A Rags To Riches And Back To Rags Story
A report from the Oregonian. “The 10,000-square-foot estate home in West Linn comes loaded with Mount Hood views, three wet bars and nanny quarters. It once fetched $3.3 million. The neoclassical Italian-style villa in the West Hills: $1.4 million. The 17th-floor riverfront condo in South Waterfront: $798,170. All were coveted properties during Oregon’s housing boom. Today, all fester in foreclosure.”
“Recently, real estate brokers who specialize in foreclosed homes say the nation’s foreclosure troubles have crept into the Portland area. Bankruptcy lawyer Michael O’Brien is seeing more people who bought expensive Happy Valley homes with a 10 percent down payment, then pulled out what little equity they had to go shopping.”
“‘They needed new furniture to furnish that big Happy Valley house,’ he said.”
“‘It’s ugly,’ says Sande Sivani, who scans foreclosures for investors and has seen filings nearly double in Multnomah and Clackamas counties to a combined 300 a month. (She doesn’t handle Washington County.) ‘There are a lot of people who bought over their heads probably because someone told them they could qualify.’”
“Bill Ridge owns dozens of rental properties, and his Ridge Mortgage Services in Tigard specializes in financing investor home purchases across the country. In 2006, Ridge thought he saw a deal on the banks of the Willamette River.”
“The Meriwether came amid a historic rise in Portland’s downtown condo supply. Ridge paid $798,170 for a place in the Meriwether. But then: ‘My wife said, ‘I hate the height,’ Ridge says.”
“They moved back to West Linn and put the condo up for rent. Ridge knew the rent wouldn’t cover his $5,748 monthly mortgage payment, but he wanted to hold on to ride what he expected would be rising value.”
“In August, he put the condo on the market for $995,000. No takers. The next month, he stopped paying his mortgage. In December, his lender put the condo into foreclosure.”
“‘This is a rags to riches and back to rags’ story, Ridge said. ‘It’s my own stupidity and my own fault I got into it.’”
“Ridge has similar troubles on other investment properties, and his mortgage business isn’t what it used to be. ‘My company’s income is going south, and my income is going south, too,’ he said.”
“Looking back, he said he tried to ride the boom too long. ‘I got greedy.’”
“Two other Meriwether condos went into foreclosure. In one case, William A. Dittrich of Vancouver paid $387,740 in June 2006 and tried to resell it for a profit four months later for $448,000.”
“But it didn’t sell. By October 2007, his listing price was down to $335,000, 14 percent less than he paid for it. It still hasn’t sold.”
“Sean and Stacey Davis used an adjustable-rate mortgage to buy a condo near Portland’s Northwest 23rd Avenue shopping district for $534,100 in March 2007. Five days later, the couple from Camas, Wash., tried to flip it for a hefty $55,000 profit.”
“‘Then, ‘the market turned,’ said Jeff Abney, a broker who tried to sell the condo. In January, the couple — who declined through their broker to be interviewed — listed the condo for $500,000, a 6 percent drop from what they paid.”
“Investors’ speculative fever spread to buyers who expected to live in their homes. In January 2005, a couple bought an Italianate villa in the West Hills for $1.4 million. Two years later, their lender foreclosed.”
“Broker Philip Higgins expects to resell the house for the lender for $850,000, a 39 percent drop. ‘The fact that the house sold for $1.4 million,’ Higgins said, ‘is flat-out ridiculous.’”
The Associated Press on Oregon. “Portland’s condo market is ailing, yet developer Mark Edlen just started his seventh condo tower since 2004. Edlen sees an untapped market for his 16-story Cyan, where a sales office recently opened.”
“The pitch goes something like this: If you’ve been priced out of the condo life in the Pearl District, come live in a new downtown building that offers smaller, more affordable condos but the same easy access to the arts, parks, MAX and groceries.”
“The Cyan will be Portland’s first large-scale condo tower to lean so heavily on the market for small, European-sized living spaces. ‘We think every city has a challenge,’ Edlen says. ‘How do you house people who don’t make $150,000 a year?’”
“Two-thirds of the Cyan’s 354 condos measure less than 600 square feet, and about 60 percent are priced less than $300,000. When asked about the Cyan, Jerry Johnson, a Portland housing economist, said: ‘That’s a head scratcher. But who knows, maybe the contrarian idea is the right way.’”
“Howard Weinman, the Cyan’s lender at San Diego National Bank, notes that he closed the loan last summer before the condo market slowed further. But he remains optimistic about the Cyan in light of its pricing.”
“‘Most of the inventory is luxury condos,’ said Weinman, the bank’s Northwest real estate manager. ‘This is definitely not that. In my analysis, we felt it was a good risk. There’s a lot of people who’d like to live in the urban core, but just can’t afford it’”
“The concept dovetails with a philosophical movement of living smaller but richer lives. Edlen mentions Peter Walsh’s book, ‘It’s All Too Much,’ as part of the appeal. Or, think Target’s tagline: ‘Expect more. Pay less.’ Or, the Ikea store layouts to promote living in less than 1,000 square feet.’”
“‘As opposed to the McMansion theory,’ he said.”
“To see how people live in tightly packed cities, Edlen, along with architects and builders, toured Seoul, South Korea, Toronto, Amsterdam and Tokyo.”
“The light-bulb moment for the Cyan came in a 550-square-foot place in Toronto. About 12 people and Edlen filled the room, looked around and thought, ‘Yeah, you could hang out here,’ said broker Todd Prendergast.”
“To save space, kitchen cupboards flip up, instead of sideways — an idea snatched from Italy. The design allows a person to walk under the cupboard door, accessing all its contents, while cooking. The fridge is just 24 inches deep, compared with the typical 30 inches.”
“‘The tiny spaces, you have to be pretty clever and thoughtful about it,’ said Damin Tarlow, Gerding Edlen’s Cyan project manager. The stove has a glass top that plays double duty.”
“‘If you’re not cooking,’ Tarlow said, ’set a beer on it.’”
The Seattle PI from Washington. “Dutch and Brecky Bihary are three months behind on their mortgage payments and scrambling to hold onto the three-bedroom rambler they’ve had for 12 years. Their troubles began when they refinanced four years ago.”
“Despite asking for a 30-year fixed-rate loan, they realized at closing that their mortgage broker got them a two-year adjustable-rate mortgage they repeatedly told him they didn’t want. He also failed to tell them that monthly payments didn’t cover escrow.”
“When their interest rate reset last year, at the same time Dutch Bihary lost his job, the family couldn’t keep up payments that had doubled to $1,505 a month.”
“‘We made our decision. We don’t blame anybody. He did his job, and he didn’t look out for our best interest,’ Brecky Bihary said. ‘But buyer beware. You trust that they’re looking out for you. It didn’t happen, and now we’re having a hard time getting by.’”
“Like many borrowers, the Biharys, who live in Mount Vernon with their two young girls, assumed their broker was working for them. In reality, mortgage brokers aren’t legally obligated to do so.”
“The Biharys sought the help of a mortgage broker because they expected him to work for them.”
‘”We were told we were getting a fixed (rate loan), but through double-talk and side-stepping what we signed was an ARM,’ said Dutch Bihary. ‘I kept asking if things could be explained. He lulled us into a sense of security. This isn’t the position I wanted to be in.’”
“After the rate reset, the Biharys’ money problems were compounded by the loss of Dutch’s job and the realization that they hadn’t been paying homeowner’s insurance as part of their monthly payment. Both have since picked up various jobs, including face-painting gigs, to catch up.”
“Theresa Dimartino, who lives in Burien, put her three-bedroom rambler up for sale late last year when she couldn’t keep up with her mortgage.”
“She admits making bad decisions, including tapping her equity for home improvement, but she said her mortgage broker, whose name she can’t remember, rushed her through refinancing. He told her the ARM would increase her mortgage about $150 a month, when it actually went up by more than $400.”
“‘He saw me as someone who could fall into an easy loan that was good for him and not so good for me,’ she said, who paid about $15,000 in closing costs. When the ARM reset from 7 percent to 9.88 percent in October, around the time her live-in partner moved out, she couldn’t afford her $2,390 mortgage payment.”
“‘Had I known, I would have sought (financial) counseling,’ Dimartino said. ‘A lot of the mailings go to homeowners; they make it sound so easy and good. Getting into this mess has been humiliating, embarrassing. I lost a lot of sleep.’”
More than a few people have the Midas Touch, in reverse.
No late-afternoon California thread? I’m so confused…
Most everybody in Oregon is from California, so there you have it.
And most people from GA, Carolinas, TN are from FL or NY and ruined those states just like the Clownifornians ruined OR
Ever met a native Oregoonian ?
My grandfather is one. But I’m not (Seattle) and neither is my wife (Vancouver BC). 50% of Oregonians are from elsewhere, which is why I continuously pray for heavy, cold rain (and usually, my prayers are answered
*raise hand* I can trace family back to the Oregon Trail. Do I get a cookie?
Here you go, I hope you like oatmeal raisin with cinnamon.
Evil Rob is a native Oregonian. I think he’s still baffled sometimes at the fact that we’re now living in California (and that they’re so much more straight-laced here than he thought they would be!)
Cali comes and goes…
‘Tis often ground zero - day after day (I fell a song coming on!)
Smog,
Leigh :0
SFer,
It’s never the same around here!
Kick up your feet; Ben has a nice den.
Smiles,
Leigh
Tried to flip a condo in five days for a 55K gain. In 2007.
Now there’s some financial Darwinism in action for you.
No kiddin’ - the top here was May 2006 in terms of frenzy. Medians are still up YOY (barely), but summer/fall of 2006 was when things slowed down. Hell, it took me 4 months and 10% off to sell my place…
Gee, that story seems to imply there was no fundamental demand for condos, only speculative buying. I though portland was different
Portland IS different. We were the place that all the developers and MSM suggested wasn’t making the same mistakes as SD, LA, NV, and FL: our condos will only be owner-occupied!
Oops!!
Problem is there were few of us that believed the bubble had burst in May of 06. Anyone that believed that was considered tin foil hatted, black helicopter riding, certifiably crazy.
The Black Helicopters have been photographed and identified as US DHS Housing Bust Aviation Wing.
Heads Up..Large pallets of plastic bundled $100 Bills may be dropping soon in your neighborhoods.
But I’m sure they painted it …
Tried to flip a condo in five days for a 55K gain. In 2007.
Now there’s some financial Darwinism in action for you.
I had a guy try this on me in FL. I sold my place in Jan 06 for 167k and he listed them next day for $220k. Now the funny party is, I had them under contract for 167k on 3 separate occasions, but the deals feel through due to the bank appraisals coming in at just $120k. We put on the listing, cash deals only and here this dumb*ss comes with a pile of money. We closed and the very next day they were back on the market at $220k. Oh, they are still for sale and needless to say the condo market in FL is probably not the best place to be speculating these days.
What I love about all these Portland stories is that they profile the part of the market that everyone says will hold up.
Let them eat puke.
lmfao!!!
Do you eat puke or slurp it?
Probably eat it, since most will be of the “projectile” nature
That’s the grossest post I’ve ever read on this blog. LMAO.
Oy Ex’nvbkr!
P or S?
…s - l- o - w - l - y…
back away from the bottle!
Grins,
Leigh
P.S. Don’t hurl on my shoes dude! *
600sq ft for around $300K. “face-painting gigs” to “catch up”.
It just keeps getting better and better. Or weirder and weirder…
If you are not cooking, set a beer on it.?????????
Great, I always wanted to pay an arm and a leg to live like I lived in an RV.
Lol!!
Which you can buy brand new for $100k AND get to use it for your vacation.
And move within 5 minutes if you don’t like your neighbor!
I vote for weirder and weirder. Nary a day goes by now I don’t shake my head in amazement.
When the going gets weird, it gets more fun.
“When the going gets weird, the weird turn pro” - HST
This looks like NYC prices! No way would I live in a 600 square foot anything for long. Maybe as a second house on the cheap
Yo Egg: I could understand the 600 sq. ft concept, but at $300 K it’s nuts. Maybe $100K would be feasible IF you could still get exotic financing, but those that would buy $100K places usually don’t have $20K sitting around for a down payment. Always been my problem in CA. I don’t want to live where I can afford not because of me, but I don’t want to live with others where that’s all they can afford. I’m one of those didn’t live up to my financial potential, but consider myself highly successful in life.
Being a native of the Deep South where a home is an entirely different type of dwelling than what one finds in NYC or other major Northern cities, it is hard for me to imagine someone paying that much for one of my closets. Yes, one could yammer on about the vibrancy of the Big Apple, plays, yada, yada. I have been there. The plays are great, but I can find culture in many other cities. To me it is dirty, noisy, crude and everything costs too much. God forbid one should be low wage earner and try to live. Yet if that is where you were brought up, then it is normal and probably great.
I will continue to visit NY on occasion but I won’t stay with anyone who is living in 600 sq. ft. My closet in the house I reared my family in was 600 sq.ft. Of course it was a dressing room also. Can’t say I need that now as a single person living alone, but I can’t live in tight quarters. I love open rooms and plenty of windows. Living in 600 sq ft. is not relevant to the average American much less one with a family.
One persons closet is another persons home.
BTW, 600 sq ft closet?
Dang, dats a big one!
You go -
Leigh
I’ll say that closet is a big one - my main bedroom, ensuite and WIR is 54 square metres, which is just shy of 600 square feet (I think!)
My childhood room was 12×12— that’s 144 sq ft. (Our house was plenty big IMO; big enough for everyone (parents, grandmother, and five kids) to live in and not too big to clean.)
Duuuuude, big closet.
It just amazes me how these people bought and then the market turned. Wow, what bad luck. There is no way the market turned just before they bought???
And to add insult to injury, we have our own mortgage fraud problem here in Portland: http://www.kptv.com/news/15127794/detail.html
Fortunately, it is different here in Portland due to the urban growth boundaries, Californians moving in by the truckload, everyone wants to live here, etc. Nothing to worry about here… now back to bashing AZ, FL and CA.
I am out!!
After two tours, where are you headed?
Waiting for AZ to crash hard and will probably go back there in a few years. I am hoping to pick up a million dollar McMansion for 1/2 price or less.
Last weekend, I got a call from a realtor who told me that this is perfect time to buy in east bay, california as market has bottomed out. She said that interest rates are low and that as soon as the spring arrives, prices will go up.
Anyways, being a regular visitor to this blog, I started stating the facts about how the prices are going down and will go down even further, she got annoyed (big time). She hung up on me after saying “You will be waiting for the market to go down forever. Good luck waiting!”.
Just wanted to share this story - funny for me, sad for her. Haha…..
We need to start having Reamtors® sign such forwarding looking statements and put them on record. By the time this is through, I want lawsuit against the scum so they can’t make such wild claims. CFAs certainly can’t.
I’m a CFA charterholder myself and people who in my business who call up strangers saying it’s a perfect time to buy a stock are call fraudsters working out of a boiler room.
Another charterholder here. I think what we need to come of all this is something akin to the Investment Advisers Act of 1940. Self-regulation among real estate sellers is not working. If they’re going to be talking up “investments,” they should be held to the same fiduciary standard as stockbrokers. This investment involves risks and may go up or down in value, etc.
The CFA Marks provide a recognized symbol of professionalism and integrity for investment professionals worldwide.
Hmm…O.K., I’m nervous!
NOT,
Leigh
I’ll bet she was peeling off the same cheap lines in late 2005. I cannot agree strongly enough, since these people “purport” to be experts they should be subject to the same type of liability any other “professional” would be who gave bad and even dangerous “professional advice”. Realtors seem to want it both ways - we’re professionals which is why we get 6% and no we are not responsible for a word that utters from our lying mouths! I cannot tell you the “buy now or you will never get in” and “don’t count on prices going down - prices only go up”
My brother bought a 1500 sq ft place out at Canyon Road near the Portland Zoo for $300K in 2005, because prices were going up up up and they figured it’s now or never.
Folks are still saying prices will never drop there because of the urban growth boundary or because Portland is a hot commodity…. sadly I think my bro and a lot of other dreamers there are going to be underwater a year from now.
The UGB is such a bullsh!t red herring. There is tons of land (*cough* - Happy Valley - *cough*) inside the UGB and it’s not like it can’t move. It simply dictates that growth is confined to the area within the boundary…FOR RIGHT NOW….
BTW, that auction that was held here recently was in….yep, Happy Valley. And they say this place isn’t overbuilt.
Like in Sun Valley, Arizona, those Happy Valley sellers are waiting for the Canadians and the millionaires to show up. Where are those guys, anyway?
Well, my cousin is a partner in an accounting firm in Canada and during a phone conversation last week he told me that he was looking to buy a second home in the Phoenix area. I told him that the local market is toast and referred him to this blog. He wasn’t at all interested in hearing about it.
He’s probably from Vancouver, BC… Nothing like real estate true religion in this place…
Portland and their UGB (urban growth boundary)… HA! Vancouver, WA- Portland’s “dirty little secret”. It will fall, just like everywhere else that went berzerk-o.
I heard recently that Vancouver, WA (Portland area’s fastest growing area) has had the largest increase in foreclosures.
Whether your brother is under water only really matters if he needs to move or he needs to refinance. If the house suits him for the long-term and he can afford the payments, it doesn’t matter if the house goes down in value.
Sounds like he got twice the place for the same price as the closet condos mentioned in the article.
That’s why I do not think it’s right when people that can afford their payments, just decide to bail on their houses because it’s upside down for now. All of the sudden they’re called shrewed business people making a strictly business decision to stop contributing to a depreciating asset.
Am I the only one whose jaw is dropping over the rinky dink Portland condos??
Less than 600 sf?? Are you serious?? Damn well better be less than $300,000….like about $290,000 under $300,000.
I’m speechless, again.
ah, but it comes with a brand new glass-top stove and Italian cabinets.
what’s not to love?
Oh yeah, I forgot, you can sit your beer on the stove………silly me!!
What gets me in the ‘fridge. It’s not the standard depth, to better fit in the mini-kitchen. Bet it’ll cost more to replace.
How much demand can there be for 600 sq. ft. units, especially when you can buy a much larger. Lots of inventory available, courtesty of FBs.
That less than 600 sqft number for $300K blows my mind. I have one-bedroom rental units that are larger than that. Why would anybody bother to buy something that small? It’s an apartment, for heaven’s sake! Rent it!
600 feet is less than a regular suite at the Venetian (vegas). and like the bathroom takes up a third.
I remember our first apartment was 900 sqft and we paid $700 a month in rent. That was like 15 years ago. And I thought that was expensive.
600 foot is the same size as that 50×12 trailor I see being sold for around $10k. You can buy your own land(if cheap enough) or rent a lot in a mobile park. The cost would be a tiny, tiny fraction of that $300k condo!
I’m amazed…
My apartment has just over 1,200 ft^2. WTF are you going to do with half that space as an adult? Yes, in grad school two of us lived a life of luxury in 800ft^2. But I’m not a grad student anymore…
They had better get cheap enough so that you can buy two or three and combine them into a real place. (During the 1970’s NYC downturn, one of my aunts did just that.)
This won’t end pretty…
Got popcorn?
Neil
Ya know, at Ikea, they have setups to show you what it’s like to live in X square feet (some are really small). I wonder if Ikea and the condo tower builders think they have a symbiotic relationship. Perhaps they’ll go down together.
See, we just got an Ikea here in Portland about six months ago. It wasn’t packed at first, like previous openings elsewhere, but I think they are doing OK. They’re private, I believe - anyone know how they are doing?
“They had better get cheap enough so that you can buy two or three and combine them into a real place.”
Yeah, three of those would be about the size of my place, which is 2 bedrooms / 2 baths plus a small den and a laundry room.
The remodeling/construction guys will have a field day when those units fall in price to their true value. Either that or they will be become starter apartments for college kids.
Why buy two 1/1 condos and break down the wall to convert it to a 2/2? Why not just buy a 2/2 in the first place? The cost per square foot for larger units are usually lower than smaller units!
Besides if one needed plenty of space, why not just buy a detatched house and one of those 600sf condos as a second house just to hang out for a couple days?
Ikea is an international company that has been around for more than fifty years— and part of their design philosophy is to sell cool-looking stuff for really cheap.
I think overall they’ll do okay; they’d have to be stupid to have not built up some assets over that time period, and it never hurts to be one of the cheaper games in town when the economy takes a turn. They may lose a few stores but I don’t have a handle on their finances, so I couldn’t say for sure.
Just as a side note, here in Amsterdam that would be a good deal if inside the 5 Km radius of the city centre. Most appartments here are between 550 and 700 sqft.
I have a school friend who now lives in Amsterdam with her husband and son. Her Christmas letter told of the traumatic adjustment from a large American suburban house to a small Dutch apartment. I think the word “dollhouse” was used.
Portland rents are dirt cheap, too. A 600 sf apartment would probably rent for less than $700/month, I bet. Paying even $100k to buy it would be insane, especially if there is ANY association fee at all.
600 sf is fine for ONE person but one person should not be taking on that amt of mortgage. Or, why would someone who could afford it, settle for it?
I had a little house less than 600 sf, on a fenced lot with garage. It was perfect for me but it cost only 21k in 1990. I could make the payments (223) with money I picked up playing in bands.
Hmm… Candle-making biz, Doggie - Bow WowTique biz, now… drum roll.. pay your mortgage with Face Painting! Yeeehaw!
I had no idea face painting would be so lucrative.
ditto… faster, pussycat, daub, daub!
Hey, I resemble that comment!!!
Hiding your face in shame is coming back.
It will only be lucrative until all the snobby moms run out of money to put on the over the top child birthday parties.
She’s probably in porn…
I had no idea face painting could be so lucrative!
Face-planting is a more likely result, financially.
Paint your face black, go rob a bank.
I have a numer of friends and family in Portland. That said, Portland really is different. In the expectations of its residents of the rising lifestyles they are destined to receive, they remind me of more like San Francisco than any other place. When these expectations meet reality, they will react differently also. They will simply be ’shocked, just shocked!’
While the trend has been there since the 80s, this bubble really ramped things up. I can’t wait for the Cali-specuvestor money to go away.
Just don’t call it “livable.” Every idiot that moves here uses that phrase.
Last week it took my gf and I 1.5 hours to go from Lake Oswego to cross the bridge into Vancouver on our trip to Seattle. 17 miles, per Google Maps. Mind you, this was leaving at 3:30 on a Friday, but still, that’s crap. That isn’t what I consider “livable.”
The traffic is still much better than in Seattle.
Growing up in Oregon, the new trends from California used to take awhile to arrive, but they surely did.
And then in Oregon, when the good times finally arrive, they surely are the first to go and a long long time to get them back.
C’mon Ben, you’re making this stuff up! The names, the situations this can’t be real!
“Dutch and Brecky Bihary”
“Both have since picked up various jobs, including face-painting gigs, to catch up”
Hey Dutch, Here’s a couple of bucks, why don’t you paint my A$$!
LOL
“Hey Dutch, Here’s a couple of bucks, why don’t you paint my A$$!”
At least he’s trying something; better than suckling welfare.
Whatever happened to that “People are Smart” advertising campaign?
I personally liked that “You know you are a F’ed B when…” series that was on this blog some time ago. How about “Smart People know that that are F’d Buyers when they have to work at face painting to pay the mortgage…”
“People Are Smarting”
Is more like it…
“Looking back, he said he tried to ride the boom too long. ‘I got greedy.’”
Greedy I can deal with. Stupid-greedy I have zero tolerance for. You, Sir, are the latter.
At least he’s not blaming anybody else (yet).
I like any of these people that at least admit their mistake and don’t try to pass the blame to anyone else. Some of these folks are kind of wishy washy, though - they say it’s their own fault, but the then complain that the mortgage broker led them astray. We sat right at a closing and refused to sign on one where they tried to do the bait and switch to an adjustable. No matter what they said, I just kept saying. A fixed loan is the only one we’ll close on. Amazing how fast they were able to close on the fixed - the next day. Makes me think there were 2 loans approved and the broker just hoped we would crumble and take the ARM.
To bad more people didn’t scream bloody murder when they got a loan switch at the last minute like that .There is no excuse for a loan switch like that . Further , if the borrower didn’t qualify for the loan they applied for (at least in the old days of lending ),the loan agent would call the real estate sales person and tell the borrower ,who at that point had the option of getting out of the real estate deal . So…….,you can’t tell me that the real estate agents were not working with the loan agents to strong-arm the borrowers into bad loans that were easier to qualify for .Look ,real estate agents babysit the transactions and they are calling all the time …..so….what happened ?
I would like just one real estate agent to say that they never saw this sort of tricking the borrowers into taking a loan they didn’t originally want take place . And pray tell …..why did the real estate sales people not protect the borrowers by putting a clause in the contract that if they didn’t get the loan they wanted they could get out of the deal ? Somehow people were sold on the concept that the loan didn’t matter because they could always refinance .Did anyone care to tell these borrowers that refinancing can be a expensive luxury that raises their real cost of money ,or that they might not have the equity to refinance , or that money might not be available ? I’m just so shocked about the kind of business practice that took place during the boom ,especially the last 3 years of this bizarre frenzy . What is also shocking is how expensive these refinances were on these toxic bad loans . The only thing I can say is that these borrowers sure had to pay a lot of money for loans they didn’t really qualify for (or Wall Street Investment Banks paid big buck commissions to push these loans .)
I just can’ t believe these stories that I’m reading about the behavior that took place in these lending offices .
Hey H’Wiz,
Maniacal behaviors are predictable, like bubbles.
The loan fees were “FREE”.
The stolen money is real.
“They” did , several times. (Many refinanced).
Clean heart, one voice…
Hope,
Leigh
Why can’t you believe it?
Mutual fund sales, structured financial products and life insurance sales people do this every freaking day. They choose the product for the client predicated on the COMMISSION THEY WILL BE PAID FOR SELLING IT, not necessarrily its benefits for the puchaser / client. Not all, but many are cheats in this manner.
Also, the commisions on a conforming mortgage are a fraction of what you make on placing an ‘exotic’ mortgage product.
It’s that simple, and lets not forget “everyone was doing it” and the mtge broker employees were not highly regulated and so the potential punishment was not a deterrent. And the “lure of easy money has a very strong appeal”.
why did the real estate sales people not protect the borrowers by putting a clause in the contract that if they didn’t get the loan they wanted they could get out of the deal ?
Hmmm- site ate half of my post?… Anyway, the point I tried to make was: I suspect those protection clauses *were* in most purchase contracts. I know that everytime I have bought or sold property, the contract has been contingent upon specified financing terms. The real question is why those clauses weren’t enforced at closing. I suspect it’s becuase people were eager to buy in under any terms- as real estate was seen as a guaranteed road-to-riches.
“We sat right at a closing and refused to sign on one where they tried to do the bait and switch to an adjustable.”
Jail time, huge fine, and license revocation for any broker who pulls this crap.
I’ve had the same thing happen to me, and everytime I HAVE screamed bloody murder. And two deals I have just walked out, because the lenders would keep trying to steer us into funny ARM type loans.
One mortgage broker and real estate agent even tried the switch and bait on me, and when I refused to sign, said, “But if you sign now, you could have the keys to your new home today.” I told them I had plenty of time to wait on something I was going to be paying off for 30 years, and walked out of the office, and told them to call me back when they had fixed it. I’m pretty sure the mortgage brokers know what they’re doing, and just think that most people don’t have the balls to say, “Nope, we’re not doing this,” and walk out of their office. I had one lender even threaten legal action because I refused to sign the switched over paperwork! I just laughed and told them to go right ahead and sue me, and of course a lawsuit never materialized.
My God Spacepest ,can you imagine all the borrowers that might of thought they had no choice but to sign those loan documents with these creep loan agents/real estate agents saying this BS to them .There is no question that many commissioned sales people lied to borrowers during the boom.
I have know really good sales people in my lifetime that are honest and disclose everything, but during the boom I can’t believe how many people turned criminal or closed their eyes to wrong behavior toward their fellow man/women.
Cyan sounds like an awesome project. I bid $35K for a 2 year old used one.
Er…cyan…pretty blue color?
“To see how people live in tightly packed cities, Edlen, along with architects and builders, toured Seoul, South Korea, Toronto, Amsterdam and Tokyo.”
“The light-bulb moment for the Cyan came in a 550-square-foot place in Toronto. ”
This is America. Americans do not want to live in 550SF rat traps. Americans just want a normal house (1800-2500SF) with a normal yard (1/4 acre) that a normal middle class person can afford to buy($160,000 to $185,000). How hard is that for builders to comprehend ?
Actually, 900 sqft would be pleeeeeenty for me. Land is nice, though. Trees and vegetable garden.
But please do not burden me with 1500+++sqft. Who is going to clean it all? The wife and I have day jobs, you know.
I love tiny houses, and one of these would suit me just fine. I think the concept is great, but I’m not willing to pay that much.
Agree. My 1100 sq, with 1/5 acre, is just fine for one person and four dogs. But that comes across as small in today’s market, even for one person, when it’s not. The prior owners (I bot in 01) were h and w and 2 kids. Yikes.
Seriously, folks: 600 sq ft is livable for one person. Lots of people in Manhattan (NYC) live in studios roughly that size, or slightly less. It’s the price for these things that is absurd.
Toronto is tightly packed?! Next time somebody needs to give these guys window seats when they fly in.
What you described is exactly what I bought … in 2001.
Funny I just got back from a visit to Toronto.
It is in some sort of a bubble for sure.
But give me a break. In Toronto the standard house is 2 story brick house with 2000sf for $300-$400k!
The downtown waterfront properties will fetch a very high price, I am never interested in that piece. And Portland is probably the size of Scarborough, with mies and miles of lots in surrounding area, why is this guy talking about dense city living?
I agree. Not touching a condo. My house is gonna be around 1500 square foot(but ill settle for smaller while waiting for prices to drop more) and when land gets cheap, im buying acres to grow my orchard.
I agree with that in general I’d like a smaller house size than the one mentioned. But honestly, if builders accepted 2500 sf max as a middle class house, by comparison the house I’d want to live in wouldn’t be so outlandishly “small” by current standards.
The current McMansions sizes feel so cold and empty to me. I have a family friend who bought a new townhouse for herself and her cats that has probably at least 2x or 3x times the square footage that we 4 live in. I need a sweater every time I walk in the door and I can’t imagine why she needs all the space.
Also, her property tax bill alone would pay for 4 months of rent where we live. It’s new, so there’s not much maintenance but she hasn’t paid the mortgage or the HOA fees.
At some point builders will get the message when the only houses they can sell are the small, energy efficient models. It’ll take a while, though.
I disagree… small spaces can be very liveable and they allow densification, which means less urban sprawl. It’s a good option for the right person, I just think the pricing is wrong on these types of deal… They’re usually designed for the developpers to stuff their pockets with the cash of speculoflippers.
The problem is that only 3, maybe 4 American cities have the infrastructure in place for high density living. Chicago and New York, absolutely. San Francisco, for the most part, then Seattle to some degree.
The rest of the large American cities were built up post-WWII and post-automobile. The sidewalks are small, public transportation to accommodate a large urban population would be prohibitively expensive, the close-in suburbs offer a more desirable and affordable way of life for families, etc.
Not all Americans want 1800-2500 sf homes. You’re perpetuating pseudo “conventional wisdom” which has merely justified inflated house prices.
Americans just want a normal house (1800-2500SF)
That was NOT “normal” until the past 20 years or so.
1900 -1940. Median size was 1200-1400 sq ft
1950s Median size was 1500 -1600
1970s Median size was 1700s
It was when “greed is good” and “bigger is better” started in the 1980s that people began to think that they need nearly 2 times the house their grandparents had and 75% more than their parents.
On the land? Nothing less than nearly a 1/2 acre here (but then I am a dedicated gardener.)
“‘It’s ugly,’ says Sande Sivani, who scans foreclosures for investors and has seen filings nearly double in Multnomah and Clackamas counties to a combined 300 a month….
Lots of opportunities for those high stakes investors. Doubling all the time.
“Despite asking for a 30-year fixed-rate loan, they realized at closing that their mortgage broker got them a two-year adjustable-rate mortgage they repeatedly told him they didn’t want. He also failed to tell them that monthly payments didn’t cover escrow.”
————————–
Let me continue the story…
“At which point, the Bihary’s stood up, called the broker a slimy jerk, and walked out, only to later laugh at how close they came to signing mortgage documents that were NOTHING like what they had asked for. The End.”
Oh wait, did this story say that they STILL SIGNED the documents!?!?!?!
Geez, there’s a word for people who sign contracts they disagree with, and it begins with an “S” and ends with “tupid”.
The sense of urgency…er…I can’t read…er…I trusted you;
People who sign contracts, must read them, says Confucius!
grrr…
Leigh
“The Cyan will be Portland’s first large-scale condo tower to lean so heavily on the market for small, European-sized living spaces. ‘We think every city has a challenge,’ Edlen says. ‘How do you house people who don’t make $150,000 a year?’”
WTF????
I’ve got an idea, go look at how the bottom 95% of wage earning folks are housed, ya friggin idiot. 600sqft condo?, Who the eff wants to sit on the toilet and simultaneously check the frig for snacks?
Easy come, easy go, I guess.
Actually, that sounds pretty convenient. Can the toilet double as a sofa, so I can watch football, grab a beer, and pee simultaneously? Might as well make it a sleeper sofa, and I’ll never have to get up off my fat lazy arse.
I know everyone wants to be like Peter Griffin (Family Guy) but that was too much…
U guys see “Idiocracy”?
“Shut up.. ‘Batin!”
Yeah, when I saw Idiocracy early last year, I said “500 years in the future? Right,try 5″.
Two years ago, Bill Ridge was advertising nothing-down mortgages for investors. Funny to see him get foreclosed now.
Portland has a handful of high-profile hot spots which are vastly overpriced. The rest of the city is grounded in reality.
Condos are going up a few blocks from me, starting under $100K. The overpriced high-end condos - some of which are still under construction - have been way overbuilt, but there’s plenty of demand for less glamorous locations at lower prices.
Portland has a handful of high-profile hot spots which are vastly overpriced. The rest of the city is grounded in reality.
Are you sure? Job losses will penut butter they pain to everyone.
Got popcorn?
Neil
Stated Income Loans, with a major twist. Bye, Bye Investors…
Lenders are becoming increasingly cautious regarding stated income borrowers.
Many lenders want to see three to four times the monthly stated income in reserves.
Although these are unwritten guidelines and typically only six months PITI is required, it is the underwriter’s discretion.
Look, Kid, developers can build normal houses just fine. The problem in Portland is that the Urban Growth Boundary has made land inside it outrageously expensive. How does $500K per acre sound?
Build a normal house on that and you couldn’t make a profit selling it under $300K
500k per acre sounds like a bubble. Restrictions don’t matter, affordability does.
As we have seen over and over, land prices fall much harder than houses.
Ben, I’m emailing you off line to see if you want to write a guest blog on the bubble for Lexis-Nexis. I’m charged with convincing you to do this.
$500k an acre is insane, but you haven’t seen how insane land in San Francisco was, ive seen lots going for over $10m an acre. Even here in south FL, there were 1/4 acre lots for $125k and it wasn’t waterfront either.
Ill be buying correctly priced land at $2000-5000 an acre in NW Pennsylvania and get all the land I need
NW Pennsylvania. Anywhere near Eerie?
About 50 miles south of that great lake. It’s around Oil City/Franklin.
Although north FL land prices are falling nicely, will keep my eyes open on other locations in the future.
Gods, I miss PA. Grew up there, but ended up moving to the mid-west and I still can’t get used to a horizon that’s not decently hemmed in by mountain ranges and roads that run straight for miles. Probably why we ended up in a neighborhood that pretty much requires a (smallish) 4WD SUV to get around when it snows . . . .
Sounds so familar. I was pure PA-east coast and maried someone from Chicago whose family lived in Peoria. I had just moved out there and we were driving downstate to see his family when I woke up from dozing off, looked around and said “Isn’t there any place in this damn state where you can’t see for 50 miles?” He said he knew right then that we would be leaving Illinois at some point. (And then a few months later he gave me the ‘what to do if there is a tornado’ lecture - yieeeee.)
“How does $500K per acre sound?”
If I’ve done the math correctly (1 acre = 43560 sq ft), that’s about $11.50/ sq ft. For comparison, downtown San Diego peaked at about $250/sq ft.
That’s LAST year’s price. And by the way, I bought 5 acres 20 miles SW of town for 189K in 2000 - with septic, well, and 1977 doublewide. Same deal would still be $300 today. Problem is you can only put one house on it -which is fine with me.
“Two-thirds of the Cyan’s 354 condos measure less than 600 square feet, and about 60 percent are priced less than $300,000.”
This has got to be some kind of a joke, right? 300 large for a walkin closet? Are these people smoking crack?
SubKommander Dred
I think Cyanide is more their speed.
Australian Market off almost 3% at open.
Nikkei off almost 3% at open too.
Now down over 500 points in Japan.
Will the FED make another emergency rate cut tomorrow?
Any bets on when the Fed is forced to go below 1%? I say this fall. 1.25 BP in the past 2 weeks hasn’t done squat. There is some serious sh#t going down that MSM has yet to pick up on.
Like Peter Schiff said, FED cuts aren’t going to fix it. It will in fact make it worse.
Any idea how much money the FED would have to print to get it below 1%? I don’t know if they would have enough paper. Even if they did, how could they afford paper with rising prices? They would use about 1 ton of paper to buy a half ton of paper.
I have said it before, but the Fed lacks the right tool for the job. When the only tool you have is a hammer every problem looks like a nail.
The difference between today and 2002, is that in 2002 there was still potential to drown everyone in debt. Today credit lines are tapped and lenders and receding fast.
Do you think foreign banks and sovereign wealth funds will want to invest in us when their own economies are tanking?
You folks need to understand something though - the eastern markets do not lead the U.S. - they follow. So their downturn is a reaction to today’s U.S. downturn, not an indicator of what will happen tomorrow in the U.S. Otherwise they would have been down Monday rather than up, and also down big yesterday rather than flat (relatively).
The big MLK-day drop in the east was a reaction to perceived weakness in the U.S., combined with the shenanigans of that Frenchie. If the U.S. markets had been open on MLK day or on the Sunday before, they would have led the east down then, and the fall most likely wouldn’t have been as precipitous. IMO the Fed screwed up big time when they panicked into the emergency cut after MLK day. Nothing says “confidence” like breaking the glass and pulling the pin on the fire extinguisher the second you smell smoke. The next time someone walks into the building with a cigarette everyone will be running screaming for the exits.
Now close to 600 points down.
Meanwhile, the Hang Seng is down over 1400 points. Ouch!
Yeah, get a load of the Asian markets tonight. So, now what?
More rate cuts from Helicopter Ben?
Nikkei coming back. It was down over 600 points… Actually 611…. slowly crawling back.
The currency markets are doing some really odd things. The last two rate cuts (.75 emergency and .50 later) plus this mornings index release.. They did the opposite of what is expected.
AUD and NZD should be going up. Heck NZD just raised interest rates this week… and still not responding.
I don’t believe the priced in BS. Somebody is moving lots of money into the USD right now.
No big deal to me, I can hold for years if I have to… and I’m getting paid good interest to hold AUD (mostly) and some NZD.
Somebody is moving lots of money into the USD right now
Perhaps the Chinese sensed weakness and have made some behind the scenes deals. It is in their best interests the US economy hold together at least while they build theirs. It would be disasterous for them right now if our market crashed and we could no longer buy all their garbage.
“Howard Weinman, the Cyan’s lender at San Diego National Bank, notes that he closed the loan last summer before the condo market slowed further. But he remains optimistic about the Cyan in light of its pricing.”
Is there anyway to short San Diego National Bank?
“Is there anyway to short San Diego National Bank….”
…and/or Howard Weinman?
I smell desperation from a lender in downtown San Diego…
702 Ash St #802
San Diego, CA 92101
Price: $169,900
Sales History
Date Price Held Return Annual
03/10/2006 $405,000 1y 4m 50% 34%
10/22/2004 $270,750 n/a - -
And of course at the end of the description, they have the following HBB anthem…”Recommend cash buyer.” I thougtht you would never ask.
This complex is cheap because:
“Pending litigation with contractor”
That’s from the MLS listing. This complex has major problems. You don’t want to buy here…. a lot of owners are walking away.
“In a closed society where everybody’s guilty, the only crime is getting caught. In a world of thieves, the only final sin is stupidity.”
Hunter S. Thompson
Comment by Jimmy Jazz
2008-02-05 12:20:06
Sorry, the feds are too busy raiding medical marijuana stores and going after porn producers to bother with this stuff.
Leave the weed alone, if its used correctly for medical benefits, I don’t see the harm anymore than other types of medicines! As for porn, I thank the FEDs greatly for their dilligant efforts to rid the world of this vile filth that transgresses human rights! Down with porn!
Comment by Tim
2008-02-05 10:35:30
I was playing poker this weekend, and someone asked the dealer how the sale of his house was going. He said I cant get what its worth right now so im renting it out until we rebound later this year. I bit my tongue. Ah, the salty taste of blood.
Once the denial is gone and full blown panic sets in, we will see hard and furuious drops in house prices. Patience, people
To confirm this observation with another: my in-laws, whom I regard as the almost perfect J6P investor (lost their shirts on Enron and tech stocks in 2000) have “investment” houses bought around the peak in Co. Springs.
My MIL put 2 or 3 houses on the market this summer because she’s tired of the stress of being a landlord from 2000 miles away. Unhappy with the results ,she’s taken all but 1 off the market, counting on a turn around in the market.
It seems like everyone (including the banks) is in a semi-holding pattern right now. Once we get a little more panic, we’ll get more panic, and I figure eventually my MIL will panic, too. Once that happens, I’ll know housing prices have started their serious downward plunge.
The Late 2008 Rebound myth is roaring around Tucson too.
That myth is what the herd mentality is feeding on. Things will really heat up later this year. 2007 was a warmup with itty bitty price declines. Early 2008 got a little more interesting.
Your MIL probably would simply walk away soon. Is she underwater yet? If not, please urge her not to chase the market down! If shes already underwater, tell her to walk away and stop bleeding more money.
“I cant get what its worth right now so im renting it out until we rebound later this year. ”
Ah, the sweet, sweet smell of shadow inventory… Much of this won’t come onto the market until panic/capitulation sets in.
Back to the economy:
Shopping for small things makes me nervous.
I was picking up some wet and wild lipstick for my mom.
She really likes my lavender lipstick.
Normally I buy whatever I want.
I got her two and one for me.
18 bucks paid in cash.
My mom used to sing us the titanic song!
Thank you for posting and here it is again.
http://www.youtube.com/watch?v=LfIMOx0OqtI&feature=related
Titanic
There is one verse they left out:
Uncles and aunties, little children wet their panties
It was sad when that great ship went down.
Ya know, they’re selling little crackerbox condos for $95K on the east side of Portland. I think they are 500 SF. Mother Hubbard’s shoe?
“Broker Philip Higgins expects to resell the house for the lender for $850,000, a 39 percent drop. ‘The fact that the house sold for $1.4 million,’ Higgins said, ‘is flat-out ridiculous.’”
Well broker Philip, I think you are going to find that $850,000 is “Flat-Out LUDICRES”
ALERT: - If you are in Brazil, you need to get out now. Jim Cramer is saying Brazil is a “BUY”!
That is your signal to sell sell sell!
You know, it’s kinda sad and pathetic, but it’s true.
damnit.
Cramer’s late. Brazil double topped in December
http://www.profitspi.com/stock-chart.aspx?id=EWZ&ca=776237906
I wonder what is writing sessions are like….
phone rings, picks up… This is Cramer.
(from the phone) wha, wha, wha, wha.
You need suckers to buy into Brazil so you can get out of your losing positions? No problmem… it will be today’s top pick.
Wha, wha.
No problem.
(phone rings. Cramer answers.) This is Cramer.
Wha wha wha wha. wha wha wha wha wha wha. Wha wha.
Really? You need me to pretend that home builders are about to turn to feed your short squeeze? Wow, that will be a tough sell. How do I justify it?
wha wha wha wha wha.
I shortage of housing???? You really expect them to believe that? 3 months ago you had me talking about buldozing under huge tracts of houses in IE.
Wha wha wha wha.
Yeah… you’re right. The are so afraid and desperate, they’ll fall for anything. Okay, I’ll rate builders as a buy…. Anyone stupid enough to believe me deserves to lose their retirement.
Wha wha.
Just be sure to close that advertising deal with my web site.
wha wha.
Yeah, you better or I’ll go on Opening Bell and let slip again how we all get together an decide how and when we manipulate the market to screw the little guys.
wha wha.
Back at you. (hangs up).
I noticed US bank at a local grocery market they had a big sign up offering to open accounts for folks on Chex systems. This seems a bit desparate to me for sure.
Go Hang Seng! Go Hang Seng!
“To save space, kitchen cupboards flip up, instead of sideways — an idea snatched from Italy. The design allows a person to walk under the cupboard door, accessing all its contents, while cooking. The fridge is just 24 inches deep, compared with the typical 30 inches.”
I once lived on a 32′ sailboat, but it was a boat, living space was not the objective.
Flipup cabinets, ranges that double as tables….how do these fricking morons get jobs. That is not an apartment, not a condo, not a house, and most definatly not long term living. It is called a motorhome you morons. People put wheels on them and take them to vacation in. Go back to design school and get a refund because your teachers sucked.
Actually, I’ve seen the Italian flip-up cabinets they’re talking about - they’re pretty sweet, and very efficient. However, while I don’t look at 600 square feet as a closet - it’s too small to house two people for more than two days. There is no room to get away from each other. I think that Europeans must go out a lot more than I do. I think that around seven hundred is the bare minimum I would accept for a one bedroom. Me, I’m looking for a two-bedroom condo in DC, approximately 1100 to 1200.
“‘We made our decision. We don’t blame anybody. He did his job, and he didn’t look out for our best interest,’ Brecky Bihary said. ‘But buyer beware. You trust that they’re looking out for you. It didn’t happen, and now we’re having a hard time getting by.’”
Give me a break! People in America are just plain lazy. They expect everyone to do the work for them. Today with the internet and mortgage calculators there is no excuse for not know beforehand what your monthly payment will be. And not knowing that escrow was not included…that is just icing on the cake. How can you not know that. Once again someone overly fixated on the monthly figures with no clue about all the rest. YOU ARE BUYING A HOUSE NOT A USE CAR!!!! . “people are smart” now that is the biggest joke going.
So funny. Do you think he heard himself ask that question? “During the run-up, we pretended everyone made a million dollars a year. It’s disappointing that they don’t.”
My apartment has just over 1,200 ft^2. WTF are you going to do with half that space as an adult? Yes, in grad school two of us lived a life of luxury in 800ft^2. But I’m not a grad student anymore…
I’m renting less than 400 square feet.
*raise hand* I can trace family back to the Oregon Trail. Do I get a cookie?
It’s already in your PC.