It’s All Part Of The Culture We Have
The Boston Globe reports from Massachusetts. “Foreclosures in the region more than doubled between 2006 and last year, when 1,211 homes were taken. The hardest-hit community in the region, and among the worst hit in the state, is Brockton. Last year, 363 homes were foreclosed there, far more than any other community south of Boston, according to Banker & Tradesman.”
“Lisa and Eric Jacobs are trying to sell their condo in Madrid Square in Brockton before it is foreclosed on. They paid $82,000 for their home in 2000 and believe it is worth about $185,000 now. But they owe about $180,000 on first and second mortgages.”
“They got into financial problems using equity to pay off credit card debt and spending on home improvements. Lisa also was laid off and unemployed for 1 1/2 years, so they fell behind on both mortgages.”
“‘We want to refinance with a company that will give us a second chance,’ said Lisa Jacobs. If forced to sell, she says the couple will have to move in with her mother-in-law.”.
The Hudson Sun from Massachusetts. “In upscale as well as downtrodden neighborhoods around Marlborough and Hudson, foreclosures have been on the rise.”
“‘The problem is not just in French Hill,’ said Code Enforcement Officer Pam Wilderman. ‘It’s hitting all over the city. More and more people are just walking away from their homes when they’re foreclosed.’”
“Banker and Tradesman reports that foreclosures nearly quadrupled in Marlborough between 2005 and 2007, to 59 last year. In Hudson, the number of foreclosures went from 1 in 2005 to 23 last year.”
“Marlborough Savings Bank VP Jeff Dale said some recent immigrants have sought refinancing help from his bank after they secured risky mortgages from other sources. The bank has a loan officer dedicated to helping Spanish-speaking people who are burdened with now-unmanageable mortgages.”
“‘A lot of people got into sub-prime mortgage situations where they financed 95 or 100 percent of their properties,’ Dale said. ‘Now, what they owe is equivalent to 105 or 120 percent of what their property is worth, and there’s very little we can do in cases like that.’”
“‘We help as much as we can,’ said Dale. ‘But if people are ‘upside down’ in a loan – owing more than a home is worth – we can’t do very much.’”
“Dale blames unscrupulous lenders who prey on lower-income people. ‘You can’t sell a $300,000 loan to someone who’s making $15,000 a year,’ he said.”
“Vince Valvo of The Warren Group, which publishes Banker and Tradesman, said that foreclosure trends in Marlborough and Hudson mirror that around the state and the country. But he added that people of all income levels have lost homes that they could not afford in the first place.”
“‘People who decided to really stretch and buy the biggest house they could afford with as little down as possible are also in trouble,’ Valvo said. ‘It could be the guy down the street driving the Lexus. He’s got a pool and a car but he’s in debt up to his ears.’”
“‘It’s all part of the culture we have…that it’s our right to be living not just in a home, but a home with granite countertops, three bathrooms and tons of garage space,’ Valvo said.”
“Wilderman said she…took a complaint a year ago about a crowded home on Ridge Road, which she described as a ’solid, middle class Cape Cod type neighborhood where everybody keeps up their yard.’”
“After the home changed hands, ‘there was suddenly a lot of traffic going in and out of it,’ Wilderman said.”
“‘I found out that the owner of the home had been able to purchase a $340,000 home with no money down,’ she said. ‘The very next day he closed on another house on Barnard Road for $500,000, again with no money down. Now tell me that person didn’t know what he was doing. Both of those homes ended up in foreclosure within 18 months.’”
The Connecticut Post. “The first new downtown construction in decades — a five-story condominium building rising off Fairfield Avenue — is in financial trouble. Developer Phillip Kuchma has lost his main lender, who cited a weak economy and subprime loan losses as the reason.”
“In an effort to attract new lenders, Kuchma is asking the City Council to help reduce projected cost of the condos, estimated between $220,000 and $350,000 per-unit, by approving a seven-year payment in lieu of taxes program.”
“Although initially pledging to build the complex without state or city assistance, Kuchma said lenders now will not provide money necessary to complete the development unless sale prices are mitigated by a tax break.”
“‘We wanted to do it without asking for a tax break. If the market was not what it is, we would not have to ask. It’s now make or break with the lender. He won’t lend without it,’ Kuchma said.”
“The project is already being built, with three floors of the structure erected. There was no visible activity at the site Wednesday.”
“Kuchma said he cannot reduce unit prices given the cost of construction. ‘Our lender, who sees the market tightening, doesn’t think they will sell. And the cost of the building is too high to rent.’”
“City Council member Robert Walsh, who has opposed other tax breaks sought by developers, said the Kuchma deal would amount to ‘corporate welfare at its worst.’ ‘None of the numbers make any sense. I want to see written documentation,’ he said.”
The East Hampton Star from New York. “Although it may not be apparent amid the giddy headlines of record-breaking rentals and multimillion-dollar sales, a parallel foreclosure crisis on the South Fork might be more imminent than previously thought. With banks waiting longer to take action on their delinquencies, some longstanding problems may just be emerging.”
“‘People are calling me who are not only behind two or three months but a whole year or year and a half,’ said Ann Nowak, a Water Mill lawyer with a specialty practice in bankruptcy. ‘Foreclosures are not happening as quickly. It appears the banks don’t want the houses back, maybe because they don’t want to have to unload them.’”
“Ms. Nowak offers free consultations to those who might be facing bankruptcy and foreclosure. She said that the number of calls she has been receiving is climbing. ‘I can’t quantify it for you, but we’re getting a lot more calls over the past few months. All of a sudden there’s a lot of activity.’”
“A bank now owns a 2,200-square-foot house in Southampton Village on a third of an acre with more than $1 million on loan and a market value of only $990,000.”
“That illustrates how the amount borrowed often exceeded the value of the house at the time of purchase. In some cases, borrowers who invested no equity in a property were getting loans of up to 110 to 125 percent of a house’s market value to make improvements or just to have extra money at a favorable interest rate.”
“The rationale was that home values would keep increasing, so that either the borrower could refinance later at better market conditions or the higher price could be fetched in a later sale.”
“Then, the market slowed, the two or three-year grace period expired, the required monthly payment mushroomed at a new higher interest rate, and no bank was interested in refinancing.”
“In East Hampton and Southampton Towns, recently there has been even more rapid growth in activity in preforeclosures, in which a notice of default and then impending litigation are filed on a property, but the bank has not yet taken possession of it or attempted to sell it at auction. Much of that activity in East Hampton Town occurred in the second half of 2007 in parts of Springs and Montauk.”
“John Kern, a private-practice lawyer based in Southampton Village, has been representing sellers in ’short sale’ transactions. He said…he has seen an upswing in the short sale market. Since November, ‘I’ve closed four of them,’ he said. ‘That’s a significant increase. I saw them very rarely before that.’”
“A new tax law that forgives the tax on the amount received in a real estate transaction that is owed to a bank may be contributing to the trend, he said. The law expires in 2010. In addition to the short sales that have closed, he is representing three more listings in contract and has ‘a lot in the pipeline.’”
“Ms. Nowak said…three-quarters of the calls she receives are from those too far gone for that protection, many of whom waited because they wanted to avoid the stigma of bankruptcy. Ms. Nowak said one person who called her had monthly payments of $3,500 and was at least a year in arrears.”
“Then, ‘there are people who bought their homes almost with mirrors. They have one or more mortgage — one adjustable rate and an interest-only.’ Before they defaulted, they ran up their credit cards with cash advances. Now, there is truly nothing left.”
“‘I spend 20 minutes with them on a consultation and I can’t help them. It’s in my interest to help them out, but they can’t afford to do it. I have to tell them there’s no hope.’ In this environment, where her call volume has grown steadily over the past three months, she said, ’sadly, I think there will be a lot more foreclosures.’”
The Ambler Gazette from Pennsylvania. “Location, location, location - the mantra of the real estate market - is being given a new emphasis by some local Realtors wishing to dispel the notion that all is bad in the housing market.”
“Sales in the Philadelphia region, by comparison, were down 11.1 percent in 2007, with the median sales price up 1.8 percent, according to the Prudential Fox & Roach HomExpert Market Report.”
“The average sales price in the eight-county Philadelphia region has increased 60 percent over the last five years, said Joan Docktor, Prudential Fox & Roach executive VP of sales. ‘Buyers are buying and sellers are selling because of life circumstances. Our market is not depressed.”
“In addition, ‘our housing is relatively affordable compared to other markets,’ Docktor said.”
“Housing prices in Pennsylvania did not rise the way they did in states like California, Nevada and Florida - where housing is being particularly hard hit - ’so the prices won’t deteriorate like theirs did,’ she said.”
“The five-county Philadelphia region ‘has not had out-of-hand appreciation, it’s had steady growth, so [the downturn] didn’t affect us like some other areas,’ said Harry Caparo, chairman and CEO of Coldwell Banker Preferred. ‘I think we’ve reached the bottom in the price and unit decline in the Philadelphia area.’”
“‘We’re in a slowdown,’ Docktor said. ‘The bottom is not falling out in our area. People are watching what they spend, but if someone is thinking of buying, now is a good time. Prices aren’t going to drop.’”
“‘Anybody who doesn’t buy today is nuts,’ agreed Art Herling, manager of Long & Foster Real Estate’s Philadelphia/New Jersey region. ‘Interest rates are 5.5 percent or lower; sellers understand they have to do what they have to do to sell.’”
“‘It’s all about price,’ he said. It’s a buyers’ market, Herling said; there are 55,000 houses on the market in the region today compared to 35,000 four years ago.”
“‘Houses with negatives will get slaughtered,’ he said, adding three years ago ‘nobody cared,’ because they just wanted to get into a particular neighborhood.”
“2008 will remain a buyers market, Herling said. Personally, ‘I’m going to buy investment properties, I’m going to sell and I’m going to refinance.’”
“Kuchma said he cannot reduce unit prices given the cost of construction. ‘Our lender, who sees the market tightening, doesn’t think they will sell. And the cost of the building is too high to rent.’”
“City Council member Robert Walsh, who has opposed other tax breaks sought by developers, said the Kuchma deal would amount to ‘corporate welfare at its worst.’ ‘None of the numbers make any sense. I want to see written documentation,’ he said.”
Sure Mr kuchma, and when you are filling out the documentation and calculating construction costs, put you and your staff down for minimum wage for the remainder of this project and we will think it over.
Yeah, how about that Bridgeport CT condo developer? I wonder how many other condo developers will try this? Funny how he admits they can’t rent them - maybe they should threaten to make them Section 8 and terrify the city into granting the breaks.
IMO expect more of this, esepcially with regards to condos. The inventory is going to go supernova and so many were built where they never should have been.
“maybe they should threaten to make them Section 8 and terrify the city into granting the breaks.”
LOL, edge! That would be no big threat in Bridgeport.
Bridgeport, CT?
This is the place where people who take the train and walk to work/study need to pay the gangstas weekly to not get beaten up. They build it into their monthly budget.
Can’t pay? They have “installment” plans with interest!
Ummm, yeah, $500K-$1M condos are reaaaaaaaaaaly going to fly in Bridgeport, CT.
mcgovern opened a B&B in Bridgeport- roflow
that town is nastier than Gary,in
Yep, agreed.
Having been through both more than a few times, and having survived, Bridgeport makes Gary look like a flower garden.
“And the cost of the building is too high to rent.”
And what does that tell you?
I guess there is just no market for those condos in that area. Oops!
Maybe the builder should have thought of that *before* breaking ground?
Who are these people thinking that now is a good time to buy “investment properties”?
Answer: People who SELL real estate.
Remember, it’s ALWAYS a good time to buy….N.A.R.
It’s always a good time to collect a commission.
Who are these people thinking that now is a good time to buy “investment properties”?
Well, let’s consider the current environment in Mass… interest rates are low, 5.5% for a fixed 30year conforming. No risk return on capital is running 3.3% and heading lower with every Fed rate cut. Prices are soft for all but the best properties in the most desirable locations. Bank REO’s are stacking up and short sales are increasing. I’ve seen Cap Rates as high as 9% on properties for sale right now. Granted, these properties are true “Slum lord” properties, with Section 8 tenants in poor areas, and often aren’t in the best condition (lots of deferred maintenance).
Now is a very good time to buy an investment property if you know what you’re doing and have the cash and credit to get favorable terms. There is blood in the water and the sharks are circling… you can try and time the bottom, but there is no guarantee that interest rates will be favorable or credit markets open when we hit bottom.
Add to this analysis that Mass hasn’t had the speculative overdevelopment that other states have had, that cost-of-living is high, but coming down (as SFH prices decline) and pay is still higher on average than many other parts of the country. The population exodus from Mass will subside as cost-of-living becomes more affordable.
I’m not saying there won’t be problems: SFH prices are still to high compared to incomes and unemployment is higher in Mass than the rest of the country and will likely go higher still. However, buying an investment property, as in Multi-family, is a pretty good bet right now, as long as you’re buying for cash flow and not appreciation. I think the Commercial Real-estate market has another year to go before we’ll start to see bargains. Same goes for raw residential land…
*disclaimer, I currently own a multi unit in Mass. I’m still waiting for capitulation in the SFH market before I buy a house. Past results are no guarantee for future returns. Objects in mirror may be closer than they appear. Your milage may vary…
Mass…
One of the communities that I had been keeping an eye on had a home come on the market just recently. This is a gated private country club. The home is a beautiful wooded property on the third fairway. I thought the price $549 was a mistake as the place was appraised for $880.
I gotta admit I weakened a bit till I got to the fine print. HOA = $545 mth, Taxes $733 mth. Almost $1300 just for HOA and taxes. OUCH! I pay $1600 currently to rent in a very nive townhouse.
Gotta pay for the privilege of those iron gates. When hell breaks loose, all the po folk are going to head for those gated communities with pitchforks and torches. Let them eat gate.
RE: Let them eat gate.
LMAO!
Easily, today’s LENO’s One-Liner AWARD!
$545 HOA? Does that include unlimited golf?
same question I asked. No answer yet. And an occassional lesson from TIger as well?
I’ll bet it entitles you to “reduced” greens fees — you only have to pay $80 a round, as opposed to non-members who have to shell out $110. And you get preferred weekend tee times.
Just based on what I’ve seen elsewhere in “private golf communities”
Paying HOA’s on a condo - which includes cost of maintaining structure, elevator, heat/water (and sometimes electric) - that I can understand. Paying an HOA for your community center, guardhouse, and common-area landscaping — that just seems like money for stuff you might never use.
RE: Past results are no guarantee for future returns
Hey NE~ All I”m seeing around here is former bastions of middle class employment aka-GE (Lynn), Lucent, (Andover)
Poloraid (Wilmington), Fidelity (Beantown), Gillette (S, BT)
disappearing and in the process shedding thousands upon thousands of well-paying jobs. I won’t even get into the earlier tech bust in ‘90/’91 which took out Wang, Digital, et. el.
In their place is Duval Patrick posturing for 3 gambling casinos
and a billion dollar subsidy for the “bio-tech” industry which at the present only employs 2.4% of the work force.
Then you have every facet of the transportation infrastucture broke and busted with the Big Dig payments grabbin’ every transporation tax dollar in sight. Plus the schools, firemen, and police with their unions cry continual poverty.
This entire state is runnin’ on Greatest Gen pension & SS dollars.
Readin’ between the lines-I wouldn’t invest a dime in the place. Age demographics is gonna kill Mazz.
Readin’ between the lines-I wouldn’t invest a dime in the place. Age demographics is gonna kill Mazz.
hd74man, I respect your opinion as a frequent poster here. Generally I agree with you, but not in this case. Mass is centered around Boston. That is the hub. Any bet on the prosperity of Mass long term is betting on the prosperity of Boston and all that it offers.
Case in point, Michigan had the benefit of the auto industry, which is now gutted. MI is in decline. The midwest was manufacturing-centric, now in decline. Boston on the other hand has the benefit of many universities. We can debate whether this will last, or what kind of impact it has on employment, but my feeling is as long as we have the best and brightest in the world coming to Boston to learn, we’ll have industry in the area. Everything else will rebalance itself over time.
this is wishful thinking
these are not ordinary times
you have no real idea what investment properties are worth if their cashflows become impaired and you end up in a ‘cash or near cash’ finance environment
probably the dumbest thing you could do
and while you’re at it, why not try sell your current ‘investment’
there is, or shortly will be, no market for uneconomic investments.
you have no real idea what investment properties are worth if their cashflows become impaired and you end up in a ‘cash or near cash’ finance environment
That is certainly a risk. I guess I’ll run out and sell my property right now, just in case the entire US economy shuts down and the global financial system implodes… I can’t hedge against complete financial meltdown except by being well capitalized. In the meantime, I’ll enjoy the benefit of living rent free…
BTW, in 3 1/2 years of owning this property, I haven’t had a single rent payment default and my vacancy rate over 42 months has been 4%, it would have been 0%, but I took two months to rennovate an apartment. The apartment was rented two weeks after my previous tenant gave notice, they just couldn’t move in until I was finished with the work…
The only advertising I’ve ever done was free… on craigslist. Proper planning and management is key to any successful venture… and peter, I haven’t heard what you’re doing with your money these days.
Sorry if this posts twice, as my last post was eaten by the blog gremlin…
Who are these people thinking that now is a good time to buy “investment properties”?
Well, let’s consider the current environment in Mass… interest rates are low, 5.5% for a fixed 30year conforming. No risk return on capital is running 3.3% and heading lower with every Fed rate cut. Prices are soft for all but the best properties in the most desirable locations. Bank REO’s are stacking up and short sales are increasing. I’ve seen Cap Rates as high as 9% on properties for sale right now. Granted, these properties are true “Slum lord” properties, with Section 8 tenants in poor areas, and often aren’t in the best condition (lots of deferred maintenance).
Now is a very good time to buy an investment property if you know what you’re doing and have the cash and credit to get favorable terms. There is blood in the water and the sharks are circling… you can try and time the bottom, but there is no guarantee that interest rates will be favorable or credit markets open when we hit bottom.
I’m not saying there won’t be problems: SFH prices are still to high compared to incomes and unemployment is higher in Mass than the rest of the country and will likely go higher still. However, buying an investment property, as in Multi-family, is a pretty good bet right now, as long as you’re buying for cash flow and not appreciation. I think the Commercial Real-estate market has another year to go before we’ll start to see bargains. Same goes for raw residential land…
*disclaimer, I currently own a multi unit in Mass. I’m still waiting for capitulation in the SFH market before I buy a house. Past results are no guarantee for future returns. Objects in mirror may be closer than they appear. Your milage may vary…
…………..And, with all that long-winded reasoning about why it’s a great time to buy, let me ask the very basic financial question:
If you put down 10% or 20% on your purchase, (lets use a $500,000 house as an example, so 50k to 100k of your money), balance owing of 400-450k,
What is the effective rate of return after taxes, insurance, cost of replacement, repairs and vacancies of your “investment”???????
If the number is NEGATIVE, it is NOT a good time to invest in Real Estate.
Thank you very much!
diogenes, you are right. I have only a couple of data points for Mass — i.e., friends who tell me about sales comps AND rental comps. Certainly for SFH the cash flow would be negative — rent wouldn’t even cover an I/O mortgage. Maybe “Northeastener” [sic] has the savvy to find some cash-flow positive deals on multi’s. …
If the number is NEGATIVE, it is NOT a good time to invest in Real Estate.
(Net monthly cash flow * 12) / (down payment + closing costs) = annual rate of return on investment
That return should be higher than the risk free rate of return, currently averaging 3% in CD’s/ Treasuries/etc. How much higher a margin on return over risk free is a personal preference, but 3-7% is an average number, for a total return on cash of 6%-10% in our current interest rate climate. If rates go up, adjust your target return rate accordingly.
Net cash flow should take into account vacancy rate for the area, repairs, management fees (if outsourced) as well as the usual expenses like mortgage, insurance, etc. This is all basic real estate investor math that was ignored by speculators for the last six or seven years as they were too busy buying based on condo conversion numbers.
There are plenty of multi’s in Mass that pencil out… check out Realtor.com or Loopnet.com. Many listings list the rents and figures for various units, making it a simple matter to do some “back of the napkin” calculations. This isn’t rocket science…
What about factoring in opportunity cost of your time. The time harrassing bum tenants to pay up, fixing leaks, eradicating pests, mowing lawns, etc.
In my opinion unless you day job is paying less than 20/hr (in which case you wouldn’t have the cash to invest anyways), I can’t see it being worth your while to invest in RE unless you buy the properties at firesale prices and are very handy.
I can’t see it being worth your while to invest in RE unless you buy the properties at firesale prices and are very handy.
Then put your money into a CD earning 3% and forget about it… also don’t complain when that yield drops to 2.25% and inflation runs 4% or higher. Risk vs. reward. Again, this isn’t rocket science…
“‘Anybody who doesn’t buy today is nuts,’ agreed Art Herling, manager of Long & Foster Real Estate’s Philadelphia/New Jersey region. ‘Interest rates are 5.5 percent or lower; sellers understand they have to do what they have to do to sell.’”
“‘It’s all about price,’ he said. It’s a buyers’ market, Herling said; there are 55,000 houses on the market in the region today compared to 35,000 four years ago.”
I guess I’m nuts then! Herling is right about the price. There is a reason why houses are not selling. It’s priced too high. Take it back to 2000 prices with 3-4% inflation increases and maybe people will buy. If not, STFU.
QT:
“sellers understand they have to do what they have to do to sell.’”
No sellers don’t understand. If they did they would be selling now wouldnt they?? Lower the price dammit, or STFU is right.
I agree and the banks could help by getting more realistic themselves on the REO’s they are collecting…
At this point they still see more harm in letting properties go for less than 80% (or higher) of their perception of market value (”Wish Price”) since they dont want to recognize the extra loss associated with the fact they are carrying it on their books at a value of the Wish Price or higher. I think the regulators and auditors will have to be firm before they start really trying to move properties. If you or your friend are intested in foreclosures, I think next year there will be more bargains.
Perhaps someone like Tuxedo Junction can shed a little light on why banks don’t seem to be acting very astutely in this matter. I’ve been looking at REO’s in San Diego, and most of them are price ABOVE the rest of the market (i.e., FB’s who are under duress).
pretty basic really
if they drop REO prices to a market clearing price, those prices will establish lower market prices which then reduce the value of all the real estate collateralizing the 52% of their entire loan portfolios (dedicated to RE lending of all sorts). It would also serve to raise the risk profile of said portfolio and lower its value as or require an impairment charge due to the shrinking equity cushion. This in turn, due to the fractional reserve system of banking, will use leverage in reverse to curtail the amounts these banks can lend. This would (will) continue in a vicious re-inforcing and recurring cycle.
dear real estate professionals,
the time to buy is never when inventory is high and prices are beyond what the area median income can afford at 30% of gross pay.
signed,
mr. sanity
sorry! You’re “NUTS”. I’m going to call the guys with the net to take you away to the funny farm!
Anyone know what % of median income was median Calif house-buying cost in 1995? I.e., may have been more than 30% even at the “bottom” …That doesn’t necessarily mean it won’t get MORE rational at the next bottom, but I would be curious about this historical data point.
There must be a way to construct a “nuts” indicator to project future real estate value. The indicator could be based on the frequency of “nuts” references used by REIC principals when referring to potential customers. A simple example, “anyone who is not my customer is CRAZY!” , or more obtuse, “if you stupid people don’t get off-the-fence and buy now I’ll start shooting” - would both be forms of a “nuts” statement.
I’m certain such an indicator and prices are negatively correlated, that is, when “nuts” references go up home prices are going down. Since, besides its obvious value in alienating customers, I believe it reflects the REIC’s current stage of recovery in the loss and grief cycle - that is, they’re still mired somewhere in the denial and anger stage.
Herling is hurting. I had a conversation with a couple of Realtorwhores in Holts. Lets just say they do not understand a concept of “return on investment” or “return on capital”. According to a star realtor from M|G taxes and condo fees should not be accounted for when analysing cashflow.
Hey, let’s price Condos at $100. with a $6500 a month Condo Fee! Then these agents in Holts will go crazy at the hot deals!
(That is just for the 1 bedroom 530 square foot unit, Condo fees are an extra $15 a month per square foot beyond that).
BTW, has anyone compiled a list of recourse states? I would like to keep a mental note of defaulters that can expect to be hounded the rest of their lives.
A quick search on Westlaw turned this up from a treatise entitled “The Law of Real Estate Financing”:
§ 12:62. Rights and duties of parties at foreclosure—Election of remedies and one-action rules—One-action rule—General
One-action laws embody the judicial economy rationale of the election of remedies laws in prohibiting multiple judicial actions by the mortgagee, as well as a “security-first” principle to require that the mortgagee exhaust its collateral before pursuing the mortgagor’s general assets. The western states of California, Idaho, Montana, Nevada, and Utah each have one-action laws of general application to mortgage loans, while North Dakota and New Jersey have one-action rules of more limited application.[FN1] California’s law has been the subject of the most lively case law and commentary, and is the focus of these materials.
California’s one-action rule has been construed to operate both as an affirmative defense and as a sanction. Used defensively, the one-action rule will require the mortgagee to foreclose its collateral before seeking recourse to the debtor’s general assets (either through a deficiency action or through an in personam action). Thus, the borrower can raise the rule as an affirmative defense in the mortgagee’s action to obtain a personal judgment on the underlying note in advance of foreclosure.
The one-action rule can also operate as a sanction when the creditor has pursued the debtor’s general assets prior to foreclosure, without the debtor’s invoking the rule as an affirmative defense, and then attempts to foreclose the mortgaged property.
Particularly in California, however, the law is unsettled as to the nature and degree of the sanction for violating the one-action rule. Among the possible approaches are loss of the preferred status of a mortgage lien claimant (but with the right to proceed against the collateral as a judgment lien claimant); loss of both the security interest and the right to sue on the underlying debt (often referred to as the double-barrel sanction); and the mild sanction of the return to the status quo ante through damages for the violation. As stated by one California commentator:
[T]he classic sanction against the creditor who fails to exhaust all his security for the same debt in a single action is harsh, yet it follows inescapably from the availability of but one action to the creditor—he waives the balance of the security and he waives any claim to the unpaid balance of the debt.[FN2]
Because of the harsh nature of this double-barrel sanction, some commentators and courts have questioned its application.[FN3] Much of the case law involving the appropriate sanction has arisen in the context of the lender bank’s setoff of the borrower’s bank account in advance of foreclosure; these cases are discussed infra at § 12:64.
[FN1] See Cal. Civ. Proc. Code § 726(a) (West Supp. 1996); Idaho Code § 6-101 (Supp. 1995); Mont. Code Ann. § 71-1-222 (1995); Nev. Rev. Stat. Ann. § 40.430 (1996); Utah Code Ann. § 78-37-1 (1992). See also NJ Stat. Ann. § 2A:50-2 (West 1987) (applicable to residential loans). For discussion of North Dakota’s interpretation of its antideficiency laws to provide a “modified” one-action rule, see Nelson & Whitman, at § 8.2 n.10, § 12:12, supra.
[FN2] See J. Hetland, California Real Estate Secured Transactions § 6.18, at 258 (1970).
[FN3] See, generally, Conley, Comment, “The Sanction for Violation of California’s One-Action Rule,” 79 Cal. L. Rev. 1601 (1991).
“A bank now owns a 2,200-square-foot house in Southampton Village on a third of an acre with more than $1 million on loan and a market value of only $990,000.”
Correction - current market value has not yet been established.
‘You can’t sell a $300,000 loan to someone who’s making $15,000 a year,’
Hold on Dale, let’s run those #’s again, only this time make it $15,000+ a $600 government check. I think we’ll be pleasantly surprised.
LOL
hehehe
Haven’t you heard all the geniuses on the internet? That $600 (of my own money) is going to reflate the housing bubble, put all those billions back on SIV balance sheets and save millions of FBs.
I find it ironic that the very organizations which have been pushing the hardest for offshoring (financial / banking) sector are now taking the biggest losses, primarily as a result of wages being suppressed and no a $600 advance on next years taxes will not help it is just another form of debt. I guess there is no free lunch after all!
Yes… as a matter of fact, I won’t be getting a penny since I make too much. But I guess George down the street who never finished high school and desperately wants a flatscreen TV deserves it way more than me. Have fun spending my tax dollars George!
jetson, what income limit did they end up with? Seemed to me it started at $75K for individuals (no refund for me) but then went to $150K for individuals (yes refund for me). Where did it settle out in the final version?
I think it’s 75k for individuals phased out at 87k. 150k phased out 174k for married. Other stuff if you have kids, low income, etc.
Shortest explanation I found:
http://tinyurl.com/ytr9kt
That $600 (of my own money) is going to reflate the housing bubble,
By the time those people get that $600, 15 and 30yr rates will have had a significant increase. Look at the rates as of today, they are going up.
It’s a good thing I won’t be getting that $600, guess I won’t be buying an overvalued house this year. Rant Off!
600 dollars is exactly 1% of the needed capital to buy a median priced home in my area (300K median, 20% down, 60K at close).
I don’t think that’s going to go very far to help reflate this market, although, I have been wrong before!
Precisely. The very EARLIEST that these checks are supposedly heading out is in early summer… which is around two months after April when the largest to date reset of subprime loans reset. The enormous fallout from foreclosures is going to happen well in advance before any checks, legislation, or finagling with the system in an attempt to prop things up will occur regardless. The damage will be done.
They might as well just mail the money directly to Bank of America and Country Wide.
very EARLIEST that these checks are supposedly heading out is in early summer… which is around two months after April when the largest to date reset of subprime loans reset.
They’ll just use the $600-1200 to pay for first month’s rent on their new apartment after they leave the keys for the bank… though I have to say as a landlord, I check credit and won’t rent to credit stiffs, regardless of how much cash they’re throwing around.
It’s a long spring waiting for that check. I wonder if knowing the check is coming will effect on decisions and actions taken between now and when the check comes.
I predict long lines at KFC’s, leather jacket stores, and pimp wheel shops.
“April when the largest to date reset of subprime loans reset” - that description would be true of many recent months! - are you trying to say that in current projections April looks like the max (exceeding the May projection, for example)? If so, I wouldn’t necessarily believe it, as the Jan 07 chart showed the peak in 4Q07, a chart circulating early last fall showed the peak in Feb 08, and you are perhaps saying the “new” peak is Apr 08. There will, of course, be a peak at some time, since the issuance of subprime ARMs is not now increasing. I don’t actually understand why the projected peak keeps receding, but I have some expectation it will recede further.
You must be talking to him on your new Comcast phone.
“Sorry Roga, you tiga now.”
I laughed hilariously at that commercial the first 2 or 3 times it aired. Comcast has a brilliant strategy: do something funny to distract your captive consumers from your pi$s poor service.
Last night (on TV) I saw a lady who was so frustrated by Comcast’s lack of service, she marched into one of their customer payment locations with a hammer and proceeded to smash the CSR’s telephone.
That one is funny as hell. I’m surprised some civil liberties union didn’t sue for type-casting or something.
Is that commercial only local to Philly? It’s hard to tell these days.
“They paid $82,000 for their home in 2000 and believe it is worth about $185,000 now.”
Wow. A paper correctly calls them on “wishing price”. I am impressed.
yea, but the paper missed the whole story, as usual.
They didn’t pay $82,000 for anything. They signed a loan agreeing to pay. Then, apparently, they refi’d and took out about $100k.
So, buying the house has paid them $100k, so they now owe $185k, which they want someone else to pay for them. This is the greatest PONZI scheme ever devised.
You “buy” something for nothing and rob the bank of $100,000, then walk away, without getting arrested. Is this a great country or what???
How much Credit card debt did they have? How much does it cost to improve a small Condo? What kind of cars do they have?
They aren’t victims at all. A potential two wage earner family and they still can’t pay $1500 a month in mortgages.
“They got into financial problems using equity to pay off credit card debt and spending on home improvements. Lisa also was laid off and unemployed for 1 1/2 years, so they fell behind on both mortgages.”
If I was the reporter there, I would say, “Show me the home improvements you made. Where are the receipts?”
Incidentally, Subzero appliances don’t count as “home improvements.”
And why do these FBs pretend that refi-ing to “pay off credit card debts” is somehow a legitimate excuse? I’m sick of that excuse being used. That’s exchanging one bit of debt (unsecured) for another kind of debt (secured), and the eventual walk-away is going to let them get away with it.
This makes me sick.
– Judge Smales
“You’ll get nothing and like it”
Why would it make you sick.
These POS jerks with their sense of entitlement have just screwed up the only piece of financial good fortune they have ever had. They are broke, probably unemployable and total a$$holes.
They got theirs, blew it and now they will get theirs good and proper, the wasteful fu#%#s.
According to FBI statistics, $100K is equivalent to 20 retail bank robberies, actually.
Link.
5k/Robbery?
Damn, thats chickenfeed. So much for that career option.
You’d have to knock over one bank a month to feed a family of four and maybe have enough left for the anual pilgramage to Disney World. Eff that, that’s too much like work.
Besides the benefit that the cameras point outwards - the inside jobs are far more lucrative.
So, the housing bubble became evident — at least in Seattle — around 1997. And in 2000/2001, the 5-year interest only ARMs became very popular, giving it an end date. And I still didn’t see this angle. I could totally have bought an $82K house with no money down, paid the interest, extracted another $100K in home equity, and dumped it in foreclosure. This was available to everyone! And I’m kind of sad I didn’t do it
In Miami, the joke for years was to rob your banana republic and ship the $ to the US and live the phat lifestyle. I wonder how many people are doing that in reverse now?
They purchased in 2000 so that is $100k/(7 or 8), or about an additional (magical) $11k/year boost to their “income” (after transaction costs). They spent the money and had a great time, but now that it’s “pay the piper” time they are gonna walk, watch and laugh as it becomes somebody else’s $100k+ problem.
The next thing these two will do will be serial MLM. They will hound their friends, co-workers, relatives, and customers to no end with MLM pitches. (Just like I have to endure every time I pay my auto insurance premiums. They are selling a concoction of fruit juices for $40 a bottle. I have been told 2 ounces a day is good for high blood pressure, headaches, backaches, borderline diabetes, knee pain, arthritis, muscle aches and pains, and perhaps other ailments they have not yet told me about.)
I still think MLM is gonna be the next big scam-thing. I am seeing more MLM activity in my area in KY. Some of these small businesses are just fronts for MLM. You can not rent a motel room, or buy insurance, or get your car fixed without these MLM people hounding you.
But can you blame people? My local area is ENTIRELY dependent on manufacturing (and a false sense of hope that rich people will move here in droves and buy up all of the MT McMansions because some two bit magazine editor said so). All of the big plants are closing down and moving out of the country. The small factories are closing down for good. The only local growth remaining is in the spending by the local school board. (Consider yourself lucky if you can sell your land to the LSB.) So the local people will be doing MLM out of NECESSITY. When they are not working their two or three retailing jobs they will be pitching MLM, because there simply will be nothing left to sell or do. Either that, or move out of this area. But to where?
What I found baffling is how they think a condo could over double in value in 7 years. It isn’t exactly like they could add on another few hundred sq feet.
Incomes have not more than doubled in the past 7 years.
Demand (number in population) has not doubled in the past 7 years. If anything Massachusetts has been losing population.
For their ‘home improvements’ read painting, upscale countertops and other nonsense that never ever recoups its cots.
What I found baffling is how they think a condo could over double in value in 7 years. It isn’t exactly like they could add on another few hundred sq feet.
Real world example… bought distressed 3 bed, 1 bath condo on the South Shore in 2000 for $119K. The condo was trashed and the family was being forced out by the condo association for having too many people living there. Similar condos in good condition were going for 140-150K.
Gutted the condo, new Pergo and ceramic tile floors, new carpet, new bath with Jacuzi tub and Kohler fixtures, new doors & slider, new light fixtures and harware… knocked down a wall and turned it into a 2 bed with a living room and a dining room. Fenced in yard, built deck, and landscaped. $20K in renovations. Lived there for two years. Sold condo for $220K in 2003. Almost a doubling in value…
Friend in same development bought condo from his parents for around $140K in 2004 and did similar rennovations. Parents bought condo in 1998 for about $85K. Sold this month for $207K + $7K condo assessment (paid by buyer) for some sewer work performed by the association.
These are actual results. This is why people like the couple in the post thought they could double the value of a condo. They can, when they buy below market, make improvements, then sell into an up market. They had bad timing…
Pergo ain’t an improvement. Where Pergo, I don’t go.
Pergo ain’t an improvement.
It’s an improvement over carpet in high traffic areas, it’s an improvement over real wood if you have large dogs with nails. It’s a viable flooring option if you have a concrete slab with no sub floor. It requires no maintenance other than wiping with a mop once in a while… don’t knock it until you’ve tried it.
Besides, I’m not remodelling million dollar homes here, rather entry-level condos and apartments. But hey, I only net $70K profit tax free on a $35K investment(down payment + renovation costs) with a 2 year hold period… don’t let me stand in the way of your better judgement.
IMHO, a stained concrete floor beats plastica woodgrain anytime. Cheaper than Pergo too.
..and you put no value on your time spent nor deduct opportunity cost for the amounts invested and of course you don’t deduct purchase/ sale fees and expenses, transfer taxes,etc, etc.
Which is why I always shake my head when watching “Flip this house” and shows of is genre. Almost NO improvement pay back 100%; why on earth would you think that MORE then 100% is reasonable to get back out of a big imporvment. Now, granted, sometimes these guy go above and beyond, basically building a new home where the old one stood. But STILL; then you just a small homebuilder competing with the big guys.
This whole business model made no sense to me; maybe because it makes no sense! Perhaps if you do all the work yourselves you can turn a profit. But, once again, you would likely do better just doing that work for someone else (for profit) then taking the huge risk/liability of actually buying the sh)tbox!
The thing that really cracks me up is that THEY HIRE SOMEONE ELSE TO DO IT. There’s you’re profit margin down the sh!tter right there. What’s to stop the next buyer from overpaying some contractors to do the same thing. It’s like their thinking is, well, I did it 6 months before it was flipped to the next FB so therefore my improvement s worth $100k. Whatever. Does it really matter who flushes that money down the toilet? … I think not. First flusher gets extra smarty points and a paycheck? Huh?
RE: Almost NO improvement pay back 100%; why on earth would you think that MORE then 100% is reasonable to get back out of a big imporvment
Remember those Ditech ads?
Incompetant appraiser’s were giving people 20% of inflated value in their appraisal reports-then Ditech adds another 25%.
That 45% of fictional value soon became the common expectation.
As the hysteria really picked up and you threw in some really crazed number hitters who were taking to the streets by the legions and punching whatever number they were told to hit-and it’s easy to see how quick the 100% payback for improvements got totally outta control.
“They got into financial problems using equity to pay off credit card debt and spending on home improvements.”
Wrong. Their problem was spending money they didn’t have. The shortfall was at first covered by credit card debt. This unsecured debt was then rolled into secured debt (2nd mortgage). The rollover didn’t cause problem; it actually was the smart thing to do (reduced interest rate). But they then continued to spend what they didn’t have by increasing the 2nd mortgage balance.
The root problem was these peoples’ lack of self-control.
dear $82,000 condo owner
4% appreciation per year equals about $103,000. since there is still some insanity out there, list at $125,000 and let the next owner watch the depreciation. if you find this unacceptable, then start figuring out how to do the foreclosure or short sale. those are your options.
signed,
mr. sanity
and.. how can someone be unemployeed for 1 1/2 years. I have been working since I was 16. I have always managed to pay my bills. Some jobs I didn’t like but you’ve got to to what you’ve got to do. I have waitressed, counted vending machine inventory, sewn tassles on bras. I now have a great job in the school district but nothing is guaranteed. These people lived the high life while taking NO responsibility.
Amen, sister!
However, there’s a subtle point here. You appreciate the value of what you’ve earned, and hence are far less likely to just toss it away on baubles and spin.
Therein lies the difference.
…sewn tassles on bras.
I’m sure that there is a good story here…
I would imagine the market for the bras with Realtors (TM) was pretty big.
“‘People are calling me who are not only behind two or three months but a whole year or year and a half,’ said Ann Nowak, a Water Mill lawyer with a specialty practice in bankruptcy. ‘Foreclosures are not happening as quickly. It appears the banks don’t want the houses back, maybe because they don’t want to have to unload them.’”
Well there it is — what we’ve all suspected. Perhaps the banks have written off the missed payments, perhaps not, but they haven’t written down the value of the loan or collateral. Perhaps they can’t. Just as those underwater can’t afford to sell, those undercapitalized can’t afford to foreclose.
But eventually, the missed payments will crush them.
Perhaps we are waiting for capitulation from the banks, not the so-called owners.
Lots of naked swimmers out there.
I agree, the banking industry is fully aware that if they allow prices to fall naturally in a free market manner they will end up with even more foreclosures and greater future losses. Question is how long will they retain sufficient liquidity to continue playing that game?
IMO, banks are busily doing everything in their power to avoid - “Sorry Roga, you tiga now.”
In what alternate universe did the Philadelphia/SE PA area NOT experience ridiculous price appreciation? Those Coldwell Banker comments are so very, very funny. Oh, and also sad.
“Sales in the Philadelphia region, by comparison, were down 11.1 percent in 2007, with the median sales price up 1.8 percent, according to the Prudential Fox & Roach HomExpert Market Report.”
sales were down 11 percent, a double digit decline…significant IMO. But the median price was higher? whoopee…what does that tell me -
Median price is higher because the bottom is falling out of the market. People on the low end can’t get financing now. So people on the higher end get more bang for the buck.
I used to work for PFR. Take whatever comes out of that outfit with a hefty dose of skepticism, Philly people.
What I’m seeing is resales are just sitting (very stubborn sellers around here in Chesco anyway). The sales are happening in new construction still. New construction tends to be more expensive overall, so that would lend some uplift to the median sales price.
this is true. The folks with money to spend (or who qualify) are more likely to want the shiny new stuff.
Are you in close Chesco (WC) or out there somewhere?
My parents live outside of West Chester. I grew up there. (In fact, I was in Scouts with one of Mark Zandi’s siblings.)
There are quite a few spending fools in and around West Chester, and they provide a never-ending source of amusement for my frugal family.
However, there are some cracks in the armor. My mother reports the disappearance of an SUV dealership on West Chester Pike. The thing just up and vanished in late ‘06. The property is still vacant.
Mom also notes quite a few houses for sale and for rent. Some of these houses have been in this limbo state for months. More than a few are on their second or third real estate agency.
Yes I’m in West Chester. Not only that dealership but another suddenly closed right by here on Rte 30. Definitely cracks are showing. I hear things - scary things - from the other families around here. I kept wondering “how did they afford to?” and the answer is - debt debt debt. The debt people live with out here and don’t blink an eye at is really shocking.
I have a fascinating Radley Run story for anyone is interested. Hell you all could put it together for yourselves, just Zillow 818 Hessian Circle, 19382 zip. Just one example. They got a TON of dollars out of a recent refi on that place - now it’s supposedly valued at TWICE what all the neighbors are?
and of course out here the developers are still building like crazy, cos here it’s so very different.
I hear you, Black Orchid. In recent years, my parents and I are convinced that many of their neighbors float on a sea of debt. And now it appears that more than a few of them are taking on water.
Meanwhile, the Slim family just keeps on paying as we go.
How old are you Slim? I graduated from Bishop Shana”hole” in ‘87!
Their putting in a new dealership at the old town motors in exton on 30. I think it’s gonna be a Volkswagon. They keep building office complex that just sit vacant too. Which i just don’t get.
I’m in WC and i agree and starting to see lots of cracks and alot of very stubborn sellers. I keep track of houses of the prudential website and when houses came under contrct it would state that on the website. Now nothing comes under contract and houses just disappear from the MLS. Some houses discriptions even say house is under contract but it’s still avialble for a higher offer.
I was amazed at how much mechandize is still sitting in the stores. At CHristmas time I was in Kohls and they we’re still trying to get rid of summer stuff on the clearence racks. The Exton seemed alot less crowded at Christmas time too.
Too many keep of with the Jone’s around here IMO.
Question - zillow doesn’t know the refi history, right? do you just happen to know it with this address?
NotInMontana - yes I happen to know it - they did a complete - nearly a teardown of the existing (quite nice) colonial just after I met them (04? 05? around there). Simultaneously getting brand new Lexuses! The renovation is like - well it’s sort of funny really. This is a nice, quite nice, development, but they are at lot line with a 7200 sq foot McMansion now - they really stand out from the neighbors!
Some houses discriptions even say house is under contract but it’s still avialble for a higher offer.
and this folks, is a telltale sign of the beginning of desperation in Realtorworld
Black Orchid, I was born in the same year that Sputnik was launched.
There was indeed ridiculous price appreciation in this area. My parents live there, and my mother gives me regular updates.
“‘People who decided to really stretch and buy the biggest house they could afford with as little down as possible are also in trouble,’ Valvo said. ‘It could be the guy down the street driving the Lexus. He’s got a pool and a car but he’s in debt up to his ears.’”
Sounds like a good premise for a commercial……..
Change “ears” to “eyeballs” and you’ve got a winner.
Love that commerical. Stan is the man
Here’s the link:
http://www.youtube.com/watch?v=hn5EP9StlVA
Haha. I remember that commercial. Thanks for the post.
I would posit that many are up to their rapidly receding hairlines.
People who decided to really stretch and buy the biggest house they could afford with as little down as possible are also in trouble,’ Valvo said. ‘It could be the guy down the street driving the Lexus. He’s got a pool and a car but he’s in debt up to his ears.’”
That is why my favorite commercial doesn’t play anymore….Bob on the lawnmover..”I’m in debt to my eyeballs..somebody help me!”
Yes, Ann, that was funny.
But remember the solution…………RE-finance!
Just rearrange your payments so that you don’t have to really pay your debts, but back-load the debt on the mortgage.
The entire US economy has become a financial scheme.
“entire US economy has become a financial scheme”
Amen. I am a fine example, scheming to get other people’s pensions mailed into my ML account just because in some set of past years, those people were spending when I was not. I don’t apologize for this M.O., but it adds no real goods or services to the economy. Mortgage lending is not a “real” service IMO, just part of the ubiquitous Financial Scheme. No wonder that Real stuff like food, medicine, energy must rise in price. Some HBBer defined a Real Job to include maintenance of appliances, electrical systems, plumbing systems; I agree with that. Hope I don’t have to learn it myself…thus must Scheme nimbly to try to stay a step ahead of other infestors. Teaching was Real work, in a way; but too many people wanted to do that, so sideways mobility was limited. Whereas nobody wanted to lend, only to spend.
That is why my favorite commercial doesn’t play anymore….Bob on the lawnmover..”I’m in debt to my eyeballs..somebody help me!”
I think that it was just too painful for FBs to watch.
Help! I’ve fallen into debt and I can’t get up!
http://www.youtube.com/watch?v=hn5EP9StlVA
I wonder if Lending Tree is still in business
Lending tree was a scam like all the others. I tried to get a HELOC from them (yes, yes, I know..). The whole banks competing thing was a load of crap. After getting their offers it took me less than 30 minutes to get a much better offer from someone else on the phone. I called them on it and then they immediately were able to offer me a better rate. I thought the whole premise of the place was so that they handled all of the legwork and got the banks to compete before they gave you their “best offer”. Needless to say I was a bit nauseated and took my business elsewhere. They are not any better than your average schill mortgage broker looking to hook you with the worst possible loan so they can get a better commission.
Uh, those TV commercials are expensive … and the money to pay for them has to come from somewhere, and …
The average sales price in the eight-county Philadelphia region has increased 60 percent over the last five years
That’s a, roughly, 10%-13% annual appreciation. Somebody help me here: assuming wages have increased 5% over the same years (and I think I’m being generous) and, say, inflation was the same. What, if anything, can be said about how much houses are overpriced (if at all)?
Joan Docktor, the PFR mouthpiece quoted in this article is very high up on their corporate food chain. She states unequivocally that “prices will not drop”. Translation: we know we’re on a price slide, we’re panicking and we’ll say anything we must to fluff up this dog of a market
(I learned their language when I worked for them. never spoke it though)
In an unrelated story Joan Docktor stated “that if any of these homeowners do lose their houses they can always live in their vacation homes. Let them eat cake.”
Some interesting stuff this week…
Helping a friend look at some foreclosures now in her price range…not ready to buy..but weeding down to the ones she likes and having me keep an eye on them as we watch the prices fall..looking at something around $200-$225…
Went into a couple this week and sort of sad..kids rooms painted and decorated empty, swing sets in the backyards, nice family communities…some home improvements you could tell done by the owners(no crazy granite upgrades)…the properties were not damaged just like somebody died…
Also got a phone call from another person running away from FL..not a FB…owned the home for 7 years, no refi craziness, just can’t afford the constant increased in taxes, insurance and cost of living(electric bill has doubled in 2 years)..can’t downsize since prices have still not reached reality…
I think a lot of people weren’t trying to get rich…it just came time to buy a house, and that was what a house cost, so they payed it.
Sure, they didn’t do the math, and stupid SHOULD hurt, but I don’t think everybody jumped in for the easy money. They’re getting their beating from the invisible fist of market economics. No need for us to jump on them too.
Where in Florida have the electric rates ($/kWH) doubled over the last two years?
“Lisa also was laid off and unemployed for 1 1/2 years, so they fell behind on both mortgages.”
Unemployed for 1.5 years? Doesn’t Brockton have a Wal-Mart or McDonalds, or a TEMP AGENCY? Sorry if it ain’t what you’re used to, honey, but its a paycheck.
MA was hit hard with the dot com bust, and a lot of well paying jobs went away, but the illusion of them did not. I have worked with people that made over 100K a year during the boom, and were making 30 between 2002 and 2005. They considered themselves lucky just to have a job.
Brockton, is not a haven of the well off, more like a working class neighborhood full of laid off manufacturing jobs that never came back to the state, and now laid off construction workers. It is not the worst part of the state, but it is not overflowing with jobs either.
As an anecdote, I used to work in Norwood off of the I-95 interstate in 2001, and rarely did I see the amount of traffic that I am seeing now, specially the amount of Rhode island plates. It seems that most of the RI plates are working in Boston, and that is one long commute…. And you can tell it is a RI plate because they are traveling on the left lane 10MPH slower than the limit.
MA was hit hard with the dot com bust, and a lot of well paying jobs went away, but the illusion of them did not. I have worked with people that made over 100K a year during the boom, and were making 30 between 2002 and 2005. They considered themselves lucky just to have a job.
I have an in law in the UK who did the same. IIRC she had job at a place called moneygator.com straight out of college, and after it went belly up she had to settle for a job that paid 1/3 of the old salary. I believe that it was fun while it lasted. She took a lot of very expensive vacations back then (Bahamas, Disneyworld, New York, Seychelles, Paris, etc.).
“MA was hit hard with the dot com bust, and a lot of well paying jobs went away, but the illusion of them did not.”
Very good point, pinch. It illustrates what happens in these boom and bust cycles. Totally destroys stability. The full realization of what has happened has not hit New England yet. On top of this, many of these former manufacturing towns have attracted large amounts of immigrants, legal and illegal, who gave a facade of revitalization to these towns. But they were only “here for the beer” so to speak. My sis lives near a somewhat depressed New England town that is struggling with the effects of out of work immigrants.
I commute down 128 from the North Shore and I see more and more New Hampster and even Maine plates coming off of 95 onto 128. I actually know a few people who commute down from Maine.
Another thing I can say — traffic on 128 has been GREAT lately, and seems to improve by the day. I think there are layoffs happening out there that we really haven’t heard about yet.
I’ve heard from multiple people that 128 traffic moving great lately. I commute between W towns and my commute time as almost been cut in half in 2008.
“Doesn’t Brockton have a Wal-Mart or McDonalds, or a TEMP AGENCY?”
Brockton is one of those New England former manufacturing towns, I believe it used to be a center of shoe manufacturing. Also home to the late, great Raging Bull Jake LaMotta. There wasn’t much going on there thirty years ago when I wuz a pup. Very gritty place. Much has been said about the Midwestern Rust Belt, but many of these former factory and mill towns in the Northeast could rival Detroit, IMO.
“Much has been said about the Midwestern Rust Belt, but many of these former factory and mill towns in the Northeast could rival Detroit, IMO.”
Right on P. Lawrence, MA is a perfect example of what I would estimate hundreds of small factory towns that have been in decline for 30 years or better all over the northeast. Although their manufacturing was nothing on the scale of Detroit (I can only imagine what that is like), it was very diverse in the northeast. Textiles, large machine shops and foundries, papermaking, mining, agriculture(dairy), electrical components (large transformers, capacitors)…. All gone, will never return and nothing to back up the missing profits/revenues/jobs, etc.
I see the real potential for a large chunk of the Northeast to simply hollow out as people increasingly pack and move out. The weather sucks, winters are miserable, the cost of living is high, traffic is miserable, and so on. As a Southerner, all I can think is: Look out below!
Weather sucks, check
winters are miserable, check
cost of living is high, check
traffic is miserable, check
But salaries can’t be beat. If you can get by with less while you’re here, you’ll do okay. You won’t be a multi-millionare but you’ll come close to a million if you do it right.
Last time I looked, salaries in many Northeastern areas were either slightly higher, or in some cases-lower than other areas costing 1/3rd to live in.
For example, the median income in Boston is $52792
But the median income in Raleigh, NC is $66,000
So in this case, an area signifigantly cheaper actually pays more. You’re also not considering the fact that heating bills in areas way up north cost twice as much as those elsewhere.
Lastly, money is one thing. Living in an area where going outside is miserable 6 months out of the year is another. I’ll take slightly less money please…
I think jetson_boy has a really strong point here. Long-term I would imagine continued population shifts away from yucky, grimy, grim Northeast (can you tell I’m sick of winter?) down to the southlands . . . it’s only family ties that keep most of us up here.
The only caveat here is global warming. As time goes on the south will get intolerably hot, the western areas will get so dry that no water is available, and as the winters in the north get nicer (we are already seeing the trend - or so I believe), areas like NE - with plenty of water and forests will actually start to look good again - it may take 30 yrs but I think you’ll see it. - Just be careful about buying too close to the shore.
Can we stop ragging on the weather please? Last time I checked, history books said the southern part of this great nation wasn’t so desirable until the invention of air conditioning. When it comes to climate, you pays your money and you takes your choices.
California, of course, really is different.
I tracked the condo prices for Brockton once. The median price for a condo reached a peak in 1987 that was not matched again until 2003. If you calculate nominal dollars I doubt it has been matched yet.
They used to make shoes there — Brockton was a lost cause long before Detroit.
Upstate New York - Buffalo, Rochester, Syracuse, Utica, Schenectady, Binghamton, etc.
Two words for her: Westgate Mall. She could work at the Orange Julius there. OK, so it’s been a while since I hung out in Brockton.
And don’t forget Marvelous Marvin Hagler!
Unemployed for 1.5 years (18 months)? 2 back-to-back pregnancies?
If it happens to me I hope I march right down to Taco Bell or W Mart. My brother lost his tech job at Unisys in the ‘91 bust, took it easy and then looked strictly for other tech jobs. He kept looking until about 4 years ago.
…I should add, he never found anything and finally gave up when he got SS at 62.
Check out the Albert Brooks film, Lost in America to see what happens when a yuppie LA couple lose their “egg” in Las Vegas and try to make a living working at Taco Bell. Hilarous scenes of them hunting for jobs at employment agencies at various podunk towns. The interviewers say stuff like, “It says here you made 80k. Is that over 2…or 3 years?”
It turns out we always gave it our all, as much as 125%.
“That illustrates how the amount borrowed often exceeded the value of the house at the time of purchase. In some cases, borrowers who invested no equity in a property were getting loans of up to 110 to 125 percent of a house’s market value to make improvements or just to have extra money at a favorable interest rate.”
There is a credit union in Needham that advertised %125 loans back in 2003. Even at the time it seemed like madness.
Now, there’s a place where I won’t want to stash my savings.
The credit union I belong to used some of our money to have a house built so they could give it away to a deserving family. This, to me, is a “sell” signal; I’m in the process of transferring my savings elsewhere.
Nice that all of those activities are in the future.
“‘We want to refinance with a company that will give us a second chance,’ said Lisa Jacobs. If forced to sell, she says the couple will have to move in with her mother-in-law.”.
Notice how inventory can grow even without new construction if the prices get too far out of wack. Given how large houses are now days and how expensive they have become this is not surprising.
12 2
We hardly knew you….
Consumption is not culture.
“Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They’re not fond of rules, and they have no respect for the status quo. You can quote them; disagree with them; glorify or vilify them. About the only thing you can’t do is ignore them. Because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world are the ones who do.”
Jack Kerouac
These folks seem to be a shrinking percentage of the population. So many just get beat down into mush anymore.
“It’s at the borders of pain and suffering that the men are separated from the boys.”
Emil Zatopek
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The cream always rises to the top…
Thanks for some great quotes. It gives me hope…. had to explain to a friend who Dorothy Parker was after I used one of her quips: “what fresh hell is this?” sigh…
Another sign of the times:
I just got off the phone with a friend in Ohio. There is a foreclosure for sale on her block for a while, which had been the talk of their neighborhood as they thought it was part of a larger scam going on in the Columbus area. She said the owners, a single mom and her two kids, moved in one night with all their stuff in a pickup truck. This to fill a huge, newer 4 bdr., 3-car garage house. The following week the woman started driving around in a shiny new car. It seems she never made a single mortgage payment, & lived there about 4 months or so; apparently moved out as soon as she got her foreclosure notice.
When the bank got possession they had to rip out all the carpets, starting in the basement, just to show the place. It seems none of the neighbors knew the family, in fact, had a dog, as it had never been spotted outside.
Sorry, this sounds like an urban legend to me.
I don’t think so… I’ve known this lady (foreclosure’s neighbor - 4 doors down) since grade school and she was one of my bridesmaids. Just relaying what she told me.
I think this is the house:
http://www.realtor.com/search/listingdetail.aspx?ctid=92621&mnp=30&mxp=29&bd=5&typ=7&sid=e457211e43174f4394b5588eda2cb23d&lid=1089451934&lsn=8&srcnt=18#Detail
Yeah, no bubble in Philly, prices in my ‘hood only went from 95k in 1996 to $220k in 2006. Nothing to see here. Nothing to see here at all, shitboxes in South Philly only went from $60k to $225k. Shitboxes down in old city only went from $60k to $400k.
What’s the deal with the change to GSE loan limits? Seems to be a virtual media-blackout on this potentially costly feature of the “stimulus” package. Last weekend we stopped at an open-house in SF and looked at a $1M condo at $1,000 sq/ft - ridiculous! The 20 something agent babbled on about prices still going up while anxiously showing us the pro-forma lending sheet. Interestingly, all 4 of the scenarios contained a $650K conforming 1st at 5.5% and a 7.5% second as part of the financing package. What does the NAR know that we don’t? At the time they printed up those flyers there was no such animal - the Senate had not even voted yet.
Them NAR has the Congress in its pocket. Bernanke will print more money, how much do we need now?
I am a Realtor in the Phoenix market. There are a lot of people who could be in trouble well beyond any subprime issue. Many people who didn’t put down significant equity in their homes when they bought in the last few years will be challenged if they sell today. That is why I have always focused on buyers needing to plan on being in their homes a long time and working hard to get the best possible deal they can. Each buyer’s timing in the market is specific to their circumstances, so I always tried to do my best for them. As for the people in the latest blog where the broker, buyer and lender supposedly phenagled the deal, I couldn’t sleep well at night if I had a play in that. Our market, here is challenged in that we have huge inventory (55,000 properties available) with foreclosures definitely having an impact. If the change in tone on the part of some troubled sellers I see catches more broadly, we will see a whole lot more properties going back to the banks which will on the one hand, complicate the market further, and on the other, serve to reduce prices at which we may be able to get this market going again. Thanks for the interesting posts! Dave Lorti, http://www.davelortihomes.com