of real estate meant carrying a home loan beyond her means. Even with her father’s initial contribution, she still took on a roommate to help offset monthly expenses……The two had agreed up front that his money was an investment and not a gift. When she eventually sells, which she guessed will be in five to seven years, she’ll repay him with interest…..”
A marketing mgr for a law firm, had saved some money but it wasn’t enough to make a dent in the necessary down payment?! So she borrows money and take on a roommate to buy an 800sq/ft place to live?!!. Insane. Not saying she has a big money job, but should easily be enough to afford this place.
The only part I found amusing was dad getting paid back with interest on his investment….. wonder how that’s going to play out.
I guess *Not* choosing to live in the city never occured to her ? We do have a rail line that runs right into the city. And a roommate in a 1 bedroom junior apt ?
Really, Mo….and of all places, Pacific Heights! Mucho $$$$.
(NYCityBoy, you’re cracking me up with your comment below!)
BayQT~
No kidding, if she moved out to the Sunset where I live, she could buy this beach charmer for only $619k:
http://tinyurl.com/2hwx5g
At least her roommate would get her own bedroom.
She bought in “Lower” Pacific Heights aka “Upper” Western Addition (just above the gang members in the housing projects)…
If her and the roommate are good looking they could set up a web cam. Nightly pillow fights in Jell-O could help pay that place off in no time.
LOL. You’re quite the pragmatic fellow.
Aplogies to the lady bloggers but so many single women want RE because they are single and want something “permanent” in life. I am single the permanent thing I like (in today’s market) is cash not some overpriced sticks and bricks. And what’s the big deal on decorating like you want? You can do so in a rental. Sometimes you can even do some renovations.
lefantome says:
“The only part I found amusing was dad getting paid back with interest on his investment….. wonder how that’s going to play out.”
*********
She said she would sell and pay back his investment in five to seven years.
So it sounds like she could be selling at the bottom of the market.
Won’t that be a great family moment, as dad has to AGAIN bring money to the table to provide Amanda’s next and newest housing want that she has so “yearned for”…..
Marketing manager for a law firm? Poverty wage in LA.
The only part I found amusing was dad getting paid back with interest on his investment….. wonder how that’s going to play out.
“Welcome to Walmart.”
“It’s not a buyer’s market yet.”
It’s a fools market.
It’s a sucker’s market! If you are buying and you don’t realize this, well, you are one of the suckers.
““‘A home is like a trophy,’ said Haynes, who works for United Mortgage Inc. ‘Once you get it, you feel as if you’ve accomplished something.’ While this will be the first time Haynes has put on her seminar, she has been doling out the same advice for a while.”
Buying a home makes a person feel good. Its all about shopping rather then making critical financial decisions.
Good luck-
And then once you have that feeling of having accomplished something then what?
Some like to skin and mount their trophies.
No kidding. Getting the loan is the easy part. Anyone who can fog a mirror can do it.
Making the payments is the tough part. And a lot of recent “buyers” aren’t even paying all the interest, let alone making a dent in the principal. Nice “accomplishment.”
“A home is like a trophy,’ said Haynes, who works for United Mortgage Inc. ‘Once you get it, you feel as if you’ve accomplished something.’”
I guess the economic arguments don’t work anymore (why would you put yourself incredibly in hock for a depreciating asset), so stick to the emotional ones. We can soon look foward to NAR ad’s showing the little puppy scampering across the backyard of the new house…
The bunnii rabbit had a good point. Just signing a mortgage is not a reason for celebration.
We all celebrate when we buy a new house. That is natural. We feel good about the purchase. But the only time to really celebrate is when you can burn that mortgage. That flaming pile of lawyer-speak is the real trophy. Until you have those charred remains you have still not won the game.
Then you work on your next accomplishment - something to the effect of maxing out four credit cards to furnish and appoint the “trophy”.
Yep, you gussy it up using every last penny of all available credit, then you’re done. Yeah, DONE. You’re not living there of course, you’re on your way to browner pastures. Someone else gets to enjoy the fruits of your foolish labor. So long, suckers.
“Buying a home makes a person feel good. Its all about shopping….”
Just like the feeling you get buying that 30th pair of shoes or that new loveseat or that new SUV. It’ll wear off soon enough and they’ll be the same unhappy person they were before the purchase, if not more so due to their monthly living expenses doubling.
There was a great line in the Grapes of Wrath. I don’t remember the exact wording but it went something like this. “I never met someone that wasn’t busy squirrelin’ things away that didn’t have a big hole runnin’ down the center of ‘em where his soul should be.”
From the Dust Bowl to the Housing Mania, some truths remain just as true.
The ratio between the cost of owning a house vs. rent in SF Bay area is more than 2 now. There are two possible ways to reduce the ratio, one way is for rent to catch up slowly, which will take years; the other way is for house price to come down, which shouldn’t take as long. Either way, I will not buy until the ratio reaches 1.5 or lower.
–
With declining population, rents are not going to go up for long. Then, the rents and the home prices are going to fall, one faster than the other and you know which one is the other.
Jas
You may be right. If that happens, housing price has to be down at least 40% for the ratio to reach my goal.
The puff piece above from the Vacaville, CA (retch) THE REPORTER, on “Certified Mortgage Planning Specialist” Pia Haynes trying to rustle up the last few stupid and unwary future FBs really set me off. I felt compelled to fire off a letter to the reporter, John Ireland, responsible for this “reporting.”
Mr. Ireland,
If you aren’t on the NAR’s payroll, you should be. Any reporter that had the public’s interest at heart, or was capable of original and independent thought, would have noticed that Pia Haynes is not a disinterested educator. Rather, she has a vested interest in persuading - some might say luring - people into buying rather than renting, using old canards about “stop throwing money away on rent.” Perhaps you and Pia haven’t noticed, but foreclosure rates in places like, say, Vacaville, are soaring precisely because an unholy trinity of unscrupulous realtors, mortgage brokers, and appraisers - usually touting the “buy now or be priced out forever” line - made it all to easy for unsophisticated - read, stupid - subprime and clueless borrowers to take on dangerous levels of debt, using creative financing they didn’t understand, to “buy” overpriced houses they couldn’t afford. Now the bubble is imploding, and more and more “homeowners” are finding themselves saddled with a depreciating asset, while mortgage resets are also causing their “low monthly payment” to soar. It seems you could have devoted a line or two to that side of the story, instead of being an echo chamber for Ms. Hayne’s RE industry shilling.
With the so-called “Forth Estate” having long since abdicated any sense of responsibility for safeguarding the interests of its readers, and unwilling to challenge powerful advertisers like the RE industry, it is unsurprising that the print media is in decline, while Bloggers who dare to tell the truth (see link below) are thriving.
Respectfully,
Sammy S.
http://thehousingbubbleblog.com/
Sammy,
Well done! Thanks for sharing.
Vacaville = Cowtown?
“… you make the numbers work”. This is nuts. If you have a job in Redwood City, or Palo Alto or some other bay city why don’t you move to a city where a good home is $100 a square foot and the pay is the same?
There’s a myth about California. People believe that jobs pay more in Cali that in other prosperous states. For the most part it’s just not true. The average income in Cali is (maybe) 10% higher than Plano, Austin or Denver but the cost of living is 200%-300% higher. It seems that people will sell their souls to live in this state. It is oh so important to own a chicken wire and stucco box here that people will mortgage themselves to the hilt and endure the world’s worst traffic jams.
When property values were going up 20% a year, it might have made sense to put up with 2 hour one way commutes and 70% of income mortgages. But not now.
You hit the nail on the head. I grew up in the Bay Area. The weather’s not that great, most of the the houses are small and old (many built in the 50’s, 60’s, and 70’s), and now that the IPO machine has stopped raining stock option gold from the heavens, it doesn’t pay that much more than other places. The people who work for me in Atlanta make the exact same amount of money that their peers do in CA. It astounds me that people will eat Top Ramen and commute four hours a day for the privilege of living in the Bay Area — or worse, for the privilege of living in Stockton, Folsom, or Tracy.
“…..for the privilege of living in Stockton, Folsom, or Tracy.”
That’s scary, John…using privilege and those cities in the same sentence. LOL! But I get your point. The prices that people are willing to pay in Stockton and Tracy are absolutely beyond ridiculous. And all those new builds way out in no-man’s-land (exurbs) add to the horrendous commute traffic throughout the Bay Area.
BayQT~
Paying extra here in New York City makes sense. It’s special here. Last night the wife and I went to my favorite local Taco Bell and had a giant rat burrito with the Nacho Bell Grande Rat Nachos and my wife had the Rat Taco Salad with a side of hot rat sauce. It was all very delicious. The Zagat Ratting for the place is very high. I love the crunch of that tail. It is different here. Eat your heart out California. You haven’t had such delicacies since Jack ‘n the Box cleaned up its act.
NYCityBoy,
That IS funny!!!
If people are making the same money elsewhere and paying 200K for houses, jeez, everyone outside of LA should be a millionaire?!
Plano, Texas has a per capita income of $37,950 and a median home value of $196,000.
Anaheim, California, which is in Orange County and has about the same population as Plano, has a per capita income of $20,794 and a median home value of $553,000.
And Plano has a lower crime rate.
But Plano doesn’t have Disneyland.
“…..for the privilege of living in Stockton, Folsom, or Tracy.”
But I thought Johnny Cash indicated you could live in Folsom for free?
–
“…the cost of living is 200%-300% higher.”
No need to exaggerate, it is more like 30-40% higher. Yes home prices could be 3-4 times and rents almost double, but overall it is just 30-40%.
Jas
A 2000 sq ft house in Plano will run about $200,000. The same home in Redwood City would cost over $1million.
Plano= $1200 month mortgage= $14,400/year
Redwood City= $6000+ month mortgage=$72,000/year+
$72,000-$14,400= $57,600/year.
For someone making $75K a year in Plano just the difference in housing costs would require an income increase of at least 100% if they moved to Redwood City. Add property taxes, income taxes, health care, etc and the difference is going to be big, much greater than 30-40%
P.S:
For all Californians that are used to $800,000 crackerbox homes in the the Bay Area, Orange County, etc go to this Coldwell Banker real estate site and look at what $200,000 will buy you in Plano-Frisco-Allen, Texas, remembering all the while that you can make the same amount of money in those Texas cities than you can make in Cali.
http://www.cbdfw.com
“If I owned Texas and Hell, I would rent Texas and live in Hell” Philip Sheridan 1866
“The only good Indians are dead Indians”-General Philip Sheridan, advocating genocide. I choose not to take advice from people like him.
I just left a Texas-based job (the mother-ship is in Plano) and took a job 5 miles from home, and my salary went up 19%. I’m California born and bred, and I’m not moving, not to some place where I have to shovel snow or dodge tornadoes or hurricanes. I can take the occasional earthquake….been there, done that.
So you’re saying you’d live in Texas, and rent Hell out to the Indians?
To bedub:
And your cost of living went up 200-300% if you live in any place worth living in Cali and bought a home.
California has a big gang problem that is growing bigger.
Most of California’s population live on or very near major earthquake fault lines. The 1989 Loma Prieta quake killed many more people and caused much more damage than any tornado caused in Plano. The 1994 Northridge quake caused more damage than Hurricane Andrew caused in 1992.
California is overrated. People need to get real about this place. $800,000 crackerbox falling down shacks, swarming gangbangers, shrinking high tech job base (which is moving to Plano and the Telecom Corridor), 80% of the population and business centers built on top of major earthquake faults.
clearview
I do agree that Cali is overated. I know that Cali is not the center of the universe and there are nice places to live that have a lower cost of living and better quality of life than California. Why people pay premium prices for half million dollar fixers in SD or to live in places like Riverside, Bakersfield, Sacramento or Fontana is a mystery to me.
However no matter how you talk up Texas, I still can’t get down with it. I’ve spent a bit of quality time in your state the last few years and if it wasn’t for the good company, it would have mostly sucked.
I watched the local nightly news and Texas has plenty of crime, gangbangers and illegal aliens.
Texas may have cheap housing but here are plenty of hidden expenses and negatives that you didn’t mention. Property taxes are sky high. Your car insurance will cost you more because Texas has the most uninsured and some of the WORST drivers in the nation. You didn’t mention winter storms, flooding and the damage to your car from the golf ball sized hail. The heat and humidity is hellish. Most of Texas’ new construction is shoddy “crackerbox falling down shacks” and many of those new communities are sure to be the home of future ghettos.
The housing in most of the nicer areas in Texas, the places I would seriously consider living were relatively pretty darn expensive. I rather rent in Cali for the rest of my life than own a home in Texas.
To Wickedheart:
This is funny. I believe you think I live in Texas. I live in Santa Barbara, California.
I was born and raised in Cali. This state is sucking sewer gas.
This morning I came to my shop and the wall of the building next to the 101 freeway was tagged. For everyone who lives in Santa Barbara, if you’re driving on the Northbound 101, as soon as you cross over State Street look to your right and you’ll see what some crap gangbangers have done to my place. And for this I pay $1,000 a month to rent a one bedroom apartment and pay sky high state income taxes, sales tax, etc. I have bums sleeping and crapping in my driveway. THIS IS THE REAL CALIFORNIA. WELCOME TO MY WORLD.
Indeed, car insurance is less than half of what it is on Long Island, or Boston, or any other ice-locked place. Heating bills are pretty much forgettable, as are cooling bills most of the year. Produce is cheaper, as is fresh beef.
It balances out with the ludicrous home prices. Rental prices are about what you see on Long Island and Boston.
But there’s better (more frequent, better hours, more locations) public transit in LI and Boston.
I heard that in California they fought commuter rail for years because they thought it would give workers an excuse to go home at 8pm … or even 6pm … horrors!
“It took a bit of scrimping and saving, but Santos has no regrets. In fact, after only a year in her house, she had built up enough equity to refinance and pay off her debts. She actually ended up with extra money at the end of the day.”
What debts… the credit card debts she racked up because her new house payments were too big? As soon as the payment on the new debt resets, she will wind up in foreclosure…. Oh, I forgot, she will just sell or refinance……
So after a year, she’s deeper in debt than when she started. Realtor/Journalist math is so fascinating.
yeah, that does not compute.
“Fuzzy math”
It’s not fuzzy math. You missed the key statement in that article BanteringBear. This woman bought 3 years ago. She caught the tail end of the hyper-appreciation that California had to offer. If that article read “2 years ago” it would be a whole different story.
Oh, good she doesn’t have to pay back the loan then. Those are the best kind. Who needs lotteries.
Jeffy is hungry for cocoa puffs!
In case you missed it: http://en.wikipedia.org/wiki/The_Ringer
with a new 30 year loan on clothes and a car?
Thing is, she bought in Fairfield where things have slowed considerably. People who had equity from the last three years and took it out, may now owe more than the property is worth. It’s not like she bought in the city or on the peninsula where it is definitley not a buyers market.
“It took a bit of scrimping and saving, but Santos has no regrets. In fact, after only a year in her house, she had built up enough equity to refinance and pay off her debts. She actually ended up with extra money at the end of the day.”
No, she ended up with more debt at the end of the day. And she converted unsecured credit card debt into a second mortgage, so now she can lose the house if she doesn’t pay it back.
Worse, the refinanced loan is non recourse, so after the lender takes the house, they’ll go after her other assets.
Recourse
Probably just a car (encumbered by an auto loan) and a bunch of Ikea junk and used clothing - not worth paying a lawyer even to write a threatening letter over. Lenders will reap what they have sown when they eliminated the 20% downpayment rule.
Good point, but when you’re refinancing after only a year to pay off credit card debt, you probably have no other assets.
“It took a bit of scrimping and saving, but Santos has no regrets. In fact, after only a year in her house, she had built up enough equity to refinance and pay off her debts. She actually ended up with extra money at the end of the day.”
Am I reading this correctly? This idiot thinks that taking out a “home equity” loan on imaginary equity (translation bubble-inflated “value”) and paying off other debts is a mark of success? Does she realize she has to pay the home equity loan back?
I hear this so often, I wonder if I died and went to heaven, but nobody bothered to tell me.
Right. They need to revisit Santos in 6 mos to a year.
“It took a bit of scrimping and saving, but Santos has no regrets. In fact, after only a year in her house, she had built up enough equity to refinance and pay off her debts. She actually ended up with extra money at the end of the day.”
The debts she refers to are the ones she made on the credit cards on those days when ” scrimping and saving” got to depressing. She thought, ” I am going to buy myself something on my credit cards, I deserve it”. So she loaded up the cards at all of her favorite stores each month she felt depressed.
Some hero she is.
SKB
No, that’s exactly how she “scrimped and saved”. You see, you can save a lot of your paycheck when you pay for everything with your credit card. At the end of the month, she probably saved $1000. Don’t we look dumb?
Incredulous, you beat me to it. Building up equity means, reducing debt. What the author means is that the possible market value (not known until house actually sells) increased. I supposed in three years a tiny percentage of principle was reduced.
I don’t get it either. Instead of being helped by the temporary increase in market value of her home, she was hurt because it probably made her feel “rich” and overspend on credit cards. If my house value goes up to five zillion-million dollars for three weeks, and I take out loans for that amount (and spend it) without bothering to sell the house, how the heck would that “help” me?
I think a lot of people are waking up with a hangover and only just now realizing that their perceived equity was not free money.
“Michelle Perez, a Realtor who has dealt with several renters looking to get into their first home. ‘They didn’t want to throw their money away anymore,’ Perez explained of her clients’ motives.”
Sorry, buying a house when prices are flat and renting costs half as much constitutes throwing your money away on a far grander scale than simply renting. Not to mention the extraordinary extra risk you take on.
You know I’m getting really tired of this “renting is throwing money away” crap. Is going to a football game or a concert throwing money away? Is getting your hair cut throwing money away? Is taking a vacation throwing your money away? Of course not, you’re getting something you want in exchange for your money.
Shelter is a service, and paying fair market value for it (i.e. renting) is in no way throwing money away. Paying way too much to buy a depreciating asset (i.e. a house) that yields the same service is throwing your money away.
This is so easy to picture…
The angel on the right shoulder says….‘If the numbers say you can’t afford anything, then you shouldn’t buy.’”
Then the devil on the left shoulder….“After a slight pause, he adds, ‘Or, you find another way to make the numbers work.’”
Pretty obvious who has been winning this “war” the last few years……
Kind of like that scene in Animal House: “F*CK HER!”
‘First-time buyers need to consider alternative ways to buy a place, such as getting financial help from relatives.’”
BWHAHAHAHAHAHA. Fat chance, but just in case any relatives ask, I’m practicing to say “Hell, no!” in every regional dialect.
“First-time buyers need to consider alternative ways to buy a place, such as getting financial help from relatives.”
In other words, the same technique for making bail also works for making a down payment.
What a clever observation.
Japanese: 無理です - “muri desu”
Literal translation: “It’s unreasonable.”
Cultural interpretation: “Uh, uh. Hell, no. No friggin’ way. That would be IMpossible, Jack.”
How do you say, “lick my balls” in Japanese? That seems to be about the most appropriate. It may seem offensive to some but you don’t want to leave any gray area when financial suicide is at stake.
Saying that in Japan would create more “gray area” than you can possibly imagine…
taiketsu no mono
PROTECT MY BALLS
LETS FIGHTING LOVE!
NYCityBoy,
Are you on roll tonight or always this good. Next time I’m in the big apple where can I catch your act?
Always this good! I usually tone it way down for the blog. If in NYC, look me up. The wife and I will take you out. I know this special little restaurant in the Village.
do they serve rat there?
“She actually ended up with extra money at the end of the day.”
So, you take out equity on your house and end up having extra money at the end of the day?? Under what world does that happen? Because it is not the real world.
Sounds like an ARM or Option Arm refi to me.
and the next day the bill came
“And, while that explosive growth has stabilized this past year, many first-time home buyers still feel its sting. ‘You need to run the numbers to understand what you can afford,’ said Bob Walters, chief economist at Quicken Loans, a national mortgage lender that conducts a significant amount of business in California. ‘If the numbers say you can’t afford anything, then you shouldn’t buy.’”
“After a slight pause, he adds, ‘Or, you find another way to make the numbers work.’”
He starts out telling the truth, then suddenly realizes who he works for. ROFL
When I was doing analysis we used to joke that we would “torture the numbers until they confessed”. Apparently thats SOP in the RE biz.
Upton Sinclair wrote nearly 100 years ago that “It is impossible to get a man to understand something when his salary depends upon him not understanding it.”
I sent the following letter to the reporter who wrote the puff piece on Pia Haynes, the “Certified Mortgage Planning Specialist” leading the (choke, gag) “Why it Still Makes Sense to Buy vs. rent” seminar:
Mr. Ireland,
If you aren’t on the NAR’s payroll, you should be. Any reporter that had the public’s interest at heart, or was capable of original and independent thought, would have noticed that Pia Haynes is not a disinterested educator. Rather, she has a vested interest in persuading - some might say luring - people into buying rather than renting, using old canards about “throwing money away on rent.” Perhaps you and Pia hadn’t noticed, but foreclosure rates in places like, say, Vacaville, are soaring precisely because an unholy trinity of unscrupulous realtors, mortgage brokers, and appraisers - usually touting the “buy now or be priced out forever line - made it all to easy for “unsophisticated” - read, stupid - subprime and clueless borrowers to take on dangerous levels of debt, using creative financing they didn’t understand, to “buy” overpriced houses they couldn’t afford. Now the bubble is imploding, and more and more “homeowners” are finding themselves saddled with a depreciating asset, while mortgage resets are also causing their “low monthly payment” to soar. It seems you could have devoted a line or two to that side of the story, instead of being an echo chamber for Ms. Hayne’s RE industry shilling.
With the so-called “Forth Estate” having long since abdicated any sense of responsibility for safeguarding the interests of its readers, and unwilling to challenge powerful advertisers like the RE industry, it is unsurprising that the print media is in decline, while Bloggers who dare to tell the truth are thriving. [I included the link to this blog].
Maybe we should rename them the “Froth Estate” since they seem to have helped to put so much froth in the market.
“There are, however, practical reasons as well. Things like knowing a landlord can’t kick you out with a minimum of notice, or suddenly body-slam your budget with a rent increase. You can also write off property taxes and the interest on your mortgage payments.
“People who rent don’t have those types of advantages,” said Michelle Perez, a Realtor with Annie Vogelpohl Real Estate who has dealt with several renters looking to get into their first home.”
Is this Vacaville pub an actual newspaper? I mean, this read like a Blanche Evans/Realty Times expose. I would like to “body-slam” the writer.
I know the landlord can’t kick me out with a minimum of notice* because of something called THE LAW, you know we have that here in America…
*below the statutory minimum
And if we have a lease (contract) and I don’t break it but you do … see you in court.
“After some serious number-crunching, economists on Friday predicted an economic slowdown for the Coachella Valley during 2007.”
I see…. It’s finally starting to add up. Hmmm..
Are you sure your office is not going out on a limb with that prediction?
Good point; they wouldn’t call it if they weren’t 100% sure. If they’re predicting a slowdown, then it’s going to slow down like a sky-diver pancaking on the tarmac.
“It took a bit of scrimping and saving, but Santos has no regrets. In fact, after only a year in her house, she had built up enough equity to refinance and pay off her debts. She actually ended up with extra money at the end of the day.”
Actually, no, she rearranged the deck chairs, while generating some nice fees. Hopefully those deck chairs aren’t on the Titanic.
It’s hard to read, the boat has listed 90 degrees. But I can definitely make out a “Tit”.
“Adibi said valley residents should expect the economic slowdown to last into early 2008 because housing downturn cycles typically last some 27 months and this one started in about June.”
How long did the last downturn last? and this one is after the mother of all housing bubbles.
“Adibi said more than 25 percent of homeowners in the Inland Empire opted for option-ARM type loans…”
Add to that the fraud that pushed prices up and we have a disaster starting to unfold. Every lending branch that closes takes more potential homebuyers out of the market.
The disasters always start with the suckers (sub prime), and works its way up.
How far up?
On the Titanic she would have had some hope. There is no hope now.
These HomeDebters mentality never ceases to amaze me. Normally Debt normally crushes people slowly and it hurts.
These Clowns are almost like the tortured Salem witches being crushed to Death under a door with rocks being added one at a time saying…
Sheesh..This FEELS Good….May I HAVE another Rock..Please ?
These people have been mentally trained for this by all the gurus.
How low do you think the economy will go?
If California doesn’t end up in a fairly deep recession within a few years from now, I will be completely astonished.
I personally expect that it will be at least as bad as in the early to mid 1990s. And this time around, it’s by no means certain that we will have another windfall stimulus like the dot-com bubble to rebound us out of it, so the hangover may last longer this time.
I think when the baby boomers get wind to just how bad it is going to be, they will be getting out of the markets, re and stock. The sucking sound on the way down will be tremendous. It will be to late.
“If California doesn’t end up in a fairly deep recession within a few years from now, I will be completely astonished.”
Just talked with an engineer friend this weekend who works in the Central Valley. His employer received notice that one of their big developer clients recently filed for protection from creditors, and this client owes them, and everyone else, a great deal of money. I told him to keep an eye on the Bunn coffee machine; when it goes, the pink slips will be just around the corner. He wasn’t amused since he has a 2002 Stockton mortgage and two car payments, but he did commend me for having the foresight to leave CA when I did. He said his wife would leave him before she’d move away.
I can see her point - living in Stockton you have the unique opportunity to enjoy a Texas quality of life while paying a California cost of living. What’s not to love?
I just peed myself. Thank you for this laff.
Real GDP will fall by 35-40% from current levels. IMO.
I think the stage is set for another Great Depression a la the 1930’s. Debt is much higher now then in 1929, the country is in debt to a point that it can not be paid back, individuals are living beyond their means(negative savings rate)and the real estate market is starting to plunge. Unemployment reached 25% in the 30’s. It could well be worse in a few years. We are in for a tough ride!
Question ………..
Is the USA considered a sub prime borrower?
Nope, if it was, the 30-year would be 18% and the housing bubble would be over instantly tomorrow.
Hence Hyper Inflation. Not a damn thing the FEDs or anyone can do about it, but trust me when I say the feds will repay every last cent and will never default on SS payments or any other entitlements either. They just wont be worth much thats all.
Greenspan always promised that Social Security recipients would get all their money, but never said what they would be able to afford with that money.
“When she eventually sells, which she guessed will be in five to seven years, she’ll repay him with interest.”
oh yeah right
Obviously you missed what “she’ll repay him with interest” meant.
Greenspan in his congressional testimony used to marvel at homeowner’s ability to “extract” money from the houses via home equity loans - however it is going to soon be apparent that these extractions were often themselves being used to pay the underlying (and ever expanding) mortgage interest
The proper term for this would be Ponzi Scheme
http://www.bloomberg.com/apps/news?pid=20601087&sid=aweF4bef45GQ&refer=home
Darn Japanese are watching this bubble too…….. Does this mean no more 1% money??
Thanks to We Rent!, I am now fully prepared if some FB in Tokyo starts calling random numbers here in Colorado Springs to ask for a bailout or help with a down-payment:
Japanese: 無理です - “muri desu”
Literal translation: “It’s unreasonable.”
Cultural interpretation: “Uh, uh. Hell, no. No friggin’ way. That would be IMpossible, Jack.”
Sammy, please refer to my earlier response to your post. I need a refresher on how to pronounce that phrase.
Regarding the balls request:
I’m sorry to say that it just doesn’t translate well. It took 30 minutes and a six-pack of Asahi to explain what “opening a can of whoopass” means. Not pretty.
How do you say - Casey sits on a big blue ball - in Japanese?
Case sit’s on a big blue ball -
Casey-san ha okikute Ao tama wo suwateimasu.
Tokyo is going through it’s only crazy real estate bubble as well. Everyone is going nuts buying up condos and townhouseses here. I checked one out yesterday near my apartment. Next weekend, the wife and I are going to take a look at a new housing development out in ‘Machida City’ (Suburban Tokyo).
http://www.engrish.com/
Yeah, that “lost in translation” thing will get you every time.
haha great site. love that stuff.
“First-time buyers need to consider alternative ways to buy a place, such as getting financial help from relatives.”
Good advice! If someone does not have the money, just pressure your relatives for it. Another stupid suggestion by a realtor.
I loaned my sis $10k to help her get into a condo in Fullerton 2002. We skirted the repayment issue by having the voluntary repayments go to mom (who needed the money).
The stock I sold to give her the money is now worth $90K, but let’s not go there.
Keeping up “with the Jones’ ” is taking on a whole new perspective. Question, -If a FB moves out in the middle of the night, does anyone hear them?
Answer: Not if they can help it.
…depends on how loud the generators running the underground pot farm are.
Maybe, if they’re driving their HELOC-financed H3.
Somebody commented on this earlier, and I have to say that the NEW and NFI message boards on yahoo have become some of the funniest things I have ever seen. The shorts are going completely nuts on the Longs for the whole housing mortgage bubble and making some pretty vitriolic comments on the way down
“‘Normalcy has come back to our market,’ pointed out (broker) Ben Coleman.
I love how “normalcy” is to pay $750,000 for a house.
Right. That’s totally normal.
Yup, not a single metric is anywhere near the long-term trends or averages — and things are normal!
Anyone paying full price for real estate right now - is rolling the dice
Consider just the risk right now to the worldwide economy and thus real estate in the USA in regards to the issue of: if and when Israel is going to hit the Iranian nuclear facilities - since it is very obvious no other country or any UN led “sanctions” are are going to stop Iran.
If Iran absorbs the hit and claims victory and continued development is still going on, and doesn’t respond: the economy can withstand it, however it Iran launches a full scale conventional missle attack on Israel - there is little doubt Israel will go nuclear
If China, Russia, and the USA stay to the sidelines and keep things under control - eventually in a few years the economy can recover - otherwise all bets are off
If you’re going to worry about sh!t like that, you’ll never get a house, you never would have through the Cold War, Vietnam, etc. etc., you’d always be worried about macroeconomic geopolitical crap.
People fantasize about doomsday scenarios but global warming is a 90-100% certainty and yet no one even cares. That is crazy.
“They didn’t want to throw their money away anymore” Perez said of her clients.
Who was that? Casey Serin’s lawyer?
“Perez has been busy lately, especially now that it’s a buyer’s market”
Right, just pay 95% to 98% of peak market prices - and look forward to 7 to 10 years of little or no price appreciation- and potentially a 30% or worse crash in the near term
That is called a fools market
NYCBoy - for Japanese. Use this good one
“o-shiri ni irete kudasai”
literal translation - “please kindly insert (whatever) into your asshole.”
nobody there would have a clue of its real meaning.
“After a slight pause, he adds, ‘Or, you find another way to make the numbers work.’”
All time jackass…just my 2 cents…
crush
““‘It’s definitely a buyer’s market now. But that hasn’t changed the fact that it’s still very expensive to buy a house here, especially your first one,’ Reeves said. ‘First-time buyers need to consider alternative ways to buy a place, such as getting financial help from relatives.’”
- I see a fatal flaw with that analogy. First of all, that statement assumes that all current first time buyers have no options other than to stay in California and suck money out off a rich uncle’s wallet. The fact of the matter is that I am quiet sure that most people in this boat ( I am one of them ) are also considering other states and cities entirely. 600+k, or 400+k for that matter is totally unacceptable. The rest of the country ( with the exception of the classic bubble coasts) is too incredibly affordable to simply ignore and offer such drastic differences in quality of life amenities - affordability being just one of them- that I imagine that unless prices start making some healthy reductions, that slight trickle of people we have leaving the state now will turn into a torrent.
‘They didn’t want to throw their money away anymore,’ …rather, they would prefer to add it to principal on a neg-am loan.
“‘It’s definitely a buyer’s market now.”
I keep reading and hearing this new mantra from the NAR foot soldiers. Oh yeah, suddenly everyone has $400k to give in a sh**box that went down just $100k. This in a country where 70% of the population lives paycheck to paycheck and can’t save $40K for a 20% downpayment. It will be a buyer’s market only when the P/E gets down to reality.