The Housing Boom Ended In A Bust For Some
The Journal Constitution reports from Georgia. “Teresa Weathers may have bitten off more of the American Dream than she can afford. Recently laid off from her job as a mortgage loan processor and unable to find more work, the Clayton County resident is two months behind on the $1,345 monthly mortgage on her $125,000 four-bedroom townhouse.”
“The number of foreclosures is particularly startling in the communities south of Atlanta. Nearly 1 in 20 homes in Clayton County is in foreclosure, the highest ratio in the region, according to a recently released Atlanta Regional Commission report.”
“And Clayton has the second-highest percentage of subprime home loans of any county in the nation. The report also found Henry County has the highest percentage increase in foreclosures of any metro Atlanta county, jumping by 327 percent from 2001 to 2006. ”
“ARC officials caution that the rising foreclosure rate has occurred during a housing boom in the Atlanta region. Despite the foreclosure problems, townhouses are now springing up in the suburbs, in places such as McDonough and Marietta. About 125 new homes a day are built in the Atlanta area, according to data from the ARC report.”
“‘So it’s not that surprising there’s a high number of foreclosures given the [aggressive] lending market we have,’ said Mike Carnathan, who wrote the ARC report.”
The Gwinnett Daily Post from Georgia. “Housing foreclosures are soaring throughout metro Atlanta, an alarming consequence of mortgage costs that increasingly are outstripping growth in wages, a regional planning agency reported Wednesday.”
“There were nearly 43,000 foreclosures last year in the 10 counties that make up the Atlanta Regional Commission, up nearly 200 percent from the more than 14,000 that occurred in 2000.”
“While counties throughout the region are seeing a high number of sub-prime loans, Clayton and Rockdale counties are among the highest in the nation. More than 38 percent of home loans in Clayton came from sub-prime lenders in 2004, second highest in the country. Rockdale ranked fourth in the nation with sub-prime loans making up 34 percent of its total for that year.”
“Susan Adams of the Atlanta Neighborhood Development Partnership pointed to a report her organization did back in 2004 that showed a mismatch between the area’s housing stock and the incomes of most of its residents and between the locations of affordable housing and jobs.”
“The report found a shortage of 185,000 units of housing that are both affordable and accessible to job centers. Adams said that’s a huge problem considering that one-third of the region’s households earn no more than $40,000.”
“‘We have an oversupply of higher-end executive homes,’ she said.”
From WDEF 12 in Tennessee. “The housing boom during early part of the decade ended in a bust for some homeowners. Where does Chattanooga fit into this national problem?” “This morning, a husband and wife stayed away from the Hamilton County Courthouse as their Woodmore Lane home sold at a foreclosure auction. ‘A bid of $50,000 to FSG bank, going once twice, sold.’”
“It’s on to the next house, for the trustee running this auction. On this day, nearly a dozen homes in foreclosure will be sold.”
“Financial planners say a few years ago, people with credit issues entered the housing market, using a sub-prime loan. Aside from sub-prime loans, foreclosure factors include buyers purchasing more of a home than they could afford and adjustable rate mortgages, which shot monthly payments up hundreds, if not thousands of dollars.”
“Jim Place of Evergreen Management says ‘most of the people aren’t going to lose their house because they lost their job, they’re going to because their payments have become too expensive.’”
The Leaf Chronicle from Tennessee. “New home construction market analyst Edsel Charles told a group of local builders, developers, lenders and realtors this week that Clarksville still has a ‘heck of a good, doggone market,’ but he continued to warn of a ‘problem coming down the road.’”
“Charles continued to beg builders to plan for a growing influx of retirees. ‘here in Montgomery County, you need more lot inventory in the under $175,000 category. We haven’t taken the time to fully understand that market, and the truth is, it’s going to become 30 to 35 percent of this market,’ Charles said.”
“The two highest growth areas of Montgomery County continue to be the area near Interstate 24, and Sango. In the northeastern quadrant of the county, there are now 915 more lots for development than existed a year ago, and 298 more in Sango.”
“In all, the county has 125 subdivisions with 17,001 lots, according to Market Graphics’ numbers.”
“‘One problem I see is that rising prices are also driven to some degree by rising land prices in Montgomery County. Montgomery County’s current average price on closings is now around $183,000. That’s getting to be a little high. It should be just a little lower than that,’ he said.”
The News Journal from Florida. “Authorities investigating online sales of unbuildable swampland near Daytona Beach have seized $178,000 worth of cars, including a Hummer and Dodge Viper.”
“A warrant served at the 2,700-square-foot Ormond Beach home of James A. Kelly last week was just the start in a state investigation of real estate fraud for peddling ‘paper subdivisions’ in wetlands to unsuspecting victims, mostly from South Florida.”
“Among real estate transactions Kelly handled, records show Beata Jeune of Spring Valley, N.Y., bought five acres from him for $32,000 in August 2005. But the land has a listed value of $2,500, according to the Volusia County property appraiser.”
“Marketing such properties is nothing new; books and newspaper stories have been printed on the subject statewide since at least the 1960s. The same hooks for speculators and dreamers remain, but the Internet has made it easier to reach out to faraway buyers. Kelly used the Ebay Internet auction site to make some sales, officials said.”
“Several buyers claimed they were bilked; buying without seeing the property and only learning they could not build on the sites after they had paid.”
“All said they would not have bought the land if they knew they could not get building permits for the lots, the affidavit states. Some, according to the affidavit, claim Kelly got angry when they asked ‘why he was doing business on the side of the road.’”
“‘All the individuals who questioned Kelly felt extremely pressured to make the purchase,’ the affidavit states.”
Recently laid off from her job as a mortgage loan processor and unable to find more work, the Clayton County resident is two months behind on the $1,345 monthly mortgage on her $125,000 four-bedroom townhouse.
In a sane world, someone with a job like hers should have atleast a couple years worth of mtg payments saved up as reserves for this kind of tough time (unemployment). Methinks Teresa has other issues.
Doesn’t that $1345 payment seem a bit high for a $125,000 house? There is definitely something fishy there.
12.6% if PI amortized at 30. What’s the lowest possible FICO score?
“12.6% if PI..”
Probably has taxes and insurance escrowed. Maybe more like 7%.
Yeah, in Florida taxes and insurance equaling almost the principal and interest. Trouble in River City.
This one’s in GA. It would have to be I/O to be in FL with a payment that low.
I need some coffee.
350 I think
That what I was thinking.
A Realtor recently questioned us about why we were still renting. WHen I mentioned that it would be hard to give up the aprox $2000 a month we are saving renting vs. buying (no joke), he went on to say that with our income, why did we need to save that much more money, that it was a “quality of life” issue, spend it before you die, etc. I started to explain how my wife and I BOTH had unforeseen job changes in the near past, and that it was a good thing that we had a good sized emergency fund, or we would have been forced to take jobs that we didn’t want, and that we hoped to actually *retire* someday, instead of *having* to work. I say “started” because I felt like a moron trying to explain such obviously antiquated concepts to someone with today’s modern financial attitudes. *Sigh*.
A Realtor recently questioned us about why we were
stillrentingnot providing him with a commission.fixed
The sweet revenge is when you achieve financial independence and retire. Then all those “financially savvy” debt and wage slaves who are still working well past the age of 60 will wish they were you. For me “quality of life” is about financial freedom. I wish I had understood this when I was younger, as I would probably would have been able to retire before turning 50.
As a relatively young person (45), now a reader of the obits, and a conserver (or cheap, as my wife calls me), I am learning the importance of balancing living for today against preparing for tomorrow. Financial freedom is good, but what good is that if your life memories consist of living frugally in small hovel, driving back and forth to a hum-drum job in a beat up used car, while your family and friends are having fun and living it up? You might get the last laugh; you might not. I can see why a post-60 yo person still working would look back and re-evaluate; but what a shame if that person had indeed lived his life in that “correct” way and not made it to 50?
living frugally in small hovel, driving back and forth to a hum-drum job in a beat up used car
That’s an extreme which isn’t being advocated here. No need to live in a hovel, ‘hum-drum job’ is another issue altogether, and no need to drive a beat up car (older model can be mint).
My wife and I live frugally but we still eat dinner out once a week, still buy quality items when they’re on sale, still have a great life. Meanwhile, we’re saving $4k a month. We’re not waiting till retirement to get the last laugh; we’re laughing now.
Didn’t mean to sound adverse; just pointing out that there’s a balance that needs to be struck. Me, personally, I struggle with this all the time. Right now, the big question is whether to save for the 3 kids’ college fees, or move up to a bigger house, buy a vacation home, etc…
Mikey, no need to over dramatize things…because of our income and the money we save renting (a nice house with a view), we can afford to save *massive* amounts per month while *still* doing and having nice things (eating out, going on vacation, have nice vehicles, etc.)
Yes, people like us do buy used vehicles, but both of our vehicles were only 2-3 years old, and we saved a *very big* chunk of change going that route, while *still* ending up with very nice vehicles.
Also, with money we are saving, I can take a few years off from work to spend time with the kids (even though I still do stuff on the side). To me, *that* is THE quality of life issue. NOT buying a house that a Realtor wants me to (in a falling market, I might add), just because we “already have a lot of money”.
I just don’t feel the need to throw my money away on mortgage payments…yet.
“save for the 3 kids’ college fees, or move up to a bigger house, buy a vacation home”
Make a list of wants (remember, these are not NEEDS). Write the $$ amount next to them, and a small note on the plusses and minuses (yes, they all have minusses). Then prioritize them, based on what’s important to you and your family. When you run out of money to allocate, cross the rest out, at least until you have or expect more money.
I’m with Betamax on this one.
It’s not skimping to the point of pain and unhappiness, but establishing a base way of life, spending/saving/earning balance where you are happy - and then planning for ‘financial freedom’. I describe financial freedom as being able to LITERALLY do whatever you want each day. That may be still working, building a business, doing charity work, golf, whatever…
The key to it either way is that you are happy with what you have, who you are and what you stand for. Pursuit of happiness through acquisition of material assets has never been proven to me to be a long term solution to people’s well being. I still have a few pricey little things that I could likely do without if I decided to mizer it to death…but they’re relatively small things that keep me happy while I bank $, lower my debt coverage/life coverage costs and work towards eventually not HAVING to do anything to cover bills/overhead.
Geez…how did I bite on this one and go off on this tangent and get all soft?
“but what a shame if that person had indeed lived his life in that “correct” way and not made it to 50″
One last place…people have been telling me that the “correct” way is to spend like there is no tomorrow, as there will always be someone around to clean up the mess (again bringing us back to your “personal responsibility” post).
Liberate equity, buy lots of boats and jet skis and Hummer H2s and Pinot Noir and boob jobs and semi-anual vacations to Bali…the worst that happens is that the bank takes your house back, you rent for a while, and move on to your next adventure.
Easy peasy lemon squeezy!
very nice point : “what’s the point of saving all this money if you arn’t there to enjoy it”
although i think this is a valid argument, i think i personally get my “kicks” from hunting for bargains in wholesale and gray markets, and having the peace of mind that, God willing, i might be able to weather a job loss.
Besides, i really don’t get any satisfaction from showing-off material stuff.
Movie scene: in the movie Road House, Brian works as a bouncer and drives a beatup car to work, but his real ride is a sweet S600 (i think) i need to rent that movie again.
got cash?
“You might get the last laugh; you might not. I can see why a post-60 yo person still working would look back and re-evaluate; but what a shame if that person had indeed lived his life in that “correct” way and not made it to 50? ”
This is a dysfunctional way of thinking simply because your value statement assumes that things and experiences through money spent make for happiness and therfore not spending makes for misery. Not so. That’s the same logic an obese person would use in justifying over-eating, eating makes them happy and not eating makes them miserable, whereas a normal healthy person make enjoy eating, but realizes at some point they’re satiated and they’re ready to do something else for enjoyment. Take two guys with boats, one has a 42 foot Hatteras with a $1,800/month payment for 30 years and the other guy a paid off 17 foot used Carolina Skiff. They both enjoy their day on the water. Most likely the 17 foot Carolina Skiff owner probably enjoyed his day more.
I dated this shallow girl once that dumped me for owning old stuff. Turns out she was jealous because all in all for half the price she paid for her consumer competition Honda Accord fastback I had a 20′ used boat, an old suburban to tow it with, another car, and a pilot’s license, and here she just had a friggin car that looked nice. Big deal, I can guarantee you I enjoyed my time with my not so pretty stuff much more than she did cruising around looking for people to notice her in her faux BMW.
AndyInJersey,your sooooo right. Why would anyone think that spending more money or having more stuff brings them more happiness? That is the most shallow and absurd statement I’ve read on this blog yet.
Best comments so far:
“Pursuit of happiness through acquisition of material assets has never been proven to me to be a long term solution to people’s well being.”
“This is a dysfunctional way of thinking simply because your value statement assumes that things and experiences through money spent make for happiness and therefore not spending makes for misery. Not so.”
Far from living a Scrooge McDuck lifestyle, I travel fairly frequently, eat out at least once a week, see all the movies I want and can buy all the stuff I need (vs. “want”) when I need it. However, I pay for it all out of my own earned or invested income, not debt money, or money I have defrauded from pensioners or investors. Mikey(2) has presented us with *yet another* false dichotomy (live miserably in a ascetic hovel like a “looser” or live it up with leverage with all the “winners”).
I do not need a garage full of bought-on-credit crap to feel “happy”. Time spent with family & friends or working on fun hobbies for me ranks a lot higher than blowing Other People’s Money on “luxury” goods I cannot really afford and must service with an ever-expanding pile of serial debt.
I have the true freedom and peace of mind of knowing where my next meal will come from if I am laid off tomorrow. If I wanted to, I could easily afford to pick-up and move to a different state or different country if I so choose. I sleep soundly at night, knowing I don’t owe anybody anything, don’t have any alligators to feed, or resets to face.
I wish everyone my kind of happiness.
“Teresa Weathers may have bitten off more of the American Dream than she can afford. Recently laid off from her job as a mortgage loan processor and unable to find more work,…”
I wonder how much trouble she’s going to have finding work in another industry. After the .com bust, anyone who worked for an Internet startup was kind of like a pariah for a while. Would you hire anyone from this industry right now?
there are always floors that need to be swept
at least the .comers were ethical- mort brokers have to lie or who would buy
I was a dot.commer; I worked in Finance (Controller/CFO) at five different ventured-back Internet technology firms. In general, Dot.coms, while definitely nowhere near as unethical as mortgage brokers, would never be classified as “ethical” by most who were involved. I saw some stuff in those days that would make your head spin.
“Authorities investigating online sales of unbuildable swampland…”
I thought this scam was over in the 80’s! WOW! I love this one in particular because it shouldn’t happen. Who would buy land sight unseen…especially in FL?
You should see the lavish British real estate web sites gushing on and on about how wonderful it is to buy real estate, especially condos and codo hotels, in Florida, particularly in and around Orlando. You can pick your condo, tract McMansion, or glorified hotel room right on site, and arrange everything on-line.
Buyers are told what fabulous investments these are, and that they can rent them out when they themselves aren’t partying in Orlando (or wherever), because they’re such great income properties.
These British hucksters–and there appear to be thousands–make ours look like babes in the woods.
“These British hucksters–and there appear to be thousands–make ours look like babes in the woods. ”
They’re not all British hucksters. I know of one real estate agent in Orlando who actively seeks British business. He’ll fly them in, put them up in a hotel and then get with his partner and strong arm them into buying something that is almost sure to lose value.
I bet he gets them good and drunk first.
“I bet he gets them good and drunk first.”
I would hope so. I would want more than a $500 plane ticket and $400 hotel stay if I were going to lose a couple hundred grand!
LMAO, snaker charmer. Hades with the Brits.
They’re still trying to keep ahold of their colonies and direct our foreign policy, etc. Nice of Queen Betty to come over and inspect us, just to see how things are going. Pip-pip and all that rot.
I would hope so. I would want more than a $500 plane ticket and $400 hotel stay if I were going to lose a couple hundred grand!
They probably throw in tix to Disney and Universal as well.
Apparently, Disney vacations (in Florida, not Paris) are a big status symbol in the UK.
Among the working class, yes. The swells go to Spain.
Nah, spain’s dead working class too.
The middle class always seems to head to france, italy or the far east. And I don’t think upper class brits like abroad - something to do with wogland beginning at calais.
So, how’s the real estate in Blackpool? Place reminded me of Jersey shore honkytonk with bad weather.
This may not get read since I am a day late, but I’ll post anyway…
I just returned from Blackpool this week where I was attending the annual Ballroom Dance Festival. I had the chance to look around a bit and I cannot imagine paying anything to live in that town, never mind the prices that are asked. Run-down duplexes start at 150,000 pounds and go up from there. I saw a few small flats that started at 120,000 pounds. There has been quite a bit of building going on there over the past several years, but I don’t know how you can afford anything in that town, since it seems that everyone is involved in the tourist trade.
I did not have the chance to check out any detached houses until I got to Manchester where I was staying with friends. My friends live a good 10 miles outside the center of Manchester, in a rather ordinary [by English standards] neighborhood, in one half of a duplex. The detached house across the street sold last month for 500,000 pounds. One down the street is on the market for 600,000 pounds. These two detached houses are probably ~2,500 square feet each.
Within Manchester itself, they have gone absolutely insane with the flat building. New flats are everywhere, but I did not get the chance to price any.
One morning, I was listening to the radio and I heard an ad where a return of 70% in two years was all but promised if I were to invest in some properties - in Cape Verde!
I know. LMFAO. This is more classic than three-card monte.
I always am amused when non-Floridians fall for this sort of thing. The irony is that it is non-Floridians who are the most critical and condescending towards my decision to rent.
“The irony is that it is non-Floridians who are the most critical and condescending towards my decision to rent.”
I got that too in 04 and 05 until I bought at the end of 06. Thought I was going to grab the bottom from a bagholder…now my super discount is almost run of the mill. My house was $221,500 and needed nothing…today that same house will list for $250K and sell around $230K. If you want to buy a dump you can buy for $199,900. My advice to anyone is still wait.
“Several buyers claimed they were bilked; buying without seeing the property and only learning they could not build on the sites after they had paid.”
Now c’mon, shouldn’t people at least walk the land BEFORE they buy it? The seller may have committed fraud, but that still doesn’t excuse the buyers. My gosh, people, where did you put your brain?
Friend of mine was going to buy sight unseen in Flagler Estates (near St. Augustine). He happened to be down in Florida (it was early spring) and walked the land to see the “pine forest” lot they were selling. More like palmetto forest shifting over to cypress knees as he got into the lot and toward the “river” which was more like a canal!
So palmettos, maybe. But cypress knees? Not wetlands, is it? Naaahhhhh. The seller assured him that he knew of no restrictions.
Maybe he could have still built on it, but he skipped buying that lot. It still took a lot of convincing from me to get him to do that, but in the end he finally realised that really, really should look at Florida lots in the wet season, not the dry.
You are a true pal.
St. Auggie is a hot tourist location, so I am sure there are plenty of suckers walking around, although it seems to me when I come in on the state road that they are still making land there, especially dry, sere, high dusty lots in hicksville. Obviously the really nice stuff on the island and in old town is pretty rich for anyone’s blood (especially with the hurricanes wash it away).
I remember being in Datona Beach in the mid 90’s … beach bums coming up with small talk and eventually trying to get you to go up and see an oportunity that they have … unloading their awsome condo. Seems like nothing much has changed.
“Among real estate transactions Kelly handled, records show Beata Jeune of Spring Valley, N.Y., bought five acres from him for $32,000 in August 2005. But the land has a listed value of $2,500, according to the Volusia County property appraiser.”
Beata Jeune was apparently too stupid and lazy to use google. A search would have brought up http://webserver.vcgov.org/vc_search.html where one may easily check the assessed value.
“…but the Internet has made it easier to reach out to faraway buyers…Several buyers claimed they were bilked; buying without seeing the property and only learning they could not build on the sites after they had paid.”
Fools and their money SHOULD be parted.
“All said they would not have bought the land if they knew they could not get building permits for the lots, the affidavit states.”
Do your own due diligence.
“Some, according to the affidavit, claim Kelly got angry when they asked ‘why he was doing business on the side of the road.’”
And yet the fools still bought.
“‘All the individuals who questioned Kelly felt extremely pressured to make the purchase,’ the affidavit states.”
Pressured by what? A gun? Knife? Rope? Or was it their stupidity and greed that allowed Kelly to apply pressure?
” Some, according to the affidavit, claim Kelly got angry when they asked ‘why he was doing business on the side of the road.’”
“‘All the individuals who questioned Kelly felt extremely pressured to make the purchase,’ the affidavit states.”
Doh! Again, WHERE WAS YOUR BRAIN? He was selling land at the side of the road, I stopped by to see what he had, and then I felt extreme, undue, and unstoppable pressure to buy some land from him, sight unseen. It turned out to be a scam.
Duh.
Doh! Again, WHERE WAS YOUR BRAIN? He was selling land at the side of the road, I stopped by to see what he had,
LOL
I’d stop roadside to look at Rolex or Kate Spade knock-offs maybe, but swampland in FLA…not so much.
I’d stop roadside to look at Rolex or Kate Spade knock-offs maybe
I was in Orlando earlier this year, for about 36 hours (I mean, scheduled for 36 hours. United Airlines had different ideas). Had a rental car and nothing to do, so I went for a drive down International Drive. Noticed a couple vans setting up roadside stands full of knock-off handbags. Thought to myself, you have to be kidding. Who’s going to buy something like that from a roadside stand. Sure enough, when I turned around and drove back 30 minutes later, both roadside stands were packed with customers.
Its doesn’t matter that its not a real Prada, just that others think its a Prada (or hot brand ju jour).
“‘We have an oversupply of higher-end executive homes,’ she said.”
Currently true all over the country. No problem. In a year or two, these houses will be knocked down sufficiently in price to house the working class.
Actually, I think the houses will be split up into apartments to house the working class and their extended families. Welcome to the USSA.
Either that, or subdivided.
Is there any student of history who fails to see the parallels between the current situation and the South Sea bubble of the late 1920’s? Paper subdivisions, alleged to be close to towns that don’t exist, or advertised as “waterfront” when they’re just plain water - all of this has been done before. Buckle up and keep your arms, legs and all financial assets inside the car until it comes to a complete stop at the end of the ride.
We’ve stepped well over the bounds of anything that passed for good fiscal behavior long ago, and it’s all uncharted territory to follow. This will be the first bubble to play itself out, with instananeous communication at our fingertips. All that information flow, honest computers spitting out dishonest doings, at a much quicker pace than we’ve seen the past month or 2, the $hit really does roll downhill…
Welcome Back To The Future
“You can get any kind of house you want! You can even get stucco. (Boy, can you get stucco…)”
and if you go a bit further back, paralells with the “Darien” settlement in Panama which essentially bankrupted the Scottish nation and was a large reason for the Union with England.
Everything happening now has happened before. People forget after some time and then it will happen again.
S&L crisis–now the ARM/interest only loan crisis
It’s all the same
“those who do not learn from history are doomed to repeat it.”
http://en.wikipedia.org/wiki/South_Sea_Bubble
1720’s ?
He or she may have been referring to the “Florida speculative building bubble”:
http://en.wikipedia.org/wiki/Economic_bubble
I think you actually mean the Florida bubble of the 20’s. The South Sea bubble was a British 1700’s bubble.
Then everybody simultaneously saw the writing on the wall, and panic selling ensued. With thousands of sellers and very few buyers, prices came down with a sickening thud, twitched a bit, and then crawled down even lower.”"
http://www.investopedia.com/features/crashes/crashes4.asp
The Leaf Chronicle from Tennessee. “New home construction market analyst Edsel Charles told a group of local builders, developers, lenders and realtors this week that Clarksville still has a ‘heck of a good, doggone market,’ but he continued to warn of a ‘problem coming down the road.’”
I am from Indiana and totally feel the love of these comforting statments like ‘heck of a good, doggone market.’ Even though our So Cal prices are 10 times higher than his - I am tempted to buy right now.
‘heck of a good, doggone market.’
Heckuva job, Greedspam.
“Edsel Charles told a group … ‘heck of a good, doggone market’ ”
just like the great market for the Ford Edsel way back when!!!
(Not. One of McNamara’s bombs.)
Clarksville has the advantage of having a large employer just up the road that’s currently VERY stable (US Army). Still bubblicious, I’m sure, but it truly is (a bit) different there. Their “crash” will be whatever happens when housing turns down but there’s still plenty of consumption being done with real paycheck dollars and not just debt.
I say this based on the possibly outdated assumption that nobody built a bunch of $500k condos anywhere around there in the last few years.
“‘heck of a good, doggone market,’ ”
And now they’re getting advice from the Andy Griffith Show? Opie Cunningham! Opie Cunningham!
Sweeeeet. Just put a fork in us. D-U-N. The more I read these comments, the less worry I have with my short psns.
Georgia?
Tennessee?
I thought the bubble was confined to the northeast and west? Well, I guess anything can be northeast or west depending on the perspective.
I’ve been looking in these areas for the past two years. The owners and agents have been pretty oblivious, despite almost no sales at all in some areas/price ranges. But I see the wall beginning to crack, not just in the low end but in the $250-750K range as well. Too bad for them that so many seem to have waited until their alligator ate all of their money, before deciding to capitulate to the inevitable. It just kept me renting longer, a minor inconvenience relative to their pain.
I moved from Middle Tennessee, the bubble is there also. Williamson county may be the capital of overpriced Mcmansions. and I wonder where all of these people from florida plan to work, the job market (for anything not service related) is relatively narrow.
“…the job market (for anything not service related) is relatively narrow.”
That’s what they don’t understand! I’ve seen a lot of reverse moves here in Palm Beach County. People left in ‘04 and ‘05 claiming it was “unaffordable” only to find that unaffordable is a term that’s open to interpretation. Sure a $150K mega home sounds good until you realize that the grocery store is the only job you can find and it only pays $7 an hour.
Not to turn this into a political blog, but given the obvious stupidity and/or vulnerability of a significant number of people in this country (come on people still go for swamp land?), the whole concept of “personal responsibility” as the guiding principle of government is simply untenable. Sure, people put themselves in bad situations, but it is often at the hands of some sales guy with sharp skills of pursuasion and intent to deceive. You can’t fault people for being greedy, that is the essence of our system; and you can’t expect them to be knowledgable in all aspects of daily life, be it finance, nutrition, product safety, etc….Putting the onus on the people to protect themselves from the power of corporate greed is like telling the sheep to fight the wolves. Yeah, we all think we’re all so smart, even the stupidist amongst us believes that. But even the smartest of us has subjected ourselves to risks beyond our knowledge - be it the risk of medication; chemicals in food, cosmetics; and, yes, the purchase of swamp land.
The problem is that when you artificially protect the sheep from the wolves (e.g. gov’t bailout of “victims”), the sheep multiply uncontrollably causing more problems that would otherwise have existed. Sometimes natural selection is a good thing.
If you allow the wolves to take out a few sheep, then the sheep population is kept down, and the sheep get smarter too. Both factors prevent overpopulation of wolves as well.
Need a ‘Great Pyranees’ or two to protect the sheep. The sheep have been dumbed down over several (welfare) generations and natural selection will not work before all the sheep are slaughtered.
The “people” equivalent would have to be Jedi Knights. I’m sure a number of us HBBers would readily volunteer, if only we could get our hands on some real lightsabers.
““personal responsibility” as the guiding principle of government is simply untenable”
Uh, yeah, and while you are at it, let’s do away with that antiquated concept of “free will”. Is this how you raise your kids? “Well, officer, I know he shoplifted that iPod, but c’mon, he’s just a stupid kid. I think you should let him off.” Or “Johny, I found drugs in your room, and I am not pleased. However, you are just a stupid kid (at 17), and can’t be expected to make the right decisions at any age; therefore, you will get no punishment, and I will not even voice my disapproval so as to reinforce to you that it wasn’t your fault.”
“You can’t fault people for being greedy”
You mean like politicians and large corporations? Or are we just talking individuals here? If a large corporation (many individuals) does “a bad thing” because of greed, should we (the public) be expected to bail them out?
One last point…have you considered the “Law of Unintended Consequences”? If I’m going to get bailed out of every high-risk, harebrained scheme out there, I’m going to take those risks MUCH MORE, as I’m sure that YOU will bail me out if things go wrong. It’s in my best interest to keep investing in these scams, as one MAY pay off, and you are making sure that I have no consequences for my actions (”“personal responsibility” as the guiding principle of government is simply untenable”).
Uh, yeah, and while you are at it, let’s do away with that antiquated concept of “free will”. Is this how you raise your kids?
And these are the kind of false comparisons that are used to support the concept. I’m not suggesting bailouts for anyone; I’m suggesting enforced regulations. A proactive approach versus a reactive approach, that’s all. Make laws and punish for the violation thereof. Corporations taking advantage of ignorant the less-informed in nothing new; how much time and effort is wasted in cleaning up the messes when much could be prevented.
But Mike, what you are suggesting goes against the free market. I am not stupid enough to buy swamp land from a fruit stand but I was duped by MBNA for an interest free advance of 10 grand on my MC 2 years ago. I spent 10 minutes on the phone with the CS rep and got his guarantee that if i paid my balance in full each month there was no way i could be charged interest or fees on the card. I took the 10 grand to put in the bank and a couple months later my wife bought something on the card, we paid the balance in full and MBNA applied it to the 10,000 advance, then hit us for a finance charge on the purchase.
I cancelled the card, wrote a letter and told myself I should have read all the fine print or better yet realized it did not make sence on the surface. MBNA had a free ride on us (no points on this card) and they lost a card holder for life for $2.47 profit. This is far better than what you are proposing.
Hi jonaskinny -
One problem (amongst many) of the “free market” is that it assumes that knowledge is handed down over the generations; that is, people will eventually catch-on and the companies will have to adjust their behavior or face ruin. The fact is that knowledge is not handed down by individuals (but companies do hand it down religiously) and there is so much to be known in different areas (whereas companies generaly specialize in one area) that the companies can easily find a new audience to dupe. To the extent that the free market adjusts, it’s often after a lot of people get seriously hurt. And a government believing in free markets will do nothing to prevent history from repeating itself. Just wait for the next generation of duped RE purchasers and purchasers of other goods. It’s an endless cycle.
Sorry, but I don’t think that the government’s job is to protect people from their own stupidity. I wasn’t set up that way in, it doesn’t work that way and quite often creates larger problems than the ones there before.
I agree that the government should be a watchdog to protect my personal freedom, but that’s about it. If I really want to take out an I/O 100% financing 2 year ARM at 7%, I should be able to do that.
So how do I “pass down” this “personal knowledge” to my nieces (no kids — shocker) that the aforewentioned loan is bad? Not by explaining every darned thing to them. It’s by getting them to think. It’s by telling them little things to help them out of many situations like, “If it’s too good to be true, it probably is” and “If you’re stuck in a hole, at least stop digging”, etc. Sorry to sound like Polonius, but seriously!
MrBubble
Hey Mike,
I hear what you are saying but I still can’t agree with you. Government can not solve everything for us. If we are doomed so beit; I’ll just try to work towards educating my kids to carve out a decent slice of this pie while its still available.
I believe that a successful democracy depends on “personal responsibility” as the guiding principle of government. A people without honesty/integrity/responsibility are incapable of governing themselves. I’m sure someone will volunteer to do it for them, though.
Having said that, I do believe in prosecuting the scammers, assuming they have broken the law.
all of these foreclosures going on
where are all those people going that got booted out of their homes?
FEMA trailers.
I’m going to offer them flop space in the homes of all those who keep urging me to STOP THROWING YOUR MONEY AWAY ON RENT
“Nearly one in 20 homes in Clayton County is in foreclosure.”
“Where are all those people going that got booted…”
They can rent rooms from the ones who are still making payments, thus enabling the other FBs to hang on.
5% in foreclosure, isn’t that incredably high ?
I thought 2% of housing stcok in foreclosure was high
Mom & dad may have space. My mom has her house paid for and has enough room for my family and herself with room to spare. We have friends whose houses are easily big enough for two families (of course, we also have friends with 3 daughters and one bathroom- not everyone is overhoused).
On average, there is no housing shortage.
“where are all those people going that got booted out of their homes”
RENT.
Oh, wait, the financial requirements for gaining a rental (higher fico score, verifiable job, references, deposit) are higher than the requirements to buy/finance (no money down, stated income, stated assets, no closing costs, cash back at closing). Oooops.
“where are all those people going that got booted out of their homes”
I hear Mexico is cheap, and the place is emptying out.
Back to TJ.
Where are all those people going that got booted out of their homes?
Into the same homes that they had “owned” - not the exact ones, of course, they will get shuffled. The supply of houses hasn’t changed, the number of households hasn’t changed, just the “ownership” rate. They are going to be renting the foreclosed houses from whoever bought them. The new owners have to rent them to somebody, don’t they?
Rather obvious, don’t you think?
Ingnoring all my warning, a family member of mine bought 3 investment properties in the Phoenix area with no money down using neg am, interest only loans. Pluse they mortgaged their primary residence to buy furniture and other crap for the three vacation rentals…For a whopping total of 6 mortgages!!!! 4 on the houses and a second and third on their primary residence. And I know they’re not alone, I pesonally know 6 other people with multiple properties in the Phoenix area. This is getting really ugly!
What bugs me about this sort of thing is figuring out what to do when a family member’s house of cards implodes. I can’t stand the thought of bailing out a family member, but I wouldn’t want them to be on the street either.
“I can’t stand the thought of bailing out a family member, but I wouldn’t want them to be on the street either.”
I’d be happy to put my “down and out” family member up at the No Tell Motel for $25 a night. Maybe after a few months they’ll understant the error in their ways.
“Maybe after a few months they’ll understand the error in their ways.”
…and after a few treatments for the crabs they get during the stay.
“I can’t stand the thought of bailing out a family member, but I wouldn’t want them to be on the street either”
I don’t quite understand? They would still have jobs…why wouldn’t they just move into a rental (house, apartment)? If they get a rental before they lose a house, their credit should still be ok. Is there something I am missing?
Many of the same fools have no money saved and no equity. So if they do lose their jobs, they have absolutely nothing to fall back on except the bleeding hearts of others, especially family.
No sarcasm here, but they are probably eligible for welfare, or at least section 8 housing and food stamps.
“I can’t stand the thought of bailing out a family member, but I wouldn’t want them to be on the street either.”
Those are choices that they made. All my siblings are self-sufficient but when they overspend they sit out and work a little bit more until they have more spending money and become broke again. If they knew my net worth, they would be demanding lots ‘o money from me. I sacrificed a lot to get where I am today. My nephew and niece do not know what I have either. If they were responsible, I would remember them in my will (trust). So far they have not demonstrated that they would be excellent stewards of wealth. The American Cancer Society and American Heart Association organizations are where the bulk of my wealth will go.
Sounds like you will be purchasing personal lubricant for stocking stuffers this xmas.
I guess they are “Type B” people. I couldn’t eat or sleep if I had to pay on six mortgages. Had a close call on just one mortgage when I was in my late 30s, and that was scary enough.
anyone have a foreclosure chart as % oh total owned homes ?
I was thinking 2% is the distress level
1900 to 2005 would be good
“I wouldn’t want them to be on the street either.”
That’s a tough one. I am in the midst of that dilemma as well.
Has there been a job loss? Why wouldn’t the family member just rent (ie “not be on the streets”)? I don’t get how losing a house means you are “on the streets”.
http://www.thestreet.com/_tsccom/newsanalysis/realestate/10361191.html
Good article. She really has a handle on the big picture.
Funny thing is that her case that real estate isn’t always a good investment doesn’t even discuss the bubble - the comparison of relative gains of RE vs. inflation includes the unnatural gains of the bubble and still makes its case!
Florida swamp land….too funny. “And then I thought, a bridge, I can buy a bridge in Brooklyn???!! Where do I sign up?!”
Is that the case, we just recycle the same scams over time, in 10-20 more years we are back with junk bonds? Wow, I love history and I guess people just don’t learn from history, too funny. Then again people in Southern Cal couldn’t remember back to 1991 when this area got beat down in housing. All I heard was there wasn’t enough housing for the demand out here, housing never goes down, blah blah blah…what about 91′ I would ask….”what happened then?” Freaking morons deserve everything they get and I hope all the people that I talked to and tried to warn get it even worse, rare when the truth comes to you and you don’t listen you deserve it all.
ting, ting, ting
Literally….. swamp land in Florida.
We’ve just hit another data point on the downward line graph that charts this beautiful realestate market that will bottom in ………..well, you’ll know it around a year after it actually hit…….
Whats sad is the first ladies mortgage is less than my rent
WOW this is something else. I posted yesterday about a cold call trying to sell CDOs (very unusual with no existing relationship). I was busy and dropped the call pretty quick. Now I wish I had gleaned more info from the caller. He did not sound experienced. I got the feeleing they pulled a bunch of green trainees to make cold calls. Now this morning I see this http://www.marketwatch.com/news/story/bear-stearns-criticized-over-subprime-securities/story.aspx?guid=%7BD8716033%2D3C15%2D4B69%2D84CB%2DADA6C1E529EF%7D
Is Bear desperate? Either they get left holding the bag or it is found after a second round collapse of toxic securitized packages that they were pawming them off were they should not have been. By the way the typical process to sell a structured product is either an established relationship or some due dilligence on the side of the seller to determine the investment suitability. A day before I got an email from our advisor that was a 3 page legal doc that I had to accept just to get info on structured products. The next day Bear Stearns cold calls pushing CDO’s that I know are worthless. Hmmmm???
What sort of return were you promised on this product?
Like I say I dumped the call pretty quick so I didn’t get any details.
Did someone forget to read “Why the Real Estate Boom Will Not Bust”?
bonds moving really fast- especially since it’s all adjustment for risk
weeeeeeeeeeee
Owowowowow! 10 year and 30 year above 5%…what is the world coming to?
rates up adjustable ups and prices plunge.
buy price is trending lower on each tick up.
a huge drop is in store for these clueless fbers.
Kelly used the Ebay Internet auction site to make some sales, officials said.”
Did they get their swamp land delivered to their home via UPS? There’s a sucker born every minute…seems to be a conservative estimate.
bwah haha haha haha haha - have I got a bridge in Brooklyn for you
This is all about right for the Atlanta area…so much stuff built OTP (outside the perimeter I-285 loop). And there are large swaths of poorer/working class areas particularly south and west of downtown that were preyed upon to live the good live with the housing ATM, etc…
The only thing holding up reasonably well is limited supply, high quality, areas within a couple of miles of Midtown and Buckhead business district for SFH. And then only quality, updated homes. People are beginning to realize its better to have 2000-3000sf 2-4 miles from work than to have 4000-6000sf 20-30 miles away.
The last statement may finally begin to hit home with people over time. It’s not the gas prices, though those can hurt the 60 mile round trip Hummer commuters. It’s the time in the car. And the small, but increasingly possibility of much higher gas prices and rationing. This last has not really dawned on people as a possibility. How do you live in a 5000sf house 20 miles from anywhere but strip malls and (out of gas) gas stations on 10 gallons of gas a month? Real panic will set in if this becomes a publicly discussed possibility or reality (war with Iran, revolution in Saudi Arabia, dollar crash, and eventually peak oil).
Part of a note I wrote to my boss last week:
I scanned Bloomberg for downgrades in the mortgage credit market and discovered that for the one week from May 24 to May 30, there were 347 mortgage credit related products that were downgraded or for review of a downgrade. In the past month there have been 1,062 of these synthetic credits that have either been downgraded or under review for a downgrade.. And some of them were quite spectacular. For example, CDC Mortgage Capital had a tranche from a 2003 CDO rated BBB- by Standard & Poor’s as recently as last April. That CDO is now in default. This is from a group of mortgages aggregated in 2003, before the large runup in home prices.
My bet is that this aggregate index goes below 25, and perhaps to zero. 2006 BBB- pool aggregated in the second half of the year:
https://www.markit.com/information/affiliations/abx
Getting back to Theresa Weathers at the top of the story, if she took 100% financing on a $125,000 townhome at 7% for 30 years her monthly mortgage (p&i) would only be $831. How can she be paying $1,300/month? Why doesn’t the story explain?
How can a mortgage processor who should know better pay $1,300 mortgage on $125,000 property? Are they really that stupid?