It Seemed Like A Good Bet, But They Got It Wrong.
The Telegraph reports on Colorado. “For Cathy Busby, May 1 marked a personal ‘Mayday!’ as she was sucked into the housing crisis sweeping the United States. On Tuesday, she went into arrears on her mortgage after her monthly repayments soared by 40 per cent. The hospital administrator will lose the three-bedroom home in the Denver suburb of Montebello that she bought 11 years ago, unless she can reach a deal with her lender.”
“‘It’s a terrible thought that I could lose it all,’ she said on the first day that she failed to pay her interest-only-mortgage.”
“These western states witnessed a decade-long boom in house prices, fuelled by their popularity as places to live. ‘Folks thought that prices would rise indefinitely,’ said Tom Rooney, a Denver property entrepreneur. ‘It seemed like a good bet, but they got it wrong.’”
“Two years ago, Miss Busby took out a re-finance mortgage to cover her existing car, home and student loans. She borrowed $170,000, the value of her home, at an interest rate of 7.6 per cent (or $1,076 a month).”
“She knew that rate would increase after two years, but planned to take out another loan at that point to avoid the extra charges. However, when she had her house revalued a few months ago, it was worth $125,000, falling with the slowdown in the market.”
“Unable to refinance the original loan, she must now pay a higher rate of interest, 10.6 per cent, which means payments of $1,501 a month, a $425 increase. ‘With my other outgoings, I can’t afford that,’ said Miss Busby, a divorcée who earns $4,000 a month before tax.”
“For other Montebello residents, such as the family that walked away from their debts and left the house next to Miss Busby empty, it is already too late. The same is probably true for Harvey Ryan, who built his home 32 years ago. ‘It breaks my heart,’ said Mr Ryan, who suffers from dementia.”
“He took a loan of $115,000 four years ago and now his home is scheduled to be sold at auction this month as he cannot meet the monthly charges of $1,052, nearly half his disability income and pension.”
The Denver Post. “Hundreds of thousands of home valuation notices are hitting mailboxes across the state, leaving some homeowners wondering what county assessors see that they don’t.”
“County assessments show home values rising on average anywhere from 3 percent in Adams County to about 11 percent in Boulder County over a two-year period ending June 30, 2006.”
“By contrast, Realtor tallies and other counts show anemic, if not declining, home prices, with the typical metro home now taking 119 days to sell and metro Denver foreclosures rising at a pace of 30 percent a year.”
“For the current cycle, the 18-month time frame stretched from Jan. 1, 2005, to June 30, 2006, when the market was stronger than it is now. ‘Our value is approximately one year old,’ Arapahoe County assessor Corbin Sakdol said. ‘During that time period, the market was possibly better than it is today.’”
“Many areas saw declines, triggering something Adams County assessor Gil Reyes thought he’d never see, homeowners protesting fallen property values. That typically means lower taxes, but it isn’t good news for borrowers desperate to refinance out of adjustable-rate loans on homes they paid too much to purchase.”
“‘We have received a lot of phone calls from people wanting to know about why their value went down. A lady filed an appeal because she was upset she had lost equity,’ he said.”
The Rocky Mountain News. “The median price of a Denver area single-family home was $248,000 last month, down slightly from $250,000 in April 2006.”
“Mic Ortega, a broker in Lakewood, said a number of his clients gave up selling their homes in January, February and March because the weather was so bad but are sprucing them up to put them on the market.”
“Broker associate Connie Telfer noted that she and her husband recently bought two homes as investments through short sales, where the lender takes less than the full amount on the loan on a house facing foreclosure.”
“‘It’s a perfect time to buy if you have money to invest,’ Telfer said.”
The Greeley Tribune. “Privacy, these days, is harder to come by…as Greeley recovers from an unprecedented growth boom that made it, along with the rest of Weld County, one of the fastest-growing metro areas in the country, according to the U.S. Census Bureau.”
“‘Everywhere you look,’ Joyce Warehime said, ‘it’s houses.’”
“Even when the boom hit Fort Collins and Loveland, Greeley and other areas, including Windsor, lagged behind, and city officials were anxious for the growth. They wanted it. They practically begged for it.”
“City officials began to do little dances when the growth rate, measured by planners on how many new housing units are added, reached 2 percent in 1995. In 1997, it hit 3 percent. Now 3 percent is considered a robust rate, a rate that means a ton of building activity and new homes are popping up everywhere. After a couple decades of never reaching 2 percent, Greeley reached at least 3 percent six of the next eight years.”
“‘It used to be slow in the wintertime, and so you’d get some other projects done,’ Greeley Planning office director Greg Flebbe said. ‘It hasn’t been that way for 10 years.’”
“An voter growth initiative, Amendment 24, helped open the floodgates. The fear of ‘get it while it’s hot’ created what planners called the great land grab of 2000. Cities in northern Colorado grabbed as much land as they could. Cities threatened legal action against each other, including Evans against Greeley over a parcel of land.”
“‘We annexed more that year than had been annexed in the previous 15,’ said Becky Safarik, a planning office assistant.”
“Once that land was available, developers moved to put homes on it before others did, meaning many were eager to move as quickly as they could on it.”
“The boom has ended, at least in Greeley, where the growth didn’t even reach 1 percent in 2006. Half-empty subdivisions out west are more common than planners would like these days, and yet developers are pushing Greeley’s western border.”
“Empty lots that are building-permit ready, meaning you could stick a home on it tomorrow, number into more than 2,500. That’s generally at least 10 years of inventory, Flebbe said, and that number doesn’t take into account all the vacant homes from foreclosures or homes that are up for resale.”
‘The fear of ‘get it while it’s hot’ created what planners called the great land grab of 2000.’
The Tribune mentioned this is the beginning of a series on the build out in Greeley. IMO, this article goes a long way to explain many questions raised about why Colorado is where it’s at in the cycle.
I believe that the strong psychological factors that help push people to buy when prices were going up will keep people away as they go down.
In reading the article I got the impression that land was in limited supply in Greeley for some reason…maybe wedged between the rockies and a river or something. Google Earth shows it smack dab in the middle of nowhere.
Check it out for yourselves. It is beyond belief to think that a land grab would occur there.
I was talking to a Realtor(tm) at a new development in Fredrick CO (S of Greeley N of Denver) back in ‘98. They were building houses on 60′x 100′ lots. I asked the agent why the yards were so small and she told me it was a “lack of land”. I took her to the window and pointed to an oil pump in the distance and mentioned that that was probably the only object between us and Kansas a few hundred miles away. I asked again “why are the lots so small?”, she had no answer.
Greeley has a shortage of jobs and shortage of other things as well, but not land.
>>Greeley has a shortage of jobs and shortage of other things as well, but not land.
That reply above was clipped: Testify!
For people who live elsewhere, where water is not an issue, you might not find the idea of a small lot appealing. But, after spending a small fortune trying to keep a lawn alive in the high desert, you might find the small yards more attractive.
“…and shortage of other things as well, but not land.”
Colorado had the lowest rate of obesity in the USA according to the papers recently.
yea - and something you should know about Greely. There is a livestock feedlot on the outskirts of town. The entire town (not kidding) smells like cow manure. I went to school in Ft. Collins. Every time we would pass Greely, the feedlot would make it’s presence known. I can’t imagine living there for a week let alone a year.
Its not as bad as it used to be. Most of the feedlots have moved east to Ft Lupton. Still can be smelly, though.
I’ve been there recently- it still smells, and has the flies to prove it. And there was absolutely no shortage of land- it was just rampant speculation, combined with an irrational reaction to the sales tactics and peer pressure (”buy now or be priced out forever,” “only losers rent- buying is the best investment you can ever make”)
There’s a town like that in PA called Paradise. My youngest has made it one of her sayings: “the sweet smell of Paradise”.
‘The fear of ‘get it while it’s hot’ created what planners called the great land grab of 2000.’
This is happening in WA state right now. My frustration level peaked when I read today that home prices are up 20% YOY in Lewis (meth) County. I don’t have the raw land numbers but people are flipping raw land for profit. I’ve really had it with this bubble. There are so many rookies buying land and homes with the help of the ever continuing funny money that I don’t know when this thing will run out of steam.
rant off
Some developer took a late fifty/early sixties rambler a few blocks from my house and subdivided the lot into two 6000sq footers, fixed up the house and is building another one on the back lot. The remodeled one is going for $800,000. Who knows what the wishing price will be for the new one. This is in a nice suburb of Seattle. But the lot is nothing special. No view, no sidewalks and on a fairly busy street. Looks a little out of place for the quality of construction. If it sells for the asking price I will be very, very surprised.
This bubble has got to be topping. I’ve given up on caring.
As a fellow NW’er, I agree. Yes, things are definitely slower here, but I’m still surprised at what people are agreeable to in this market.
A house that was bought a year ago and recently put on the market again just sold for $80K more than last year’s price, a 34% gain!! It had NO work done to it and looks across a very busy street into a market’s parking lot.
Why do people assume when buying that they owe a higher price than what the current owner paid. Really p!sses me off. And then, they give them 34% more!?! WTF?
My only consolation is that they do have to pay cap gains and maybe it’s someone leaving Portland.
Just looked up the loan amount. You got it, 100% financing.
Back on the market in 6 months is my prediction.
I want a stop to this zero down crap. I don’t care about credit scores. The no money down just juiced the market to no end. There are an incalculable number of people willing to overpay when they don’t have to part with a dime of their own money (should they even have it). Of course, the whole industry does NOT want zero down to go away, for that would result in a bigtime correction. The lending industry, REIC, MSM, politicians, big business, etc. want this bubble to continue.
“The hospital administrator will lose the three-bedroom home in the Denver suburb of Montebello that she bought 11 years ago, unless she can reach a deal with her lender.”
11 years!! Borrowing the entire equity??!!! And the guy with dementia who built his home 32 years ago! This ain’t just happening to the flippers who bought just last year. It’s the re-fi’s, the debt swimmers.
Man, it gets worse every day.
Not only that, but she borrowed money from the house to pay down debt for a depreciating asset (car) and student loans (which typically are long term low interest loans).
Good effort, but wrong approach to reducing debt.
“She knew that rate would increase after two years, but planned to take out another loan at that point to avoid the extra charges. However, when she had her house revalued a few months ago, it was worth $125,000, falling with the slowdown in the market.”
Too many people beleived that low rates would be here forever, they learn the hardway that they aren’t.
That’s like the mortgage broker who wanted to sell me one of these mortgages in 2005. He kept harping on the initial few years and how low the interest rate was, and at the end of that, you could “just refinance”.
It was like talking to a rock as I tried to convince him that if ARM rates go so high that I’d need to refinance, then all the other options would be high as well. “No, no! You can get rates as low as 2.9%!” Today, right, how about three years from now? “Yes! I’m sure it will be no problem.” I should have got him on tape. Then again, I should have expected that from a broker who didn’t know what COFI or LIBOR were.
Yep NoVa, I had a similar argument several times on other bboards a few years ago. People would INSIST that it didn’t matter what their interest rate would be 5 years out, because they would be moving before then. And I would insist that you can’t ignore ANY years of your contracted payments, because that’s equivalent to betting that prices will rise and/or rates will stay low. People just didn’t get it.
“Too many people beleived that low rates would be here forever, they learn the hardway that they aren’t.”
Today’s rates are low… These poor people have only themselves to blame for being foolhardy.
Is Portland a second home market? Actually it is a second home market.It started in 2002 after 9-11 and has continued to gain momentum ever since.
Many folks have come here seeking a smaller city life environment. An environment that has all the amenities that a larger City has, but on a smaller more satisfying scale. Frequently properties are bought and used as weekend getaways or are rented until retirement. In January, our client, a scientist from the Smithsonian, bought a condo in the old Port, just because she loved the city, and wanted to enjoy some vacation time here. Our city is incredibly vibrant and attractive to many who visit here.
Vacation Homes
A record number of vacation-home purchases was offset by a sharp drop in investment-home sales, bringing down the overall number of second-home purchases in 2006, according to the National Association of Realtors. Vacation-home sales were up 4.7% to a record 1.07 million homes in 2006, compared to 1.02 million in 2005. Investment-home sales dropped 28.9% to 1.65 million homes in 2006, down from 2.32 million in 2005.
According to the NAR, The typical vacation-home buyer in 2006 was someone 44 years old with an income of $102,200. The report stated that 79% of vacation-home buyers wanted the property as a vacation or family retreat, 34% wanted to use the property to diversify their investments, 28% planned to use it as a primary residence in the future, 25% were motivated by tax benefits, 22% intended for a family member or friend to use the property, 21% said they bought because they had extra money to spend, and 18% plan on renting the property to others.
The most popular location for the homes was in rural areas; 29% of the homes were purchased in the country. But 24% were located in resorts, 22% in a suburb and 10% in an urban area or central city. Sixty-seven percent of the homes were detached single-family houses, 21% were condos and 8% were townhouses or row houses.
http://www.realestateinportlandmaine.com/newsletter.asp
ABC=Always Be Closing!
Portland Oregon has maybe 8 weeks of sunshine and non rainy weather a year. At the Rose festival held in July most people are wearing rain gear over heavy clothing. I left 30 years ago and have NEVER regreted it. Rainy, cloudy and gloomy.
Although there’s no sales tax (I assu me that’s what you’re referring to), OR has one of the highest income tax rates in the country. Plus you can’t use the lower fed rates for cap gains (not sure about dividends).
And second the comment about the miserable weather. It starts to get to you after the first year or so.
Catherine, what I wonder is…are all these people greedy SOBs, or are some just trying to survive? Sure, a lot, and I mean a lot, took the equity and ran to the nearest cruise line. However, I have to wonder, did the guy with dementia just screw up or has 32 years of crappy inflation just eaten away at his income? I know we get on all the FBs here, but I wonder how many have to borrow to just survive. Hey, we all know that real inflation is running at 12%, not the microscopic, antiseptic, greatly underestimated amount the gubmint puts out that isn’t even worth the time, effort, or recycled paper it is written on.
OCDan,
I have wondered the same thing…with all the decent, middle-class jobs with benefits that have been outsouced, and the paltry to non-existant raises that those with jobs have gotten, I wonder how many refi-ed just to maintain the illusion of a middle-class lifestyle? I think with the refi’s causing people to go belly-up, what we seeing is the beginning of the end of the formerly majority middle class in this country. When the smoke clears, it will be clear how few really middle-class folks are left. I expect the majority to be working class (if they’re lucky) or less.
Reply to Spike’s post:
Thank you corporate America!
Sarcasm off.
Since 1990, my annual, so-called “pay raises” have been around 3%….(I’m in the part of the business that is considered a “necessary evil”, not a “profit center”).
This begins to suck after 5-6 years.
I have 25 years plus of experience in a job that experience really matters. But even after the so-called “promotions”, I’m making less money in adjusted dollars than I did in 1987-88
The moron paid off a Student Loan with a MEW!! The height of stupidity proving she didn’t take a single accounting or finance class with that loan. The reporter should have shown us the terms and recourse of the student loan she replaced with a Option ARM.
If this borrower makes 4k amonth before taxes than they could pay the $1,501.00 per month. Because this borrower took out alot of money from her home she got the benefit from that money . For this person to think they can just walk on this obligation and claim they are a victim is BS . In this case I hope the lender goes after the amount she owes by attaching wages .
To me this case is different than a party that bought a house and the value immediately dropped and they never took any equity out .
175k for a car and student loan?
what kind of car, or what kidn of student laon bills to only be making 4k a month….
something doesn’t add up methinks
“Miss Busby took out a re-finance mortgage to cover her existing car, home and student loans”.
So, she already had a MEW taken out and she needed another one to pay for the first one?
“She borrowed $170,000, the value of her home,…her house revalued a few months ago, it was worth $125,000,”
So the bank bought her house from her, and over paid by 40k doing it. She did get the money and spent it, right?
The Bank’s got the big problem here…..
Well at least now she can declare bankruptcy and not have to worry about paying off her student loans (which are excluded from normal bankruptcy)….and she may even get a car out of the deal.
Montebello is not they kind of area you’d find a huge amount of flippers in. Refi/cach out addicts maybe but not flippers.
I feel a little bad for these people and those like them. But they were gambling, plain and simple. Sometimes you win, sometimes the house does (pun intended).
And was it really necessary to tell us that Mr. Ryan suffers from dementia? Or is it supposed to tug at the heartstrings? And should someone with dementia really be making big financial decisions?…
Somewhere in the back of my mind a voice tells me that a man who can prove “dementia” (or most any other intellectual deficiency) can find a lawyer who will take his case.
Not sure but I don’t think you can hold a mentally retarded person to a contract……or someone with “impaired cognitive abilities” either.
A contract requires a ‘meeting of the minds’. However, considering how demented many brokers are, maybe they DID have a meeting of the mind…
Do you remember the foreclosure hot-line article in Denver? They reported 75% of callers were refis.
It just goes to prove that lenders didn’t care if the borrower had dementia or could pay back the loan or if it was the right loan for the person .
I got to say when I was in lending I would refuse alot of loans based on what the reason was for the loan . One time a older lady came in and wanted to take out a loan she qualified for . I would not let her have the loan because she told me that she was going to give the money to her dead-beat boyfriend who had taken all the other money she had . As far as I was concerned this lady wanted someone to stop her because that was the only asset she had left after working a hard life .
I even wrote up a turn-down letter for the lady so she could show it to her creep boyfriend so he would stop trying to get her equity . I asked her if she was prepared for the fact that her boyfriend might head for the hills if there was nothing else to get from her and she nodded yes . Now that’s lending !
I think I see two tiers of people in trouble.
First tier, the obvious…the naive speculator/flipper with multiple houses all bought w/ liar’s loans, etc.
Second tier, the drowning in debt people, desperate for whatever reason (school loans, cars, vacations, home improvement, Kate Spade bags), who had no intention of making a killing in real estate…just had to get cash out of whatever equity they had.
These two tiers working in tandem…however, I’m just wondering whether that second tier is very under-reported and will actually turn out to be the biggest problem.
Being that flipping is pretty rare in Colorado, its no surprise that the second tier is the lions share of the trouble. You have to keep in mind that prices here were barely keeping pace with inflation.
You need to add another Tier for the people that had a good income and not much debt that just decided to raid the piggy bank because “hey, everyone is doing it”. Not really victims, not really greedy, just going with the flow.
We’ve been seeing more and more of this tier popping up these days
I used to wonder where people were getting the money for the $5000 TV’s, the Hawaiian or Florida vacations, the fancy cars, etc. DiTech!! No equity, no problem, you borrow up to 125% LTV!!
I was waiting for a Fla. thread ,but looks what may possibly the first tropical system off Georgia…I’m real curious what will happen if the season is even half of the predictions reported. Anyone say the end of whatever selling season was left…Hmm Huh? Say goodnight Irene.
Working in the industry that I do “credit card debt”. I am confident that that second tier you mentioned will be right on the money.
People are so consumed with the greed of material things, lack of education of finances and lack of foresight, there is NO doubt in my mind that this second tier is going to be bigger and greater than the first tier.
And many lenders let you borrow up to 125% LTV!
And many lenders let you borrow up to 125% LTV!
And remember…this 125% percent is based on an appraisal which is usually 18/20% higher than fair market because it’s prepared by incompetent split fee hacks makin’ $125.00 per assignment.
hehehe…$125.00 to measure the value of a six-figure “asset”
Man, is the system fooked up or what.
That just goes to show that the mantra “Only the people who bought in the last two years MAY be in trouble” that the RE bulls espouse doesn’t hold water.
Exactly! The hidden majority.
The equity extractors.
Imaginary equity extractors
I prefer the term “equity liberators” (thanks LAY!).
“Two years ago, Miss Busby took out a re-finance mortgage to cover her existing car, home and student loans. She borrowed $170,000, the value of her home, at an interest rate of 7.6 per cent (or $1,076 a month).”
This is a prime example of what happens when you make ‘affordable loan’ or loan for quote ‘affordable housing’. You assume that the person will be responsible and appreciative, however, these people are where they are for one reason only and that is they are programed to buy items on the ‘How much’a month it a’gonna cost me’ plan and will spend every last dollar that passes through their hands. They have ‘NO’ financial discipline. I’ll say it again, the really big bang is going to come when they have no way to borrow on their house ATM to pay their CC debt; and CC debt doesn’t grow at 11% it’s closer to 30% for some. Banks are going to be writing down a lot of debt in the not to distant future.
Warren Buffet says the housing implosion will not affect the US economy.
maybe he thinks it will affect the chinese instead
Just when we thought we had this bubble all figured out, you have to factor in all the empty lots that are building-permit ready.
This bubble is soooooooo massive it is bigger than any of us could even have imagined.
This just in….Yep, we are running out of land.
There’s a for sale sign on an empty lot down the block from my parents house. It’s the only lot let on a nice block but it’s been there for a while.
Even the longtime owners are trying to get out at the top, thus contributing to the inventory glut.
Good point, Bantering. From the point of view of long-time owners, we still ARE at the top. This suggests the topheavy tower will topple, not just sit there.
administrator?
the janitor should have more sense
She’s either lying about her income, or her position. There is no way an administrator makes only $48K per year, even in Denver, where pay sucks. Maybe it is more like, administrat——-ive assistant.
Actually, $48,000 per year isn’t really all that bad. A person making $50,000 per year is in the top 65 percent of wage earners in the country.
“‘It’s a terrible thought that I could lose it all,’ she said on the first day that she failed to pay her interest-only-mortgage.”
One of the problems is that a lot of the first-time home buyers are former renters, who forgot that if you own your own house, you also have to pay the insurance and propety taxes on it — things that their landlords took care of while they were renting.
Not to mention utilities like sewer, water, trash, maybe heat/hot water (lots of rental include that), etc. Yes - I’m sure it’s an eye-opener for many who haven’t done their research.
Better yet, they believe that Tax Break = No Property Taxes. Good luck with that one.
“Better yet, they believe that Tax Break = No Property Taxes. Good luck with that one. ”
Yep, my wife’s step sis pulls that one all the time. “But if you have a $1,200 mortgage and you pay $300 per month in taxes and interest, well your really only paying $900 a month!”
No matter how many times I tell her about deductible from taxable income, she goes glossy and comes back with that. She doesn’t do her own taxes - big surprise.
Renters still pay insurance and property taxes. These expenses just aren’t itemized.
My renter’s insurance is about $250/yr. This included some special riders.
To insure the house I live in would run $200 a month or more.
The property insurance is priced into your rent. No owner in their right minds would charge you exactly the principal on their loan.
no, the property insurance is “taken out” of the rent. Rent is not determined by the owners costs, it is determined by the market rate. There are plenty of owners who are not even covering the principal of their loan by the rent.
Where I live we have people that just purchased 3/1 WWII homes in not so good shape for 500K and are now renting them out. They try to get 2k a month but it’ll never happen. What they end up with is around 1600 month.
Even at the 2000 month, I doubt that is covering piti.
There are plenty of owners who are not even covering the principal of their loan by the rent.
Like I said. No owner in their right minds.
You’re paying it. You just don’t see it as a line item. It’s priced into your rent. Sure, some landlords are bleeding cash and not able to meet their obligations. Yours may be one, but if so, he won’t be a landlord for long, and you won’t be living there for long.
Heinlein said it best: TANSTAAFL.
Avoid Strong drink. It makes you shoot at tax collectors…. and miss.
She can’t even pay an IO mortgage?!?!
Bitter Homeowners!
have a friend who is just east of boulder that is selling his sfr that appraised for $190k three years ago for $110K. meanwhile there are several hundred “luxury” urban condominiums selling for $1000 per square foot in downtown boulder. could this represent the hedgefund blowoff from the stock market, i’m totally confused. this is boulder, colorado, not manhattan. guess the rich are getting richer. you can see the smoke over the horizon while everyone in boulder is gorging on organic margaritas at the oxygen bar.
boulderbo,
Where does your friend live? The only thing I could imagine selling for $110k in Boulder County is perhaps a 1br condo.
I used to own rental condos in Boulder, but sold them a few years ago. According to the ads I see online the prices are flat to slightly down over the past 3-5 years, but nothing like the drop you mention (190k->110k).
Bill
bill,
you haven’t been to longmont lately, serious trouble going on out there. bottom of the market dropped from around $200k to just over $100k. erie, weld county, brighton even worse.
Only a matter of time then before the fall in Larimer County.
Inventory just past 700 in Boulder too. There just behind the curve.
So far my condo ‘hood in Boulder is hanging tough in the 250k-300k+ range, surrounded by 500k houses. I wouldn’t mind picking up one of those Watersong townhomes that back to Lefthand Creek in Longmont if they crashed down to under 150k…
I don’t follow Longmont. $110k for a single family home? Wow, that’s amazing.
I don’t own any investment real estate anymore, and don’t intend to in the future. I found it was not worth the hassle to me.
Bill
I took a peak on realtor.com. There are 40 houses under 150K in Longmont. They all look very old (i.e. built in 1930) and look like they need plenty of TLC. Then again, comparable properties in San Diego would have fetched 300-400K not too long ago.
LMAO,
Your comment is prose to me. Def Jam Comedy Boulder style!
Two years ago, Miss Busby took out a re-finance mortgage to cover her existing car, home and student loans. She borrowed $170,000, the value of her home, at an interest rate of 7.6 per cent (or $1,076 a month).
Sounds like she got hit with the Stupid Stick……
No,… the “wealth effect”.
or the “debt effect”.
Paying for that pre-2007 vintage car and college education over the next thirty years is going to look mighty “smart” in a decade or two. I sure hope her car is Japanese –that way it stands a (very slim) chance of surviving the loan.
WHERE IS THE CALL FOR MUCH LOWER HOME PRICES SO PEOPLE CAN AFFORD TO MAKE THE PAYMENTS?
HHHMMMMMMMM……. “Experts”????
Yup, you don’t need a 500K mortgage to shoot yourself in the foot, but it helps.
“It Seemed Like A Good Bet, But They Got It Wrong”
LOL. This could be the theme song for the whole mess.
… or any mess.
I find it hard to believe Busby makes only $48,000 gross annual income as a hospital administrator. Methinks the article overstates her occupational title, as probably did the HELOC application along with her income.
Assistant *to* the Regional Manager
She’s probably not THE hospital administrator, just one of a few thousand. Any wonder why health insurance is so absurd? (Maybe we can refi our health plans with an ARM or HELOC) Or she might be THE administrator. Salary to cost of living in Denver is terrible, so who knows, she might just run the place.
If true, that’s kind of sad. I live along the Front Range and make make nearly three times her salary, but I have nowhere near the responsibilities of an administrator for a healthcare facility. Bummer for her.
You guys hiring?
$48k is really low for an administrator even in Co. Chances are she’s just a specialist admin in a particular area. A beginning admin specialist makes about 40k a year here in Sac for example.
More likely assitant to the janitor, judging from her finincial skills.
It’s probably an animal hospital.
“‘We have received a lot of phone calls from people wanting to know about why their value went down. A lady filed an appeal because she was upset she had lost equity,’ he said.”
Hey DOPEY homeowner, show me the price guarantee.
Bwahahahahaha….The Blame lays in the unethical REIC. If these greedy thugs just cared one ioda about people then house prices would be still affordable and dopes would not be able to get toxic loans to bid up the house prices in the stratosphere.
This is unfolding exactly how I believe it would. Of course it went on for about 2 years longer than I ever expected due to these outrageous lending schemes.
Bring on the pain. It is a welcome sight for once.
A lady filed an appeal because she was upset she had lost equity
Almost unbelievable. How can someone be so stupid. First off, it’s obvious that the less your assessment, the less tax you pay. That can be a nice chunk of savings in some places. Secondly, the assessment and a sales/purchase appraisal are completely different things. They only track each other roughly, and the assessment usually lags by a couple of years in most jurisdictions.
What the ignorant lady doesn’t seem to understand is that the county tax assessment is not what the appraiser looks at when the house goes on the market. Nor will any sharp buyers. They want true market value, which might well be set below whatever assessment is given.
In fact, an overly high assessment can cause several problems. Firstly, it can turn off some buyers when they see the higher annual taxes that are based on it. Secondly, it can lead to the owner setting too high an asking price, a price that will be unsupported by the market. Thirdly, even if you find a buyer who overcomes (or ignores) the first two items, the appraisal might well come in low and scuttle the sale!
Personally, I hope for the opposite: a lower and lower assessment on my house each year. Doesn’t seem to ever happen, though.
“First off, it’s obvious that the less your assessment, the less tax you pay”
Actually, in Colorado, it isn’t “quite” that obvious. Way back in the late 80s or early 90s, back before I moved there in ‘93, they passed this law called “the Tax Payer’s Bill of Rights”. It locked government spedning, on all levels to the level x number of years prior, adjusting for inflation and population. They could collect more, but they couldn’t spend it without voter approval.
Every year of the boom times of late 90s, they’d collect more taxes, then run a ballot initiative asking if they could keep and spend it. Each and every year, we’d say “NOPE! and we’d get it back as part of the next year’s tax return.”
So, my house that I bought in ‘93 went from $100K to $140K assessed value. BUT, since the government couldn’t spend the extra money, they kept dropping the mil rate. My taxes were virtually flat, inflation adjusted.
It really is about how much your home is valued compared to the neighbors.
That said, the tax assessment if STUPID to fight higher. It isn’t like a buyer or a lender is going to use it to decide what the house is worth.
I think they revoked it in the State Legislature after the dot.com bust sen the State into a multi-multi-million dollar deficit. ??????
TABOR was not revoked. All they did was allow it a 1 time “catch up” to prior spending levels. What happened was that during the 2001 recession state revenues collapsed. That caused a baseline reset to the new lower level of revenues collected. All last years props did was restore the baseline to the levels prior to the bust. Growth restrictions still apply.
Yup, my property tax bill went up ($100) for the first time since we bought the place in 1999.
Most people would be overjoyed if their assessment was reduced. In the small town in Maine where my husband’s family house is, almost everyone objects when the assessment goes up, as a matter of principle. It’s kind of a sport! If your assessment went up and you didn’t object, you’d feel like a wimp. Ergo, assessments are incredibly low, often a small fraction of selling prices.
“She knew that rate would increase after two years, but planned to take out another loan at that point to avoid the extra charges.”
Can someone please explain to me how taking on MORE debt could possibly reduce the amount of money you pay the lender? This is one of the things about this whole fiasco that boggles my mind. People actually think adding to their debtload is a good financial move. A nation of idiots…
I have friends who have refi’d to consolidate credit cards, car payments, etc. I, personally, don’t think that’s a good way to handle debt. However, the only thing I begged them to do was make sure they went fixed. They did, thankfully.
But now they can make ONE EASY PAYMENT!!! Writing multiple checks is hard work!
OK, everybody raise your hands if you believe that someone that has maxed out on their credit cards, and has a couple of car loans, will live within their means once they consolidate their debt into a 30-y loan.
I have a friend who did this. He was good for about 2 months then turned around and put 12k worth of cosmetic dental work on the cards. This is after he went from a 6% fixed to an adjustable to roll a HELOC into the house too. He’s admitted he’s just treading water. He’s a guru at Intel and has been throught the school of hard knocks growing up an orphan in Ohio. It kills me because he’s normally pretty money savvy.
If he is a guru at Intel he must be under a great deal of on the job stress. Some people handle stress by boozing or drugs, others by overeating and other by over spending.
It’s not that refinancing credit card debt into a refi is a bad thing to do. It’s that living beyond your means is bad, no matter what form of debt is used to finance it. I suspect that with most of these people it wasn’t that some eogenous event (job loss, health difficulties etc.) caused them to go into debt and once they pay that off they’re fine. I have sympathy for them. They’re the people that we created bankrupcy protection for. But alot of these FBs simply can’t seem to live within their means. Now unless you’re living in a refrigerator box, there’s always SOMEBODY who is living within your means. But because people have an expectation to a lifestyle that their paycheck can’t support they get in trouble.
But because people have an expectation to a lifestyle that their paycheck can’t support they get in trouble.
You said it, Jim, that is they reason why the hurt from this mess will go beyond anything we can imagine. As I remember, the first economics class at school was all about hammering into your head that “necessities” are infinite and “resources” are scarce. That is the absolute central point in any human economic activity. You have to make do without some things in order to have the things that are really necessary. What happened in the last couple of years was that we lived as if there was no limit to the resources we could get our hands on throught debt and that skewed even prudent people’s conception of what they could and could not afford. There is always something you would buy if you could. If you think about it, it’s a very human thing to do. Our evolution, or our psyche, or whatever it is, makes us value scarce things and disregard and mismanage what we perceive as abundant. Lenders were practically putting “free” money in people’s pockets with these loans, and house appreciation made them believe they had an escape hatch in case they needed it. Before industrialization, almost everyone had a direct experience of this tension between resources and necessities. Now, we live so far removed from the origin of our resources, and educaction is so lacking, that even trained professionals can’t make this simple connection in their minds, in the same way that Californians keep failing to connect the water that fills their tubs with the snowpack in the sierras. Oh, well, as always, the day of reckoning will come.
great post, cassi.
I’ve been thinking about how necessary it is for young children to learn basic economics…you know, rather than gymboree and making paper maiche jewelry. There is no general public school education (outside of some extraordinary private school situation, I guess) that facilitates hardwiring financial good sense into children.
So much of the folly we are witnessing could have been averted.
So much of the folly we are witnessing could have been averted.
That’s what keeps me up at night, all the damage that could have been averted if lenders were only a little more responsible and borrowers had more sense. As for gymboree and papier mache, I have nothing against them. In fact, I think that crafts teach children a lot about the process of how something is made, about patience, about good and bad results, etc. It’s as good a teaching tool as any other, but I agree that good old economics should be a part of the curriculum as much as math. And don’t forget history.
“Can someone please explain to me how taking on MORE debt could possibly reduce the amount of money you pay the lender? ”
Let’s say you are paying 6.5% interest. Let’s say you could refi today and lock in 2% for the next 3 years. AND, you assume you can refi again at the end of those 3 years for 5%.
Well, as long as the refi fees are low enough, you could save money by refi-ing, even if refi fees are rolled in.
STUPID to do most of the time!!
But it could make sense. Like drawing to an inside straight…. There are times when it is the right thing to do, but you better be getting very good pot odds.
I think a lot of people thought the teaser rates on home loans would be just like with credit cards: when the new big rate kicks in, you just transfer the balance to a different card with its own low teaser rate. It was easy to buy the line “then you can just refinance” from brokers, because people were familiar with that credit card trick (which often really works, or has in the past anyway). Of course no one thinks too deeply about teaser rates going away, in either case.
And for a lot of people, it DID work for a while.
I just realized that there are about the same number of homes for sale in Queen Creek, AZ: 2638 (population 16,628) as Chandler, AZ: 2761 (population 234,939). Wow there must be entire blocks that are on the market.
Maybe Kim Basinger will buy Queen Creek
“These western states witnessed a decade-long boom in house prices, fuelled by their popularity as places to live. ‘Folks thought that prices would rise indefinitely,’ said Tom Rooney, a Denver property entrepreneur.
NO Tom … no money down, no doc loans fueled the boom.
The other thing he forgot was the decade was 1992 to 2002. The boom stalled out around 2002 or so. The yuppie areas held out a little longer, but there were plenty of signs things were slowing down the last few years.
“The crisis will also play a role in the race for the White House as Democrats call for a federal bail-out plan while Republicans say that would be a waste of taxpayers’ money.”
I will definitely not vote for any one who supports a bail-out.
It is kind of ironic the Republicans took this long to draw the line. If they had a record of fiscal responsibility it would be a little more credible. After the medicare drug boondoggle what’s a housing bailout going to cost?
The Rocky Mountain News. “The median price of a Denver area single-family home was $248,000 last month, but down slightly from $250,000 in April 2006.”
Hey San Diegans!
Would a median price of 248K seem “affordable” to you guys?
Colorado,
Denver got nothing on us sleepy Bozeman, Montana median price of $300K (some estimate are as high as $329). We are living large!
David Chapelle, “I’m rich b*tch.”
Cinch
Bring some six figure jobs with you, please. We don’t have any junior it/finance/sales roles at that salary available. you can be a hospital adminstrator at 48K, however.
FWIW, as a former San Diegan I can testify that pay isn’t so great in America’s Finest City either.
FWIW, I can’t get qualified candidates to relocate out of San Diego to Colorado. Salary is their reason. Certainly can’t be the cost of living. Maybe its the weather also because eveyone knows Colorado is arctic and miserable. I never lived in SD, so I am not the ultimate source. But I love to visit.
Maybe its the weather also because eveyone knows Colorado is arctic and miserable.
You’re kidding. Arctic? Try Wisconsin or Minnesota. I know plenty of people who moved to Colorado from the great lakes region and they wax about how “mild” winters are in Colorado. SoCal friends who visit us in the winter are always amazed at how mild it can be here. They expect to arrive to non stop blizzard conditions and are blown away when we get highs in the 60’s in January (not at all rare). Last winter was the coldest one I’ve experienced in 13 years, and was far from typical.
Salary is their reason.
So what is the gap? Are you offering 60K and they want 80K? Or do they want 120K?
My experience in California was: if you want to be paid well, move to either LA or the Bay Area. If you want nice, move to San Diego, but get paid less.
I ask because my pay INCREASED when I moved here.
“I ask because my pay INCREASED when I moved here.”
I hear all the time about the terrible Colorado economy, but my spouse had no trouble finding a position with a well-regarded, private tech firm at a comparable salary to what he earned in the Bay area. As a bonus, Colorado’s lower taxes and his employer’s excellent healthcare coverage boosted his take home pay by about 4%.
Hey Colorado - check out ebay. There is a guy selling a Crested Butte South lot for whatever the auction allows. Last time I looked it was $55K.
ot…ever notice the incredible number of antique Schwinn bikes riding all over Crested Butte? What’s with that?
Hippies that can’t touch their trust funds yet. Thus being in CB and not owninf a $300K condo in Boulder and driving a Range Rover.
im holding out for 250.000
Is that $250,000 or $250? I’m holding out for 300k but I’ll start looking at 350k.
“‘It’s a perfect time to buy if you have money to invest,’ Telfer said.”
Isn’t it always?
we have thrown 40,000 families out of their home over the past three years, we’re on track to throw another 30,000 families out in 2007. record inventory, record builder inventory, no sub prime 80/20 financing, no alt-a stated salaried loans and a declining market. me thinks telfer may be catching the falling knife. it is not pretty out here.
That’s a pretty big IF nowadays.
Telfer will lose that money, and her job. Who says there’s no justice in this world?
However, when she had her house revalued a few months ago, it was worth $125,000, falling with the slowdown in the market.”
That was a pretty steep drop (from 170k), and a very low price, even by Colorado standards. Montebello must have some pretty serious issues (like crime) if prices have dropped by that much. From the picture in the article the neighborhood looks pretty nice, but nice doesn’t buy much if you have to barricade yourself in your house at night.
I stopped appraising in Colorado (burbs and mountains near Denver) because it was pretty obvious at that time that the appraisers who were willing to push values the highest were the ones who were hired by the lenders. It was obvious to anyone with half a brain that prices were inflated and eventually there would be problems because of it. There was no way I could do my job without feeling as if all of the comps were at least a little bit tainted, and if I couldn’t feel comfortable with it then I’d just sit on the sidelines until the dust settled.
Well…that’s what’s happening now. Values haven’t dropped as dramatically as that story might indicate. My thought would be that it was appraised too high two years ago.
Ever appraise anything in Willow Springs/Morrison? Any thoughts? I have been watching this local as a place to put the family down for the next 25 years. The resales still seem high and comps don’t help…….
As I said, it’s been a while since I’ve appraised so I don’t think it would be good for me to guess at the current market. I have appraised in the Willow Springs area and personally prefer homes in the older section and the way that it feels like mountains but close to the city. If you don’t mind the commute from further south, you might try the Roxborough area around the back side of the Arrowhead golf course. It has a similar feel but seems to be less expensive overall. You also have Chatfield Resivoir and Roxborough Park close by. Willow Springs is probably more kid-friendly though. Good luck in your searches.
Cathy, use credit cards to get yourself out of house hock! Look, lots of people are starting to do it!
http://www.bloomberg.com/apps/news?pid=20601087&sid=avBx6ZRcr_r8&refer=home
Didn’t it used to be the opposite…they were just talking about home equity being used to consolidate credit card debt.
The debt merry-go-round.
Three cheers for the Ownership Society!
Hip hip….oh never mind.
“‘It’s a terrible thought that I could lose it all,’ she said on the first day that she failed to pay her interest-only-mortgage.”
Well Cathy here it is, you aren’t losing anything. You already sold your house for $170k. It only appraises at $125k. You made out like a bandit. Now let’s pay those cap gains on your 45k gain. You lived there making a minimal rent payment of only $1076 a month and now the rent is going up. Oh I almost forgot….leave the keys under the front door mat on your way out.
Consumers boosted their borrowing in March at the fastest pace in four months, showing resilience in the face of rising energy prices and a painful housing slump.
Consumer spending is indispensable to a healthy economy.
http://biz.yahoo.com/ap/070507/consumer_credit.html?.v=15
WOW! I cannot believe how people thing going in debt is healthy for the economy? I guess it keeps those jobs at Burger King filled.
Is it true Casey was arrested today?
No Jamba Juice for him.
Nevermind…
False alarm as usual. Guess I have false hope for our justice system
“Is it true Casey was arrested today? ”
His moral development was arrested years ago.
The Moral of this story is ANY IDIOT could buy a House or Equity Strip from 2000-2006.
The Problem will be HANGING ON to it from 2007 and INTO the Future.
The FB’s Shock and Awe is only just beginning.
I looked at that a couple of times.
IF she took out that IO for the entire value of the house where did the money go?
She had lower payments so she could have saved up? Where did it go. Yeah, its trajic that you lost the house but you did chose to lose it by spending all the money.
I wonder… trip to Europe, fancy Mercedes or boob job?
Look at this quick before it changes!
Dow ties record set in 1927
http://moneycentral.msn.com/investor/home.asp
“It was the Dow’s first close above 13,300 and its 24th gain in 27 sessions. That ties a record set in sessions that began on July 1, 1927 — as Babe Ruth was in the process of hitting 60 home runs.”
And just like the ball players of today who broke the Babe’s record I believe the Dow to be artifically enhanced.
“She knew that rate would increase after two years, but planned to take out another loan at that point to avoid the extra charges.”
Can someone please explain to me how taking on MORE debt could possibly reduce the amount of money you pay the lender? This is one of the things about this whole fiasco that boggles my mind. People actually think adding to their debtload is a good financial move. A nation of idiots
I was wondering about where that whole idea came from. And then I remembered WHY it was supposed to work.
Our first refi was in 2002. We took some money out, and used it to fix the house. But the reason the refis started, and made sense, was to bring DOWN the interest rate (from 8.5%) and what we did is made it a 15 YEAR loan.
That way, you can take the equity out that you would NOT be paying in interest anymore, saving yourself money while taking money out.
Of course it got corrupted into the ‘just refi’. The question should have been ‘refi into what?’
As I told my wife, we could have purchased a million dollar home, seriously, with a good chunk of equity (about $300K then). But there was/is NOTHING in this world that would have made that loan affordable to us in the long term.
So we still live in our house, except that now the equity is about $200K.
Of course you can refi to bring down the rate, but that’s hardly what’s been going on here. Rates are still at historic lows. Counting on a rate cut right now is delusional. These people only see one or two months ahead. If they can somehow cut their house payment by $50, they think they’re geniuses, even though they had to finance another 2 points into the mortgage and were put into an I/O ARM that will reset in two years. They’ve dug a deeper hole and put off the day of reckoning for a little bit longer.
Like I said, nation of idiots…
“Our first refi was in 2002. We took some money out, and used it to fix the house. But the reason the refis started, and made sense, was to bring DOWN the interest rate (from 8.5%) and what we did is made it a 15 YEAR loan.”
Good for you. We also refinanced a condo we bought in Cambridge (in 1999) in 2002, reducing our interest rate from 8.5 to 5.6. We took out a little cash (enough to buy my mother a modest house in TX, though she died before the deal was completed) and our monthly payments were reduced, to boot.
“Rates are still at historic lows.”
That still does not matter. For example, right now I have a 30 year loan at 5.25% on a $267K loan. Full payment is about $2000 a month. By using extrapolation, I can guess what a payment ’should’ be using this standard loan, which as known is the CHEAPEST long term loan out there. So whenever I get the chance to see what others are paying for their mortgage, I can easily figure out how much they ’should’ be paying.
Therefore, if I see someone saying that they have a payment of $2000 for a $600K house, I know something is wrong. And if I then extrapolate the figure to what they should be paying, I come up with over $4000/month.
There is NO loan out there, regardless of interest rate, that would make that payment come down to $2000 again. And that is what a lot of mortgage brokers were insinuating this to many buyers.
Are you including taxes and insurance in that? If not, you’re getting screwed, as a 30-year fixed at 5.25% should cost you $1474 a month for a $267k loan.
Are you including taxes and insurance in that?
Yes, that is total payment. But it is with full price of $348K, and a $90K down payment.
“Even when the boom hit Fort Collins and Loveland, Greeley and other areas, including Windsor, lagged behind, and city officials were anxious for the growth. They wanted it. They practically begged for it.”
I lived in Fort Collins about 10 years ago and remember it as a nice quiet town. God knows what the @#$ing bubble has done to it.
Its grown a bit, but not a whole lot. There is still a lot of open space on Harmony. Ft. Collins has earned a reputation for not being developer friendly. For this reason most of the growth has been happening in neighboring communities. Wellington, Windsor, Timnath, Loveland have all grown more. Ft. Collins has been having budget issues since 2000, as sales tax receipts have been consistently falling short of estimates, while Loveland has been riding the sales tax gravy train. McWhinney built a mall across I25 from the Outlet mall, as well as a business park (Centerra) and a “Car Mall” north of The Outlet mall. He has another monster project called “Grand Central” also on I25. People out here complain the McWhinney has the Loveland City council in his pocket, since he always seems to get what he wants: corporate welfare, rubber stamp approval for his projects
Does anyone have information on Parker, CO (20 miles south of Denver?) Some friends of mine moved there from San Diego last month and bought a 3b2b 1800 sf house for $300K. I tried to talk them into renting for awhile, but they are convinced the market there is “hot”, that there is very little inventory and that they were lucky to get the “deal” they got.
I have a feeling they just had a really smooth realtor, but I don’t have any data to back that up.
Is anyone familiar with this area?
I have noticed that for some reason pricing is higher on the siuth side of metro Denver. Comparable neighborhoods on the north side, like Broomfield and Westminster, are much cheaper. Maybe it has to do with being closer to the Tech Center?
“Unable to refinance the original loan, she must now pay a higher rate of interest, 10.6 per cent, which means payments of $1,501 a month, a $425 increase. ‘With my other outgoings, I can’t afford that,’ said Miss Busby, a divorcée who earns $4,000 a month before tax.”
Yup divorce is a bitch in a dual income world.
She’ll be ponying up a Match.com membership fee to find a new husband as her next ploy.
“The hospital administrator will lose the three-bedroom home in the Denver suburb of Montebello that she bought 11 years ago, unless she can reach a deal with her lender.”
You did not purchase a home whenever. You purchased it when you refinanced!
I’ve always wanted to move to Denver and live in Castle Pines.
Let me know when homes there become affordable.
How much is a Castle Rock Golf membership nowadays anyway?