The Tables Have Turned In California
The Desert Sun reports from California. “With sales of existing homes in 2007 expected to match the 2002 national sales record, REALTORS still must educate the public about the value of real estate as a long-term investment instead of a get-in and get-out stock strategy. That was among the key messages at the recent National Association of Realtors’ Conference and Expo in Las Vegas, said Emily DiSimone, president of the California Desert Association of REALTORS.”
“‘Housing continues to be a good long-term investment,’ DiSimone said. ‘Real estate is alive and well in the Coachella Valley and there are plenty of opportunities for consumers and REALTORS in the current market.’”
“Jose Miralla, who lives in Beaumont, is already three months behind on the mortgage on his four-bedroom house. His troubles began on closing day, when he was presented with a higher interest rate than he expected. With a credit score of 670…Miralla says he could have qualified for a better rate. But he accepted the subprime rate for fear of forfeiting a $5,000 security deposit.”
“Miralla, who sells home alarm systems and works on commission, figured he could make the payments although money would be tight. But his sales figures slipped. A newlywed, he now wishes he’d backed out of the deal.”
“‘All the dreams we had to be together, to have a life together have just been ruined,’ he said.”
“As foreclosure rates climb, so has the number of homes available for purchase, said Greg Berkemer, director of the California Desert Association of Realtors. ‘There is more inventory than there is demand today,’ he said, noting about 9,000 homes are for sale in the desert.”
“The median price of a home in Palm Springs is about $346,000, an 8 percent decrease from the previous month, according to the association.”
The Recordnet. “When Jenny and Ricardo Hernandez bought their north Stockton home in 2005, their monthly mortgage payments were around $1,800. Now the payments total nearly $3,000 - more than the working couple’s monthly net income - and the Hernandez family is facing almost inevitable foreclosure.”
“‘We can’t go back and change what we’ve done,’ Jenny Hernandez said. ‘But we need to do whatever we can do now.’”
“‘They’re supposed to be the experts, and they’re making money to represent you,’ said Carol Ornelas, the CEO of a Stockton-based nonprofit that builds housing for low-income families. ‘Realtors and lenders have a fiduciary responsibility to their clients. That’s Real Estate 101.’”
The Sacramento Bee. “For Stephen Cook and Georgia Turner of West Sacramento, the trauma from losing the single-story house on Tacoma Narrows Street last spring remains all too real today.”
“‘Sacramento just means sadness to me,’ Turner says, crying at a coffee shop before leaving town. ‘Whenever I look at a house now I see an albatross.’”
“‘I just wanted to own a home,’ says Andrea Eddy, who lives in Trinity County now, a four-hour drive from the capital. ‘I thought everything was perfect with my husband and our jobs and our daughter, and that a house was the next step.’”
“A year after losing her new light-brown two-story home at Southport’s Huckleberry Circle, she says, ‘I just wish we never would have bought.’”
“‘It’s been hard,’ says Andrea Eddy in Weaverville, where her family of three now rents from her father. ‘I feel everything we worked for to that point is totally destroyed. Now we’re trying to work our way back up and keep our heads afloat.’”
“Eddy and her husband, Christopher, walked away from their West Sacramento house in December 2006 because everything they banked on – rising home values, ability to refinance an expensive and risky subprime loan within two years and uninterrupted incomes – went wrong.”
“The new $337,000 house they bought in May 2006 lost value from the day they moved in. (It’s for sale now for $255,000. Nine more homes nearby are also for sale). One state government salary couldn’t make the $3,000 monthly payments when Christopher lost work. Neither could the Eddys sell as newer neighborhoods such as theirs slumped across the capital region.”
“Seven months after buying their first house, they were renters again. ‘We just got our credit better and now it’s shot,’ she says.”
The San Francisco Chronicle. “The 5 1/2 weeks between Thanksgiving and New Year’s used to be a time for agents, brokers and others in the real estate industry - at least the ones who have had a good year - to pack their bags and head to the Caribbean. The thing is, this hasn’t been a very good year.”
“‘The sellers who are on the market now really do need, in fact, to sell,’ said Frank Cannella, branch manager for Prudential California Realty in Pleasanton. ‘Sellers don’t go through the hassle of having their homes on the market during the holidays to test the market. There is more sincerity on the seller side.’”
“Earl Rozran, a Prudential agent…is working with a client in San Leandro to get his home on the market in the next week or so. ‘We talked a lot about whether to wait until the first quarter,’ Rozran said. ‘We’ve seen a lot of foreclosures and short sales and in some respects some pretty desperate sellers and my own gut feeling is that will increase considerably in 2008.’”
The Orange County Register. “Martha Baker-Jordan had hoped to sell her four-bedroom home in Placentia by now. But after 90 days on the market, only about three people have even bothered to come see it.”
“So when her real estate listing agreement expired last week, she dropped her price and signed up to keep the home on the market right through the holidays. ‘I really want to move. I really want to downsize,’ Baker-Jordan said of her decision to persevere through the holidays. ‘I’m tired of the maintenance. I’m tired of taking care of the pool.’”
“Buyers traditionally take time off from home shopping as well, devoting more time to gift shopping instead. This year is no different, several local real estate agents said, except that many sellers have no choice but to keep their homes on the market.”
“As a result, the number of Orange County home sellers this holiday season is the highest it’s been in at least a decade, said Steven Thomas, an Aliso Viejo broker. There were 16,803 homes for sale in Orange County as of Tuesday, Thomas said. That’s 3,200 more than this time last year and double the number in 2005.”
“Not everyone is staying on the market. About 500 sellers took their homes off the market in the last two weeks, with about 50 sellers leaving the market every day, Thomas said. But the number of listings remains high because fewer homes are selling.”
“Rich Cosner, president of a Prudential California Realtychain in Orange County and the Inland Empire, believes that it’s smart for sellers to keep their homes on the market through the holidays. The buyers you see from Thanksgiving to Christmas are the most serious ones, he said. And chances are that sellers will have to sell for less if they wait until next year.”
“‘There’s a huge number of foreclosures down the road,’ he said. ‘Because of these foreclosures, I think (prices will) get less and less every month.’”
“There is an axiom of California politics that no issue is too large or too complex that state lawmakers can’t react to it, late, and with ineptitude. The veracity of this was illustrated again Thursday.”
“For about an hour, speaker after speaker rhetorically wrung their hands and recited a litany of woes about the situation. The legislators trotted out two ‘victims’ of the meltdown, who told parts of their stories about losing their homes to foreclosure.”
“It turned out one of them apparently hadn’t read the fine print on the adjustable rate mortgages she signed, and the other – who actually owned two houses and was renting one – got into trouble when much higher payments started on one of his mortgages.”
“Not a single speaker suggested that perhaps at least part of this problem has been caused by people who knowingly took on a bigger mortgage than they could afford, and gambled that higher housing prices would bail them out by letting them sell for a profit before their mortgage’s interest rates climbed.”
“Or that some people are dumber than stumps, and signed a legal document without even inquiring what it obligated them to do.”
“I’m in no way suggesting that there aren’t hundreds or even thousands of people who were conned into bad mortgages by slimy lenders, or that people who lost jobs or spouses got slammed when housing prices dropped while their mortgage payments went up.”
“But for legislators to show up on this issue in late November isn’t just an example of closing the barn door after the horse is gone. It’s more like they’re trying to build a new barn door while the horse has been running around for weeks, pooping on the neighbors’ lawns.”
“And one doesn’t have to be overly cynical to suggest that their call for a special session on the issue is based in part on a desire to have something to trot out in front of voters before they ask them to extend their terms in office at the Feb. 5 election.”
The Modesto Bee. “The housing slump has a silver lining for public agencies, which are finding a glut of private contractors looking for work and dropping their prices. And the competition equates to lower bids.”
“‘What is essentially happening is that there is no real construction for housing development right now so these contractors don’t have a lot to do, and so they are bidding pretty tight to get these jobs,’ said Pete Martin, senior civil engineer for San Joaquin County’s public works department. ‘It is not good for the industry, but it is good for us, at least temporarily. We get a lot for our money, and there is nothing wrong with that.’”
“Martin said if prices stay low through the year, the savings might be enough to pay for another project.”
“The tables have turned. For the last several years, builders have had the upper hand in price negotiation. The lowest bids regularly came in above engineers’ estimates as municipal projects competed with work on residential subdivisions and prices surged for materials — particularly steel. They have since leveled off and even dropped.”
“‘This represents a great opportunity for taxpayers, while the cost of labor and materials is lower, to push projects out the door because, obviously, the taxpayers will get more bang for their dollar,’ said Steve Madison, executive VP of the Building Industry Association of Central California.”
“‘And that will help the local construction economy because while the home building sector was the leader, we are not the leader right now. And if the other sectors of construction can be more involved, that will help the economy,’ he said.”
“As a result, the number of Orange County home sellers this holiday season is the highest it’s been in at least a decade, said Steven Thomas, an Aliso Viejo broker. There were 16,803 homes for sale in Orange County as of Tuesday, Thomas said. That’s 3,200 more than this time last year and double the number in 2005.”
Not to put too fine a point on it, but doesn’t being a ’seller’ mean actually selling your home, rather than holding it on the market forever at a price where no buyer is forthcoming?
To re-purpose a Cote-ism, I suppose you’re a “wisher” in that case, rather than a “seller.”
When I wish upon a price,
If I sell it would be nice,
When I wish upon a price,
My dreams should come true!
LOL!
OC really does run on Tragic Kingdom happytalk…
Wishin’, and hopin’, and thinkin’, and prayin’
Plannin’ and dreamin’ each night of a sale
won’t trick buyers onto your trail.
so if you’re looking at a loan you can’ pay
all you’ve gotta do is price it to sell it and list it
atta price they can pay
Mystery solved. First rain in over a year and hurricane like winds yesterday. Yun was here blowing hot air. Jobs being added my butt. I watch the local jobs everyday. Thursday there were a total of 9 new jobs added for the entire valley - none of which would have provided enough income to buy the median price home. Outright lying is not the same as having a positive attitude.
“With sales of existing homes in 2007 expected to match the 2002 national sales record, REALTORS still must educate the public about the value of real estate as a long-term investment instead of a get-in and get-out stock strategy.”
Two things come to mind. Sales are waaaay down, and now match 2002 levels. Perhaps we are getting closer to a ‘normal’ sales level. In other words, this is proof that the sales number is NOT NOT NOT depressed, but ‘returning to mean’.
The other part is this RE as a long-term investment: Guess what?
It won’t be for a long time. If sales figures are returning to normal, this means that the current high inventory numbers are here to stay for a while, depressing prices even further than ‘returning to the mean’.
Nobody will really know which way this market will turn for 10 years or more. Way too much inventory (at any price point) out there.
“value of real estate as a long-term investment…” and,
“‘Housing continues to be a good long-term investment,’ DiSimone said. ‘Real estate is alive and well in the Coachella Valley and there are plenty of opportunities for consumers and REALTORS in the current market.’”
I’m not sure how real estate in the Coachella Valley is to be looked upon as a long-term investment. Most retirees who move there aren’t expected to live very long.
Oh well, …. who cares if it makes sense or not.
~Misstrial
“Seven months after buying their first house, they were renters again. ‘We just got our credit better and now it’s shot,’ she says.”
So they made one payment?………maybe?
“‘It’s been hard,’ says Andrea Eddy in Weaverville, where her family of three now rents from her father. ‘I feel everything we worked for to that point is totally destroyed. Now we’re trying to work our way back up and keep our heads afloat.’”
Everything they worked for? You’re kidding me. They borrowed money to buy something they couldn’t afford. If they’d worked they would have had a down payment and wouldn’t have lost the home in seven months.
Come on…
That is why their credit was bad to begin with. Irresponsible and lacking in good judgment!
They aren’t lacking in good judgment - these people are borderline retarded!
And worse - they’re BREEDING!
Are you suggesting a mandatory sterilization of all FB’s? If so, bravo! I like it!
Who were Yun’s and LAY’s doctor who gave them the lobotomies?. Did they get a discount together? Two for One eh?
Now, now - I’m the child of FB’s (from several bubbles ago) and while my mother has lost one house to bankruptcy, and is about to be carrying two mortgages just to get out of her drugs-and-guns infested neighborhood, I have good credit, only student loan debt AND just payed for a cross-country move.
Some of us rebel against our parents by being responsible.
You! Out of the gene pool!
I know I read this stuff and I simply don’t get it. I make a really good salary and over about 300k is way to much for me. And over 200k for a house has me thinking hard. Also because of this fiasco even though I’m prudent I have to worry about my own job prospects. So even when housing gets affordable again we had to deal with the recession caused by the bubble. Which means I have to wait and see if what my income will be during a recession. I’m planning on dealing with a 50% paycut. Overall I can’t see a end of this fiasco for a decade at least. Even people that are prudent and buy what they can afford are going to get nailed by job loss in a bad sellers market once the bubble blows off.
You explained it wonderfully. This is what makes bubbles so terrible. In the end, even people who didn’t participate pay a price.
Yes. 90% or more of all ppl would have been better off if the bubble never occured - homeowners would be paying lower taxes and insurance, and would have not been enticed to pull fake equity out and gone upside down; wall street would still have been profitable but based on sound economics; people wouldnt be losing their jobs; banks would not be collapsing; young families could focus on raising families and spending time together rather than paying on mortgages they can never pay off, etc, etc.
the government and so-called “economists” with their heads in the sand or their hands soaked in blood really let us down on this one. . . ive said this time and time again, if the feds ever see national housing appreciation rates in excess of 8% they are put on notice that a serious problem is occuring that they need to correct as soon as possible; if its rising above 10% it should have been their upmost priority -
the feds and bush administration have let us down on so many levels it is beyond comprehension
I think there was some real blinders put on by the public - we must not lose focus on this all being voluntary - no one was forced to buy houses or take out exotic loans. I think the politics of telling the public to go out and spend to prove to the terrorists that we hadn’t been whipped by 9/11 was pure folly. I think the selling of the “ownership society” idea wasn’t for the public’s good. I think the idea of showing patriotism by spending is complete crap, but you can’t just blame the admin - people choose to disengage their brains, they choose to be numbed zombies by entertainment, they choose not to learn about economics or history, and they choose not to set an example for their children. All the glorification of fame and weath, all the dreadful pressure put on children starting way too young about looks or about having to grow up to be the privileged class has become completely whacked out. Parents saying they CAN’T control their kids computer or media use is BS - they are too lazy to take control. Media doesn’t belong in kid’s private rooms and a kid can’t get far on a computer if the keyboard and mouse are removed. Parent’s saying they don’t have time to prepare or share a meal with their kids - everyone stop with all the overscheduling and extar activities. What is wrong with people? Rant off
Bravo!
Amen.
Michael and Tim, you are so correct. The fallout from this bubble will be felt by all of us. My wife and I were making nearly 200K a year and could not afford to live using sound financial pricipals in Orange County. We have relocated to Highlands Ranch Colorado and cut our cost of living nearly in half. However, no place is immune and I am sure we will see fallout here, even though appreciation rates were nothing like CA. We did buy a home, only beacuse it was exactly what we were looking for, we had 30% down and rent was about the same. We could also afford the payment on HALF of my current salary alone.
Sad thing is, we took two high paid professionals out of the CA economy due to cost of living issues. That is one of the most insidious things about housing bubbles, they hollow out your economy. Outsourcing can be major like other countries, or minor, like a move to other states. With us, we have moved, our company is expanding in other lower cost states with most jobs in the 80-120K range, good paying solid work, very stable. We can’t recruit in CA because the cost of living is so high. All the educated young professionals are fleeing that state. The damage will be felt in CA for a generation or more. I don’t think CA will be what it was before in the 50’s-90’s. I believe those days are gone. I could be wrong, I hope not, I love CA, especially South OC, there is almost no place I would rather live than there(I was born in Newport Beach), but quality of life for my family is more important.
We’ll see what the future brings.
Besides income possibly going down, the inevitable rise in interest rates will help keep homes nice and pricey.
I happened to be a poor American hick that married into a wealthy Taiwanese family ( yes it works both ways ) so borrowing money is not a issue with me but I’m still very obligated to be prudent. I’m also like the other poster in the 200k salary range. But the point is because other people cannot borrow easily I cannot safely buy. I can pay cash at least as far as public banks or concerned but you hit the nail on the head. I can’t buy unless I can reasonably expect to sell for close to what I paid. It does not matter what my financial position is if when I decide or need to sell I can’t find a buyer what good does a house do me. Sure you can say that I’ll live in it forever but I’ve lived in 15 American cities and four different countries I can’t say when I’ll have to move again.
If I can’t sell it really does not matter how much money I have buying is not a good investment.
RIGHT! I earn an excellent salary as a senior software engineer, probably top 5% and I would be freaking out with a mortgage over $250K. Even that would not leave much room for problems if a recession or worse should strike. Here in San Diego, that still represents a 50% reduction to bring prices in line.
Lol!
Oh boy… worth it to own that 30 days, eh? This just amazes me. I bet they taunted their ‘renter’ acquaintances about being priced out forever.
LA Times has an article on how the flippers are going to discount Realtors ™ to maintain profit. Chuckle… Just think, we’re aren’t to February yet.
Notice how the REIC doesn’t like to talk about the financial damage they’ve done to the various municipal governments and retirement plans? That pain still hasn’t been recognized. That pain is going to tighten the mortgage market. When? My guesses have all been too early. But its going to happen.
I’m about to make the reservation for the dinner on the 8th. Any more takers? Click on my name for a link to my blog.
Got popcorn?
Neil
Old Pasadena sounds great. I’ll come. I haven’t been to a blog party since Patricks at Surfer X’s. Harm–are you out there? You live near Pasadena. We should all get together!
I RSVP’d –the wife and I will be there. Look forward to seeing you again, Linda.
Any chance I can meet up too??? If so, please email me…armmat@gmail.com….I’d love to meet up with fellow Housing Bloggers.
Thanks
nozferatu,
Click on Neil’s name (link) and you will be taken to his homepage, where you’ll find all the details (RSVP email, locale, time, etc.).
My mom is in Pasadena and I’ll be there this weekend. I’d like to join the party and represent SD.
“Earl Rozran, a Prudential agent…is working with a client in San Leandro to get his home on the market in the next week or so. ‘We talked a lot about whether to wait until the first quarter,’ Rozran said.”
Man, inventory numbers by Spring of next year are gonna be awesome!
“Man, inventory numbers by Spring of next year are gonna be awesome!”
You got that right. Their’s a lot people who put off trying to sell this year. Believing that things would be turning around in 2008. Now they’re coming to the realization that’s its only getting worse. New sellers competing with people who couldn’t sell in 2007. 2008 should see some real pain for sellers.
I live in Santa Monica and when I used to go to Open Houses and say “I think this house is overpriced” the reatwhores would get angry and almost slam the door on my ass on the way out. Now I say the same thing and they say “I think so too, make an offer and I’ll talk to the seller.” Boy times have changed. And yes! I love all the jackholes who took their homes off the market this year because they didn’t get their “magical wishing price” and decided to wait. HA! They are sooo screwed!
And yes! I love all the jackholes who took their homes off the market this year because they didn’t get their “magical wishing price” and decided to wait. HA! They are sooo screwed!
I have quite a few areas I’m tracking. Some I started later than others.
But what’s going to happen as credit slowly tightens?
Slower sales.
As buyers become more cautious:
Slower sales.
As sellers suddenly realize they ‘want to downsize.’?
Greater inventory
And as the wanna be Trumps watch their empire destroy their retirement?
Greater inventory
As a large fraction of the workers suddenly are working less overtime, under-employed, or even un-employment and go home to live with Mommy and Daddy in their McMansion?
Greater inventory
Bwaa ha ha! (oops, keeps coming out load)
And the Real Estate bulls wonder why their FUD tactics are’t working so well (except on people who are having a tougher time qualifying).
Got popcorn?
Neil
FUD ???
“Bwaa ha ha! (oops, keeps coming out load)”
Please explain. Spontaneous load eruption everytime you laugh? If so, that’s gotta suck……You’re a good guy Neal, I’d get that fixed.
ex-nnv, I’m not getting myself fixed!
Earl:
FUD=Fear uncertainty and Doubt. Its a nasty way of temporarily getting someone to do what you want.
Got popcorn?
Neil
Hey man, if you’re cool with it, so am I.
FUD = Fear, Uncertainty, Doubt
Then there’s FUBAR - where our economy is going.
and “load” = “loud” with a typo, I suppose
Wish I could come to dinner, Neil. Hope you will have another in Feb or March, I promise to come
I’m not sure now if I wanna go to dinner with Neil or not….
Hope you will have another in Feb or March, I promise to come az_lender, I’ll give you a good look ahead for one post ‘V-day’.
Neil
FUD is what the admin used to go into Iraq…very good tactic by that scum.
“Inventory numbers”
It’s my understanding that there are currently around 5 million homes for sale around the U.S. I’m assuming that includes condos.
According to reports, another 2 million homes will be foreclosed in the next few weeks.
THAT’s unsustainable and it will crater the other 5 million homes sitting on the market.
Next spring: I can’t even imagine what it’s going to look like early next year.
I beleive you, but 2 million seems an incredible number.
Re: 2 million homes.
I was a little too quick on the keyboard. It appears that it looks like 2 million homes, but it’s going to take months, not weeks.
Now factor in the huge # of people who will move in with friends or back into their parents house as the employment picture worsens.
The 5 million homes for sale does not include
1. Second homes that may be sold to raise income if the economy worsens.
2. Homes that have been pulled off the market in the hopes of waiting the storm out. There are two empty houses down the street that were pulled from the market for this reason.
We’ve been watching that a lot around our neighborhood – have one down the street was on the market for over a year – now it’s got the dumpster out on the road and it looks like they are ripping everything (including landscaping) out. We think they might have broken a water pipe or something (was left unoccupied for most of the time it was on the market).
We just keep seeing the same homes on – then off for a month or two –then back on. Quite funny for those of us not stuck in such a situation, though I’m sure for many that are it is quite nerve raking (and after listening to all the gloating I hope they get the lesson of a lifetime in this!)
We know a few people who took their homes off the market to wait until spring.
They’re “not going to give it away.” (seriously, one actually said that to me)
Today’s business section projects only a tiny decrease in the employment numbers coming out this week. Goldilocks prevails! They are going to draw this out as long as possible. But we can wait - popcorn is yummy.
Local observation from Charlottesville, Virginia;
In my neighborhood, not far from downtown and made up largely of 1950’s era brick ranchers, within a 10 minute walk of my house are at least 18 houses for sale, 3 for rent, and 2 outright abandoned. This is going to end badly.
SubKommander Dred
And Charlottesville is one of those great little college towns where everyone wants to live! If Charlottesville takes a hit, hardly any place is immune.
If the government goes ahead with their ridiculous bailout scheme, then many of those houses will not go into foreclosure for another 3-5 years.
Do not put your house on the market until the spring, or better yet, the week before the Super Bowl. ‘The buyers are coming’. hehehehehehe
“‘They’re supposed to be the experts, and they’re making money to represent you,’ said Carol Ornelas, the CEO of a Stockton-based nonprofit that builds housing for low-income families. ‘Realtors and lenders have a fiduciary responsibility to their clients. That’s Real Estate 101.’”
That’s a fallacy that people really need to learn the truth about. Realtors and lenders primary goal is to get a deal and make a commission. Their salespeople, driven by commissions. Caveat emptor.
Agreed. This lady should be hustled out of whatever position she’s in before she does any more damage with her lack of knowledge.
From Bob Sullivan, The Red Tape Chronicles
Mortgage brokers, for example, may act like they are on the buyer’s side, but they’re not. They’re working for themselves. When it comes down to it, they are economically motivated to pick profits over the buyer’s best interests.
All the brokers are or represent businesses. Businesses are entities not human beings. They have no emotions or loyalties. Yes in the “olden days” maybe businesses pretended to have some sense of loyalty to employees or good will to the community, but those days of even pretending are long gone. Most people can’t even trust their own families or friends when it comes to money matters so why should they think that a stranger is doing them a favor.
I don’t do my borrowers any favors, but some of them persist in sending my Christmas cards and stuff like that. Because my best way of serving my own interest has been to treat the borrowers reasonably. All my business is word-of-mouth, and, as I have often posted here, I keep all the mortgage notes myself (no securitization). I did a few repo’s since 1993, but none since 2003.
“Businesses are entities not human beings. They have no emotions or loyalties…Most people can’t even trust their own families or friends when it comes to money matters so why should they think that a stranger is doing them a favor.”
While there still are some honorable businesses and businessmen out there, I’m afraid you’re mostly correct. It’s not only businesses, but customers as well.
Upon liquidating some inventory last year, I sold many items to an old man (neighbor) with whom I had become friendly. He was a potential client who I had given a bid for a job which I never got. He said it was more than he wanted to spend, and I understood. Anyhow, I gave him an extraordinary deal on some material, and felt good about it since I generally liked him. Well, sure enough, the guy starts getting greedy, calling me back, angling hard to get more stuff. I politely declined, expressing the fact that what I did was an exception, and not the rule. In the end, one good deal wasn’t enough, and the old b@stard turned out to be as greedy and cantankerous as they come, bordering on rude. It was unfortunate to see.
“‘They’re supposed to be the experts, and they’re making money to represent you,’ said Carol Ornelas, the CEO of a Stockton-based nonprofit that builds housing for low-income families. ‘Realtors and lenders have a fiduciary responsibility to their clients. That’s Real Estate 101.’”
Typical “non profit” employee. Too ignorant to know RE agents work for sellers and bankers work for shareholders.
Actually, Carol makes a good point. The problem is that for the past five years the realtors forgot their ethical and fiduciary responsibilities.
Problem is, according to the law –they have no such responsibility. IANAL, but every lawyer who’s ever commented about fiduciary resposibility on this blog and many others (Patrick.net, Calculated Risk, Big Picture, Mish, etc.) say that mortgage brokers and Realtors have ZERO obligation under the law to act as “fidiciaries” in the best interests of the buyer.
Perhaps what’s needed is a Sarbanes-Oxley for the REIC.
‘I really want to move. I really want to downsize,’
Sorry baby, you’re in the OC. Downsizing is strictly forbidden.
“Martha Baker-Jordan had hoped to sell her four-bedroom home in Placentia by now”
Placentia is close to Pasadena.’
I was encouraged reading this so Glendale is next!
Are you kidding me? At least a 45 minute drive between the two, without traffic…
In OC, the bigger, the better with buyers paying 10 to 15 times their gross incomes for that “perfect” house. Now not only are sellers worried but the Paulson, “elites” are especially worried by trying to freezing mortgages, etc, federal reserve printing money and anything else too keep the debt slaves in their houses. Many will soon realize this is crazy on paying or staying in a house that is going down in value on a upside down loan, freeze payments or not. What happens after the freeze ends! F–ck me? F–ck You? I’m out of here and so is your Wall St. future commissions.
In OC and buyers in California took out [45% on adjustables in 2005-2007] for loans 10 to 15 times their gross incomes for that perfect house. Soon they will realize they can’t pay. Worried also are the Paulson, “elites” who set up these wonderful toxie loans and are now along with the federal reserve printing money and whatever else it takes to keep the debt slaves in their upside down loans with incentives of freezing mortgages for 5 to 8 years etc. What happens after the freeze? Wages increases make up for paying 10 to 15 times of gross income, don’t think so. Many will realize it’s crazy on being a debt slave and will walk. F–ck Me? F–ck You? No more Wall St. commissions.
Wages increases make up for paying 10 to 15 times of gross income, don’t think so.
Don’t you love how the real estate bulls try to create inflation FUD? Somehow increased energy and import costs translate to higher wages… fast. Not going to happen.
The freeze will result in more banking/finance layoffs. Lower bonuses (read, less income). Yep… that will help. Not.
Got popcorn?
Neil
RE: Downsizing is strictly forbidden.
Same here in Mazzland.
McMansion aristocracy won’t stand for any pikers slummin’ it up in a house under 4,000SF
http://www.boston.com/realestate/news/articles/2007/12/02/a_cottage_comeback
Martha is lying. She doesn’t want to downsize - she is just ashamed to admit that she can’t afford her house and pool.
I thought that’s what downsizing means. “I can’t afford to keep up this big place and I’ve run out of excuses ot have such a big place.”
Got popcorn?
Neil
I talked to an architect friend who’s working on a major development in downtown LA. He said they’ve totally given up on attracting local condo buyers and are modeling their units off of Asian condos, hiring feng shui consultants, the works. The message to local buyers is clear: unless you’re a multi-millionaire, go rent some failed flipper’s stucco box!
Yet another city waits for multitudes of wealthy foreigners to swoop in and buy up depreciating assets in an economy going down the tubes. Vancouver, New York, Toronto, Los Angeles, all of Florida, Phoenix…
Americans leaving the B.C. housing market
Derrick Penner, Vancouver Sun
Published: Monday, November 19, 2007
The flip in the Canada-U.S. currency advantage is encouraging some American owners of B.C. real estate to take an exchange-rate gain by selling their properties, realtors are beginning to notice.
“We are seeing some activity that is the result of people assessing the exchange-rate situation and deciding to [sell] now rather than later,” Patrick Kelly, president of Whistler Real Estate, said.
Kelly said the activity amounts to only a handful of listings. But for some owners in Whistler — where property values have stagnated over the past few years — the recent gains for the dollar gives them a return on a property investment that hasn’t performed as well as they’d hoped.
But foreigners will ALWAYS want to buy here!
From the Vancouver Sun:
The flip in the Canada-U.S. currency advantage is encouraging some American owners of B.C. real estate to take an exchange-rate gain by selling their properties, realtors are beginning to notice.
“We are seeing some activity that is the result of people assessing the exchange-rate situation and deciding to [sell] now rather than later,” Patrick Kelly, president of Whistler Real Estate, said.
Kelly said the activity amounts to only a handful of listings. But for some owners in Whistler — where property values have stagnated over the past few years — the recent gains for the dollar gives them a return on a property investment that hasn’t performed as well as they’d hoped.
http://www.canada.com/vancouversun/news/story.html?id=2f844371-43dd-454b-bcac-9acba1e0b34f
I’M BEGGING ALL OF YOU
Please join this Vancouver BC condo blog and frequently tell them of your stories and opinions on why those housing bulls in Vancouver (billed by the real estate propaganda machine as “The Best Place on Earth”) who think they are immune to the housing bubble bursting are delusional.
Vancouver BC has the highest home prices in N America. Please help bring them down folks. This BLOG is read by many many Vancouverites and because the media up here is controlled by the building industry many people here are being scammed by the building and realty industry.
It all helps so see you there I hope
M.R.
Oy, over Thanksgiving my father-in-law commented on how he thought the housing bubble wouldn’t burst because of rich Asians snapping up properties right and left.
I just smiled and asked him to pass the turkey.
Your FIL thought the bubble wouldn’t burst? Where the hell has he been? Doesn’t he read the paper or watch TV?
you just smiled and asked the live turkey to pass the dead turkey
Do we all have the same f—ing in-laws? Oh wait, my family is just as f—ing dumb on this.
My son in law told me that the house he bought in ‘04 for 400k in Fresno (NW off Herndon) was going to 850k by ‘08. I didn’t say a thing.At Thanksgiving, he confessed that his 2nd TD reset. Doubled the former payment. Told the wife. She said shut up and don’t meddle. He’s a good worker, owns his own security business, provides well for my daughter, what can I say? There are stupidos in almost every family
Yup, Hong Kong millionaires are lining up to move to Farmington, NM; Casa Grande, AZ; and Stockton, CA.
That wouldn’t happen to be the same tower some Korean firm just picked up. They didn’t even think to talk down the price.
I can’t imagine what a feng-shui/Frank Gehery mashup would look like. Scares me to imagine that monster.
The last time someone tried to feng shuei in a tower was 1800 Wishire. That stood empty for years. I don’t think that helps in LA.
The Sacramento Bee. “For Stephen Cook and Georgia Turner of West Sacramento, the trauma from losing the single-story house on Tacoma Narrows Street last spring remains all too real today.”
Tacoma Narrows Street!? What delicious irony. Did the house swing back and forth before collapsing?
No, but the prices swung up and down before collapsing.
Real Estate 101: Prices will fluctuate.
Real Estate 102: In a boom or bust, prices will fluctuate wildly.
I read that story. They bought a house in West Sacramento for $195,000 in 2001. Should have been the end of the story, but you know what these idiots did afterward - were foreclosed after multiple cash-out refis. And we’re supposed to feel sorry for them. Not. The punchline was that he is still driving around looking for houses to buy.
Have the tables turned? In which bubble market can one buy, right now, a home for what it would have sold for if the bubble never occured, let alone less?
Sales are down, but they are no low. The shock is that they aren’t at zero. My guess is a non-greedy seller can STILL get more than their house is worth, if they are willing to discount deep enough.
What something is worth is purely subjective. When two folks are attempting to trade their possessions, the trade only occurs if both parties feel that what the other holds is worth more than what they are currently holding (this includes all “values” of the object-physical or tangible (use), emotional or intangible (exchangeable).
Now, most transactions are done with notes from the FED. There are many calculations to be done with just this measuring stick. How long will this good be used, how much will it be worth in the future, how badly do I need it, how badly do I think others will need it in the future, etc., etc.
With what the Fed is currently doing to their notes, it is making it very difficult to use Fed notes in any fashion, whether as stores of value or for large transactions such as cars and homes.
When a transaction occurs, that was the value as determined by those two parties at that exact instant in time. Two other parties may very well have assigned different values to those two objects. As soon as it has occurred, there is no telling if even those two people would attach the same values the next day, let alone next year.
Things are going to be very interesting.
I am more on the side of WT Economist, who implies he can assign an objective value to a house. For me the objective value is the price at which the house could be bought and rented out without incurring a negative cash flow or passing up a better rate of return on a safe investment. House prices in most areas have not declined far enough to make this possible.
“‘Sacramento just means sadness to me,’ Turner says, crying at a coffee shop before leaving town. ‘Whenever I look at a house now I see an albatross.’”
The real burden of home ownership is becoming apparent to the sheeple.
“But for legislators to show up on this issue in late November isn’t just an example of closing the barn door after the horse is gone. It’s more like they’re trying to build a new barn door while the horse has been running around for weeks, pooping on the neighbors’ lawns.”
Yes, Mr FBtoBe, I can put you into this great loan, because you have such wonderful credit - FOR ME TO POOP ON!
Love,
Triumph
The Mortgage Broker Dog.
The real burden of home ownership is becoming apparent to the sheeple.
It’s a slow trickle of awareness, due to be a stream next year and a river of awareness in the following years.
“So when her real estate listing agreement expired last week, she dropped her price and signed up to keep the home on the market right through the holidays. ‘I really want to move. I really want to downsize,’ Baker-Jordan said of her decision to persevere through the holidays. ‘I’m tired of the maintenance. I’m tired of taking care of the pool.’”
Some possible responses to this one:
(1) And I’m tired of entitled homedebtors asking too much for their McCrapboxes.
(2) Ah, the joys of homeownership.
(3) Didn’t you listen to what the REALTORS say? Housing continues to be a good long-term investment!
(4) Hey, cheer up. There’s no place like home for the holidays.
whimper…
“Jose Miralla, who lives in Beaumont, is already three months behind on the mortgage on his four-bedroom house. His troubles began on closing day, when he was presented with a higher interest rate than he expected. With a credit score of 670…Miralla says he could have qualified for a better rate. But he accepted the subprime rate for fear of forfeiting a $5,000 security deposit.”
“Miralla, who sells home alarm systems and works on commission, figured he could make the payments although money would be tight. But his sales figures slipped. A newlywed, he now wishes he’d backed out of the deal.”
“‘All the dreams we had to be together, to have a life together have just been ruined,’ he said.”
First off, why on earth would a newlywed couple need a 4-Bedroom house? That is insane. Unless, of course, he had an insta-family… Then, nevermind.
Hey Salad - similar to my reaction. So they lost the house and now their whole lives are ruined? Why don’t they just end it all then? How pathetic these sheeple have become that they value houses more than anything else they will do or have their entire lives. That’s what they get when the end all and be all of life is money and things. I just want to bitchslap this guy.
Salad
If you are in SoCal you would understand the feeling of entitlement everyone of these loooosers have.
The younger they are the worse it is - no one taught them about ’saving and defered gratification’. They gotta have it all and have it now. WTF!
It’s depressing. I feel like its a losing battle trying to demonstrate that you can live quite happily with less stuff. But I don’t think it’s just limited to SoCal, this entitlement disease is everywhere. And certainly we have to endure the crazies that move here and adopt with a vengence some cliche idea of the SoCal lifestyle they saw on TV. SoCal natives are pretty normal and low key. I’m still pissed off that Cheney said the reason we had the electricity black-out in the summer of 2001 was because of our hot tubs. (Maybe 5% of the folks I know have a hot tub). When we finally learned about the Enron scam to manipulate our energy supply it all made perfect sense.
And certainly we have to endure the crazies that move here and adopt with a vengence some cliche idea of the SoCal lifestyle they saw on TV. SoCal natives are pretty normal and low key.
————————
Yep. You can spot a CA native from a mile away…because they are not trying to “look like” a Californian.
Most of the obnoxious “Californians” (using that term loosely) are really from somewhere else.
no one taught them about ’saving and defered gratification’. They gotta have it all and have it now. WTF!
I’ve become of the opinion that it takes a recession to teach such lessons. It takes a hard lesson to teach preparedness and foresight. Much of what I know if from listening to grandparents and their friends talk (usually while crying) about the great depression. I remember the 1970’s recession seeing the adults crying at the mall. Same thing happened in the ‘peace dividend recession’.
Today’s selfish idiots are about to get a wake up call. Sadly, this economic downturn will punish everyone.
Oh well… the lesson has to be taught.
Got popcorn?
Neil
You’re obsolutely right. It’s been virtually impossible to explain why you must save money to buy things when the whole system showered us with easy credit. 0% somehow translated into “Free”!
“1970’s recession…adults crying at the mall”
One person’s disaster is another person’s opportunity.
In December of 1974, the DJIA was briefly below 600.
You read that right: SIX HUNDRED. (Not 13,000; not 6,000.)
My whole life savings then was $8,000. I put it all in stocks. Unfortunately (?) I took it all out of stocks when the DJIA reached 888 in July of 1975. I won’t say I never bought a stock since then, but I never went “all in” again. I was spoiled by that one-time bargain. I certainly wasn’t crying at the mall, though. I was probably crying at the gas pump!
“adults crying at the mall”
WTF? Haven’t they seen pictures of kids who look like skeletons in Africa? Last I checked, the largest epidemic in America is obesity!
Thirty years ago next June we got married and drove from Michigan to southern California. Those were fun years - we lived in a little one-bedroom apartment (I remember bleaching the mold off the window sills when we moved in - who knew?). Rent was cheap, we gave up meat to save money, and had a lot of fun just hiking, running, watching TV, playing cards, reading, etc. Maybe this bubble will force young people to go back to the simple joy of being young and in love.
The bubble already has forced one youngish couple into something different.
We gave up a fixer-upper house this spring to rent a modest apt with the kiddos. Free time is something that is making it’s appearance again.
“Rent was cheap, we gave up meat to save money, and had a lot of fun just hiking, running…”
Today’s young “porky pigs” are not able to hike or run.
What if all this legislation passes, the rate to borrow goes to zero and prices still scream downward.
Mr Lawmaker its not about people being put on the streets, rent is a viable option. Its really about the home price increase turning to a decrease.
Save our homes. Save our home prices. Save our city coffers.
This talk is absolutely shocking!
When Jenny and Ricardo Hernandez bought their north Stockton home in 2005, their monthly mortgage payments were around $1,800. Now the payments total nearly $3,000 - more than the working couple’s monthly net income…
So why were you paying more than 50% of your net income on your mortgage in the first place?
Because real estate only goes up - and they could refi before the reset, extract cash from the ‘equity’ and use that to live on until the next refi and the next extraction.
Because they’re greedy morons.
This is a great example why a rate freeze won’t help. Above 30% of income is considered unaffordable. No margin… In Stockton? Chuckle…
Got popcorn?
Neil
Many tenants pay more than half their GROSS income for rent every month, simply because they can’t find anything for less than that. In California half of all tenants pay more than 30% of their income for rent and 25% pay more than 50%. So many tenants wouldn’t think paying half of their net income was that unusual.
New casualty of subprime crash: More square feet in SF East Bay are empty in third quarter
http://tinyurl.com/38unj2
Oh, Ben, the caps on the REALTORS is cracking me up. Just makes them look stupid for complaining about that.
“‘Realtors and lenders have a fiduciary responsibility to their clients. That’s Real Estate 101.”
Homebuyers have personal responsibility not to trust any salesperson and read (or get some help to) any loan document before they sign. That’s reality 101.
DOC
‘I just wish we never would have bought.’
I hope everyone gets the message. As these horror stories replace the bragging about home values at the water cooler, the world becomes a better place. Affordable housing for all in 2010. Save your cash.
‘I just wish we never would have bought.’
I had the same wish for an entire decade after buying in 1990 at the California peak and selling in 1996 for a 20% loss (brought money to the table and preserved my good credit). Even for several years after I sold I had the same wish.
Suppose I never bought at all until 2004? Maybe I would be severely stuck. The first bubble was a great lesson. Maybe I should be glad I bought back in 1990 after all! That bubble burst was a tea party compared to this current bubble burst.
I remember thoses days I also bought in 1989 and not until 1999 could I break even. I sold in 2006 and made about 10% per year on my downpayment AFTER 16 years !! I rented the thing out for a brief period of time when my job transfered me. That did not work out well BTW. Stupid renters and now I rent and its just fine. I suppose we have a new group of 16 year bubble busting house sitters, or like so many did in Cali in the mid 1990’s just walk away. I didn’t because I had a down payment and at the time didn’t think you could walk away scott free.
I bought in ‘99 and the people I bought from paid 5k more than I did when they bought in ‘95.
During the boom, I “remotely” was considering purchasing a home. Searching for a Realtor, I get recommendations such as.
” My cousin is a realtor, she’ll help you out”
” I know of a friend that will locate a great loan for you”
” I just became a Realtor”
But when I did talk to a few Realtors, I asked them what they were doing before they became Realtors. I got all types: Software Engineers, Homemakers, Retail, fresh out of College, car salesmans (#1), etc..
These people were the experts?
I have a funny story about software enginners. I went to a user group in Santa Ana (I think) for .net developers and the guy that ran the group there was no longer a Software developer but now sold real estate. He tried everything he could to shove a condo down my throat. In the end I told him that it was just two expensive right now, I wondered what happend to the old fudd.
I take an execucar to/from the Phoenix skyharbor airport. One of the drivers of the Lincoln Continentals told me he used to be a systems analyst programmer (SAP). He said his field has had bad years for several years and is only now recovering. He also admitted to having real estate problems. So he works all day driving people to/from the airport to help make ends meet. He told me that he worked at least 12 hours that day. Maybe he should get back into SAP? He’s 45-ish and has a family.
Bill, I’ve been in the software field since the mid-80s. I only had a bad 3 months, rather than a “bad several years” because I always lived within my means, had money set aside for layoffs, and never expected my salary to continue increasing 30% a year forever. Many of my friends took the attitude that “I will never work for less than $150K a year” and consequently remained unemployed for so long they could not re-enter the field and hold a decent salary (if you’re out of the software field for more than a year, you basically have to re-enter as a plebe all over again).
I’m glad the ups and downs in the market purged the ranks - it left more money on the table for those of us who stayed in. Despite the popularity of outsourcing (an environment I’ve worked in for at least a decade) there are still high-paying jobs in software, but only if you’re aggressive and can balance your checkbook. Come to think of it, it’s the same for any other line of work, except real estate
I’ve been in the Microwave electronics field since the early 1980’s and learned to save and save, one never knows when your company is going to get bought and/or go out of business. I’m just the test guy not my fault the company goes from great to sucks in a couple years.
You both bring up good points. When I had that anchor (known as a mortgage payment on a rapidly declining value of the house) a colleague showed me an article about outsourcing software to India. This was in the early 1990s. Well I focused on getting out from that house and since 1996 started working on building up savings for emergencies. Since 1985 my downtime in the software field has been a total 6 weeks. Of course, I had to be flexible and be able to move across the U.S. a couple of times within days (not weeks). I’m not really worried anymore about outsourcing personally. I have enough savings to go into something else for awhile, perhaps even downsize. My current income is high but realistically I am also open to a huge drop in salary down the road.
When I was home on LA over Thanksgiving, a good friend related the following: He bumped into a mortgage broker and asked how he was doing. (He’s been good to my friend, urging him for the last four years NOT to buy anything.) The broker repsponded that he was going to lose his own house because his business had gone from 90 million last year to around 6 this year. From 50 employees to 4. A sign of the times.
Ouch…
I’m glad to see that broker was honest. However, most would lie and say their business is doing great. I think we’ll find out the truth about tax time…
Got popcorn?
Neil
I guess the broker never thought about saving for a rainy day.
You know… I read right past that and didn’t think about it twice. I’m so used to Americans being effectively broke. Finding another one sans a rainy day fund… didn’t even occur to comment.
Got popcorn?
Neil
There is a possibility that he plowed it all back into the business. Wouldn’t be the first business owner to do so.
I think we are entering a new paradigm for RE. Think Japan….15 year decline. We are a country whose greatness is behind us. From here on it is going to be a decline in living standard, the dollar, and the “old” way of life that we all grew up with. RE will be seen for what it is…a roof over your head…nothing more.
It didn’t have to be this way….but the people we elected to “drive the bus” willfully drove it into a tree going 100mph…with all of us aboard.
Besides capitalism (FED/WallSt/Gov) is about exploiting the new pools of cheap labor and resources…and that game is almost over.
Unless we create cheap labor pools “artificially” by bombing other countries into the stone age…but hey, we would never do that.
One word…karma.
“From here on it is going to be a decline in living standard, the dollar, and the “old” way of life that we all grew up with. RE will be seen for what it is…a roof over your head…nothing more.
It didn’t have to be this way….but the people we elected to “drive the bus” willfully drove it into a tree going 100mph…with all of us aboard.”
SMoose
Sadly, I agee. and unfortunately have come to the following conclusions:
Elites: Want it all.
Elites: Control sheeple through control of the MSM.
Elites: Don’t give a s**t about anyone worth under 500mil.
DOC
America will decline from now through 2020. But we will bounce back. No other nation in the world has the libertarian roots that the U.S. has. Even new immigrants understand this and expect to be able to practice more freedom than they had in the old country. I know a first generation Vietnamese American who is a pro defense libertarian and listens to conservative talk shows in LA.
I am not as pessimistic. How many times have Americans been written off? This happens every decade. In the 70s it was the malaise. In the early 80s it was the Soviets. The late 80s it was the Japanese. And on and on. We have some really big problems now. We have some really dumb people in positions of power but I won’t give up my optimism for this country until they plant me in its ground.
Unfortunately, there are also many who come here for the welfare benefits.
There’s not much libertarianism on conservative talk radio. Unless an authoritarian unrestricted police-surveillance state, massive military interventions around the world, cheerleading bloodthirstiness and xenophobia, ‘nuking Mecca’, and willfully-ignorant sneering at science - be it stem-cell research, evolution or climatology - have become tenets of libertarianism.
Elites: Want it all.
Elites: Control sheeple through control of the MSM. should add religion, and faux patriotism.
Elites: Don’t give a s**t about anyone worth under 500mil
The elites have convinced those making income in the 50-98% range that they are or will be elite, but the reality is the top 1% wants to control all of the wealth. Evidence
1. Dividend tax breaks while letting Alternative minimum tax fleece upper middle income earners, and inlfation eat away those on fixed incomes.
2. Billion dollar no bid contracts, Billions in cash, weapons and oil missing in Iraq, while New Orleans looks like ground zero
3. Our trade policies, giving companies tax breaks to outsource and not holding our trading partners to any standard regarding human rights ect. Open borders.
4. No effort to cut our consumption of oil which drains hundreds of billions from our economy while enriching those the oppose us - Russia, Saudi Arabia, Iran, Venezuela ect. Can’t offend our oil producers.
As a little fish I love the low tax rate on dividends. It’s not some much tax breaks for outsoucing it’s the much lower cost of labor elswhere. But there is wage inflation in Chindia.
1) Enjoy the dividend tax break. Invest in stocks. Take the risk of losing money in the stocks for the advantage of the tax break.
2) Waste more money on building in New Orleans, which was below sea level. Smart. Learning from the past?
3) Remember, for years, America held the advantage by exporting more than importing.
4) Cut oil consumption by what raising gas taxes? Cut dependance by drilling in ANWAR? Off the coast of California? Florida? Yeah, none of that is going to happen.
Peasants: Want it all given to them
Peasants: Too stupid, fat and lazy to realize they’re controlled by the MSM
Peasants: Only care about the rich and the famous: ‘What’s Paris Hilton up to?’ ‘Who’s on Dancing with the Stars?’ ‘Jennifer should really forget about Brad girlfriend…’ and impressing their peasant peers: ‘I have to take the Hummer in for maintenance.’ ‘We just bought a home.’ ‘Look at my new tattoo.’
Example
Lets say you bring in 500,000 a year, ie not a peasent
You have a million dollars saved, 50% in stocks some earning dividends. Let’s say on average you earn 2% per year, pretty generous
500,000 x 0.02 = 10,000 in dividends.
Now instead of paying 35% you pay 10% tax on those dividends, you save 3500-1000 = 2000 dollars.
Now assume you own a home and pay 20,000 in interest.
Your property taxes are 12,000
You have 3 kids
and your state tax is 5%
Your deduction normally would be 20k+12k+3500×3+500k*0.05
= 68k saving you 68k * 0.35 (35% tax braket) = 23,800
Because of AMT you only get to keep 20% or so of those deductions lets say 25%. Meaning you loose about 18,000 dollars.
The dividend tax break while doing nothing about AMT helps Bill Gates Warren Buffett at the expense of 98% of Americans. Borrow and Spend hits everyone.
Families earning as little as 80k a year are being hit by AMT.
The majority of working families loose more to AMT than they save on the dividend tax cut.
I don’t own a home, and the one I had was completely paid off because I knew AMT did away with any tax deductions I got from paying interest. Even without owning a home I loose a ton of money to AMT.
“When Jenny and Ricardo Hernandez bought their north Stockton home in 2005, their monthly mortgage payments were around $1,800. Now the payments total nearly $3,000 - more than the working couple’s monthly net income ”
Guess the “refi and cash out” ploy didn’t quite pan out as planned.
So let me understand here. Their original $1,800 “teaser rate” payment ate up at least 60 freakin’ percent of their take home pay?
THIS IS A HOME YOU’RE BUYING!!
Can’t read the loan? GET SOME HELP
Don’t understand the loan? HIRE SOME HELP
Signed anyway without doing either of the above? YOU’RE A PIPE-DREAMING, GREEDY, LAZY A** AND DESERVE ZERO SYMPATHY.
Rant off.
DOC
Here’s the problem:
The press, and most people understand this crisis this way:
There are two sides. On one side:
* The Evil banks!
and on the other side
* The poor struggling “homeowner” who needs a handout to help them “keep their home”.
When, in truth the two sides are:
- The Evil banks AND the greedy get-rich-quick borrowers looking for something for nothing
and
- Hardworking, taxpaying Americans with who aren’t in debt.
If the government really wanted to help, they’d make sure that good fixed-rate mortgages were made available to the “Hardworking taxpaying Americans”. Perhaps they can take the foreclosed houses and offer them, at attractive rates, to people with no BKs and a certain level of savings, in order to keep neighborhoods from being blighted with boarded-up houses, etc.
Then the correct side wins!
But it will never happen that way.
Won’t happen because those that waited would understand that realestate even w a low interest loan is still a bad investment at this point.
Right on about foreclosures NOT being a problem for the community IF they sell them quickly.
From where I sit, there is one very simple answer to all the problems:
LOWER THE DAMN PRICE!!!!!
With sales of existing homes in 2007 expected to match the 2002 national sales record, REALTORS still must educate the public about the value of real estate as a long-term investment instead of a get-in and get-out stock strategy.
This strikes me as odd. For someone with a legal obligation to represent the best interests of a buyer (in the case of a buyer’s agent) in a financial transaction, how can they legally make claims about the value of the property as an “investment”? If I were to buy, say, shares of stock or a mutual fund, I get a huge document explaining all the facts about the asset, and a disclaimer about any “forward-looking statements”.
How can “Realtors (TM)” get away with this? Aren’t they opening themselves up to lawsuits?
I don’t believe used house sales people have a “legal obligation” - though perhaps someone can clarify.
And why are those who are barely intellectually qualified to sell used cars, hamburgers, and clothing at retail considering “educating” anyone about anything?
In this market, if a “buyer’s agent” were to be completely forthright (and acting in the best interests of his client), his advice would be: “whatever properties you’re looking at, you can expect them to be cheaper six months from now.” How often will that happen?
Really, all they should say is “I can’t comment on the appropriateness of a property as an investment”
Yun also told attendees that home prices are holding up extremely well. “2007 is shaping up to be a solid year with home prices at near record highs. In fact, only two years were better, 2005 and 2006 which set records at the time,” said Yun.
Can somebody enlighten me about how this kind of completely disingenous spin is beneficial to the membership to which he’s speaking? Wouldn’t a clear-headed, pragmatic assessment of the collapse in progress at least have some kind of practical value to what’s left of the membership? I mean, it’s one thing to BS the public into thinking that the sharks have left the beach and its safe to swim again, but the members?
I don’t get these guys at all.
I don’t know if this has been posted here yet, but there was a nice piece off of the wires in the L.A. Times today, to do with fraud, fraud and more fraud…mainly on the part Yun’s audience and their friends in the homebuilding and Title insurance sectors. Can’t find the url, but it was a good one.
Suspect steering practices jack up costs for buyers and sellers
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By Kenneth R. Harney, Washington Post Writers Group
December 2, 2007
WASHINGTON — Rigged appraisals, lax underwriting and toxic loan products may dominate the headlines, but they are hardly the only issues plaguing residential real estate.
The federal government and state regulators are targeting other housing-related misdeeds that can cost consumers, — especially under-the-table kickbacks among builders, real estate brokers, loan officers, mortgage bankers and title insurers. Buyers and sellers are rarely aware of the cash changing hands, and as a result they are paying needlessly higher prices for services.
In a series of legal moves during the last five weeks, regulators have reached settlements with six major home builders and one of the largest title insurers in the country. Under the settlement terms, the firms are scheduled to pay the government a total of $6.4 million, while denying they committed any illegal acts.
The largest settlement was announced the week before Thanksgiving. First American Title Insurance Co. agreed to shut down 84 “affiliated partnerships” in Florida with real-estate brokers, mortgage brokers, banks and builders. Federal and state investigators charged that although the affiliates claimed to be title companies, they were actually referral conduits that performed few, if any, title services. Officials said they existed primarily to steer business to First American, which split consumers’ insurance premiums with participating “partners.”
In effect, according to the investigators, builders, lenders and realty firms could pocket part of buyers’ closing costs without their customers’ knowledge. On paper, the partnership affiliates appeared to be ordinary title agencies, carrying names such as Security First Title, USA Title Partners, Discount Title Servicesand the like.
But investigators from the federal Department of Housing and Urban Development and Florida insurance regulatory agencies found that “all regular title services required to effect title insurance were performed by First American, not the limited partnership agency,” which was essentially a shell entity constructed “to compensate for the referral of the business.”
Payments for referrals of home real estate business when little or no services are performed violate the federal Real Estate Settlement Procedures Act, which is enforced by HUD.
Though no example was provided in the settlement agreement, title company referral conduits often work like this: Say you, the home buyer, are charged $2,000 for lender and owner title insurance policies. Your real estate agent has partnered with a title company and agreed to steer all business to the affiliate. All the work is performed by the title insurance underwriter, which receives a steady and profitable flow of business from the referring “partners.”
Revenues may be split according to the size of individual partners’ stakes in the affiliate. If the stake is 25%, the realty agent or mortgage broker might get $500 out of your $2,000 title insurance premium. If the stake is half, the split might be $1,000.
Buyers typically are provided a disclosure — along with the paperwork that accompanies a mortgage closing — that an “affiliated business” relationship exists between the realty firm or mortgage broker and the title partnership. But the boilerplate does not reveal the magnitude of the financial compensation. Otherwise, customers might take their business elsewhere.
The settlements with the six home builders — Pulte Homes, KB Home, Beazer Homes USA, Ryland Group, Meritage Homes and Technical Olympic USA — also involved alleged kickbacks from title insurers. HUD investigators charged that the builders’ participation in so-called “captive reinsurance” schemes amounted to illegal splits of home buyers’ insurance premiums rather than actual sharing of risks with the underwriters.
Bottom line: Before agreeing to direct your title and settlement business to an “affiliate,” shop the market for lower fees.
Ask the person trying to steer your business to an affiliate: What financial split will you — or your firm — receive from my title insurance premium and other settlement fees? What proof can you offer to me that the fees received by you or your firm will result in cost savings to me?
My 11th grade English teacher had us read an old book “How to Lie with Statistics” which was a real eye opener, and I’m sure led to my sense of skepticism as an adult. Thank you Mr. Hunter! This little book, first published in 1954, is still in print. Though dated, the logic is still sound. Statistically speaking, Fun Yun is correct, 2007 is still at “near record highs” as compared to the two years, 2005 and 2006 which set records. But he’s lying when he says that prices are holding up extremely well.
http://www.amazon.com/How-Lie-Statistics-Darrell-Huff/dp/0393310728/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1196636637&sr=8-1
“it’s one thing to BS the public into thinking that the sharks have left the beach and its safe to swim again, but the members?”
Well, of course, anything Mr.Yun says in public is a defacto press release, so we shouldn’t be surprised that it’s the usual spin.
Can anyone offer comment on larenter’s conjecture (from the bits bucket)?
Hope Now Alliance = banks hoping for more money NOW?
Please let me know if I’m on the right track here. As I understand it, currently in California many borrowers who have not refinanced have NON-RECOURSE LOANS.
The FB’s with these loans have the right to walk away and mail the keys to the bank.
———————
Definition of non-recourse loan: A secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender’s recovery is limited to the collateral. If the property is insufficient to cover the outstanding loan balance (for example, if real estate prices have dropped), the lender is simply out the difference.
———————
HOWEVER, IF the FB refinances, they LOSE their NON-RECOURSE status.
“HOWEVER, IF the FB refinances, they LOSE their NON-RECOURSE status.”
If that’s the case, it’s imperative that any potential FB’s looking to refinance understand this. I’m sure it’s something the lenders won’t mention. Then in a couple years we’ll have thousands of people claiming they didn’t know this before signing the papers. The change in recourse status is enough to justify mailing the keys to the lender. Then your done with them. If the loan becomes a recourse loan, they’ll make your life miserable for years.
I’m guessing that part of the HNA plan is to clean the liability for devalued subprime debt off banks’ books. Never mind whether it is in the interest of FBs to do this…
Bingo, PB!
But if a lender puts a freeze on a teaser loan rate ,is the borrower really refinancing ,or will the banks make the borrowers sign a refinance agreement for the freeze on the teaser rate ? Can a lender freeze a teaser rate if a borrower doesn’t want them to ,or can a lender only freeze a teaser rate if the borrower applies for the new freezed teaser rate ?
Looking at your post above regarding “teaser loan rate” I first saw “taser loan rate”. No, that’s when it resets…
(I feel like its a losing battle trying to demonstrate that you can live quite happily with less stuff. But I don’t think it’s just limited to SoCal, this entitlement disease is everywhere.)
Believe it or not, I thought I could live and raise my children in Brooklyn NY, without cable TV, and avoid it. But it’s catching up to us here, too, even though in NYC no one can afford the space to put the stuff in.
Ah, the problems of prosperity.
The only stuff that comes on our 1 TV is completely up to us (Netflix) only. We homeschool at the moment which seriously cuts down on affluzena exposure. I’m pretty sure, however, that my daughter has almost every Dora The Explorer item made (including small chair) bestowed by well meaning relatives. I’m at a utter loss to tell people what we need because we don’t *need* anything. (I’ve tried the “why don’t we give to charity” route with little success. ) We are all much happier with less stuff but it’s hard to convince family (especially my elders) that we don’t need it.
Vermonter,
We also homeschool & the exposure to “fads” is one of the many reasons we do so. Also suffer from everyone else buying too much junk, even though we tell them **every single year** that we don’t need anything.
I truly believe they think we are abusive parents because we don’t buy our kids all the lastest stuff.
I can relate. Our view of prosperity has little to do with what you can get at Walmart and our relatives have a time understanding or relating to that point of view.
I have just seen a sign for a short sale in Campbell! Its hit the bay area finally.
I was at Macy’s yesterday and some lady brought her dog in the store which took a huge crap on the floor. This was then tracked all over the store which smelled like hell.
I think I will take my dog to a few open houses today.
JB-
The visuals can’t be as slap stick as what you saw at Macy’s. Laws are just suggestions these days. I am assuming it wasn’t a guide, or a handicap helper pooch, but belonged to some self absorbed twit.
My wife asked me to get some Christmas pressies from a Marin county shopping mall today. I asked her if I couldn’t be castrated instead, as I detest nothing more than Christmas shopping. She said no, so off I went.
When I arrived, I could not believe my eyes. The place was empty. No parking problems, shop attendants out in force directing me straight to what I needed. In fact it was quite a pleasant experience. The Starbucks line was non existent.
Seriously, this is not good news for the economy. If Marin is feeling it, heaven knows what others are feeling.
FWIW, the mall in Huntington Beach (at the 405 & Beach, has an REI, Barns & Noble, Bed Bath & Beyond, etc.) was pretty busy today; it was almost what I’d call “packed”. Most of the good parking was taken so you had to park closer to the outer edge of the parking lot.
That was a huge contrast to what I saw in Florida. I only went to one mall, but it was a well-established one that I’ve seen very busy in the past. That sucker was suffering - very very few people there on the Saturday after Thanksgiving, and afterwards.
Same here in Irvine. Stores basically empty but actually got some help for once from a sales person. Weird experience going into a store and actually having a clerk around to help.
Was out hitting stores (Target, Home Depot,xmas specialty) midday in the central valley ca. Noticed that there were fewer things like xmas ornaments and the like on the shelves - have retailers cut back on inventory?
And not many shoppers, and of those I saw, I just sensed a different mood from the cheerful consumption I’ve seen in prior years.
Based on what I saw I’m predicting retail will be hard hit this xmas shopping season, nevermind the uptick black friday.
After reading Otto’s post and the replies by Home_a_Loan and Michael Emmel, my conclusion is: it’s different in Huntington Beach! …so far…
If you like almost sexual advances by sales guys at Best Buy then yeah its different here. Next time we go in my wife is ditching the friggin Gucci purse. I need to protect my virginity
“My wife asked me to get some Christmas pressies from a Marin county shopping mall today. I asked her if I couldn’t be castrated instead”
The fact that you typed “pressies” has me thinking you may have been castrated already. Dude, guys don’t type “pressies”. At first I didn’t know what the heck you meant. Go get yourself a Hustler, a six-pack of Bud, a pack of Marlboros and scratch yourself 46 times. You might not be too far gone yet.
LOL
sussies used to be the word friend used to use for Surprises.
pressies? giggle
ROFLMAO!!!!
Excellent humor!!!
“REALTORS still must educate the public about the value of real estate as a long-term investment instead of a get-in and get-out stock strategy.”
It is a good long-term investment IF you can have a paid-off house in 10 or 15 years. But at these prices?? Forget it.
Actually real estate is not a good long-term investment. The Shiller data shows that averaged over the long term, real estate about has virtually no real rate of return. The benefit from owning real estate is the rent you don’t pay. Real estate is a consumption item, not an investment item. Confusing investment with consumption lies at the heart of our current problems. Real estate has become a retirement nest egg for many people, or an ATM machine. This confusion also causes people to over spend on improvements to their houses by thinking of the expenditure as an “investment.” When people get over this confusion and don’t regard paying rent as always “throwing your money away,” we will get a more rational and less toxic real estate industry. You are always paying rent because you can choose to rent out your property instead of living in it.
Good luck to that. People are morons.
“The benifit of owning real estate is the rent you don’t pay.”
Right on! Pay off your house and your cost of living is dramatically reduced.
This reduction of living costs means less income is needed to maintiin the same lifestyle. Less income translates to a lower tax rate.
It’s all good.
And in THAT sense, it is saving for retirement. I just don’t understand people who refi so that they’re still going to be making payments after they intend to retire. A paid off house is a part of my retirement planning.
I am truly dumbfounded (nothing new there!). I sold my 4br/3ba home in Elk Grove (near Sacramento) in 2005 for $460K. Six months ago, the dirtwad buyer (whom I will loathe til my dying day) let the house go into foreclosure. Today, the house is on the market for $338K!
The good news is that the house is on its way to becoming an affordable home for a good family. The bad news is that some greedy bank has taken a major nosebleed of more than $100K on the property.
I wouldn’t even want to buy the house back at this price, although I owned it for 8 years and raised my kids there. Who knows how much further it can fall?
I assume you do, since you bought it in 1997. Certainly you didn’t pay $338K.
Paul, if the house reverts back to its 1997 level, the drinks are on me!
ok - I don’t get this post
Droog is mad at the buyer who over paid him for a house that is now in foreclosure. he talks about the greedy bank. what about the seller?
He says he lived there 8 years. How much did he pay for it? He soaks a buyer and then calls the buyer a dirtwad.
I see some not just report on the market here but were part of selling their overpriced homes to some poor sucker. And now they are calling the poor suckers names and saying they should have read the fine print.
Is there no trust and decency in transactions among people anymore. It is not just the banks, mortgage companies, and realtors - how about all the seller who were willing to cash in and take these buyers for all they could get
Just sounds mean
Can’t help but think of karma and do unto others as you want them to do to you -
I do appreciate Ben’s blog but find the mean comments about Fools some times a bit over the top
Chill. I’m guessing he met the buyer and has some reason to think he’s a dirtwad. If I say my neighbor is a dirtwad, maybe it’s true for some reason other than he’s my neighbor.
Also, one thing my Momma taught me: never EVER feel sorry for a bank. When they lose $100k on a bad bet like that it was due to their own vices. In fact, everything that happens to a bank is due to their own vices.
The seller (droog) was doing the smart thing. He didn’t “take” anyone, he participated in an arms-length transaction with an idiot. If some idiot offers $100k for my Acura, guess what, I’m going to shout “SOLD!”, take the money, and walk away.
Affordability,
The buyers who overpaid wouldn’t have listened even if you took them aside and suggested they wait for prices to bottom.
We sold in 2004 to a single mother who was doomed to foreclosure right from the start. I asked the realtor, repeatedly, if the buyer could really afford the house because I was hoping for a flipper, not a single mom.
The buyer was adamant & giddy as could be.
What do you expect us to do?
CA shouldn’t worry. They’ve got plenty of $$$$ to bail out the flippers. I heard that CA gets back $0.80 or so for every dollar they send to DC. I hope they don’t ask Bush for bailout funds.
Oh, and Inland California sounds like it will take a big bath just like their buddies in Florida!
“Gergen had made a career out of talking about affordability and value. Now, he had to talk about headlines and the free-floating fear that poisoned the market like background radiation.”
why did he need to talk about the headlines? it’s because he couldn’t talk about affordability and value because it wasn’t there.
Another thing, if either California or NY or Florida or any of the big states gets a walloping, kiss goodbye to the US eCONomy. No more granite countertops and purple Hummers and Happy Meals for the flipper crowd. I still find it hard to believe that much of the total debt in the states is from Gucci bags, Happy Meals, WalmartWear(c), and the junk weapon systems and $500K toilet bowls bought by the Feds. But then again that would explain why there are so many fat people driving around in Hummers decked out in Gucci drag and smelling like Eau de French Fries. Every time I turn on the news or the net I can’t help but laugh at the stupid $H1T people are doing with their money. Much of this did originate in California. No wonder the people on this site laugh at that place. Hey at least it has good weather and is kind of a cool place. Thanks for the news at ground zero, this blog has some good laughs sometimes. I’ll bet much of CA and the West coast take a big dump.
Got Lube?
“If stupidity got us into this mess then why can’t it get us out?”
- Will Rogers
Reviewing this Bush administration-backed plan — nicknamed “teaser-freezer” which Hank was working on, and I really have to laugh. On this blog, for months, we heard our resident right-wingers screaming about any idea of a bailout put forth by a Democrat. Yet here is a massive bailout, completely dreamed up by leading REPUBLICANS, that goes so far beyond anything Dems ever thought up. We should all agree on one thing.
From this point forward, it is not credible to blame Democrats when they suggest bailout schemes. Not after the MOTHER OF ALL BAILOUTS is being implemented by REPUBLICANS right now.
It’s not a credible argument anymore.
I’m sure the bailout will be organized with as much success of the “bailout” of New Orleans, another easily predictable disaster.
Hey NYCity Boy,
I’m an Aussie, everything ends in “sie”.
But I’ll check out your suggestion.
“Or that some people are dumber than stumps”
What an insult to stumps to compare some of these FBer with a piece of wood in the ground. I am sure the wood is insulted.
“The new $337,000 house they bought in May 2006 lost value from the day they moved in. (It’s for sale now for $255,000. Nine more homes nearby are also for sale). One state government salary couldn’t make the $3,000 monthly payments when Christopher lost work. Neither could the Eddys sell as newer neighborhoods such as theirs slumped across the capital region.”
Is my heart supposed to bleed for people like this? These two (just like may others), knew damned well what they were doing. They bought this house with full hopes of cashing in for more more a year later. Why else would they be truly STUPID enough to buy a home that with some simple math, they’d realize they can’t afford if one of them loses their jobs?
This purchase was intentional and premeditated in the calculated risk of making more….THEY LOST…..tough sh&t.