‘RE Sanitation Department’ At Work In Sacramento
The Sacramento Bee reports on distressed borrowers. “It took less than eight months for Dustin Suposs’ ‘”American Dream’ to become a nightmare. He and his girlfriend, both in their early 20s, got caught up in the better-buy-now mentality that fueled the Sacramento area’s housing market last spring. They bought a $365,000, 1,550-square-foot home in Elk Grove with no money down.”
“The result: A $2,300-a-month payment that was more than 2 1/2 times the rent they were paying. By December the couple were drowning in bills and debt. Now they’re two months behind on the mortgage. Experts say the pair are part of a new trend, a growing wave of distressed borrowers just beginning to hit Sacramento and across California.”
“In December, lenders filed 321 notices of default in Sacramento County, the highest number in nearly three years Already, many working with distressed borrowers see ominous signs that suggest foreclosure activity is picking up fast. ‘We’re seeing the early indicators that it’s only getting worse,’ said Pam Canada, of the nonprofit Neighborworks Homeownership Center. ‘We’re creeping into the dozens of calls per month (from owners behind on their payments), and that’s higher than a year ago, when it would have been half a dozen a month.’”
“‘Everyone was anticipating getting in (a house) at any cost and then letting appreciation in the market handle it in the next year or two,’ said John Arvanitis, in Citrus Heights. ‘In theory, that’s great if appreciation stays at certain levels, but it’s not happening anymore.’”
“Some of today’s distressed borrowers have exacerbated their predicament by blowing their credit score or by tapping what little equity they had with a cash-out refinance or a home equity loan. Experts stress that there’s always a certain amount of financial distress among homeowners. They expect defaults to rise from today’s level even if most people with riskier loans stay out of trouble.”
“Regardless of what kind of mortgage they have, Karevoll said, people always lose jobs, get divorced, get ill or injured or simply make bad borrowing decisions. “As grim as it sounds,” Karevoll said, ‘foreclosure activity has a function: It’s kind of the sanitation department of the real estate market.’”
“For now, Suposs and his girlfriend look to have escaped their immediate financial trouble. A relative has agreed to buy their home before they lose it to the lender. ‘There were a lot of nights of restless sleeping because they can come get the house,’ Suposs said.”
Maybe someone should warn these people (from the Sunday Boston Globe)
You rock the house, you can own a house
By Danielle Dreilinger, Globe Correspondent | February 5, 2006
Rock musicians cram into Allston basements so they can afford to pursue their art. Boston idol wannabes congregate in the cheapest Cambridge digs they can find. Life is all about the music.
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But what happens when those musicians eventually decide to settle down?
Kevin Patey is there, man.
Patey, 35, moonlights with the band The Raging Teens — ”The Aging Teens,” he quips — and manages the bands Darkbuster and Emergency Music, plus his wife, singer-songwriter Mary Lou Lord. But for the last year he’s also worked full time for Northeast Lending as a mortgage consultant, telling rockers they can buy a house, even with no day job and no savings.
Patey’s two paths sparked the idea for Rock & Roll Refinancing, a seminar that drew a dozen renters to Central Square club TT the Bear’s Place last month. It was the first of what Patey hopes to be quarterly sessions. The meeting at TT’s paired hard-core financial advice with a short set from the band Blythe Hollow.
While targeting a particular audience is nothing new in real estate, Robert Authier, executive vice president of the Mass. Association of Realtors, thinks Patey may have cornered the rock-musician market. More typical are agents who focus on vacation or retirement homes, Authier says. Still, realtors ”tend to target the people they know first.”
Authier adds that he and his realtor brother performed as ”The Midnighters” in the late ’60s and early ’70s — clear evidence that rockers can reform.
At the TT session, modern midnighters express concerns that range from improving credit scores — maxing out the plastic to put together a CD can do a number on them — to documenting income and having less than $2,000 in the bank.
In response, Patey and realtor Stephen LaBollita, Patey’s partner in the seminar venture, suggest such options as interest-only mortgages and loans that don’t require income verification. LaBollita owns property in Attleboro, where he runs the small label Rotten Drunk Records. Patey and Lord own a home in Beverly.
Patey’s day-job boss, Northeast Lending’s co-owner Geoff Ricks, 28, explains to a reporter, ”It’s not that you want to be in [those loans] forever, but you get in the door.”
Says Patey, ”You can always refinance down the road.” In the meantime, ”Spend the money on other stuff, like Pabst Blue Ribbon, supporting local rock bands that don’t make any money.”
It’s this attitude that makes Patey — with his slicked-back hair, heavy glasses, and turned-up jeans — think rockers will feel more comfortable with him than with ”the guy with a suit and tie.”
TT’s bartender Shari Eleftherion, 37, agrees. With conventional real estate brokers, she says, ”You can almost hear them in the back of their head laughing at you.”
Eleftherion hopes to buy in the next three years, and after the presentation, homeownership seems more realistic. Her off-duty colleague Joanne Miller, 35, shares her reaction.
”It’s time to grow up,” Miller says.
Asked later about ways to entice reticent rockers to join the ranks of homeownership, Patey e-mails, ”I suppose I could throw a free house party with Darkbuster playing live upon moving into their new home, but the odds are fairly high they wouldn’t have much of a house left by the time the party was over. They certainly would have house guests till all the beer was gone!”
I’ve often thought it was a bad idea to buy a house with your girlfriend when you’re in your early 20’s.
Best to just let the girlfriend buy the house and let her deal with the financial problems.
I don’t know about Sactown, but here in Queens NY it seems that all it takes to keep a $750k house is having a foreign born grandmother who is willing to dig through all the trash in the neighborhood to find bottles to return for the 5c deposit…. Why aren’t these lazy Americans out there digging?
>>Foreclosure is the sanitation department of the real estate market
This is clearly an example of “doing before thinking.” Who in their right mind takes on that much debt without first thinking about whether or not they will be able to make the payments. It is really hard to feel sorry for such stupidity.
“Foreclosure is the sanitation department of the real estate market”
No. Foreclosure is the sanitation department of the mortgage market. Mortgage brokers had their Super Bowl for the last five years. Their “sanitation department” has a lot more clean up to do than the one in Detroit.
It appears they took out a fixed mortgage given the 2,300 a month on the 365K. I wonder what their combined income is.
David
Bubble Meter Blog
What is the implication for the lender with these forclosures? Specfically, if the market starts to decline and there are enough “negative equity” forclosures do the lenders lose money themselves? Could they possibly go bankrupt making even harder for people to buy houses (because they can’t acquire financing)?
“The result: A $2,300-a-month payment that was more than 2 1/2 times the rent they were paying. By December the couple were drowning in bills and debt. Now they’re two months behind on the mortgage. Experts say the pair are part of a new trend, a growing wave of distressed borrowers just beginning to hit Sacramento and across California.”
Well at least they are no longer throwing their money away on rent…
“You rock the house, you can own a house”
That article truly convinces me that satan walks the earth.
I suppose musicians are better marks than most…we tend to be fairly trusting and naieve.
(shudder)
“Regardless of what kind of mortgage they have, Karevoll said, people always lose jobs, get divorced, get ill or injured or simply make bad borrowing decisions. “As grim as it sounds,” Karevoll said, ‘foreclosure activity has a function: It’s kind of the sanitation department of the real estate market.’”
… and at least they don’t have to worry about getting divorced.
Sadly, I expect to see a whole lot more stories like this in the coming months……
How many friends do we expect Kevin Patey to have when:
1) ARMs adjust upward
2) Valuations adjust downward
“Dude, you don’t rock… Dude, I lost my house and my savings because of you… Dude, get the f— out of my life!”
Wow.
For the life of me I can’t see how a sub-25 year old boyfriend and girlfriend pair could get into a $ 365,000 home.
It’s unreal how bizzare this mess has become.
Speaking of rock stars, I have a very close friend who “made it big” in the music business in the late ’80’s. At the time, his contracts and royalties were paying him ~ $ 300,000 a year for a couple of years.
Anyway, at the time, he was 26 years old and he bought a house outright here near Orlando. At one point he had considered a mortgage….but in the late ’80’s if you were an unmarried mid 20’s kid the banks would eye you suspiciously and run the necessary stack of paperwork in order to get a mortgage. Most kids couldn’t produce the necessary documentation to qualify for a loan…regardless of newfound income…and even with his brief celebrity, my friend was no exception. It was such a hassle that it was easier ( and better financially of course ) for him to buy outright when his first big checks came in. He still has the same home and is still in the production end of the business here in Central Florida.
I am in total in awe at how the banks will willingly and readily finance the purchase of a $ 300,000 + home for a pair of unmarried, college aged kids. You can’t look me straight in the face and tell me that the stability of these loans, like the “puppy love” of young adult relationships, won’t evaporate over a three month summer.
Freakin’ Unreal.
This thing must end badly………
From Realtor.Com:
LISTEN UP !..THERE is no “BUBBLE” in Las Vegas !!!
.. Unemployment hits a NEW LOW of 3.8% in Dec., the 7th lowest in USA. 7000 NEW out of state residents get Nevada drivers licenses in Clark County… Call 702-499-7037 for pre-public release condo conversions with substantal discounts.
.. CONDO sales are strong and prices are going UP! Get POSITIVE CASH FLOW on 1 and 2 bedroom condo’s on the westside of the strip toward Summerlin, between Charleston and Tropicana
. SINGLE family houses are not going up in value in most Zip codes, but they are also NOT going down very much.
See, all’s well………….isn’t it?
Actually, things are going well in Las Vegas. Real estate is moving a bit slower, but not cheaper. You can find an occasional bargain or distressed seller, but you have to look real hard. And even then, the price hasn’t come down much.
The most interesting thing that has happened in Las Vegas lately is a cop got shot by a rapper. Some street clown who believed his own nonsense, I guess. Wiped out a cop with an AK-47. Which is horrible, of course. But the interesting thing was seeing the motorcycle clubs out in force this weekend. Riding the freeways in formation, 50 at a time, two by two. It wasn’t a funeral procession. It wasn’t the Hell’s Angels. But it was an obvious show of force. Bikers don’t like it when gangstas shoot cops.
We have more than one kind of gang in Las Vegas. I’d say this is the most interesting example of gang activity since Lefty Rosenthal got blown up in the parking lot of Tony Roma’s.
Vegas. Gotta love it.
LV is toast - we know now….
JLP at AllThingsFinancial Says:
This is clearly an example of “doing before thinking.” Who in their right mind takes on that much debt without first thinking about whether or not they will be able to make the payments. It is really hard to feel sorry for such stupidity.
=====================
It seems all of them do the “thinking”: almost everyone of these I/O - NoDoc holders think that they can refinance because the they are advised that there will be appreciation. Huge appreciation.
“For now, Suposs and his girlfriend look to have escaped their immediate financial trouble. A relative has agreed to buy their home before they lose it to the lender.
Wow..! What a smart move their relative is making….!!
Relax people, everything is rosy in Sac town. Buy now or be priced out forever:
http://realtytimes.com/rtmcrcond/California~Sacramento~jimmycastro
What kills me is that if an investment advisor or stock broker promised 10% returns he would be sued and de-registered. This guy can promise it in the face of all evidence to the contrary without any consequences whatsoever.
Suggest we fill his inbox with some reality.
If this owner asked for advice on Craigslist, housingheads would just claim it is a “bitter renter” in disguise just trolling.
renterma.
almost everyone of these I/O - NoDoc holders think that they can refinance because the they are advised that there will be appreciation.
I was stunned last Spring when every lender I talked to (and these were supposedly “reputable” - associated with major N VA RE companies) told me to expect 40, 60, 80K+ gains by next year, and that if I got an I/O it was no problem because when it expired I could “just refi”. I couldn’t honestly think how I could “just refi” when I hadn’t been able to pay any principal down. That’s when I decided “enough is enough” and renting was a great option to preserve the capital from the sale of our home.
Someone else mentioned earlier the ad on WTOP from a mortgage company that says to dismiss talk of a housing bubble and that D.C. prices would appreciate 6% in 2006. There is no disclaimer. It seems like that shouldn’t be legal. I can’t imagine someone touting stocks or any other commodity like that.
To LV Landlord:
Greetings,
I would like to ask you few things about LV market.
Could you be kindly PM me at jasminenv@yahoo.com
Thanks
HerdChemist Says:
For the life of me I can’t see how a sub-25 year old boyfriend and girlfriend pair could get into a $ 365,000 home.
It’s unreal how bizzare this mess has become.
____________________
Back in 2002/2003, our favorite waitress at our local franchise restaurant, and her boyfriend (also waiter there) bought a $400,000+ house. They were both in their very early 20s and had no money. I thought the bubble absolutely couldn’t go on after that, and the bubble would surely burst any day. Silly me.
I won’t even go into our lounge-singer friend who has always overwhelmed with debt (with an unemployed husband on disability). Or our self-employed bookkeeper with unemployed husband. Or our Realtor friends who have yet to make any money in years… You DON’T want to know how much they have “qualified” for in the past few years. See, they just keep living off that equity. It’s the American Dream/New Economy.
This is going to get so ugly!
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