Everybody In The Industry Knew What Was Coming
Some reports from the Washington Post. “Tommy Rice, Arlington County’s real estate assessor, spotted something troubling on his computer when he returned to work after a three-week vacation early this year: a half-dozen residential property transactions with an unusual code, the numeral 1, which indicates a foreclosure.Rice was taken aback, because he had seen that code so infrequently in his 22 years as an assessor in the affluent county.”
“‘It’s rare in Arlington and in Northern Virginia, too,’ he said.”
“Home repossessions are cropping up almost everywhere in the region, regularly occurring on suburban streets unaccustomed to hard times. In Montgomery County, the foreclosure rate has tripled in a year. In Fairfax County, it has quadrupled. In Loudoun County, it has increased tenfold.”
“In Howard County, there was one foreclosure in 2004; there are 157 so far this year. ‘We’re seeing an uptick, and it’s fairly dramatic. It appears to be accelerating, and we haven’t reached the peak,’ said John Rust, commissioner of accounts for the Fairfax County Circuit Court.”
“Bolivian immigrants Marcelo Ortega and his wife bought a brick-front Colonial in Herndon for $549,000 in February 2006. The payments are $4,200 a month, which grew unbearable as residential construction work slowed and Ortega’s income dropped.”
“The couple tried to sell the house, but the value has fallen to $499,000, and they can’t refinance without paying a steep prepayment penalty, something Ortega says they did not know or understand.”
“Their home is being advertised by the lender as a pending foreclosure. ‘We can’t pay for this house. We need to find something less,’ he said.”
“Sitting in his front yard, Emery St. Clair tallied on his fingers seven or eight recent foreclosures that have occurred in the middle-class, 1950s-era subdivision in Manassas where he has lived for 44 years. The houses, with a median value of about $300,000, down 14 percent from a year ago, fell into disrepair, and people started renting out rooms to stay afloat. But they still couldn’t keep up with the payments.”
“‘A lot of people bought these houses way too high, and they’re going that way,’ St. Clair said, shaking his head. ‘People can’t afford to stay in them any more.’”
“Five unrelated people are living in a house facing foreclosure in Manassas. One of the tenants, Cristian Mendes, from El Salvador, said that the owner, who lives in the house, is losing it to the bank because his boarders have lost their construction jobs and can no longer pay rent.”
“‘I’ve been here four months, but I’m looking for another place to go; I have to,’ Mendes said in Spanish. ‘I’ll be on the road.’”
“The door to the front of the house was propped open with a rope attached to the front railing to signify it would accept anyone passing by who wanted to rent a room. Tenants wandering in off the streets have plenty of options in Manassas: At the Global Foods grocery nearby, there were more than 35 handwritten fliers, most in Spanish, offering rooms to rent in homes.”
“‘It’s creating a whole subculture of boarding rooms,’ said Jose Luis Semidey, a Tysons Corner mortgage broker and real estate agent.”
“‘Everybody in the industry knew what was coming when you start loosening the criteria for making loans, allowing anybody to get a loan for anything,’ said Beau Brincefield, an Alexandria real estate lawyer. ‘Sooner or later, the chickens come home to roost.’”
“The Steeds Grant subdivision in Fort Washington projects an air of comfortable affluence. But appearances can be deceiving, as the home mortgage market turns upside down.”
“This is not a community that has had foreclosures in the past, and none of these homes looks distressed. But they are in Zip code 20744, which has the most foreclosures in the Washington area.”
“According to Realtytrac, about 80 homes in that Zip code received notices of pending foreclosures from January through May, almost double the rate from the same period a year earlier.”
“Homes in many price ranges in Prince George’s have been affected. In the past five months, there have been 40 or more foreclosures each in the Clinton, Capitol Heights, District Heights and Temple Hills Zip codes.”
“The rosebushes at the house on Bayshire Lane in Herndon have died. Plastic wrappers and empty crates are visible through the windows of the otherwise vacant house.”
“Watering his own roses and looking across at the empty split-level house across the way, Oscar Alexander says the family that lived there left two months ago lost the house to foreclosure.”
“‘The bank is getting a lot of houses,’ he said in Spanish. ‘Now there’s not anyone to take care of it any more.’”
“The rise in foreclosures is particularly pronounced in Herndon, a town of 22,000 in western Fairfax County. According to Realtytrak, a real estate information firm, 75 houses were advertised as foreclosures in a single Zip code, 20170, up from nine in that same period one year earlier.”
“‘We have a lot of vacant homes out here now,’ said lawyer Michael O’Reilly, the former mayor.”
“He said local residents have become increasingly aware of property owners struggling to keep current on their payments, because many try first to stave off foreclosure by renting out rooms, which he said can lead to overcrowding.”
“‘The community as a whole keeps an eye out for them,’ he said. If homeowners are ‘having trouble making payments, they start renting out rooms, and that’s a problem,’ he said.”
“Now many immigrants who bought homes in Herndon are walking away from the properties, said real estate agent Miguel Martinez. He said the good-paying jobs they had in residential construction have disappeared, and they can’t make the payments any more.”
From CNN Money. “Comstock Homebuilding Companies today announced that it had completed the $47.5 million sale of its 316-unit Bellemeade condominium conversion project in Leesburg, Virginia to an apartment operator based in the Midwest. Comstock had been operating the property as a rental community since ceasing its condominium sales at the project in late 2006.”
“In order to facilitate the sale of the entire 316 multi-family units as an intact rental apartment complex Comstock repurchased the 58 condominium units previously delivered by Comstock to individual condominium buyers for approximately $12.8 million.”
“‘The Bellemeade sale and other land sales accomplished this quarter are part of our previously announced goal of enhancing our balance sheet by reducing our leverage, reducing our long-term interest expenses and relieving short-term liquidity demands,’ said CEO Christopher Clemente. ‘Additionally, we have made significant progress on the Eclipse project and have begun settlements with purchasers of units in the second and final high rise condominium building.’”
Household formation is headed through the floor as inventory continues to pile up. I think analyst through out the boom forgot to take into account how out of whack household formation was. The excess supply of housing is going to prove to be huge.
deb, all they have to do is lower the price to reflect wages. That’s all.
~Misstrial
Mistrial: here is what has to happen to price in the most overvalued RE markets for that to happen:
Resale Home Prices Are Likely to Fall in Many Markets
We calculated how much prices would have to fall for housing costs (including mortgage payments, property taxes and down payments) to return to each market’s typical ratio of housing costs / income.
City / Current Price / Price Drop % / Price Drop $
Miami, FL $350,000 -41.4% -$145,000
Riverside-San Bernardino, CA $390,000 -41.0% -$160,000
Los Angeles, CA $570,000 -39.5% -$225,000
Baltimore, MD $284,858 -37.2% -$105,858
Orange County, CA $720,000 -34.0% -$245,000
Washington D.C., DC-VA-MD-WV $404,517 -33.3% -$134,517
Las Vegas, NV $305,975 -33.0% -$100,975
Seattle, WA $415,000 -31.9% -$132,500
Portland, OR-WA $280,000 -31.4% -$88,000
Oakland, CA $635,500 -30.0% -$190,500
Sacramento, CA $375,000 -29.3% -$110,000
San Diego, CA $565,000 -29.2% -$165,000
Orlando, FL $245,000 -28.6% -$70,000
Phoenix, AZ $263,000 -24.0% -$63,000
Baton Rouge, LA $179,306 -22.5% -$40,306
Fort Myers, FL $255,000 -22.4% -$57,000
Myrtle Beach, SC $207,816 -20.6% -$42,816
Tucson, AZ $230,000 -20.4% -$47,000
Boise City, ID $213,498 -20.4% -$43,498
Virginia Beach, VA-NC $235,034 -20.0% -$47,034
Tampa, FL $190,000 -18.4% -$35,000
Minneapolis, MN-WI $234,000 -15.0% -$35,000
New York, NY-NJ $500,282 -13.0% -$65,282
Jacksonville, FL $187,000 -11.2% -$21,000
Salt Lake City, UT $233,013 -9.9% -$23,013
St. Louis, MO-IL $166,250 -9.8% -$16,250
San Antonio, TX $145,700 -9.4% -$13,700
The RE consultant’s complete report can be found at:
http://www.realestateconsulting.com/local/local200706.html
Mistrial:
Well, according to this RE consultant we’re going to need a 40-10% depending upon the market and that translates into 100k+ off the median price of many homes.
http://www.realestateconsulting.com/local/local200706.html
More and more FBs will be forming “instant households” by renting their spare rooms to out-of-work construction workers!
While reading these, please keep in mind that there is no “foreclosure crisis”
Ha!
I am beginning to think the media today would call a nuclear attack a “minor radioactive shower”
They would just run an update on Paris Hilton’s ability to cope with the outside world after serving time.
Or their normal formula Fire/Car Crash/Puppy Story etc.
The financial decline of the USA is not as important as what Paris is doing, because she has done so much! We deserve everything we get….
What is not being said in the press, which is currently seeking someone to “blame” for the foreclosure mess, is that prices are way to high for anyone to safely afford right now. for most folks the frustrating choices are Rent and wait, or buy and get foreclosed on in a fairly short time. Prices are just way too high and folks are buying in thinking they will keep going up, or feeling peer pressure or that they will “somehow” handle the load, but they cannot in many cases.
“The door to the front of the house was propped open with a rope attached to the front railing to signify it would accept anyone passing by who wanted to rent a room. Tenants wandering in off the streets…” WTF!!
How many long-established, middle-class neighborhoods are going to be trashed in this blowout. First the descent into low-rent boardinghouses, then abandonment, as the short-term renters from the bank just walk away. You really have to feel for the fellow who owned his home in Manassas for 44 years and wakes up in retirement to see his street turn into a slum.
Manassas was always lame. No pity.
IO have seen this first hand in Santa Ana, CA, where in among the slums are pockets of elderly who have lived there for years. One once showed me the bullet holes in their bedroom wall, but they felt they were too old and sick to move … These were once nice neighborhoods, but now exist without the neighbor part of neighborhood. Welcome to the future of America and know why I am looking towards New Zealand in my future.
Bring lots of money, otherwise I doubt the kiwis will let you stay.
NZ welcomes people who come here to start businesses or supply skills that are in high demand - medical and IT people, as you might expect, but also skilled trades such as plumbing and auto body repair (called ‘panelbeating’ here). If you stay and contribute for two years, you can get an indefinite return visa.
We’re still inside a serious housing bubble, though - affordability is at record lows and people buy beyond their means as prices rise and mortgages grow ever more dear (about 10% these days, highest rates in the developed world). Not sustainable.
I love it here; socialist history with an open market economy now. But it’s no Utopia; social problems range from teen suicide to rising imprisonment rates to chronic shortages of doctors and nurses.
“door … propped open with a rope attached to the front railing …”
I would take the door right off the hinges, and put out one of those movie theatre purple-velvet-rope-between-two-posts things.
I agree with you, GH - prices are still way too high. Prices need to drop at least 40-50%.
I think prices are going to drop faster with the failure of the Senate immigration bill. A lot of this housing run-up nonsense was predicated and built upon a continuous flood of illegal immigrants to bolster demand for housing. In my opinion, specuvestors, the building industry, and the real estate syndicate are the main supporters of illegal immigration.
Interesting that “immigrants” are mentioned in the above article time and again.
Sorry for my bluntness, I just read an advertisement for carpenter services in Silver City, NM where my State of California was referred to as a “four-letter word.”
NOTICE TO NEW MEXICANS:
You have NO right to be critical of California since the State of New Mexico encourages illegal immigration by granting driver’s licenses to them and has established the ’sanctuary city’ of Santa Fe for them. Note to interested parties: Santa Fe is the State capital of New Mexico.
~Misstrial
I could see where with real immigrants - that is those LEGALLY immigrating and who are bringing in high levels of technical expertise and education this might be true, but in the migrant worker arena, I cannot see this.
They were expecting the lettuce pickers and janitors to buy all those $700,000 McMansions.
Can we have a Constitutional Amendment that bans people from bloviating that they ‘knew what was coming’ unless they publicly said so before July ‘06.
Like some of us here got ridiculed for.
Cool, I am in the group, so I will be the first (using your new rules) to say “I knew this was coming”!
Any monkey with a calculator and a 1/2 a brain could have looked at this during the run up and seen that it was headed where we are today. I am a younger guy, but I did live through the dot-com mess (and got burned by it) and just took my experience there to apply to the housing bubble. Same EXACT BS out of everyone in RE as there was about the dot-com stocks. It sounded like a replay; only now we were using 100% leverage (which makes it SO much more dangerous).
Anyway, I knew this was coming. Go through my blog entries here and other places, I said it publicly and tried to warn others.
Unfortunately, this is one of those times where it does not feel so good to be right.
Whats even more amazing is that even today the denial in some areas that there is an issue? You should see the greater fools in Seattle … and no one helps to correct the perception
bob, I just me a guy yesterday who bought in View Ridge for one million. 100% LTV. He’s a doctor, so he figures he can cover it, but 100%? The idiocy of people absolutely staggers me.
How many on this blog are still getting laughed at when they discuss this at work? I don’t get laughed at very much at all when discussing this any more. But I can see hostility replacing ridicule, and this is from people that don’t even own (since few people own around here). But these people want to own so they hope they have a future of 20% plus appreciation per year.
What are you people in the real world seeing?
I am seeing the same thing, NYCityboy. One would think that homeowners would be happy that the market would revert to type, so-to-speak. That rationality would be restored to lending standards. That housing values and sales standards would be re-established.
Not so.
~Misstrial
It’s more fun to play dumb. Believe it or not I have someone at work that “flips” houses on Staten Island. After repairing the last one they put it up in Jan and have had no offers. The guy told me he can hang it on the market till August before he has to RAISE the price. I asked why they would RAISE the price and was told that that is the point where he needs to sell it for more to make profit.
Don’t mind the logic!
I’ve never been to Staten Island. I’ve heard so many good things that I’ve decided it is too special to visit.
I’m still hearing the mantra “DC is different”. Lots of government jobs (and how this will help the economy in the long term is another discussion - it won’t). I was talking to a successful businessman last night, and he gave me many of the talking points: ‘DC has plenty of jobs’, ‘it’s different here’, ‘don’t try to time the market’.
People I talk to think we are at the bottom. I’ll wait until foreclosures start to decline before I consider that to be true.
arlingtonva, years ago Sen. Robert Byrd took a lot a flack for trying to transfere a lot of employees from one of the agencies (forget which one) to his state (West VA.) Since 911 we see that having government physically concentrated is not a good idea. Telecommuting makes it unnecessary. When I tell this to the it’s different here in DC cheerleaders, you can see the logic registering in their eyes. OR is it fear of being coming a FB? DC is so different. NOT.
FBI, and he succeeded. Robert Byrd always gets what Robert Byrd wants.
I am in FL, and I have stopped discussing it at work. It’s no longer funny, or even deniable (except to those who are deeply inibreated on the Kool Aide, RE agents mostly). People are scared, and they remember the discussions that I had with them 2 years ago about where home values are heading. They were telling me “Nothing but up” while I was preaching “Return to normal appreciation, and the loss of value that promises”. Now they are terrified that I might have been right, and some of them are looking at losing 30-50% of the value in thier homes.
Fact is, they already have lost it in some cases, and are going to lose it in most other cases. They just don’t want to think about it anymore. They all thought it was great fun to poke at me when I was renting and vaules were going up 30% YOY. I will not return the favor and poke at them as prices fall and I continue to rent at 1/3rd the cost of ownership.
Michael, you’ve just confirmed a mathematical formula I have been working on for the past 5 years and my eureka moment has finally arrived. Here is it folks:
Greed + reality = denial
I don’t get laughed at when talking about a housing bubble anymore. I started working at this Phoenix office in April of last year and I knew there were engineers who bought way too much house (half a million dollar loan minus rich parents’ contributions). I don’t talk about it much now. I am laughing inside only.
The funniest thing I’m laughing about is how the shills were praising real estate as the way to financial independence. Looks to me that financial slavery is what the FBs got instead.
And I’m laughing because I am free. At 48 I am told that a man in his 40s should have a house. The same guy who told me that also told me not to buy a certain airline stock, but I kept buying shares of it on the way down as I saw more business on that airline, and I made a short term gain of $3,000.
“Buy now and be priced-in forever.”
All that college money wasted for the extra earning potential, only to be enslaved by it. The financial serfdom of the higher educated among us, must be pretty overwhelming for them. Imagine all that extra earning potential going down the drain and into the pocket of the mortgage holders. Those people must be entering the depression faze by now.
I have posted before that I work at a civil engr firm. Most of these places in Southern California are starting to slow down, there are ups and downs is what I have been told by the old timers in the industry. Everyone knows i have been looking to buy a place for the last 1.5 years and a couple of the coworkers asked me last week. I said I am done looking now for at least a year. I am completely priced out of my $400k range with the interest rate going up. I also think with the mortgages being impossible for normal people to pay that there is a huge chunk of the population who cant afford. I was being told by our planners that housing will just keep going up so if interest rates go up I really will not be able ot afford.
I kind of gave up talking about this with my coworkers and have decided to start looking for a fun car to buy while I wait this out. I live at home and basically am saving and maxing out my retirement while I have been waiting. Almost done paying my school loans too in 5 years.
The only sane person is my project manager who every once in a while asks what prices are doing since he knows I am following everything closely. He also cant wait for the stocks to crash since he says it will end up being good for the economy.
The craziest thing is that my mom just retired and really wants to buy another house as an investment. The trouble is that she is somehow timed her last 3 house purchases perfectly and made good money each time and was able to move up and up and up. She wants to buy a house for $600k and give me $300k while I take the loan out. I kept asking her if the price drop 30% how long do you think it will take to go back up to beat inflation? Thankfully I was able to argue enough to stop her wanting to buy a place for now. I told her watch how long some of the houses are going to sit on the market around here.
I went jogging and noticed a house reduction from $1.25mil to $945,000. That house has been sitting vacant for over a year. Possibly 2 years? I cant remember.
I was never laughed at at work even before housing began a slump, but that’s probably because I sometimes wear my Starfleet Officer uniform and insignia, which garners natural respect and fellowship.
AMEN!!!!
At least Gary Watts was wrong and went out there and said what he believed, all these douche bag weather vain opinions turn my stomach. These people also have a favorite sports team, who ever is in 1st.
Thieves coming for your money in 3rd world city Macon, GA to pay off their mortgage….for another month.
“Bibb County Sheriff’s Investigators say Sullivan, who is being charged with two counts of kidnapping, criminal attempt to commit armed robbery, burglarly, theft by extortion and two counts of terroristic threats, invaded the Amerson’s home due to money problems he was having with his own home.
Lt. George Meadows says Sullivan claimed he needed money because his house was being foreclosed on.”
http://www.13wmaz.com/news/top_story.aspx?storyid=40500
He won’t have to worry about having a place to live anymore. He’ll have a nice little room with bars and three meals a day from now on
I certainly hope that he and many others enjoy their new Gated Community at taxpayer expense.
“Five unrelated people are living in a house facing foreclosure in Manassas”
now if we could open up the mansions in rancho santa fe for rent i could rent my own wing and have a pleasant garden view! seriously why can’t five unemployed people pay one stupid mortgage?
I wonder how many of these five even have a checking account? I’d imagine the majority of them use a check cashing service.
Home ownership is such a good thing for the community.
It seems the best way to deter the slummification of upscale areas is to have real estate where there are very few menial jobs. I would think that would be in rural areas where the average lot is twenty acres. On the other hand police and medical emergency services are scarce out in the boonies.
You don’t get it. Manassas WAS the boonies.
Manassas underwent massive growth. These homeloaners were building houses and decided to go double-or-nothing and bought a house as well.
They wouldn’t have been there without the housing boom. There’s nothing else going on in Manassas except for a small tourist trade and the Norfolk Southern crew station. Oh, and subsidized healthcare for illegal immigrants. They seem to be big on that there. Republicans. Go figure.
Ouch! I shrug my shoulders. I guess you cannot escape slums then. This country has come a long way since 1965!
…but La Raza and the US Chamber of Commerce tells us that there is no downside to bringing in tens of millions of uneducated illiterate illegal immigrants who are unable and unwilling to assimilate or learn a word of English
FYI - The 18th Street Gang in California has 40,000 members and is 90% illegal immigrants and children of illegals. MS-13 has 100,000 members and is even more violent and has the same proportion of illegal immigrants. They make the Mafia and black gangs look like boyscouts. No downside at all.
“The 18th Street Gang in California has 40,000 members and is 90% illegal immigrants and children of illegals. MS-13 has 100,000 members and is even more violent and has the same proportion of illegal immigrants.”
The Bush family has a big oceanfront compound in Kennebunkport…why not hand these guys a map and a bus ticket and direct them to George and Bab’s place…these sweet, deserving illegals can hunker down with the folks who want them to share the American Dream.
I swear the article reads like it is Californina … everyone speaking spanish?
This article brings up what is happening out west. McMansions (3000+ sq.ft) houses purchased at a low initial rate or as ‘affordable housing’ renting out rooms. Initially here they were making money, unreported income,and able to cover their mortgage plus buy fancy cars, trucks, etc, but now things are starting to change and many will soon be in foreclosure. The downside has been neighborhoods that look like a LA parking lot, not an upscale neighborhood considering the RE prices.Everyday I go outside my rental ($650K is what they were selling for in 2006) and pick up trash blown into my yard from the neighbors across the street. Because I fertilize the yard it is nice and green, weed free, while most of the neighbors are yellowish with weeds. Two years ago all the yards were green and had gardeners mowing them, now most of the gardeners have been let go.
Fake grass rules!
Salinas was a destitute Spanish-speaking town when John Steinbeck wrote about it in the mid-20th century.
Perhaps it’s finally reverting to form.
Seeing the rise from 1 to 157 in the number of foreclosures in Howard County VA (in Ben’s post) prompted me once again to visit foreclosure.com to check out Morro Bay CA, where the number of foreclosures shown has risen from 1 late last fall to 7 now. Slow, slow, slow … if it never rises further, I could buy there on the theory that it is Safe and Different. But we all know we should be waiting another 4-5 years, wherever our intended destination.YAWN
foreclosure.com is really crappy, and way out-of-date. Don’t pay any attention.
I love how 2-3 years back + I was calling this to my friends, not unlike the defense bubble in the 80’s and everyone said no way. Now it was obvious, anyone could see this, when I was the guy wearing the tin foil hat and the kool aid drinkers were sporting the graduation caps. Well, whatever at least my own insights didn’t create my own demise, I doubt many of the others can say that who couldn’t believe it. At least some I talk to now say maybe a 20% decline max in OC, where they were at 10% a year back….ohh are they in for a rude awakening!
defense bubble pop #2 especially if gop blows it- I’m for cuts either way ,but it will hit DC area and a few others
DC and Massachusetts will be hard hit.
Yeah, it’s coming… What blew the last time was that the work my dad was doing in defense was actually necessary (and cost effective) national security work. Of course my family was shocked when he lost his job.
A few years later the gov’t finally realized that Francis Fukuyama was wrong and that they still needed to do the work that my dad and his coworkers were doing for them and they rehired everyone they laid off.
Just goes to show that knowing your field can be a form a kool-aid, if you forget that no matter how good and useful the work you are doing, market conditions or political storms can shut you down in a heartbeat.
A high school classmate of mine graduated in physics and was hired into my dad’s old work group. She asked if I would apply and I said No Way.
I was fully employed in the defense business since 1985. My longest time without a job was 3 weeks. I was not aware of defense downturns until 1990 through 1996, but was still fully employed during those years.
I knew a lot of people who were laid off from General Dynamics in the early 90’s (in San Diego) and who wound up taking menial jobs,
I don’t have any qualms about bragging about my status as a temporary renter (last 2 years and possibly a couple more). In fact, I’m damn proud about it!! On the other hand, it’s fascinating to hear about all the distressed RE stories until you start to see the actual human toll that this is taking and you start to see the real pain this is causing. I make it a point to not gloat or let on to others about my bearish views unless directly asked (and even then I’m very cautious).
you should have a running clock $ SAVED SO FAR !!
I think a nice “friends don’t let friends gamble in Real Estate” T-Shirt would be appropriate.
$500k houses, period are for rich people, not immigrants nor even middle class people. I would never spend half a million on a house(even at the bottom) unless I had 4-5 million net in funds and other prolific assets. Us middle class people should be looking at houses priced around $100k. Does anyone think Florida will drop to $100k for a nice middle class house in a safe neighboorhood? You need almost $200k for that anywhere in FL and that is just insane.
If the nice, safe neighborhood is occupied by middle-class blacks, the answer is yes.
If middle-class whites, no.
Is racial status worth paying more? Not to me.
Many rich people did not get rich by overpaying.
If you paid over $150 per sq ft, I have only one thing to say, “To those who are about to die, we salute you”.
Also remember, most of these people purchasing these houses are using equity from their former house. So, that is why they fetch the big bucks, because their 190k house sold for 390k and they take the 200k into the 500k house making the purchase 300k a modest step 110k advance over their original purchase.
HOWEVER….now those houses people were selling to move up are losing their value so people looking to move in to these 500k houses are having a very tough time now….and will continue to, those who wanted to sell and move up can’t now in most cases.
“..190k house sold for 390k and they take the 200k into the 500k house ..”
Reminds me of last night’s rerun of the South Park episode in the Indian Casino.
“31 … black”
“We won! woohoo! Let it ride!”
Asset inflation in residential houses way outstripping ability to pay for most people w/out using exotic mortgages. Incredible overbuilding/oversupply which still continues according to what I can see anectodotally in Ohio. Are there any sophisticated economists who are modeling this stuff without a bias towards preaching to the pro-development business community? Kunstler was never more accurate than when he described suburban (and now the urban condo boom) as the “greatest misallocation of capital in history.” He also had a graphic on a recent journal post showing that retail sq. footage per person is an order of magnitude (i.e., 10x) higher in the U.S. than in Europe. I really have trouble understanding commercial development practice–do the original developers and banks simply rake off fees than pass the risk off to the broader MBS market? This seems like the definition of “moral hazard”. Is massive over-investment in non-productive assets deflationary or inflationary? My instincts tell me inflationary, but its just a wild guess….
This is a good thing. Money from the rich or stupid invested in real estate that is going to lose value big time. That real estate then becomes cheap for normal people and they can afford a home.
Consider it a redistribution of wealth from the rich or stupid to the frugal patient. A “tax” on the rich that enabled house creation, much better than government financed low incoming housing. Bear Sterns, Golden Sacks and all the other clowns who contribute nothing to society hopefully will be the ones to pay (via losses in mortgage backed investments) for the housing boom.
I can’t wait to buy a foreclosure and boot the spendthrist squatter who originally bought it new (probably by lying on his mortgage application but so what) to the curb. “That’s what you get for bidding up house prices so I had to wait you stupid loser. And take your kids too! And no, you can’t live in the garage I have pets! Do you see a sign out front that says “Stupid Loser Housing?”.
Then after I get buy and sell McMansions for awhile, I’m going to take spelling lessons! That should be “spendthrift”.
I would argue that Europe’s sq. footage per person is lower because land per sq mile in general is lower for the European population. So, comparing sq footage pricing in a skewed distribution is useless. Mine as well compare miles of road paved per person to those in Europe - really is a useless comparison.
Land per square mile? In the U.S. there is one square mile of land per square mile. How does that compare with Europe?
Well it’s one square km per one square km of course!
I think there is one group of sellers that are being overlooked.
These were people who bought homes with the idea that they would sell them at a huge profit and use the money to fund their retirement. Many didn’t bother to save and invest any money into stock, bonds, Cd’s etc.
They spent money like it was going out of style thinking the profit from their home when they sold it would be huge. Now they find their homes will not bring the amount they want/need for their retirement. Right now they are refusing to reduce their prices because they feel the prices will reverse course. I think this mess will hit future retirees more than they realize.
These overpriced houses will be used to help sell other houses. A common tactic by brokers, is to take someone to an overpriced listing. Then the buyer is taken to a better priced listing, which looks like a bargain in comparison.
You can’t pay the high property taxes on your inflated assessment house on credit …
Roll out the catfood jokes.
You can’t pay the high property taxes on your inflated assessment house on credit
Wrongo! Here I see a property tax bill right in front of me:
“When paying by credit card…” “American Express, Discover, Master Card, or Visa”
Credit rolls on! Oh yeah, there is a “convenience fee” added if you pay with a credit card, and they conveniently don’t tell you how much it is. I bet it ain’t cheap, though.
“Bolivian immigrants Marcelo Ortega and his wife bought a brick-front Colonial in Herndon for $549,000 in February 2006. The payments are $4,200 a month, which grew unbearable as residential construction work slowed and Ortega’s income dropped.”
“The couple tried to sell the house, but the value has fallen to $499,000, and they can’t refinance without paying a steep prepayment penalty, something Ortega says they did not know or understand.”
Marcelo may not of understood the loan terms - but he understood HIS DESIRE to buy a home no matter what obstacles were there in his way.
Good lord, I would love to buy a home too, but $4,200 a month? That is a BIG obstacle unless you are just plain crazy or make $20K a month.
$ 4200 a Month when You’re a Construction worker is Really Stupid. Construction has always been Feast or Famine.
Even $20k a month($120k gross annual salary) won’t get you into a half million house(regardless of the house and location) That is over 4x your income. It could be pulled off if property taxes was extremely low and you had a huge downpayment but meh now is NOT the time to buy, just rent and invest in stocks/funds this is where the appreciation is at.
Bolivia ain’t lookin too bad to these folks right about now.
I lived in La Paz Bolivia for a year when I was 13. It was actually my favorite place growing up mostly overseas.
“The payments are $4,200 a month, which grew unbearable as residential construction work slowed and Ortega’s income dropped.””
Again, I have to ask, how close to the edge have been/are people pushing themselves to the edge just to “afford” a house? Is this whole country living month-to-month?
“..living month-to-month?”
For many it seems more like weekly paycheck-to-paycheck.. and hand-to-mouth. But what’s to worry about?
“What are fears but voices airy?
Whispering harm where harm is not.
And deluding the unwary
Till the fatal bolt is shot!”
—- Wordsworth
Don’t do that - I think it’s a post by Aladinsane and I sorta skim over it…LOL
well!
Just ignore that, Aladinsane! I’m sure everyone enjoys and reads every word of your excellent prose .. except maybe the longish ones
“Everybody In The Industry Knew What Was Coming”
Hahahahaha…are you kidding me?
The only ones who “knew what was coming” were the folks on the bubble blogs and visionaries like Ben. Everyone else was too busy frothing at the mouth during the feeding frenzy of the last few years, installing Home Depot upgrades, and bragging about their instant wealth.
All too predictable. Wait until you have waded waist deep into the manure to say….I knew where I was the whole time and being waist deep in manure was all part of the plan. It is impossible for stupid people to admit they are stupid.
Are we not men?!!!!
Many of these idiots don’t realize it’s coming even when it’s already here. The people that actually knew how this would turn out is a bare minority. I have yet to find somebody that understood the mechanics of this monster. It was far beyond the mental abilities of the average REIC shill to understand this mess. All they understood was that they were making a lot of money.
I have yet to find anyone who even has a clue as to what’s going on, I think the average person feels like everyone else is doing better than thay are and they don’t want to talk about it. My dad used to wonder where in the world all the money was coming from as we drove around looking at big houses and seeing everyone in new cars. He couldn’t accept that these people were totally and foolishly in debt, because his world view didn’t incorporate such nonsense (Depression era). He therefore assumed everyone had money, though I would try to tell him otherwise. He just couldn’t fathom living like that, being that stupid to be in such debt and risk losing everything.
I keep getting told that its normal for a couple to make over $200k in Southern California to afford some of the lower priced housing. Of course no one can seem to point me to where all of these jobs are. There can only be so many movie stars, doctors, and lawyers living in this town.
Well they can afford it with a three income family.(singing) “Molly and me and the HELOC makes three…”
If you cobble together 30K or so a year, rent, and watch your expenses, you can at least be satisfied that your change in net worth year-to-year here in the last half of the first decade of the 21st century is not in the bottom quartile, and probably is not even in the bottom quartile of people earning six figures. Because so many of them are being buried with their RE. And meanwhile, you might even be getting some decent exercise!
This is what I though too. I have talked to hundreds of middle class people buying $200k, $300k even $500k houses and I am shocked how they can afford those prices which are meant for the rich. I estimate I can afford $50k of house and maybe $100k at most and this is all a single middle class income should be spending. Everyone told me “oh no, you can afford at least $200k of house” I just laughed and rolled my eyes!
Everyone else was too busy frothing at the mouth during the feeding frenzy of the last few years, installing Home Depot upgrades, and bragging about their instant wealth.
And they were laughing at me for mentioning that I’ve been regularly buying government securities (savings bonds, municipal bonds, treasuries) and money market funds the last several years outside my tax deferred plans.
Oh, I don’t know, plenty of people in the industry did see this comming. I mean, all those executives at home building companies who were selling all the stock that they could while maintaing prices by having a simultaneous stock buy-back. THEY certainly saw this comming. Of course they lied like rugs to keep the bubble going as long as possible, but they acted like they knew it wouldn’t last forever when it came to THEIR money.
Did You read on MSN about Virginia Passes new Fees on Traffic Tickets?
$3,350.00 in Fines for a 20 over speeding Ticket! I’d be Driving My a** right out of the State.
Got to make up for those lost RE taxes. Jeeeeeezzzzzhh!
typical lazy govt bureaucratic reaction to a loss = raise fees, raise tolls, raise taxes, raise fares, raise fines.. because we are their Masters and if the peons don’t like it, let them eat cake.
yup, that’ll really help their tourism (or does Virginia have much tourism??)
Tourism is important to VA. Apparently, this law only applies to VA residents and only applies to speeding on state highways. The article I read (it may not have been MSN, I can’t remember), quoted one of the law makers saying that the law was specifically intended to raise revenue and not as a deterrent to speeders. One of the main guys behind the bill also happens to be a partner in a law firm that specializes in helping people fight traffic violations.
as they say, you can’t make that kind of stuff up…
Virginia also recently TRIPLED the stamp fee on RE sales. Used to be Va. was in with SC and Ga as the low-tax South Atlantic states with NC and Fla on the other side. Va. seems determined to join NC and Fla. as high-tax states. (Note correlation with political orientation.) Might as well live in Fla. where sky is blue and weather warm and over 50% of population is actually still not obese.
Don’t forget that droves of people are leaving FL. It’s bye FL for me too unless the situation does a complete reversal. We would be talking around 50% off current house prices, major property tax and insurance cuts among other factors. Can you recommend a good state for a first time buyer? Tennessee and Pennsylvania are looking good.
Hey, the idea is to make the tourists stay LONGER
Keep in mind that not only was the 1st WaPo story pretty bearish, in the dead-tree edition it was page one above the fold. J6pack may start hearing the tune pretty soon.
But of course in the denial is still strong in the RE section. There was a piece about how we can’t crack down on NEG-AM mortgages and give them only to those who can affort the ammortizing rate because of: Widows in Million dollar homes, newly minded doctors and such. OF COURSE those represent typical Neg Am borrowers… NOT.