Reconciling The Loss Of Unrealized Gain
The LA Times reports from California. “Escondido homeowner Rogelio Alvarez paid $485,000 in February 2006 for a three-bedroom home, moved in with his wife and their two children, now ages 2 and 8, and began making the $3,700 monthly mortgage payments, which include property taxes and two loans, one at 11% and one at 8%. Then business slowed. Alvarez said he has tried to find extra work but can’t make enough money to meet payments.”
“‘Every day, when I open my eyes, I am thinking about my house,’ he said. ‘We never thought this could happen. This was our dream.’”
“But that dream has become a nightmare, and Alvarez now hopes to sell the home for $425,000, before the lender forecloses in June.”
“He’s not alone. An unprecedented number of buyers purchased new homes or refinanced existing mortgages in 2004 and 2005. Now a season of slower sales, flat appreciation and teaser-rate mortgage adjustments has borrowers struggling to pay their bills, and defaults and foreclosures are on the rise.”
“From January to March 2007, lenders in the seven-county Southern California region filed 46,760 default notices, up 23% from the previous quarter and 148% over the first quarter of 2006, reported DataQuick. About 40% of owners who defaulted last year reportedly lost their homes to foreclosure in the first quarter, up from 9% a year ago.”
The Antelope Valley Press. “California Economic Forecast Director Mark Schniepp reported that in April for the Antelope Valley, lenders had filed Notices of Default on 1,513 homes behind in payments. An additional 364 homes were in the foreclosure process, Schniepp said.”
“According to RealtyTrac, 1,000 properties in Palmdale are in ‘preforeclosure’ situations where the owners are behind in payments, but the lender has not yet filed a Notice of Default.”
“Another 151 Palmdale properties are scheduled to be auctioned within 21 days on courthouse steps somewhere in Los Angeles County, although last-minute negotiations will bring many of those back from the brink. Banks own another 561 properties in Palmdale, according to the RealtyTrac.”
“In Lancaster, RealtyTrac lists 1,046 properties in preforeclosure, 186 at auction and 620 bank-owned.”
“‘In the Los Angeles County portion of the Antelope Valley, subprime borrowers represented 38% of the home loans in 2006, down from 47% in 2005. In the Kern County portion of the Antelope Valley, subprime borrowers were less common at only 27% of home loans, down from 36% in 2005,’ Schniepp said.”
“‘In April 2007 in the Antelope Valley, there were nearly 120 homes in default per 10,000 households, 10% higher than second place Riverside County. The rate of default in the Antelope Valley was nearly four times greater than the default rate in all of Los Angeles County,’ he said.”
“Dean Henderson, owner of Mammoth Mortgage in Lancaster, said a subprime rate of 6¾% for two to three years ‘can go to 10%, putting the payment up $300, $400, $600. That will wipe somebody out. And it can adjust every six months. They keep floating with the Libor index or whatever it is tied to. When those things reset they get hammered.’”
“If the borrowers are surprised when they get hammered thus, perhaps they were not paying attention when they signed the loan documents.”
“‘It’s always explained to them,’ Henderson said. ‘Everybody who’s bought houses, they think it doesn’t matter. ‘The market has gone up $100,000 a year, so what could go wrong?’”
“Some people, he said, would take out equity every six months. ‘They never expected to keep the loan more than two or three years. I’ll try to talk them out of it.’”
“He said that he has bailed out clients, advising them to ‘make your house payment and be happy. Then they would run up their cards again. I would talk them out of refinancing again.’ Then, he said, a telemarketer would talk them into refinancing.”
“Realtor Donna Oehler, a foreclosure specialist in Lancaster, said that during the real estate run-up, ‘Some lenders were careless about no-doc stated income, stated assets loans. We call them liar loans.’”
“‘It was a big surprise to us when we (Realtors) saw what types of loans the lenders gave, loans to first-time buyers for $300,000-400,000 houses. We kind of saw this coming. The banks and lenders didn’t see this coming. They kept giving out loans,’ Oehler said.”
The Orange County Register. “Subprime mortgages also are reshaping entire neighborhoods. In subdivisions from Rialto to Sacramento, half or more of all home-purchase mortgages in 2005 were subprime.”
“The Orange County Register analyzed all 920,000 home purchase mortgages made in California in 2005, the last year for which complete data is available.”
“The subprime market share varied widely among counties, from 8 percent in San Francisco to 40 percent in San Bernardino. In Orange County, 21 percent of home-purchase loan volume was subprime.”
“Subprime commanded most of the market in relatively poor cities such as Compton, Lynwood and Rialto.”
“Subprime dominated the bottom of the market, accounting for 61 percent of all home-purchase loans under $100,000 and 51 percent of loans under $200,000.”
The North County Times. “When mortgage brokers sign up borrowers, they have a big financial incentive to promote risky loans, according to a variety of industry experts.”
“A San Diego attorney specializing in representing borrowers who say they have been the victims of financial abuse by mortgage brokers said Friday that two years ago, he was getting one or two calls a month from people seeking his advice.”
“‘Now, I get maybe three calls a day,’ said attorney John Cleary. ‘There has been a massive increase in that kind of business.’”
“In the first quarter of this year, more than 1,800 North County homeowners defaulted on their loans in the cities of Escondido, San Marcos, Vista, Oceanside, Carlsbad, Poway and Encinitas. Countywide, the 6,310 foreclosure notices issued in the first quarter of this year represented a nearly 50 percent increase from the 4,541 notices in all of 2005, according to RealtyTrac.”
“The county’s foreclosure rate in the first quarter of this year, 10 for every 10,000 households, matches the highest level recorded in 1997, at the end of last decade’s extended recession, according to the UCLA Anderson Forecast.”
“‘Certainly, there is no denying that you have some who are putting people into the wrong loan product, making outrageous commissions,’ said John Yeager, a Valley Center mortgage broker with more than 20 years in the business, adding that in early 2005, lenders got really aggressive in offering complex and costly loans.”
The Tribune. “The San Luis Obispo Tribune picked the brains of six Realtors from around the county: Who’s buying? Are sellers getting real on prices? Have we hit bottom? And, most importantly…Which direction is real estate headed?”
“How have sellers been pricing their homes? Are they becoming more realistic about pricing to lure buyers?”
“Becky Adams: ‘Some have trouble reconciling the loss of unrealized gain over the last few years, even some of us Realtors. One of the few things a seller has control over is the price of their home, they can reduce if there are not enough showings.’”
“Beverly James: ‘Buyers determine what a home is worth, not sellers, nor agents for that matter. It is my experience that a home priced realistically from the beginning will not only sell faster, but sell for probably more than it will if it is priced higher.’”
“Q: It’s been said that the Central Coast is like an island unto itself, a unique place with a different kind of economy. Do you agree?”
“James: SLO is a very conservative area and not subject to sudden change, in just about any way. People do not move in or out of here frequently, nor do they move even within the area frequently…Even our weather does not reach extremes.’”
“Lenny Jones: ‘I do not agree. I specifically remember the last down market (1990-96 —a 25 percent decline in value), the banks, the lenders, the Realtors, the builders and developers knew we were in a downward market, and we all said, ‘The down market, the recession will not affect SLO County, we are special and different.’”
“‘When it was all done and said, property values lost 25 percent. We like to think it won’t happen to us, but we are part of the California and national economy.’”
Just a note,
The tax treatment of real estate is far better than the tax treatment of stock options. There were a hole bunch of people that got taxed - via the Alternative Minimum Tax - on stock that they had purchased through stock option grants but had not yet sold.
A scenario; get options to buy 1000 shares of stock for $1 a share. Purchase said stock for $1000 on say Oct 1. The “market” price of the stock goes up to $200/share by Dec 31.
IRS says you had a “gain” of $200,000.
On January 31, stock drops to 5 cents a share before you sold a single share. You still owe the IRS tax on $200K. Fair?
No. If the govt is going to tax cap gains at all, it should not tax then until they are realized. And I define “realized” as “converted to cash”.
Well, the most common way to cash option grants that you got through your company would be to have your broker exercise the options and immediately sell the stock for cash. If you just exercised the options and held on to the stock, then you were speculating that the stock would go up. And if the stock went down to 5 cents the day after, then you are a greedy fool who got burnt.
And the government is right to tax it even if you didn’t got any cash. Exercising stock option grants is just a form of income and this should be taxed.
Have you ever received stock options (as opposed to stock grants)?
There is almost always a “lock-up” period, during which you cannot sell the stock. This is problem with founder’s shares as well. A lot of this stuff is not liquid.
It’s not fair to tax people on unrealized gains. Just because Zillow once said that your house was worth $1,000,000 dollars last year doesn’t mean you have to pay taxes on that valuation. You pay taxes on the valuation at the time you sell it, less the amount you paid for it. Same goes for stock. You buy it (exercise) at some price, and that’s your basis. When you sell the stock, the selling price less your basis is your gain, and that’s what you should pay tax on.
jl_in_sd has it right. sm_landlord is wrong.
An option gives you the right to buy at a specific price, usually the price at the time the company gave you the options. In the case of a startup company, that price was very low, so when you “exercise” your options — that is, use them to buy the stock, if the exercise price was $1 and the current market price is $11, you will pay out $1 per share and have $10 income per share, which will be taxed as ordinary income. You don’t pay any tax until you exercise. Wise people arrange to sell the stock as soon as they exercise the option, getting the $10 gain in cash and paying the income tax immediately.
My understanding though is that there is a difference between granted options and options that are purchased on the open market.
If you buy an option, for say, $1, that has a strike price of $15, and the stock spikes to $50 before expiration, you can exercise the option and pay your $15 per share to own the stock, but to my understanding, not trigger any gain at that point. The gain would only be realized upon either a) sale of the option before exercise, or b) the sale of the stock after exercise. The 12 month waiting period applies from either a) the date of option purchase or b) the time of option exercise, depending on which route you go.
Does this mesh with others’ understanding?
Company issued stock options are an entirely different story, with which I have no experience.
You know it is, glorgau. Anyone sophisticated enough to buy options knows the risks. And I don’t feel sorry for the house-buyers either.
That’s not true at all. Many lower level workers tax part in their company’s options program. We’re not talking about CEO’s here.
I guess the IRS point of view on this is that you exercised your options, thus realizing a profit, and then gambled with their money on the options you decided not to sell. I agree it is completely unfair, but on the other side, I am willing to bet there are many who realized a whole load of extra profit.
I think the deal here is ther IRS needs to be clear, and this is not a clear area of tax law to most, or one that makes sense, given the immediate loss of the profit, and the fact you never held any cash or in any way benefited from the transaction.
This doesn’t involve the “purchase” of options, as stated by REHobbyist, but rather the “grant” of options by a company, yes?
From the IRS perspective, I’d imagine you took the value of that option as income when you exercised the option. One would hope your capital gains on the stock from that point would be measured against the market value of the equity at the time of purchase, not the value at which you purchased the equity.
Actually, I have a few options in my company, I had considered the “buy and hold” strategy to get around the short-term capital gain generally associated with an options exercise. Thanks for the smackdown of that idea, unintentional though it may have been.
The IRS qualifies stock options in two categories: Nonqualified Stock Options and Incentive Stock Options. They tax them differently. ISO is where they tax the profits only after you sell the options. The other they tax both when you exercise and when you sell.
Yes, but the AMT tax is a different matter. An ISO stock option exercised but not sold becomes an AMT preference item. If you end up subject to AMT (and exercising options can get you there in a hurry), you’re on the hook for the imputed profit, whether realized or not, in the year of exercise. This is a real booby-trap, since other parts of the tax code encourage you to exercise and hold so as to benefit from long-term gains treatment. AMT trumps this idea, however, and the unwary can get caught, especially in the unfortunate case where the subsequently tanks. The unwary may include employees who aren’t used to thinking about AMT because their salaries alone don’t put them in that league. The one-time option exercise, however, may bump them into an unfamiliar tax world, the arcane rules of which they learn too late.
Full disclosure: I once held option grants from my employer, and learned always to exercise and sell immediately, for this and other good reasons. Just watch what the CEO of your company does with his/her option grants–s/he’s not holding on to the stock for long term gains treatment.
What about an 83b election for options. Thats what I have done for the past 10 years.
If you’re stupid enough to do something without first consulting your accountant, they yeah - it’s fair. Income is income afa the IRS is concerned.
BTW, this ran on the front page of the LATimes Real Estate Section!
“‘It was a big surprise to us when we (Realtors) saw what types of loans the lenders gave, loans to first-time buyers for $300,000-400,000 houses. We kind of saw this coming. The banks and lenders didn’t see this coming. They kept giving out loans,’
OMG!! I’m about to hop in the car and go find this gal. I’ll uproot a Joshua Tree along the way to use as a supository once I find her. C’mon Donna, if you’re gonna lie, at least make the lie believable. Please!! These loans were a god-send to realtors. When lenders started qualifying borrowers at the teaser rates, instead of fully indexed, these guys and gals started doing back-flips. The biggest arguments I got in with realtors of the last couple of years was, when the borrower failed to qualify, refusing to do some sort of toxic-delux loan to close the deal. The loan officers that got the biggest following of realtors were the ones that would bend any rule to put the buyer in the house. “Oh, it was such a big surprise…” Yeah right. Shut up you phoney!
suppository - 2 p’s….sorry. Should’ve just said ass-missle instead.
you’re gonna shove a tree up her ass?
be sure to post the pics to the HBB Photo Gallery;)
ROTFL
That would be one heck of an education.
And trying to make it sound like the Realtors ™ didn’t know? Come on! Every single one of them knew. Heck, a year ago a Realtor pointed out that buyers were now typically putting 10% down, so we had to buy know as it was other end users that would price us out forever.
Got popcorn?
Neil
ps
If you need a backup Joshua tree, let me know. I’m working “in the field” this week.
Yet another reason why I like this blog. You guys and gals are so, well, honest.
ditto…
Not just any ‘ol tree. For those not familiar with southwest flora and fauna:
http://en.wikipedia.org/wiki/Image:California_Scottys_Mountains_Joshua_tree.jpg
Oh, them needles are toxic.
Well, they look kind of like a pipe cleaner.
Thought it was against the law to misuse a Joshua Tree. A member of the Palm Tree family.
It’s a member of the lily family, actually.
http://www.calflora.net/bloomingplants/joshuatree.html
i’ll get popcorn and help you sell tickets to that one!
Not just any tree! A cactus of a tree!
LOL!
p.s.: Missile — two i’s.
I give up!
Rant on, ex-nnvmtgbrkr. The Realtors were working hand in glove with the lenders. Most developers seemed to have their own captive mortgage company. I can’t believe that the Realtors are now pointing fingers - this must be a lame attempt at CYA.
Amen. That is the thinking of 98% of realtors. Sales, sales and more sales. ” Isn’t this great and the money I’m making ” said a realtor to me in 2005 at a restaurant. I excused myself and walked away as this was not the place to express my anger.
I wonder how many realtors are bright enough to make the connection between the great sales in 2005 and the dessication of the buyer pool in 2007?
A smart parasite doesn’t kill the host.
Okay, Jerry, ‘fess up: Have you seen this real estate agent dolt since ‘05? Have you asked him/her what sort of money he/she is making now?
Frankly my dear I don’t give a dam.
Hoover?
“We kind of saw this coming. The banks and lenders didn’t see this coming”
Ummm, yes, banks and big financial institutions never do that thing called “due dilligence”. They were completely blindsided by this. Bullcr@p.
I would say the postion of the realtors was… pinch me ,I’m in heaven with this easy money where I can get any clown into a house .Why do you think realtors went out and got any Tom ,Dick ,and Harry to buy now or be priced out forever . it was more like buy now before the stupid lenders stop giving it away without qualifying with no down .
I guess realtors did have to create “myths” to support what was really faulty lending . It would be a dream come true for your average realtor to have no qualifying lending along with hit the mark appraisals . The realtors had a willing horse and they rode it . Just don’t tell me they didn’t help with the fraud with the borrowers because I don’t believe it because they sit people up to overbuy knowing the liar loans would be pushed through.
‘I’ll uproot a Joshua Tree’
- Isn’t it illegal to uproot a Joshua tree?
I’m sure they’d grant a special exemption in this case.
I think in CEQA (California Environmental Quality Act) terms, it’s providing a statement of overriding considerations.
He’s going to replant it, though.
Sure, but not in the ground. Ever seen rabbits hump? I’ll replant it all right.
All right = alright. Stick a fork in me!
Actually, according to the Chicago Manual of Style, while the former is formally preferred, either way is “alright.”
The last person I knew who did it was fined 500$ for removing the one in her front yard. That was like 10 years ago, so it’s probably gone up. I say we take up a collection because it would be worth the entertainment.
10 years? Sure it wasn’t 15, somewhere around the last bust? I surely don’t think my idea’s original.
“‘It was a big surprise to us when we (Realtors) saw what types of loans the lenders gave, loans to first-time buyers for $300,000-400,000 houses. We kind of saw this coming. The banks and lenders didn’t see this coming. They kept giving out loans,’ Oehler said.”
That JUMPED out to me as well. These sleazy realtors not only utilized these loans as selling Points, they steered these FB’s into using their RE Company’s hidden lending “in house” Brokers and Banks, in house Title Companies and their Crooked in house appraisers.
One of the MAIN reasons, besides the PRICE, that smart potential buyers AREN’T Buying, is they THAT are SCARED of ALL THE SHEER FRAUD in US Real Estate.
I remember a house I really liked in Windandsea area of LaJolla that was $600K in 1989 when we left eventually resold for about $450K a few years later. That was amazing. Don’t think it can’t happen again.
“Don’t think it can’t happen again.”
Do you mean you don’t think the price decline will be limited to only 25%?
We saw 40% on the coast in the 1990’s.
This time is worse. Note: I’m not saying all neighborhoods will drop that much… believe it or not some are only 25% to 33% overpriced. But I’m not going to stand in front of the herd until they decide what drops how much.
One thing about reading this blog; over time I have become educated to the extremely long time frames real estate can take. However, this time, partially due to the Chinese diverting their funds from bonds to “higher yielding instruments,” we’ll see a quick correction. Ghad… one man in charge of $200 to $300 Billion of investments… Whatever you do, get on his good side.
Got popcorn?
Neil
I personally think that the coast will drop at least 40%. But it’s going to take a very very long time.
If we’re going to get 40% off the coasts, what are the inland hellholes going to reduce by? Everyone says 50% from peak but I’m loosing hope fast. This GFE is burning me up.
I’m guessing that the inland h311holes go down to their natural value, which I put at about 30% to 40% of their Zillow prices. The exceptions will be actual resort towns such as Palm Springs, and areas which have productive industries, which should only go down 50% or so.
BTW, what is GFE? You lost me on that TLA.
Silicon Valley…
Dont be surprised that a 50% will be faster than most will expect.
GFE = girlfriend experience
I don’t know did Buffet Miss this? Or is he thinking HSBC, Citibank Chase Wells Fargo which he owns a lot et all….
Are going to buy up the sub-primes and take the 20-30-50+ billion hit themselves and only those shareholders will suffer the loss of book value?
Is that the End Game for the FED? Have all the big banks write off the losses?
==================
http://biz.yahoo.com/ap/070505/berkshire_shareholders.html?.v=2
Buffet also told shareholders that he thinks the sub-prime mortgage meltdown is a problem for the companies involved, but is unlikely to spill into the overall economy.
“I think that’s dumb lending and it’s dumb borrowing,” he said.
But he said as long as unemployment and interest rates don’t rise considerably, it should not cause widespread problems.
Where he thinks the employment has been going, I don’t know. Although, I know oil and gas has picked up….not in California, though.
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_gilbert&sid=ajV.07kGzMOE
“Fast, Loose Credit Scares Even the Buyout Gurus: Mark Gilbert
By Mark Gilbert
May 3 (Bloomberg) — Central bankers aren’t the only people distressed by lax lending standards. Even the dealmakers who depend on cheap finance with few strings attached are complaining that finance is too cheap and there aren’t enough strings.”
Central bankers are “distressed” over lax lending standards? It is their policies which brought them to us…
$485K in Escondido- gotta be in the banger hood.
Banks own another 561 properties in Palmdale, according to the RealtyTrac.”
“In Lancaster, RealtyTrac lists 1,046 properties in preforeclosure, 186 at auction and 620 bank-owned.”
The banks seem to be in a holding pattern with there repo’s - WTF will happen when they feel that they can no longer sit on them.
“Banks own another 561 properties in Palmdale, according to the RealtyTrac.”
“In Lancaster, RealtyTrac lists 1,046 properties in preforeclosure, 186 at auction and 620 bank-owned.”
Palmcaster will soon revert to it’s natural state: a windblown hollowed-out shell of foreclosed wreaks blown about with tumbleweeds and howling coyotes cavorting thru the debris.
Time to take a Mad-max tour thru the 138/18 along the backside of the San Gabriels and take in the breathless Vistas of former hi-desert boomtowns gone bust:Palmdale, Pearblossom, LLano, Pinion hills, Phelan, with the grand finale ending at Compton-in-the-desert(Victorville)
There is an old saying in aerospace:
“Buy in Palmdale, die in Palmdale.”
Nitpick, Victorville isn’t Compton in the desert. There are many good families there. Could it become Compton after this downturn? Oh, there is quite a risk.
You won’t have tumbleweeds… you’ll have meth labs.
I’m confused as anyone as to why the banks are not pulling the trigger. Are they just in denial? I do expect about half the loans are going to have too many liens to be easy to clear. What’s the point of the first lien holder buying out the city if that kills all of the payback? Not to mention, its a slower process due to the MBS rules. Funny how passing on the risk also makes the REO process all that more confusing. I wish I could spectate at a HSCB/Countrywide negotiation of how to handle a repossessed 80/20. I bet they have some interesting language in the contracts that neither partner likes. Just a SWAG (no insider info).
Got popcorn?
Neil
Nobody’s mentioned my version of California Hell yet…
Good ol’ Trona.
Trona is i recall out near Death valley. Used to be somewhat of a desert rat and did visit death Valley once and have been out to JOshua Tree NP many a times. Remember back in the early 90’s seeing the effects of the last RE bust on those little settlements along rte 62 such as Joshua Tree(literally a wind-blown ghost town)and 29 palms(depressed and seedy- maybe still is). Also remember that decent doublewides on prime 1-acre properties near the JT NP entrance were listed for $30,000-40,000.
Aladinsane: Google maps: Trona Ca, make this my default location!
I read somewhere that the victorville Walmart was considered by the company as one of the most dangerous in the entire county due to gang crime. They even changed their operating hours from 7/24 to 5 am to 12 pm because of the danger to customers.
“The banks seem to be in a holding pattern with there repo’s - WTF will happen when they feel that they can no longer sit on them.”
I am guessing they are waiting until the outcome of the efforts of some lawmakers to pass measures to bail them out. If these measures fail, I expect the REO dump will begin.
like any large corporate group, banks will defer the hard decision until it builds up. At that point, they will for 1 fiscal qtr, pony up all the bad news (and earning hit). Thats my opinion
And it will be done the day after year-end earnings are announced.
If they write them down, it will be like ‘87 and they will have to come up with more capital. If they can’t, then they will be taken over by the Fed. The 64 mtg firms that have become room temperature just go away and their share holders suck eggs.
It is also possible that they see the writing on the wall with respect to future ARM resets/defaults. The longer they can keep these homes from selling at auction for cheap, cheap, cheap, the longer they can attempt to prop home prices up.
Once the REO dump starts, the market has another leg down.
I think they should be called BORE’s. Acronym for Bank Owned Real Estate.
But he said as long as unemployment and interest rates don’t rise considerably, it should not cause widespread problems.
WEll,Well,well!!!! Let’s see…. If unemployment doesn’t rise(Contractors laid off),(RE agents reduced income),(factory slow downs ) we will keep unemployment down. Where did you study economics? Let’s get real as all of this will happen and the ADJUSTMENTS will follow.
keep in mind that Berkshire has a huge stake in Wells Fargo the number one culprit
Berkshire Vice President Charlie Munger on global warming (yesterday):
“Mr. Munger says that Carbon Dioxide is what plants eat. And that he does like it a little warmer than colder. Charlie Munger goes on to say about climate change, “So what we are really talking about with global warming is dislocation. Dislocations could cause agony though. The sea level rising would be resolved with enough time and enough capital. I don’t think it’s an utter calamity for mankind though. You’d have to be a pot-smoking journalism student to think that.”
Up to now, I have faith in Warren Buffett to make calls in the most sober of ways. My faith in this man is shaken. Charlie Munger is a yes man.
Study Munger a little and you’ll see he’s the absolute opposite of a Yes Man. (Not saying I agree with him here.)
Also I agree Buffett’s response on subprime was lame, with the caveat about unemployment staying low. Well duh.
That is the view from behind billions of dollars of a bankroll and Omaha, NE.
Exactly. And a man of Warren Buffets stature understands that what he says carries a lot of weight. This is nothing more than him trying to speak something into existence.
I kind of have to agree with Charlie Munger. With enought time and money, the mankind can deal with global warming.
He didn’t say it was going to be a walk in the park….or cheap.
Buffett, Paulson and Bernanke are not stupid. They are trying to sweet talk the economy into a soft landing.
there are never ’soft’ landings - common sense should tell Buffett that you cannot ‘talk’ your way into one
“$485,000 in February 2006 for a three-bedroom home, moved in with his wife and their two children, now ages 2 and 8, and began making the $3,700 monthly mortgage payments, which include property taxes and two loans, one at 11% and one at 8%. … and Alvarez now hopes to sell the home for $425,000, before the lender forecloses in June.”
This home’s market value has apparently dropped by
(425/485-1) X 100% = 12% in just over one year, and meanwhile, the poor owner cannot find enough work to make a $3700 monthly nut.
For those who do not know where Escondido is, it is the next community north of North County San Diego (Rancho Bernardo) along I-15.
P.S. Way back in the 20th century, when I was a young man, lenders used to have a rule-of-thumb that limited the amount they would lend to 30% of a buyer’s household income. By this standard, the Alvarez family would have to be pulling down
12 X $3700 / 0.30 = $148,000 / year
to qualify for their mortgages. I am wondering if they were making that much before work dried up, as it does not mention what their family income was in that article.
That is the old economy. Old economy laws doesn’t apply to this one.
Wouldn’t be nice to have people start thinking about 1/3 income, or even 1/4 income or 1/5 income. Put the rest away (saving/investment) or for vacations. No no no, in the new economy, people rather paid mortgage instead of investing or living a better life.
Cinch
There is definitely a move to part folks from ever more of their money in the gool ole US of A.
The answer to this is to gouge on anything of necessity or which is mandated, such as taxes, property valuations and rents, health care and insurance etc. Big screen TVs’ heading down in price fast, but I doubt that helps the average family get by.
Are they still heading down? I sold another painting so I’d like to surprise the DH who is hard to buy presents for (he’s a photographer and large format equip gets expensive). Who has good prices now?
‘That is the old economy. Old economy laws doesn’t apply to this one.’
- In California we use Mexi-math…it is our new economy.
“Wouldn’t be nice to have people start thinking about 1/3 income, or even 1/4 income or 1/5 income?”
We pay about 1/8 of gross.
We rent,
I had you beat for a while… Let’s see…
Yea… I’m up to 1/10th of gross.
(New higher rent place) Hey, the granite counter tops are nice if you know how to use them in cooking! Make fun of them all you want, but if you know how to use them in cooking (cold rolling board, etc.) they are worth it. (They have some nice practical features.)
Got popcorn?
Neil
I pay 7% of my gross base salary for principal and interest on my house. add another 4% for ppty tax….
and guys, I am still worried…
Dang… nice place to be…
It is great - as long as I’m employed. I am fvcked if I lose my job
I have NO IDEA how people sleep if their house is 50% of income
It is great - as long as I’m employed. I am fvcked if I lose my job
You pay only 11% of your gross salary for housing, but you don’t have enough cash savings to carry you through a year or two of unemployment? What do you spend all your money on?
Is Mr. Alvarez a legal or an illegal citizen? Does Mr. Alvarez get paid under the table, perhaps renting out extra rooms in his house with tax free money? When I see these sob stories I just want more facts with them that paints a complete picture.
Just because someone has a Hispanic surname, they shouldn’t automatically fall under suspicion for being an illegal or conforming to all the Latino stereotypes. If this guy’s last name was Peterson or Schultz, we’d assume he was just another garden-variety Yuppie FB.
There are 12.5 million people classified as Hispanic/Latino in California. About 2.5 of those people are illegal immigrant. So, absent further information, any given Hispanic in California has a 1 in 5 chance of being an illegal immigrant.
The chances of a person named Peterson or Schultz being an illegal immigrant are quite a bit lower.
Illegal or legal, doesn’t matter. I’m guessing that Mr Alvarez’s line of work is housing-related. Probably many of his prospective roomies have housing-related jobs too. If Escondido RE goes in the toilet, his work load will continue to decrease and it probably doesn’t matter how many tenants he stuffs into his house.
I used to have a semi-illiterate neighbor in Escondido. The guy was a painting contractor. During the late 80’s boom he was making money hand over fist. 2 Beamers in the driveway, season tix for the Padres, expensive vacations to Hawaii. He must have been earning the equivalent of 150K today.
Then the gravy train suddenly ended, and his life changed.
I dont understand why this is a before tax equation??? Shouldnt what you make be an after tax equation when considering what you can afford???? I am right on the 30% mark for my price range but that wouldnt include HOA or taxes or anything. With that stuff included I am seriously stretching my money on buying a place.
Of course talking with the HR guy at work on Friday he seemed upset that I said that there are very few people who can afford to buy $40k BMW’s. He seemed to think most people in Southern California can afford that. So stretching my money means I still put a little into my 401k and savings for a rainy day.
Lots of folks don’t really get the benefit of the mortgage deduction–and the deduction can vary widely for those who do get it.
The pre-tax is just a rule of thumb given this variability.
Our combined family income is (finally and thankfully) now just over $100k and there is no effing way I’d take on a $3700 payment. But maybe I’m just not in tune with the New Economy.
The work that dried up was probably building houses.
“In Orange County, 21 percent of home-purchase loan volume was subprime.”
I thought most people who lived in The OC were millionaires? Why would a millionaire want to mess around with a subprime loan?
OK… Time to talk about the alt A melt down that will dwarf the subprime meltdown.
Most of the people doubled down with an alt-a loan. So, the gains will be gone and the spending will have to cease. Its already begining but its going to unplug further as the abbility to refinance slips away.
Alt A seems to mean OK credit OR second time buyer that couple keep refinancing. Serial refinancing is probably a good term.
“Alt A seems to mean OK credit”
Alt-A = So far, so good credit
LMAO
“Alt A seems to mean OK credit”
“Alt-A = So far, so good credit”
Actually, doesn’t their credit tank the second the go into debt “up to their eyeballs?” That is to say, Alt-A tards HAD good credit until they screwed their debt ratios. No?
Alt A = I don’t make enough money to qualify for this house, so I gots ta go no doc G.
There is a vast difference between spending like one is a millionaire and actually being a millionaire. There are a lot more people in OC who spend like a millionaire than there are actual millionaires.
“Another 151 Palmdale properties are scheduled to be auctioned within 21 days on courthouse steps somewhere in Los Angeles County, although last-minute negotiations will bring many of those back from the brink. Banks own another 561 properties in Palmdale, according to the RealtyTrac.”
With an FHA subprime bailout proposal making its way through Congress, wouldn’t the banks be wise to hold off for the moment on dumping REO at auction?
I don’t know enough about the FHA to understand the likelihood of this happening. I know it’s becoming your big fear. Can FHA really be expanded by hundreds of billions of dollars to accomodate this task? That seems like something that would be hard to cover up or not cause major problems in the economy.
And the only way an FHA bailout will really help the majority of FB’s is if the principal balance on these loans is cut. If a gardener has taken out a $500K loan, you can drop the interest rate to zero and he still can’t repay it. And if he loses his job, well, he certainly can’t make his payments then. I just can’t imagine a principal-balance reduction bailout. Can you imagine the (rightfully so) outrage from responsible home owners who have to pay their original balances?
That’s just it. Unless a bailout reduces the price of the asset then it doesn’t seem to matter anyhow. It’s been said many times before but the prices are too damn high.
But NYCB , lenders are not going to drop the loan balance because lenders could sell the house in foreclosure or on short sale to a better borrower at a cut-rate price .
The whole idea would be to save a borrower with better loan terms/rate so you can save the equity of that loan and the borrower can pay it down or hold out for property going up . The idea would be anything that can save the investors or bagholders from equity loss on the gross loan amount plus foreclosure costs .
As Tanta over at calculated risk has pointed out, sometimes holders of different tranches of bonds have different interests. Some may want to preserve equity at all costs, some may want to max out the percentage of loans that don’t get refinanced. The different interests make workouts difficult.
There’s not enough money to bail out the subprime folks. And, most don’t have the documented income needed to qualify, which is why they used ARM’s to begin with. I don’t believe these politicians, as inept as they are, will choose to bail out liars. It’s just not going to happen.
I hope that is true, but people are so stupid - I am not so sure
By the time they’re REO, the auction has already occured, nobody bid the min bid, so the bank get the overprice property back.
“Now a season of slower sales, flat appreciation”
So by use of the word appreciation, I assume prices are still “appreciating” just barely right? Wait, did Mr Alvarez not purchase his home in early 2006 for $485K, and now “hope” to get $425K - That would be “steep depreciation” would it not, or is the word appreciation used in the industry to describe a $60K loss over 1 year?
Point is. Call it for what it is a period of steep price declines. Even if Mr Alvarez home sells for his asking price, that represents approximately a 13% loss of value in just one year. Hardly flat appreciation.
That sounds encouraging to me. GS: is San Diego depreciating too, or just the surrounding poorer areas?
Actually, San Diego IS the poorer area - compared to surrounding La Jolla, Encinitas, Del Mar, Poway, Bonita, and eastern Chula Vista.
“flat appreciation”
For God’s sake. That makes no sense whatsoever. Wouldn’t ‘flat DEpreciation’ — i.e., no change in prices — mean exactly the same thing? The fact that no one can bring themselves to say the “D” word says volumes about the level of mass delusion…
I have a new term fer ya:
“Inverse Appreciation”
No charge, NAR.
And San Diego will be going bankrupt as there is no way it can pay the Billions in promised pension debts but everything is “wonderful” just like the “last days” of Enron.
Yup, they continue to give their fat cat admin’s in GOVT huge pensions, allowing techniques like fake temporary promotions to pump them up, while at the same time not funding the actual pension plan. In the mean time, the only police services we have are to issue traffic violations, and the overall infrastructure has gone to hell. 30 years ago, a decision was made to put in cheap flood drains which are now all failing, the roads and sewage facilities have not seen much maintenance in years etc…I wonder who will be left in San Diego to pay all these fat pensions and what will happen to the poor “regular” government worker who thought they were going to get a pension and find out the fund was effectively raided.
La Jolla, Encinitas, Del Mar, Poway, Bonita, and eastern Chula Vista are all richer than San Diego? Maybe you should have stopped your list at Del Mar?
Not only did the Alvarezes’ home depreciate 13% in one year, but that $425K they may receive if the home sells is worth 4% less than it would have been a year ago - if you factor in inflation.
Depreciation plus inflation equals a bigger hole than previously considered.
“Depreciation plus inflation equals a bigger PIT than previously considered.”
Doesn’t it roll off the tongue better that way?
It appears the author of that piece goofed up. I’m sure he/she met to say “negative appreciation,” which is now the PC way of saying that real estate is tanking.
“Becky Adams: ‘Some have trouble reconciling the loss of unrealized gain over the last few years, even some of us Realtors. One of the few things a seller has control over is the price of their home, they can reduce if there are not enough showings.’”
Here is where the confusion comes in, and is perhaps deliberately sowed by ignorant or deliberately deceptive realtors quoted in the MSM.
A seller merely has control over the list price, and the actual bottom line price (aka reservation price) for which they are willing to sell a home.
The seller has little if any control over the sale price when there are many, many homes of comparable quality on the market at the same point in time, as anyone brave enough and qualified to buy can find a better choice if one buyer sets the price too high. Sellers pretty much have to take what the market will bear in a declining market, or else price themselves out of a sale forever.
“Becky Adams: ‘…loss of unrealized gain…’”, what does this mean? Business language is garbage. no, no it is undesirable LOL
I don’t know, sounds just as stupid when you speak FBese. “I’m not going to ‘give it away’ for less than it Zillowed for in 2005.” See, it’s just as dumb in any dialect.
I think the sellers are like gamblers, who keep hoping that they’ll be the one in a million who can sell at a high price. I watch the local listings, and amazed that every so often a crappy house sells for an anomalously high price, even though few are selling. Most sellers think that’s going to happen to them.
Fraud deal ,bad comp .
Glorgau, you said if a person gets options to buy 1000 shares of stock for $1 a share and purchases said stock for $1000 on say Oct 1 and the “market” price of the stock goes up to $200/share by Dec 31, the IRS says you had a “gain” of $200,000. If on January 31, stock drops to 5 cents a share before you sold a single share. You still owe the IRS tax on $200K.
Okay, this sounds fair if you sold the stock for 5 cents on Jan 31 and the next tax return you can claim a deductible loss of $200K. Is this how it works? That’s how mark to market works, you pay tax on the market value at the end of the year. If it doesn’t work out next year you get a capital loss. Of course that’s small consolation for a guy who never had the $200K in his bank account, only on paper on his brokerage statement, but that’s how it works for certain investors like commodities speculators who have to mark to market their $200K in paper profits at a brokerage firm. Stock speculators don’t have to mark to market so if they have $200K in paper profits at say Schwab but they didn’t sell, they don’t pay taxes until they actually sell, assuming they sell at a profit. Why the difference between commodity/option speculators and stock speculators, I have no idea.
A trader using mark to market is in the trading business. People with 200K gains in options from their employer aren’t.
Many of these people “thought” they were doing the right thing; being long term investors, not taking the gain right away. There’s also a lower long term capital gains rate…so they are encouraged to do it.
So it seems perverse that they are punished (some driven into bankruptcy) for not immediately selling the stock. All other non trading investors are taxed on the gains when sold (realized) not when you exercise an option resulting in a position but haven’t realized any gain or loss.
As for the “they can take losses against gains”, maybe, but suppose that’s your only “position”…at that point you are limited to taking $3,000 losses per year. So it could take a few hundred years in some cases.
A typical ESO runs for 3 to 10 years. You get your windfall when you exercise — you are already a long term investor at that point: you should pay your taxes when you exercise and be happy.
The last firm I worked at required you put up the tax money in withholding, or they would auto-sell 30% or so of the exercise for taxes. Seemed a good way to avoid employees screwing themselves on speculative bets.
You don’t get any windfall when you exercise unless you sell.
If you buy a stock at $10 and it goes to $1000 how much tax do you owe? ZERO, unless you sell. Why should this be any
different. Only a fool wouldn’t see that.
You get your windfall when you exercise — you are already a long term investor at that point
It is not the difference between stocks and options (can’t say anything about commodities) but rather AMT specifics.
Normally, you only pay tax on your realized gains, whether stocks or options. However, AMT changes it for Incentive Stock Options (ISOs; and only those). In this case if one exercises one’s stock options, they would have tax liability for the difference of the exercise price and the market price at the time of exercise.
So, if you have substantial stock options, you might want to check whether you are subject to AMT and adjust your strategy - for example, exercise and sell at the same time.
Takes me back to the discussions a couple of years ago here about the value of the mortgage deduction and the AMT.
“About 40% of owners who defaulted last year reportedly lost their homes to foreclosure in the first quarter, up from 9% a year ago.”
Wow that is huge. 40% of people who are issued an NOD actually lose their homes. I have to believe this is an extremely high “conversion rate” relative to even the mid 90’s. Even more alarming is we are only in the beginning stages of the foreclosure game. With sub-prime peaking in July 07 through 2008, it’s going to get a lot worse before it gets better.
Cali in for a world of hurt no doubt. If the so-called containment of sub-prime fails to hold and foreclosures spill into Alt-A and prime, the country will be lucky to avoid a steep recession.
sunday 3:30pm here in Los Angeles. tune to am 7.90 David Lireah is explaining what happened. Using words like if this or if that and everything is local.
http://abc2.andomedia.com/kabc/nReg.asp
or try above
or tell bob brinker what you think about david lireah
bob@adpad.com
“Another 151 Palmdale properties are scheduled to be auctioned within 21 days on courthouse steps somewhere in Los Angeles County, although last-minute negotiations will bring many of those back from the brink. Banks own another 561 properties in Palmdale, according to the RealtyTrac.”
What sort of “last-minute negotiations” are they talking about? The bottom line is, these people cannot afford their houses. There is no way to lower the principle, so they are hosed.
Short sales, bankruptcies, possibly even forbearance by the lender. The banks DO NOT WANT these properties, and I would expect them to start doing whatever they can to make work-outs happen.
What seems to be happening at the courthouse auctions is that no one will bid up to the amount of the loan(s). This means that the lender must bid the loan amount to protect their interest. But then they own it. The owner of a second must cure the first or they could lose the entire amount that they loaned. But then they own it.
If you were a lender, especially in the second position, would you want to own a portfolio of unsaleable properties in Palmcaster? I think you would want to engage in some last-minute negotiations in hopes of achieving some other outcome.
“If you were a lender, especially in the second position, would you want to own a portfolio of unsaleable properties in Palmcaster? I think you would want to engage in some last-minute negotiations in hopes of achieving some other outcome.”
I am not sure what these negotiations are, but I doubt they are reducing the principle on the loan, at least at this point in the game.
yup, early days yet. I wonder if some of the negotiations are short sale approvals.
“Escondido homeowner Rogelio Alvarez paid $485,000 in February 2006 for a three-bedroom home, moved in with his wife and their two children, now ages 2 and 8, and began making the $3,700 monthly mortgage payments, which include property taxes and two loans, one at 11% and one at 8%. Then business slowed. Alvarez said he has tried to find extra work but can’t make enough money to meet payments.”
$3,700/month in mortgage?? I am sure this guy did not make much more than that on a regular basis. He probably works in the housing related business (construction, real estate, etc.). It’s amazing how adults succumb to peer pressure; I would not be surprise if he bought because his friends were doing the same and how could he NOT follow along. Peer pressure or greed can kill you.
“If the borrowers are surprised when they get hammered thus, perhaps they were not paying attention when they signed the loan documents.”
“‘It’s always explained to them,’ Henderson said. ‘Everybody who’s bought houses, they think it doesn’t matter. ‘The market has gone up $100,000 a year, so what could go wrong?’”
Is this Henderson guy for real? If he is, then how the heck did he survive being a mortgage broker in Lancaster these past few years?
Why wasn’t he called to testify before Hillary and Schumer? I suspect his take was much more accurate then all the victims’ stories we’ve been hearing about being “misled”. I think almost all the FB’s had the deal explained to them and chose to ignore the warnings because they didn’t want to be priced out of the market forever.
I would guess that in the height of the mania that lenders/realtors were just selling teaser rate payments and the fact that you could refinance out of the loan ( once you made your mint of money ).The borrowers did not care so much what the loan terms or real rate was on the loan because they were getting a no-down liar loan .Have you have seem so many borrowers so willing to sign on to bad loans ?
These unqualified buyers felt it was the way to get into the real estate investment game ,or some feared they would be priced out forever if they didn’t go on the loan of choice for the unqualified .
I was looking at new homes today . The salespeople at the tracts were selling payments . Some of the tracts were pushing a fixed rate buy down loan that I know the builder paid alot of bucks for that . The builders were giving away alot of upgrades also .
One builder offered a loan buydown to a 3.85 fixed for the first year ,a 4.85 fixed for the second year ,and a 5.85 fixed for the remaining 28 years of the loan (on a zero down loan .)
So I think the builders are now trying to get the higher quality buyers on those programs , but still I would not be surprised if
they try to bait and switch the buyer .
Shoew of hands…. Who beleives this?
“Josh Nassar, vice president for Federal Affairs for the Center for Responsible Lending, a Washington, D.C.-based nonprofit, said its research indicates that of all the sub-prime loans issued nationwide in the last two years — in particular those with adjustable rates or prepayment penalties — about 20% will fail and result in the loss of a home. “
“Subprime dominated the bottom of the market, accounting for 61 percent of all home-purchase loans under $100,000 and 51 percent of loans under $200,000.”
I think that’s true for most markets. The upper end might hold up reasonably well. Most of the blood letting will be in the sub-standard housing market bought with sub-prime loans. I’ve been looking at a lot of slum property in the 200-300K range. Houses that are worth between 75-150K. What frustates me is that price are coming down very slowly…looks like I have to continue renting the shithole I am in right now for another year or two.
I found a nice new construction for $300K, but the neighborhood was real scary. Miami-Liberty City-. A Cop pointed out to me that there exists a video game “Grand Theft Auto, Liberty City” ‘cos it’s one of the worst neighborhoods imaginable. He said he wouldn’t live there if rent was free….certainly not if he’d to pay $300K for the priviledge.
Dude your handle is “Mike in Miami”. I’m starting to wonder if it’s a misnomer. If you actually were in Miami you would know how bad Liberty City is.
That said, LC was a pit the last I saw it 15 years ago. Even the word “pit” doesn’t do it justice. It was exceedingly high crime, and the local cult of the Yahweh Ben Yahweh’s had a habit of kidnapping white people and cutting their ears off. For being white.
It didn’t make it to a version of GTA for nothing. Unless something miraculous happened, then venturing in there will likely be like an adventure - a bad movie with a sad ending. You’d be a fool to spend so much money on a house there. You’ve been warned. (Unless it has improved _dramatically_ in the last decade, which I doubt.)
Grand Theft Auto uses different names than the actual cities they parody. “Liberty City” in the setting of 3 GTA games, but they really represent New York City.
Miami is named “Vice City” and has its own game. Liberty City is represented by a district named “Little Haiti” and is a crime-ridden warzone fought over between Cubans and Haitians. You should play it sometime, see what you’re missing
The LA Times reports from California. “Escondido homeowner Rogelio Alvarez paid $485,000 in February 2006 for a three-bedroom home, moved in with his wife and their two children, now ages 2 and 8, and began making the $3,700 monthly mortgage payments, which include property taxes and two loans, one at 11% and one at 8%. Then business slowed. Alvarez said he has tried to find extra work but can’t make enough money to meet payments.”
Dude, say it ain’t so! Let’s put this on the back of a matchbook. If we calculate 8% interest on $485k we come out with $3233.33 a month. But you have blended loan, let’s just get to the bottom line. 1.1% taxes which are pretty much standard in CA means you have $445.00 in taxes each month. This alone totals $3678.33 per month payment, and we are only talkin’ IO. What you mean is your rental payment is $3700 per month. Give it up dude! Just leave the keys under that front door mat.
He is too dazed to think straight and do anything sensible like leaving the keys and walking away. He will simply patiently wait till he gets kicked out, all the while trying/pinching every penny to flush it down the black hole of his mortgage.
I wonder if Rogelio makes $150K a year as a landscaper
I am somewhat in awe of the sustainability of prices thus far. Though I NEVER give much creedence to Zestimates, I just took a look at Zillow and some recent sales comps in Northern NV. It shows many GF’s still overpaying. The graph is showing prices ratcheting back up towards the all time highs. While transactions are down, apparently prices are trying to make a comeback, albeit short lived.
“I am somewhat in awe of the sustainability of prices thus far.”
Here are some reason(s) why prices have not yet fallen in many places drastically as we all know they should.
1. Subprime loans come in all shapes and flavors with reset dates varying from months to a few years. This results in the foreclosure rate of the houses to resemble more a healthy stream and not a rushing river.
2. Most $screwed borrowers who bought at astronomical prices will never lower their sale price because, even if they wanted to, they CANNOT do so since they are limited by the price of their mortage. This is especially true for mr sub-prime with no down payment. The most they can do is wait to be foreclosed on by the bank/lender.
3. Because of the cascading manner in which rates are resetting all across the country, banks seem to be able to digest the initial onset. However, their (lender’s/bank’s) books will sooner or later be filled with foreclosed houses beyond the number that they can handle. At that point lenders/banks will have to cut deals with anyone willing to buy at bargain prices.
I forone am willing to wait for a long time and would not consider buying a house other than a bank owned property at some significant discount. We will get the low prices form the lenders and banks and not from the screwed borrowers.
I agree with what you are saying Peter. I guess I am just surprised by the number of houses still selling at super high prices. I am led to believe there must be a lot of funny money still flowing out of the spigot. No matter how much I read, I am still amazed by the outrageously high prices in proportion to what people can feasibly afford based on income levels reported. I never thought this could last this long. I’d like to see a graph of the average credit card balance of the american consumer over the last few years. I believe it must be skyrocketing at this point.
“Nobody ever went broke underestimating the intelligence of the American public”
H.L. Mencken
Keep in mind that in each sale, depending on how long the seller was in the house and if they didn’t HELOC it, the seller is now flush with cash. I think this is the funny money of which you speak, not to mention still lax lending standards.
To me, a lot depends on what those people are doing with that cash. I’d love to see a study that suggests what sellers who bought before 2000 are doing with any equity that comes from a sale.
I suspect most are throwing it back into the RE market. IMO, it takes a different breed who are willing to sell and go back to renting. You just aren’t a grown-up if you don’t “own”, afterall.
BTW, another reason I suspect this is due to homes that I see that are selling in Portland. I’m surprised at the reality that > 20% is put down on some of these homes.
One such home recently sold for just under $800K, but the new loan amount on it is $640K. A reasonable person, IMO, wouldn’t have paid more than $400K for it.
I can think of a much better use for $160K, but if they stay for 20 years who am I to judge? Problem is, I bet they stay less than 4.
used to be 8k, right? avg now must be over 10 or 12 - some people really skew the avg, though. They are under 70-80k. No way for joe 6-pack to pay that one down in this -or next- decade
So, wasn’t CA govt in trouble already. What is going to happen when property taxes fall?
ppl will start b!tching that they don’t have enough $$$ for schools, that’s what!
“Now a season of slower sales, flat appreciation and teaser-rate mortgage adjustments has borrowers struggling to pay their bills, and defaults and foreclosures are on the rise.”
This is the most twisted logic. If someone is in a home they can really afford, none of the above should result in increased defaults and foreclosures. The MSM just can’t go there yet…a lot of people bought houses they cannot afford. No way around it.
Article in Parade magazine today, front page of their website. Pessimistic in a nice sort of way in the blurb “The Lowdown on Today’s Market”. Surprised to find a series with darn decent information for MSM. Does mention Tx is still looking good, but from where I live (outside Austin) maybe not so much as last year.
The Tribune should be embarrassed for it’s lazy reporting. A real estate round table interview with 6 Realtors. Just plain worthless.
At least Lenny Jones is trying to be objective.
http://centralcoasthousingbubble.blogspot.com/
I could only roll my eyes while reading it. Why not ask a commisioned suit salesman if he thinks it’s the right time for you to buy a suit…
arroyogrande….. LOL ..So right on you are This sort of rah rah for real estate reporting went on during the mania .I use to read front page new articles in which the reporter interviewed a screwball investor who just purchased 5 homes in 2 years and that investor went on and on about how good real estate investment was . The talking points were always the NAR/realtor myths that they made up to justify the run-away false market that was due to faulty lending .
I’d love to see a class action lawsuit against the media for reporting with a bias towards their primary advertisers (real estate, etc.)
If Americans are making investment decisions based on “news”, and that news is claiming to be balanced and journalistically impartial… and it ultimately isn’t. Those investors have a very legitimate legal gripe with the media. This is not only misrepresentation, its professional malfeasance and collusion.
I’d say the only way to restore any sort of integrity to the American media is for a case like this to scare the bujeezus out of some big media companies.
Also , during the RE mania I usually never saw these newspaper articles offering a counter-view to the rah rah for real estate stuff .
Lets face it , there were so many industries that were profiting from real estate . Look at how many TV shows like “Flip that House ” or ‘Designed to Sell” were sponsered by Home Depot or lenders or realtors .
By 2005 people were spending their weekends at Home Depot and you could count on the fact that the advertisers were pushing home improvements or home improvement loans or flipper fix-up properties as a sure way to gain profits or a must to keep up with the times .
The industry tried to turn real estate into the clothing industry in which styles became outdated within 6 months to 2 years .
There was a major campaign going on that brainwashed the masses during the housing mania that was backed and promoted by the advertisers that had nothing to do with objective reporting .
How many articles did you read about the crisis in unaffordable housing during the RE boom or a challenge to how unstable the market had become because of to much speculation in the RE market ? The housing boom was really a case of brainwashing the public .
“The housing boom was really a case of brainwashing the public”
Yup. It almost sounds like a bubble or a mania.
They should continue to push this mania, by creating a network where they run “Flip the house”, “Designed to Sell” and “Trading Places” non stop. They should hype the idea that you can sleep in your house and make money while doing so! Yes, while you sleeping in your bed, it magically keep appreciating whether you like it or not. Pretty soon you don’t have to get out of bed to go and make a living! Imagine your house of $300K appreciating at 10% annually. Within 3 years, you can start your first refi and continue to refi annually. With your new found money you are now able to take your kids to that awfully tacky place in Florida call Disney World every summer. Okay, enough of my rant.
lenny jones the realtor from san luis obispo lists home at peak real estate prices,thats how they all get there listings,stroke the seller tell him you can get him 800k,and then negotiate hard to get them to take much less.THE REALTORS ARE listing homes at high prices so they wont loose the listing to the next guy.MEANWHILE ZILLOW HAS THE HOME I SOLD IN 04 PRICED 200K MORE THAN I SOLD IT FOR…thank the lord i know the zestimate is way off.
“thank the lord i know the zestimate is way off.”
I suspect many people are not as lucky as you. These poor folks look at zillow and glow thinking that they have become filthy rich. All along, their reset time bomb continues to tick and the foreclosure episode get closer and closer. But the FBs continue to smile at the zillow zestimate.
The contagion spreads from Sub Prime to “A” and “Alt-A” loans?
http://forum.brokeroutpost.com/loans/forum/2/120856.htm
(Broker’s outpost on Alliance Bancorp)
There should be more news Monday, stay tuned…
It is amazing how these debt zombies are giving up their dream houses when they could not afford to be in them in the first place while driiving up the prices for legitimate buyers with a down payments. Kick them out in the streets.
I’m sickened by the ignorance and racism in these comments. A hispanic surname somehow means that Rogelio MUST be illegal and employed in construction, landscaping or the service industry?
My name is Esperanza. My husband and I own a home in Corona. We are both proud Americans - born here and living quite legally, thank you. We are both self-employed professionals. He is a financial consultant and I am a graphic designer.
Many of you, however, would probably look at my husband and I and gladly assume we’re illegals who can only afford to live in our home because we’ve got a few other families helping us out. It’s laughable that those of you who are gloating most loudly about ignorant borrowers are making your own ignorance painfully clear.
Your ignorance only detracts from the points you’re attempting to make.
Sir, one in five Californians with a Hispanic surname is an illegal immigrant (based on the 2000 Census’ count of 12.5 Latino Californians and 2.5 illegal immigrants, the vast majority of whom are Latino.) It’s not a slam dunk that Mr. Alvarez isn’t properly documented, but it’s not a sucker bet, either.
You should be especially angry about illegal immigration.