Everybody’s Sitting On The Fence In California
The Mercury News reports from California. “Bill and Beth Scozzola bought a three-bedroom house in Gilroy at an auction in July, redid everything from the floors to the plumbing to the kitchen sink, then put it on the market in September for $599,950. They’ve had no offers. So this week they parked a brand new, $18,300 Honda Civic in front, and plan to give it to whoever buys their property.”
“‘Everybody’s sitting on the fence,’ waiting for home prices to drop more, said Bill Scozzola, who has been rehabbing and flipping homes for nearly 10 years. ‘To me they’re missing out on good opportunities. I’m willing to wheel and deal on this.’”
“Using incentives and gimmicks has reached the resale market, where sales also have been slow for a couple of years. The seller of a $549,999 home in San Jose’s McKinley neighborhood is offering to loan a buyer 10 percent or more of the home’s purchase price, which could help first-time buyers who lack sufficient down payments.”
“Mary Aguilar, an agent in Monterey County, said incentives and gimmicks are certainly on the rise, but ‘I don’t think it really makes a whole lot of difference’ to getting a property sold, she said.”
The LA Times. “From the local Lamborghini dealership to dry-cleaning shops to office cubicles, the pending sale of Countrywide Financial Corp. prompted a universal question Friday: Now what?”
“The troubled mortgage lender is a major presence in the business and residential corridor that straddles Los Angeles and Ventura counties. More than 600 people work at the headquarters complex in Calabasas, with about 4,500 more a few miles to the northwest in Simi Valley.”
“How many of those jobs will be jettisoned by Bank of America Corp., the North Carolina-based financial giant that has agreed to buy Countrywide for $4.1 billion, is unclear.”
“‘You just ruined my day,’ dry cleaner Doug Tempo said after learning of Countrywide’s takeover. ‘Business is slow enough. I don’t need another hit.’”
“For Countrywide employees, the takeover only deepens the uncertainty they have been dealing with for months. ‘It’s better than being bankrupt,’ said an employee in Simi Valley who asked not to be quoted by name. ‘Ideally, I would have liked it if Countrywide had survived and pulled through.’”
“Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., predicted that ‘a lot of the headquarters staff will disappear.’”
“That would affect not only Countrywide workers who are laid off or transferred but also the various companies that do business with Countrywide, including law firms, print shops and janitorial outfits, Kyser said.”
“The fallout from that could further weaken the area’s wobbly real estate markets, said Delores Conway, director of USC’s Casden Real Estate Economics Forecast. She noted that earlier layoffs at mortgage firms in Orange County dinged home prices there.”
“In the meantime, some retailers hope the area’s residents who don’t rely on Countrywide or Amgen for a paycheck will keep things humming.”
“‘We have a lot of music producers and wealthy real estate investors out here, and they seem to be doing just fine,’ said Jessica Sarmiento, manager at Lamborghini Calabasas, which sold 15 of its super-luxury cars during its first month after opening last summer but only eight last month.”
The Orange County Register. “The O.C. Tax Collector’s final tally of collections for the first installment of property taxes shows a 48% increase in the dollars unpaid vs. the same billing cycle the previous year.”
“Tax Collector Chriss Street says this is an obvious sign ‘how stressed the real estate market is.’ Other signs of homeowners in trouble: mortgage default notices sent out by lenders to tardy mortgage borrowers and actual foreclosures are also on the rise in Orange County.”
“DataQuick has reported that defaults were up 128% in 2007’s first 11 months vs. the previous year; foreclosures soared 568%.”
“Early payments of second installments fell by 5.7% to $268 million. That’s 11.8% of second bills due vs. 13.6% a year ago. Some residents choose to pay property taxes early to boost income tax deductions for the past year.”
“‘People feel they don’t have that kind of money,’ Street says.”
The Press Enterprise. “The Inland region, like much of the nation, could be in for a rough year in terms of growing and retaining retail tenants, analysts say. The culprit is the housing slump, whose ferocity has led retailers to rethink their existing deployment and slow down expansion plans.”
“Economist Jack Kyser said real estate professionals can find an appropriate slogan after their previous inventions, such as ‘It’s great to be alive in 2005,’ or ‘It’ll feel like heaven in 2007,’ but it will have a different tone.”
“‘How much will you hate 2008?’ Kyser said.”
“He said retail will get healthy again after housing does. ‘The key is the health of the home-building industry,’ Kyser said. ‘When does unsold inventory go down? When will mortgages be freed up?’”
“‘Retail development is “basically at a three-year high,’ says Steven Marks, chief of research on real estate investment trusts at Fitch Ratings Inc. ‘And that three-year high is at a point in the economic cycle where it’s probably not the best time to be developing right now.’”
“If consumer spending falls off much more, the retail-property market faces a blood bath, some say. ‘In a recessionary scenario, retail gets killed, absolutely killed,’ says Suzanne Mulvee, senior economist at Property & Portfolio Research.”
“While retail blahs derived from the housing slump are likely for all of Southern California, Kyser said the Inland region is particularly at risk because the region led the state in new-home construction for about the last 12 years.”
“‘A lot of those homes were purchased with subprime loans and are now getting into foreclosure,’ he said.”
The Desert Sun. “One by one, people on the front line of the home mortgage meltdown in Riverside County explained their crises to Sen. Barbara Boxer on Friday.”
“‘The foreclosure crisis is having a dramatic impact across the United States,’ said Boxer. ‘California, which saw some of the greatest increases in housing prices in recent years, is at the epicenter.’”
“So she organized Friday’s roundtable discussion at Riverside City Hall that drew more than 25 housing industry professionals. While she spoke, just around the corner on the Riverside County Courthouse steps, an auctioneer rattled off trust numbers to sell 35 home foreclosures - three in the Coachella Valley.”
“On Monday, the pattern begins anew with 51 more Riverside County sales heading to the auction block - five in La Quinta and Rancho Mirage.”
“After nearly a decade of exponential growth in the housing market, Boxer said the state is confronting one of the biggest financial crises in the nation.”
“Lenny McNeill, an executive with Countrywide Home Loans, assured roundtable attendees, ‘We are not in the homeowner business.’”
“‘One reason I’m here is because we’re concerned about this issue,’ he said, citing the firm’s $16 billion commitment to home preservation in 2008.”
“McNeill added that homeowners also need to take it upon themselves to seek help. ‘A large percent is due to an unwillingness of customers to reach out at the first sign of a problem,’ he said.”
“Cities may see tax dollars shrink and assessed valuation erode. Neighborhood blight - brown lawns, algae-lined pools and potential for crime - has become a concern.”
“The city of Riverside has passed a code requiring lenders to maintain property to city standards. ‘It’s an attempt to encourage lenders to renegotiate, so it does not create blight,’ said Riverside Mayor Pro Tem Frank Schiavone.”
“In Murietta, lenders of unkempt properties can be fined $100 a day up to $100,000. ‘It’s the right thing to do,’ Boxer said. ‘After all, they’ve become homeowners now.’”
“‘We have a lot of music producers and wealthy real estate investors out here, and they seem to be doing just fine,’ said Jessica Sarmiento,…
~~~~~~~
A sound economy can be built upon RE investors and music producers, especially in a collapsing RE market.
‘music producers’…….blacked out windows with loud mufflers blasting Rap music and selling dope
If music producers are doing so well, why is the RIAA pissing off their customer base? Oh yea… weak sales…
I know the producer types. They’re doing great until the day they slink out of town bankrupt. Money flows through them faster than beer through a college kid.
There is a lot of money in LA. But less than the bay area. Far less than New York city. And amazing how much of that wealth is in the REIC…
oh wait… that’s false wealth.
I’m curious how all the various ‘Hollywood’ guilds resolve their issues. If it is done soon, little impact on greater LA home prices. If it drags out… we’ll all see how fragile the ’shell of wealth’ for LA really is. Are there savers? Sure! But home prices are set at the fringes…
Got popcorn?
Neil
Oh, you know some producers too? I worked in the music biz back in the ’70s - the period that culminated in little gold spoons on little gold chains and Disco Fever, followed by the takeover by the corporate bean counters that eventually destroyed the industry. Excess breeds destruction.
I’m going to keep my eye out for lake-front houses out in Westlake Village - it’s beautiful there in the winter. Those Countrywide execs, producers, and RE moguls won’t be needing them much longer.
I don’t know about all of the guilds, but it looks like the writers have done serious damage to the below-the-line folks like production people, editors, etc. I think the damage really kicks in this month. And the thing about the writers is that they are mostly either wealthy or just getting by - there isn’t much of a middle ground there. So the wealthy ones can hold out as long as necessary, and the rest already have day jobs or other means of support than writing. But the production and post people are your basic hourly workers who are starting to starve, and there are a lot of them.
It’s getting ugly in the Hollywood economy.
I think the damage really kicks in this month. And the thing about the writers is that they are mostly either wealthy or just getting by - there isn’t much of a middle ground there. So the wealthy ones can hold out as long as necessary
I agree there are wealthy ones. But for every one with a good stable portfolio, there are five living on the edge. Oh… living as I could only dream of living… but not with much cushion.
I agree its getting ugly in the Hollywood economy. However… that said, there are enough who are still pulling their normal paycheck. The current strike seems to be only impacting about 25% of the whole employment base. What I wonder is will it expand. If the screen actors join in, that would be HUGE. That will shut down LA.
I spent new years at a party with quite a few ‘producers’ as guest. No… no one you’ve heard of.
They’re all still pulling their normal salary (pulled from investor money) and are all setting up their new projects as if their was no writer’s strike. They were feeling no pain. But if the actors walk… ouch.
I think the real pain is still a few months away. Oh, individuals are hurting by the thousands, but that’s normal LA anyway. It appears that a few more months of ‘the strike’ are required to go past the tipping point. But there is a funny think about getting past the tipping point. A housing community is past it by months before anyone realizes it…
But its not just LA. LA just has a catalyst (the guilds). Most areas are so ‘mal-invested’ in real estate that its going to kill them. Look at how much of the ‘wealth’ of New York and DC are now invested in Florida properties. Or German/British wealth in Florida or Spain.
Got popcorn?
Neil
My nephew has been working on a TV show as a freelance graphic designer for the past four years. In 2004 they bought a condominium for 400K in Valley Village, despite my strenuous arguments against it. I haven’t called them since the strike began - he’s collecting unemployment.
Not just actors — the directors, too. That’ll shut down Hollywood for sure. That’s why the studios won’t cave to the WGA, because it’ll just embolden SAG and the DGA.
Doesn’t matter what level the industry types inhabit, everyone except for the absolute A-list live vastly above their means trying to prove their A-list.
sm_landlord,
Westlake Village *is* nice — almost bought there in 1990 (at the top of the last boom). Wouldn’t mind a little more space, though, say over the hill in North Ranch.
“I think the real pain is still a few months away. Oh, individuals are hurting by the thousands, but that’s normal LA anyway. It appears that a few more months of ‘the strike’ are required to go past the tipping point.”
Depends on how you define “normal” and “tipping point”, I guess. If this is anything like the 1988 writer’s strike, a whole lot of below-the-liners are in deep do-doo, along with a bunch of small businesses and their employees. This is not normal for LA unless you consider what happened at the end of the 1980s normal
And without scripts, there isn’t much for the actors to do, so the ones that aren’t in production on films may as well be on strike. Normally, pilot production would be getting underway for television. I’m not saying it can’t get a lot worse, but there are many thousands of FBs who are about to auger in this month, who would have been current on their mortgages if not for the strike.
I hear the directors started talking today… if they get the same reception that the writers did, you could see another guild go out.
BTW, did you see this?
Writers strike turning into incubator for Web start-ups
That will have a longer-term impact on the local economy, much like the “reality” shows that developed after the last writer’s strike, but this time with writers in the loop and IATSE out of the loop.
Condo prices in the LA area are going down hard.
tj,
Have you ever looked at Hidden Hills? I haven’t, but I hear it’s nice too. Same general area, might be opportunities there next year. But I do hate to get that far away from the ocean, if only because of the cooling bills during the summer months. There’s something like a 20-30 degree difference in temperature between the beach and that area during the summer.
Hmmm… I wonder what beach shacks will be going for in 2010?
Westlake Village *is* nice — almost bought there in 1990 (at the top of the last boom). Wouldn’t mind a little more space, though, say over the hill in North Ranch.
I like Newberry Park better its cooler with better air quality. I worked in Westlake Village it has nice weather in the summer as well. Is everybody still 50 years old and above in that area? Just kidding I grew up in that area and decided to leave because of HOUSING costs. There is one Loan Broker I knew of with a house on the lake, maybe you can buy it off him or the bank cheap in a couple of years?
s_m landlord,
Having worked as both production people and now as writers, my husband and I can attest attest to the fact that the strike is a killer for a lot of production personnel. But most of them are smart enough to lay the blame for the strike firmly where it belongs: on the greed of the producers and studios. Most of them support the strike, even though it’s costing them a lot of money. They know that without the writers they don’t have a job. Period. Just about ANYONE can raise money to make a film, but it takes a special breed to actually create something from nothing (those would be called writers). And for those of you who think writing is a piece of cake, think again. As I tell people “Writing is simple. You just have to sit down at your computer and open a vein.” Good writing is damned hard work.
The producers want to profit from the writer’s work, but don’t want to pay ANYTHING for the work when it’s shown on “new” media, saying that they don’t how much revenue it will produce for them. It’s the same argument they used during the last strike to get out of paying reasonable residuals on videotapes and DVDs. This time we’re calling bullsh&^t on that. They know darned well they’ll make a mint off new media. Writers are only asking for a percentage of the profit. If they don’t make any money, then neither do we. What could be more fair and reasonable than that?
I think the writers have a point as long as if the studios lose money and spend lots of it trying to gain this internet money, that the guilds also pay into it. So are the guilds going to pay up to the studios if the internet turns out to be a big loss? I dont see why there is a perception that everything on the internet makes money.
sm_landlord said:
Depends on how you define “normal” and “tipping point”, I guess. If this is anything like the 1988 writer’s strike, a whole lot of below-the-liners are in deep do-doo, along with a bunch of small businesses and their employees.
True. But I hate to say it, that isn’t enough to impact the greater LA market’s prices much.
Condo prices in the LA area are going down hard.
Really? I have to admit I haven’t looked into the condo market much. I have a few acquaintances who bought condos in 2005/2006 (mostly silverlake or playa vista).
Again, I don’t doubt people are suffering. I take no joy in that. But part of what has sent the LA real estate market to unheard of heights is ‘Hollywood’ B and C-listers putting themselves in deep hock to look like an ‘A-lister.’ Due to how extremely on edge some are financially, we’ll see continually declining prices go down.
For the record, I’m normally not ‘pro-union,’ but I do support the WGA on this one. Note: Most of the ‘Hollywood types’ I know are producers too.
I do not expect the directors to strike. Everything is in line for an early settlement with the directors. Usually they have more ‘power,’ so they usually force an early settlement.
Got popcorn?
Neil
sm_landlord,
I grew up on a Colorado mini-ranch with lots of horses, so YES, I’d *love* to have a place in Hidden Hills. Dare I dream of a place there? Maybe… maybe…
trishyla,
I am not knocking the writers. I’m just talking about the impact on others. You can’t ignore that in the context of the impact on housing prices, which is the subject of of this blog.
I wold actually love to see the writers get royalties on their work, despite the nutty contracts which specify that the studios are the owners of the creative content. We (those of us in the creative community) all know that is a convenient legal fiction with no basis in reality.
I’m almost embarrassed to admit that my name is on on six patents, although they are all assigned to my corporate masters that paid the legal fees to get them done. So I do get the plight of the writers, even though I am not a professional writer. I did, however, get paid pretty well to invent that stuff. Now if I could just get royalties on my inventions… So I support the writers.
But a lot of FBs who overextended themselves are gonna get hurt. That was my point.
@travanx
Check out the link I previously posted. I don’t know when, but the big studios are going away. I watched this happen in the music industry when I was there, and it will happen to the big studios the same way it happened to the music industry. Except it will be different. Control of content and distribution is key. Content itself is critical but fluid. Consider the Blair Witch effect. Yes, you cannot do Waterworld for $1 million, but what *can* you do for $1 million? Or $10 milllion?
When I worked on Max Headroom, it cost over $1 million per episode. That is considered chump change now, but it was the most expensive show on television at the time. You can do a lot of Sh1t for $1 million per episode if you have good scripts and the right process.
(end of rant)
Hey, trishyla
“Most of them support the strike, even though it’s costing them a lot of money.”
Are you f***ing kidding? I am a below-the-line worker. How can I support writers when I can not get my paycheck because of you.
“They know that without the writers they don’t have a job.”
Hey, TV and movie is a collaborative art. Without money, production people, post production people, your script is a piece of toilet paper.
“In the meantime, some retailers hope the area’s residents who don’t rely on Countrywide or Amgen for a paycheck will keep things humming.”
OK I give up who else?
Costa Mesa:
Realtytrac: 90 bank-owned properties on the market.
Realtor.com: 531 homes currently for sale. Total December sales was 28.
19.0 months worth of total inventory
3.2 months of just REO inventory
w00t
“‘We have a lot of music producers and wealthy real estate investors out here, and they seem to be doing just fine,’ said Jessica Sarmiento, manager at Lamborghini Calabasas, which sold 15 of its super-luxury cars during its first month after opening last summer but only eight last month.”
(8/15-1)*100 = 47 percent sales decline. Keep on whistling past the graveyard, Ms. Sarmiento.
Wealthy real estate investors out here, and they seem to be doing just fine,’
Haha RE investors they have had a good run out in Conjeo Valley just hope they didn’t invest in Phoenix when the pickings got slim in Cali ? Or Las Vegas or Texas or SLC or any number of other “cheap” Areas. Haha but I know many of them did. Oh and Costa Rica for some reason that was another place to invest your Helco? Don’t ask me why .
“‘Everybody’s sitting on the fence,’ waiting for home prices to drop more, said Bill Scozzola, who has been rehabbing and flipping homes for nearly 10 years. ‘To me they’re missing out on good opportunities. I’m willing to wheel and deal on this.’”
Willing to wheel and deal means he needs to lower the price. Throwing in a free car won’t help. Sellers need to realize they don’t set the price - the market (consisting of both buyers and sellers) does, and many sellers do not want to accept the outcome.
“‘Everybody’s sitting on the fence”……….looks like ol Billy Scuzz ola jumped off….. right onto a fat Joshua Tree branch……ouch!
I ain’t sitting on no stinkin’ fence. I’m perched here on my vulture’s roost, impassive as a Hindu cow, waiting for the knife catchers to join the parade of carrion before I take wing.
Why even bother making an offer when home prices are still so inflated away from anything remotely affordable to anyone except for top corporate managers and trust fund babies? And how many people who are not already homeowners are even qualified and interested in buying a home when prices are dropping at an unprecedented rate? So far as I am concerned, the only ‘good opportunity’ at the moment is to get stucco by catching a falling knife while homes are still unaffordably priced.
Testify! Buying a house in California at the current prices - without the promise of appreciation is nothing more than signing up to be a slave.
To heck with the promise of appreciation. You either afford it or you don’t.
I actually am bidding on a sfh Monday.It is well below my income level–just so I don’t have to rent any more. The mtg.(if I get it) will be will be less than my rent(incl tax &ins.)because I’m putting 25% down. I want to settle in while my son still lives with me. He’s 15. I have enough $$ so that if prices go off a cliff–I can buy that turn of the century home in Pasadena I’ve always wanted and rent the other house out for profit…I just have no interest in stocks or gold. I love to be a weekend warrior and add equity. I love to redesign a space into something I love.
“The mtg.(if I get it) will be will be less than my rent(incl tax &ins.)because I’m putting 25% down.”
To properly compare mortgage to renting, you need to not only include all components of PITI, but also potential investment earnings on the 25 percent downpayment compared to expected depreciation on the falling knife you are purchasing.
P.S. Whenever I read a newbie’s post like LILLL’s, I can’t help but wondering whether I am reading a true account or simply a lying realtor’s attempt to convince the world that yes, Mabel, there are still buyers out there.
PBear, skeptics are all too often right - especially in this day and age.
I don’t live in Cal but I do know that putting 25% down and thinking the mortgage PITI will be less than rent is dreaming. It doesn’t even add up where I am (Mobile).
But then I’m assuming a good house, decent neighborhood, etc, etc. Looks like a realtor fantasy posting.
“The mtg.(if I get it) will be will be less than my rent(incl tax &ins.)because I’m putting 25% down.”
I was thinking of doing the same thing - buying a house now for $400K (instead of waiting and paying $200K).
Since I will be paying all cash, my payments will be zero - significantly less than my rent.
Therefore, even though I am literally setting fire to TWO HUNDRED THOUSAND DOLLARS - it’s a good deal.
crisrose — Thx for the excellent post.
“I want to settle in while my son still lives with me. He’s 15.”
Hey LILLL, you’re 15 year old son doesn’t give a sh*t whether you rent or own as long as he has a place to stash his weed and porno mags. Now, as for the rest of your comment, you’re truly full of sh*t. Take for example this statement, “The mtg.(if I get it)”. So you have 25% down and enough money when its all done to purchase a high-digit home in Pasadena, and you’re worried about whether you’re going to qualify for a mortgage? LILLL, if you’re gonna lie, at least be good at it. Now all you’ve accomplished is to earn yourself a spot high on top of “The JT Recipient List”.
OK, LILLL, how lowball are you going?
WOW. And to think I’ve enjoyed reading your guys posts for over a year. I had no idea how righteous and awful you are. You aren’t the only people who know how to figure the investment value of a buck. I wasn’t born yesterday. Be happy. I DON’T CARE if I’m catching the proverbial knife. I’ll be setting new comps. And my 15 year old DOES care where we live. So does my husband of 18 years. Haters. And BTW–I’m not lying–Why would I come to a blog a lie? To impress you? I am not evil beacuse I want to buy a home. Or stupid. I’m like Sarah Winchester. I like to add on and keep tweaking my residence. I don’t want to tweak my rental. And HOW DARE YOU CALL ME A REALTWHORE just because I am bidding on a house. I am a hardworking entrepreneur. I make fountains and garden items and have built my company up from nothing. AT LEAST I MAKE SOMETHING AND THEY ARE AMERICAN MADE.
exnnbrkr–No I’m not worried about qualifying for the mtg. Not “if I get the loan”–It was “if I get the house”
“I make fountains and garden items and have built my company up from nothing.”
Thats cool ever go to the “Hunington Libairy” I like the Zen Garden .
LILLL, take your Joshua tree and quit squirmin’.
Don’t be too upset, Lilll— some people don’t realize that there can be a “good deal” (where the value of “deal” is entirely dependent on personal taste) in a falling market. I wish you luck with your house purchase, and may you live there long and happily.
P.S. Professor— You can’t count investment as part of your value unless you’re a good investor. I would never do that because I know as much about investment as a stump.
I am curious, where in California are there good deals? I have been looking for over 2 years in Glendale, Burbank, Pasadena, Alhambra, Arcadia, Temple City, and Monrovia and almost everything there in the $400k range has dropped $50-100k. These are small 2 bedroom condos though. Houses under $500k are generally dumps that need to be demolished and have a new foundations poured. I am not kidding either, I have pics of some of the “houses” I looked at in the $430k-450k range, its pretty sad. Anything above $500k and I know you must be making a lot of money, which makes me wonder what kind of money do you make?
This is more for my curiosity because people say everyone in LA makes a lot, but i don’t see enough examples to make every house/condo expensive. I can believe if you have the money and its a home to live in anytime is a good time to buy. My mom has cash to buy another place but I still think she should hold off and wait until the bottom since she already owns a large house.
LILLL is a real person. I’ve actually met her, at a party in Santa Barbara in the summer of 2006 hosted by two of the regular contributors to Patrick.net.
She’s a really nice person who has been renovating houses on the side, one at a time, for something like 20 years. She really is in a position to buy and hold, even if it means taking a short-term (i.e. 7-10 year) loss if she can’t stand renting any longer.
Personally, I wouldn’t buy now. The declines are going to be so huge that even if I could afford to take a hit, it would just be too painful to know that I caught a knife at 25% off when this thing is going to bottom out at 65-70% off. But if LILL buys now, she can afford to do so with a 30 year fixed and a payment that won’t break her.
Thanks Joe–You are the best–BTW way back when before this whole mess started crashing-you were toying with the idea of specializing in Foreclosures(Schmoe is a lawyer) Did you ever do that? Also–how are those beautiful kids of yours?
” actually am bidding on a sfh Monday.It is well below my income level–just so I don’t have to rent any more. The mtg.(if I get it) will be will be less than my rent(incl tax &ins.)because I’m putting 25% down. I want to settle in while my son still lives with me. He’s 15″
That part of Pasadena where that house is U are bidding on seems rather fishy. Close to Altadena which is not on my list of agreeable communities in the LA Area. Just south of that area is a nasty slum pocket of Pasadena (not all of Pasadena is like the neighborhoods around the rose bowl or along Oak knoll avenue ).
The $390,000 triggers a red flag warning. Must be a ‘problem neighborhood’ of Pasadena. Lots of formerly tidy middle class older neighborhoods of LA are de-gentrifying into suburban slums, a process proceeding in 1000’s of neighborhoods across LA county in the inner areas.
These are where U can get that 1920’s fixer-upper craftsmen clapboard with the stone porch on 6500 lot for around $300,000-400,000, in a deteriorated older slumburb or lower working class hood abounding with hispanic immigrant families and graffiti artists.
Buying a declining asset in a declining slumburg is what this deal sounds like.
P. Durbin,
You don’t have to be super investor to get some return on your $100K or whatever.
A little research into low-fee mutual funds should find something that matches your risk profile, level of expertise, and beliefs.
E.g. you’ll get somewhere around 5% from a basic bond fund. If you’re in a high tax bracket, consider a state muni fund. Or buy a CD if that is too complex.
If you want to get more fancy, diversify and try a mix of bond, equity, and global equity funds.
Fancier still, write down your goals and fears, and add some compatible investments (e.g. lots of HBB people seem to like commodities.)
Just start simple, and don’t get overwhelmed by all the choices. Learning even the basics of investing is knowledge that will pay off for the rest of your life.
LILL, Hi, I’m sorry so many people have been insensitive on this blog. I too would like to purchase a house soon more to have my own place to live in/decorate as I choose since I just got married and had been renting all my life. That being said, I am going to wait probably at least another year as I have no interest in buying right now when things are going down so fast. One other thing you might want to consider is how the fallout from this housing meltdown may affect your business being that it sounds like what you sell would be very vulnerable. I’m sure you’ve already considered that though. Best wishes to you; let us know how it goes. And don’t be afraid to lowball!!!
I’m disappointed in the responses most of you guys gave to LILLL’s post. If any of you have been reading this blog as long as I have and also are familiar with the regulars over on Patrick.net, you’d know LILLL is no ‘new-comer’ or real-troll. I wish her the best of luck, she’s no dummy and she’ll be fine. Stop with the knee-jerk responses already.
Ah, but gorobet, I don’t HAVE $100K. I don’t even have a quarter of that. My “investing” at this point is chucking money into savings, building up an actual cushion in case of problems. The cushions we had were wiped out by a few reversals of fortune, including the stupid hit-and-run driver that totalled our car bare months after we’d paid it off.
At least in terms of “poor years” I did those pretty well just out of college, so I learned a few lessons early on as to what to do and not to do. (Lesson #1: Oregon really doesn’t have a job market. Maybe Portland does, but when it takes five months to get a minimum wage job because people are afraid of you having a college degree, you know the market sucks.)
The fallout from those years has taken us a good long while to recover from. It might have taken less had we bit the bullet and moved back in with parents sooner, but that was a horrible idea for a newlywed couple to have to swallow, and we moved on as soon as we were able. Financially, we could have done better, but as it is we’re doing all right now.
$100K to invest. Heh.
Buying a house in California at the current prices - without the promise of appreciation is nothing more than signing up to be a slave.
Whatever happened to simply wanting to live one’s own home and being happy with it?
Testify Brotha Bear.
I happen to agree. With the retirement demographics and savings were they are… California is about to get a reset on home prices. Will it drop to 3X income? No. The midwest would be vacated if that happened. But 11.4X income was INSANE! What’s the bottom? 4X? (~$250k) 5X?
As Sammy above notes, We’re not on the fence. We’re watching the carnage. And its a warm up act now with the FB’s being smacked with 20lb trouts.
Soon they’ll we’ll have the ‘jump and see how the Joshua tree impales’ event. I think 18 months of that is scheduled… But it hasn’t started yet!
Got popcorn?
Neil
“If prices go off a cliff–I can buy that turn of the century home in Pasadena I’ve always wanted and rent the other house out for profit.”
LILLL is either an RE shill (I’m a poet, and don’t know it!) or she’s REALLY naive, one of the head sheeples!
Doug in Boone–You are the one who is naive. Buying a house has utility value. Heck even Randy H of Patrick.net was talking about buying a house about 8 months ago. He is one of the most intelligent men I’ve ever run across. You sir, have no idea how long I’ve been studying the market and how many lowballs offers I’ve made. If they don’t balk–the offer was too high. That has been one my motto. You guys are turning on one of your own. I found a house in Pasadena for $390k Monday built in 1919. Over 1900 sq ft on a 7500 sq ft lot. I pounced on it, only to find–it was withdrawn immed .for the homedebtor to apply for Bushies bailout. Similar homes in the area were going for $599k and up. So I’m naive, huh?
You put $100,000 (25%)on the down payment when you could buy silver at $15?
When silver goes to $25 you will have missed out on a $66,666.00 gain.
This is called an opportunity cost of 67%.
Let me guess…you are unfamiliar with silver?
No. I am not unfamiliar with metals. I just don’t want metals. My father is a vp of Wachovia in Seattle. Learned the market through osmosis
daver–listen-I knew I shoulda bought gold at 600. I didn’t. D@mn. I am just not interested in metals. Perhaps in your opinion I should be. But I’m just not.
Professor Bear–I am no newbie. I posted on Patrick.net since Jan 2006. I sold my house at the top of the market in Aug 2005 because the market “just felt wrong”. I had owned it for 9 years and it had almost quadrupled in price—crazy.It was only after that I found these blogs which I read daily–just because I don’t post daily—JEEZE.
I have found a place as I said(If the bank will come down to my price) And it is a reo. And it is over25% of the peak price. You should be happy. Prices ARE coming down at the street level. I have been renting for two and a half years and my landlady is PSYCHO.
If you google my handle you will find a pic of me next to HARM at Surfer X’s blog party.(the 13th entry)
Newbie –you are the newbie. Yes there are affordable sfh in LA–they are very hard to find.Take a look at Van Nuys West(91406) there is a 1289 sq ft on an over 6000 ft lot for…I think it was $269k. It just came out today. It’s fugly as sin–but hey–you can’t get a condo for that around these parts. I’m using it as active comp to try to get the banks price down.
LILLL–Good for you! I also sold at the peak after owning for 8 years. I turned around and purchased land on which to build my dream home. The roof started going on today. All the best with your purchase.
Thank you Clair. I was going to move out of state but decided to rent for awhile instead…and wait…
Good luck with your house.
Lilll,
Ignore the snarky, oftentimes mysoginistic, guys around here. Many of them are so caught up in their own little narratives, that’s it’s hard for them to be open to anyone else’s positive news.
$390,000 for a 1919 sfh in Pasadena is a pretty damned good deal (as long as it wasn’t on the East side of Lake- definitely gang territory) I’m just down the street from you in South Pasadena and prices are just finally starting to edge ever so slowly downward. Inventory is creeping up and DOM are strarting to pile up as well. But I’ve got a long wait for prices to even approach sanity in my little corner of the world. Hope it works out for you.
Hi LILLL I was going to rent also but decided to just move. If I was wrong and RE didn’t go down I would look like the town ass back in “its different this is Thousand Oaks and we have Amgen and CFC and everyone wants to live here its the new Santa Barabra.” Blah Blah
thats OK too.
Now I live with the cactus in Phoenix and its OK.
Plus my ex-Townhome back in Cali is down 60K from my sale price
South Pasadena is unreal with prices. The only other thing that would make me pass out is next door in San Marino. Very insane stuff there. Where in Pasadena are you finding a house for $390k? I have to assume its north of the 210 area? Are you really familiar with the area in Pasadena you are looking at? Very curious. I work near the Paseo.
“If you google my handle you will find a pic of me next to HARM at Surfer X’s blog party.(the 13th entry)”
Google your handle? Now if that doesn’t have euphemism potential I don’t know what does.
Hey, when I’m done googling your handle can you google mine?
travanx–To be clear–I am not buying in Pasadena at present. That house was withdrawn-but yes, it was on Dearborn at Juanita and was removed from the mls while the “owner” tries to figure things out. I had 2 calls out to Pas Police to check the area(I know it’s racially mixed) But I have a real passion for turn of the centuy architecture–esp. if it’s below $400 k–Presently, I don’t see anything good. The house I’m bidding on is in the valley–near my son’s private high school.
“That house was withdrawn-but yes, it was on Dearborn at Juanita ”
That house would be at the far northern edge of Pasadena(zip 91104) near Atadena 1 mile east of the 210. Altadena a really declining area-i have been thru there and it sucks. If U go 1 mile south of that location you hit a really nasty gang-and illegal-alien infested, crummy apt section of Pasadena -the 2 mile square pocket east and north of the foothill fwy 210. That is why it is listed at $390,000. Go on any RE data resource(zillow, foreclosure.com) and check sales/prices in zips 91101 and 91104 . Ignore the 11 homes sold for $725,000-they would be in only a tiny handful of upscale streets and the no of listings and foereclosures must be 100 times greater in that large zip area.
Pasadena 91101 2 $246 n/a 10 $575 6.5% $235
Pasadena 91104 11 $725 5.8% 1 $370 14.0% $4
BTW If really want to get a feel for the neighborhood you’re buying in suggest walk around the area late afternoon, near dark or in evening or do slow drive-bys and check out the surrounding streets and neighborhood and observe evidence of slummy rented homes, groups of unemployed illegals hanging around the streets and corner grocery shops,, decayed slummy apts ,graffiti , cheap ugly corner strip malls with check cashing signs, mexican Taco wagons, overabundance of liquor stores, ect. The Police / City/Local realtors won’t tell you jack about whether the hood is good or bad.
Thanks for the info on the area Peter. I always ask the neighbors and drive by at night. A few months ago I was interested in a 30s house in Van nuys. Drove by at night an saw it was on the corner of crackwhore and stabwound. Needless to say–I never made a move on it.
exnnvmtbrkr-
I used to think your joshua tree jokes were funny, but now I realize that you are just not that clever. I find it interesting that the HBB is in such need of trolls that you start turning on each other. Real classy exnnvmtgbrkr. I miss the days of Surfer X. He said it the way no other can.
Suzy Orman was on Larry King tonight. She actually said that the real estate market would take a long time to sort out and if you are going to buy you better get a discount. “If the asking price is $200,000, and you offer $100,000″ than yeah, do it. But get that discount!
How many nasty emails will NAR send?
“‘Everybody’s sitting on the fence,’ waiting for home prices to drop more, said Bill Scozzola, who has been rehabbing and flipping homes for nearly 10 years.
I think this idiot needs to re-read the first 12 words in his OWN sentence…jeez…
Why does anyone think that throwing in a car will help? Buyers much prefer if the price of the house is simply reduced.
Well it could make some sense, in that your finance charges for the mortgage (which now includes a car) would be tax-deductible. That is, if you wanted the car to begin with. Wouldn’t help me because I don’t finance vehicles, I strictly pay cash.
What are the odds that a potential buyer: (1) likes the house and location; (2) can afford the house; (3) is planning to buy a new car soon; (4) likes this particular car; and (5) can afford the house and the car?
This bozo has effectively reduced his potential market by an order of magnitude. Earth to bozo: Lower the Price!
There must be a lot of buyers taking a cab to look at homes for sale. I had no idea.
You don’t find the allure of a 30-year car payment simply irresistible?
“Why does anyone think that throwing in a car will help?”
Well, maybe one of them there Lamborghinis?
Because hes a Dumba## Cali FB flipper. We have Saguaros out here in AZ for his kind.
‘”The seller of a $549,999 home in San Jose’s McKinley neighborhood is offering to loan a buyer 10 percent or more of the home’s purchase price, which could help first-time buyers who lack sufficient down payments.”
How does this scam work?
It works fine if you are the seller. Pay someone to be a knifecatcher.
You get the property sold, the knifecatcher gets some big bucks.
The deception element may come in at the loan application level. Making a downpayment is taken at face value as evidence of the ability to save money, which presumably correlates with ability to repay a loan. This scam, like the downpayment gift program scam, potentially misleads lenders into overestimating the probability a loan will be repaid.
Lenders are now requiring down payments and it is almost impossible to get a second mortgage (with a loan default the second mortgage often reduces to zero). So the seller, in essence, makes the second mortgage… a very high risk loan, probably not secured, but gravey on the sale if it is actually paid back.
For the buyer, however, it doesn’t do a whole lot to make the home more affordable. So… mimimal impact on home sales.
How does this scam work?
Uh,…. Just like the 90/10 loans the brokers have been dealing for years.
Silent second. You make a contract and record it after the first closes.
Note: I do NOT recommend doing this.
It sounds highly illegal. But then the general piggyback loan scam, where a buyer gets an 80 percent LTV loan then adds a second for the remaining 20 percent, has always struck me as a ploy which should be illegal if it is not.
Does the applicant have to disclose he will borrow another 20 percent when he is applying for the 80 percent first? If no, then the first lender may be assuming far more default risk than if the borrower were putting his own skin in the game to the tune of a self-funded 20 percent downpayment. This was no big deal when real estate always went up, but it is rather more concerning in a falling knife market with tax forgiveness for short sales thrown in as an added incentive for the FB to walk away from his debt obligation.
“How does this scam work?”
Very simple - it doesn’t. The lender in first position will still consider it 100% CLTV, and, as we all know, 100% CLTV loans are bye-bye. Now, if the try and do what smlandlord suggests, that is doing a silent second, it’s still not going to work - at least the chances are slim it would work. Why? Because they would be trying to decieve the lender into thinking that the 10% down was the borrowers own funds. Now, in times past, this might have worked because a lot of lenders were not requiring seasoned funds. Today they’re going to make you cough up 6 months of bank statements to verify that money has been sitting there for a while and that it’s YOUR funds, not borrowed. Now, if you are a seller stupid enough to hand over the 10% to your potential buyer so he can stick in an account for 6 months, and all the while it sits there it’s unsecured, well then maybe you have a deal.
The only reason most of this under-the-table loan jury-rigging worked in times past was do to overly lax lending standards. You just can’t pull that off today.
a lot of lenders were not requiring seasoned funds. Today they’re going to make you cough up 6 months of bank statements to verify that money has been sitting there for a while and that it’s YOUR funds
This is why on a lot of financial forums and stuff you have poor choices being made. Like NOT paying off 12% interest credit cards… to keep money in savings so you have seasoned money for getting more credit. Seems like everybody is so damn facinated with their FICO and available credit that such ‘techniques’ are way overused.
1. Don’t pay your credit cards and keep balance of $25,000
2. Have $10,000 cash in the bank of course which you brag about how you ’save’.
3. Bank sees seasoned $10,000
4. Seller kicks you $10,000 which you then apply toward your credit cards.
I suspect this is more common than many who are truly smart with their money [don't overspend] would expect. These credit addicts out there are all about moving debt around with consolidation and long-term debt thinking.
>> “Bill and Beth Scozzola bought a three-bedroom house in Gilroy at an auction in July, redid everything from the floors to the plumbing to the kitchen sink, then put it on the market in September for $599,950. They’ve had no offers. So this week they parked a brand new, $18,300 Honda Civic in front, and plan to give it to whoever buys their property.”
To Bill and Beth:
Gilroy is maybe 50 miles inland by car from Santa Cruz, and maybe 75 inland from Monterey. Neither are giant employment hotspots in themselves. If the house was in Santa Cruz itself, no one would buy it for lack of a job and credit. Even in SC, the price would have to come down substantially, and comparable ones will in the next several years.
But this one is in Gilroy? Have you looked in the Yellow Pages under “Railroad Baron” for any leads? And will I have to redo the kitchen again–to my liking–instead of yours?
But Gilroy is the Garlic Capital of the World!
Garlic festival - really nice garlic calamari and yes, even garlic ice cream…yum! (And I am not joking, the garlic ice cream was delicious!)
But yes, that area is basically AgriBusiness and services…it doesn’t even have the tourist industry that other ag heavy places have (cough, Central coast, cough). And yet, because it is a “short” commute to The Bay Area (what, now, hours?), prices are nuts there.
I was raised in SJ and when the wind was just right–you could SMELL Gilroy.
FYI -LILLL is (tragicly) not kidding. There are days in that town when your eyes tear.
Too bad - I’d otherwise be considering a purchase, once things drop another $100k or so.
The improvement of 101 in 2004-2005 made the commute much more doable, especially for the carpool lane.
People who spend (waste) $600k on dwelling usually don’t drive Civics. Maybe the knifecatchers can let the cleaning lady use it?
Wrong car for the neighborhood. Try throwing in a couple of Lamborghini Gallardos
(That would be a 200K house and (2) 200K cars)
The employment market for someone buying that sort of house in Gilroy would be silicon valley, somewhere in San Jose or the south bay. The traffic on 101 north will suck. Probably a 45 minute to an hour commute each way every day. Maybe you could do CalTrain if the other end of your commute was located in the right spot.
It looks like the house in question was built in 1949 and is about 1,250 sq ft. I think it’s this one:
http://www.realtor.com/search/listingdetail.aspx?ctid=40419&mnp=32&mxp=32&typ=7&sid=3228020d7f574cdda01d25dc394963c5&pg=6&lid=1089423419&lsn=58&srcnt=114#Detail
all of my friends at school grew up and settled down
and they mortgaged up their lives
one thing’s not said too much, but I think it’s true
they just get married cause there’s nothing else to do, so…
I’m just sittin’ on a fence
“‘Everybody’s sitting on the fence,’ waiting for home prices to drop more, said Bill Scozzola, who has been rehabbing and flipping homes for nearly 10 years.”
No, no, no! I’m waiting for home prices to be AFFORDABLE. Dropping your price $18,000, no matter how you do so, doesn’t make a $600K house affordable in GILROY! And this guy has experience, too.
“Mary Aguilar, an agent in Monterey County, said incentives and gimmicks are certainly on the rise, but ‘I don’t think it really makes a whole lot of difference’ to getting a property sold, she said.”
This one gets it. How is a Honda Civic going to make me like a house more? Either I like the house or I don’t. It then comes down to price of that house. That’s it.
If they throw in ten years of bumper to bumper warranty and 1500 gallons of gasoline per year for ten years, plus ten years of auto insurance for it and of course ten years of parking fees and coverage for any traffic fines over ten years, then I will consider buying their way overpriced mcMansion.
And cut 30k off the price
“‘How much will you hate 2008?’ Kyser said.”
Followed by:
Not doing fine in 2009?
Bend over then in 2010?
Sellers
Hate 2008
Whine in 2009
Bend over in 2010.
Pardon the minor rewrite. But I do think 2009 will have the greatest price drops.
Got popcorn?
Neil
Somebody please correct me if I’m wrong, but the most toxic, most devastating loans for the housing industry will turn out to be the Option Arms (where people have the option of paying the minimum). The vast majority of those Option Arms do not reset the last six months of 2011…!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
You think 2009 will be bad? What happens in 2011 when all those folks who have been paying the minimum look up and their negative amortization has tacked on 30 percent or more onto the price of their home, while the housing market is in the toilet?
I can’t confirm this, but I believe that there are far more billions in Option Arms than there are in Subprime loans.
Would love to hear anyone else’s take on this, as I’m still researching all this info and have heavily relied upon this Monthly Mortgage Reset chart on this page:
http://krugman.blogs.nytimes.com/2007/10/27/some-housing-pictures/
Yes - the option ARMs are even scarier.
Go here for info. Those are considered ‘prime ARMs.”
http://online.wsj.com/article/SB119696216000715924.html?mod=hpp_us_whats_news
and here
http://blogs.marketwatch.com/greenberg/2007/12/straight-talk-on-the-mortgage-mess-from-an-insider/
The vast majority of those Option Arms do not reset the last six months of 2011
If the buyer had been making the interest only payment; once that option ARM hits its reset limit (110% to 120% of the original loan), it resets. That wave hits in mid-2008 through 2009.
Yes, the Option ARMs are the big hit. But with far more than 90% of them only making the minimum (negative amortization) payment… they’ll reset early. Bwaaa haaa ha!
Got popcorn?
Neil
Neil,
You have to hold back the evil chuckle.
I think people are still looking to get in and see the strong returns come back. There will be a dead cat bounce when buyers reappear but it will be short lived.
The retirement demographic will punish housing for a long time to come.
The demographics will push this down. But some areas will hit a bottom in 2012 through 2014 as new younger workers cycle through or the few retirees that were savers take housing stock out of the pool that is owned by ‘workers.’
But between now and the bottom will be interesting. Anyone who thinks its close hasn’t read history.
Got popcorn?
Neil
Neil,
Great, great points. Appreciate them…do you have any info on how this works? Any articles. I’m going to check out the two articles Ann pointed out…
But anything that specifically notes how those reset rates kick in when the loan max is reached?
Thanks!
Wilson,
The option ARM’s were a huge discussion here and on calculated risk about a year ago (maybe 15 months). I would have to search to find out more information.
But an option ARM holder is only going to be motivated to hold on if their costs are about the same as rent. Many Option ARMs were used by investors. When Capitulation hits, every investor will walk. As Warren Buffet likes to quote, you only know who’s been swimming naked when the tide goes out…
Desperation is going to hit soon. But its not here yet. Soon… so soon. I might have to slide out my Real estate emotions (its a monthly article on my blog) a few months. Its amazing how slow we progress through the real estate emotions.
We have five more emotional states to get through before we see any appreciation. We’re going a little faster than previous downturns. About 8 months per emotion rather than a full 12. Cest la vie. Its still slow.
Because of the state of this market, I think we’ll go through desperation and panic unusually quickly.
Part of my timeline is based on real estate emotions. Let’s face it, J6P never used a spreadsheet for his buying decision, he/she used emotions. Capitulation has the greatest downslope of prices.
Got popcorn?
Neil
I’m wondering if those “buyers” will default long before their respective resets, especially given recent price drops and the psychology that comes with it. In the same spirit of stealing buyers from the future as this bubble has done, I think some of the recent foreclosures are also stolen from the future.
Just speculation, but I’d love to see statistics indicating the percentage of foreclosures that have happened before the reset.
“Just speculation, but I’d love to see statistics indicating the percentage of foreclosures that have happened before the reset.”
I’m guessing, at this point, not that many. You still have many “owners” that are trying to ride this out - rent out, rework loan terms, etc. Once they finally realize values are going down well below what they owe and aren’t coming back any time soon, then the rout will be on. Whether that realization hits before the reset, I don’t know.
I think you have a vast amount of “owners” still living it out on credit cards, credit lines, savings, 401K loans and HELCO’s…(especially the prime borrowers who are have used their credit over the past fews year to max out their debt)
Once that train runs it course…WHOA..Huge crash..Amex already starting to feel it with the $275 million dollar write off..oh..so much more to come!
The vast majority of those Option Arms do not reset the last six months of 2011…!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Exactly! I went to that link you generously provided. A quick visual check of that graph on ARM resets shows the area below it is big, and without doubt much bigger than the area between now and 4 years ago.
Stagflation is in store the next 4 years. Got Gold?
“Somebody please correct me if I’m wrong. . . [but] the vast majority of those Option Arms do not reset the last six months of 2011″ etc.
A large number (if not the majority) of these will be foreclosed on before 2011. Remember, most foreclosures are taking out ARMs, and even the ones that aren’t foreclosed will have been written down. Thus: no effect in 2011.
Wilson, I would have to say that the scariest is the Reverse Mortgage..where mom and pop hope that they die before the bank takes back the house(What a gimmick…mom and pop have the house paid off 100% only to take a loan out for max of like 60% LTV!) when they reach the max the bank says
“Get out!”..and the grandkids will have no inheritance to build on!
Our forefathers are rolling in their graves and Rockerfeller is trying to get out!
True story on Rockerfeller..
A cabbie once said to him, “Mr. Rockerfeller why is it that your son gives me a dollar tip but you only give me a quarter?”
Rockerfeller replied, “I didn’t have a millionaire for a father.”
“Bill and Beth Scozzola … put it on the market in September for $599,950.
Scuzzola. Now there’s a name that inspires trust & confidence.
Agh…………..somebody must be making these names up.
Are you effin’ kidding me? The area where that house is located (McKinley? Never heard it referred to as that before) isn’t exactly a nice part of town. And further down the street, on Jeanne Ave is a whole bunch of apartments (max 6 units to each building) that’s filled with all sorts of riffraff.
Only someone who’s desperate would live in that area, let alone pay $550K for a home there.
I just wonder where this will end up !!!!!!!!
States probe banks’ role in risky loans.
http://news.yahoo.com/s/ap/20080112/ap_on_bi_ge/subprime_crisis_investigation
CLASSIC!
You guys have to watch the video that accompanies the Mercury News article. It’s 30 seconds and the realtor explains the rationale of giving a car away with the house!
http://video.mercurynews.com/mms/rt/1/site/medianewsgroup-bang-mercurynews-pub01-live/current/launch.html?maven_playerId=mercurynewsvideomc&maven_referralPlaylistId=94def18d0d147eb05d7a45e6d44d996270fc7128&maven_referralObject=07808a5e-3c45-4d78-85aa-1943badafe4b
Hey, NNVMTGBRKR: if you’re out there, can I show you a couple of mortgage documents? There’s a house I was looking at a year ago that has come on the market again and I swear, I can’t figure out what the current seller did. The place when I looked at it was for sale at 229K and finally “sold” in July for what appears to be 300K. No way no how that would happen so there has to be something screwy going on. Thanks.
I’m back….been away all afternoon. Sounds like a classic cash kick-back fraud deal. How did you get your hands on the mortgage docs?…and are you talking about the mortgage docs from the recent purchase? If so, I really don’t care that much about the mortgage docs, what I’d like to see is the appraisal and the HUD1 breakdown.
Easy..that deal was a “cash back at closing to the buyer..illegal but done everyday. Totally screws up the comps for the area.” Florida is the #1 in the country for it…
Bill and Beth Scozzola bought a three-bedroom house in Gilroy at an auction in July, redid everything from the floors to the plumbing to the kitchen sink, then put it on the market in September for $599,950.,,,,, During a tour of the home this week, the Scozzolas showed off the advantages of 7289 Dowdy St.: Travertine tile in the kitchen and bathroom, remodeling to current energy-efficiency standards, granite slab counters, walking distance to the Caltrain station.
(1) If they hired contractors to do the work, the most that would have been added in value was the amount charged by the contractor.
No profit gets added for the person who hired the contractor.
(2) Updating plumbing does NOT add value – that is maintenance. Unless the pipes had burst, it adds nothing.
(3) Tile and granite are DECORATING. They do not add anything to the value. An appraiser is not going to give a higher value because of that stuff. It could be formica or Corian and it would still just be rated as being in poor, good or excellent condition. (Personally, I would rip those counters out so fast the ink wouldn’t be dried on the closing documents. Yuck. Reminds me of the biology lab.)
Ditto the floors. Changing from carpet to wood or wood to tile does NOT increase the value.
These people have been doing this for 10 years which means they started at the time the bubble. They are NOT rehabbers – they are redecorating speculators. And they are gonna get burned……
To add value, you have to add a room or add a bath were there wasn’t one before and it is definitely more than countertops and paint and new floor coverings.
A Zillow search shows that they paid $378,000 for it 5 months ago.
The sale history on the house is crazy:
07/19/2007: $378,000
04/12/2007: $476,000
03/08/2005: $530,000
I was telling my husband about this story and got to your post with the prices. He sat there shaking his head saying “they are NOT going to get $220,000 more for some damn countertops, marble in the bath and redoing the floors. That is INSANE! Those do NOT add to the appraisal value”
Wow… “dowdy street”. Sounds exotic and stylish.
“Kyser said the Inland region is particularly at risk because the region led the state in new-home construction for about the last 12 years.”
- This is why the Inland Empire will lead the nation in forclosures at some not to distant point in time.
Housing can not lead / support an economy - it is the trailing indicator that the economy is healthy.
Juan sixpack does not get a home based on ‘home building’ and keep it. An economy has to be based upon manufacturing, high tech, exports, etc. Not consumer consumption and paper houses.
–
One group of people sitting on the fence in California is sellers in Gilroy, maybe suffering from bad garlic breath. The median Listing Price for SFH is $630K. Now, please tell me how many people can afford that? 2%?? The inventory is huge.
It is just as bad in Morgan Hill and Watsonville, outlying areas of Silly.con Valley that bubbled like crazy during 2004-05.
Jas
‘When does unsold inventory go down? When will mortgages be freed up?’”
That sounds so pathetic.
Why can’t the housing ‘entertainment’ folks rejoice? More people will be able to afford a home when prices come down.
What if I buy a house for under $200K? No matter how much the price drops in price, it cannot drop more than the house would cost to buy a lot and build it. Finding a lot and building a house on the lot, I assume, it costs at least $150K. I say that because whether I will be paying cash for it or financing it, it would beat the $2K I now pay for rent. Any Feedback will be appreciated
Unless you buy a dump that needs major work. Get a good inspection.
Noone cares what it cost to build it - what matters is supply and demand.
Housing costs can go below build costs - that just means people stop building - pretty common in a recession, anyway. People. Stop. Building.
This may be of some interest in light of the BofA/Countrywide foo foo.
I started tracking Countrywide REO’s (housing gems acquired by Countrywide via foreclosure/deeds in lieu/keys in the mail, etc) on Ocober 10, 2007. At that time they stood at 2,940 units in California. Through January 12, 2008 (98 days) they have increased to 4,298 units (again, California only). That’s an average of 13.85 units per day acquired. Impressive !!! From Adelanto in the high desert to Westminster, where the gang wars rage and all points in between.
For what it’s worth you can check Countrywide REO holdings in your state by visiting:
http://www.countrywide.com/purchase/f_reo.asp
I’ve been following it too, but there seems to be significant lag time, so there are probably a bunch of them that arent’ on that site. I went by and saw a Countrywide REO last week in LA (I lucked out as the tenant was moving out when I was driving by). It’s not listed on that site, but the Realtor who also stopped by as I walked through, told me that it is a Countrywide REO that will be on MLS this week…
“McNeill added that homeowners also need to take it upon themselves to seek help.”
“A large percent is due to an unwillingness of customers to reach out at the first sign of a problem,” he said.
“The first thing borrowers in distress need to do is communicate with their lenders since it is costly for a lender to foreclose, Lopez said.”
The bottom line is that lenders won’t do anything until payments are missed. Only then may they possibly become interested. Even if you do contact a lender, you may never get a straight answer and if even if you do, it may take weeks. Short of reducing the principal which likely isn’t going to happen, there’s not much lenders can do for many borrowers that will make much difference in the end. Why should borrowers waste their time trying to contact an unresponsive lender?