Incredible Pent-Up Demand Is Still Sitting On The Fence
The Santa Cruz Sentinel reports from California. “The median price for a single-family home in Santa Cruz County dropped to $599,000 in January, down 18 percent since December and a level not seen since 2004. Only 63 sales closed escrow, a new low, the previous was 107 in 2006. More than 170 local homeowners have received default notices for not making mortgage payments, up 60 percent from a year ago, and 63 homes have sold at foreclosure auctions compared to 11 at this time last year.”
“Patricia Beckwith, an Aptos accountant who has been tracking sales in the Santa Cruz Record gave up house-hunting last October. She’s not convinced this is the right time to buy. ‘Although I am seeing some sellers reducing their prices, I am also noticing sellers taking their homes off the market rather than further reduce the selling price,’ she said. ‘Sellers are stubbornly refusing to see the writing on the wall - that their asking prices are unrealistic.’”
“The current Unsold Inventory Index indicates price stability in Capitola and Santa Cruz, and price declines everywhere else, including Aptos, Scotts Valley, Soquel. The index remains the highest in Watsonville, which means more pressure for prices to fall.”
“‘I’ve got new listings coming in on the high end,’ said Gary Swanson, a broker with SCF Realty in Capitola. ‘There probably has not been a better time to buy.’”
“‘I think homes are still 20 to 30 percent overvalued,’ said Beckwith. ‘There is no way an average family will be able to buy here in Santa Cruz without the ‘teaser financing.’ And now that that kind of financing has gone away, and I seriously doubt it will be coming back in the next decade, average middle-class homes are not going to sell.’”
The Modesto Bee. “Home prices took a dramatic downward turn in January across the Northern San Joaquin Valley, with the median sales price declining by more than 25 percent from a year earlier in most categories.”
“The valley’s sales price drops were among the steepest in California, rivaled only by Sacramento, where they fell 26.8 percent last month from the previous year. The data also showed that sales volume declined in Stanislaus County by 23.9 percent last month compared with January 2007, with escrow closing on 372 homes last month.”
“Craig Lewis, CEO at Prudential Realty in Modesto, said he sees reason for optimism in valley real estate. The drop in prices and interest rates means a buyer could more easily afford a median priced house, based on a 30-year fixed mortgage with a 10 percent down payment, Lewis said.”
“‘Local people can now qualify to buy that same home,’ he said.”
The Merced Sun Star. “The median home price in Merced County clocked in at $215,000, down 33.8 percent from a year earlier, according to DataQuick Information Systems. Sales volume was down 20 percent in Merced County and 23.9 percent in Stanislaus County, compared with a year earlier.”
“Local Realtor Andy Krotik said agents in his real estate office are seeing encouraging signs of life, including multiple offers on homes and houses selling for above the asking price. The sales activity is driven mostly by banks looking to unload foreclosed properties, a phenomenon that’s pushed prices back down to the $200,000 range, said Krotik.”
“At the height of Merced’s real estate boom in August of 2005, 76 percent of houses on the market were listed at prices above $300,000, said Krotik. Today, it’s the opposite, with 76 percent of houses listed at below $300,000.”
“Many analysts believe Valley prices are now at the same level they were in 2003 and 2004, when the regional housing market was still rising.”
The Fresno Bee. “In December…sales in Fresno County were off 8.3% compared with the year previous when median prices fell 10.6% to $295,500. In addition, home builders in the Valley offered sharp discounts and other incentives on inventory houses to get them off their books.”
“Mike Miller, division president of Lennar Homes said the rising number of foreclosures in the Valley does not bode well for builders. Those houses compete with new homes for a limited supply of customers.”
“‘Two years ago, we only had seven foreclosures a month, and now we’re up to almost 200,’ he said. ‘If we continue to run at that pace … that could be 2,400 buyers. That could be 25% of the market.’”
“First-time home buyers, shut out of the market when prices skyrocketed in the first half of this decade, are becoming the dominant force in an otherwise battered market. Experts say falling prices and interest rates and an abundant supply are enticing would-be first-time home buyers off the sidelines.”
“Real estate agents — whose deserted offices provide stark contrast to the go-go atmosphere of just two years ago — are delighted. ‘I’m waiting for [a first-timer] right now,’ Fresno real estate agent Joan Jolly said while sitting in her car in front of a house listed for sale.”
“The house was owned by a bank — an unfortunate consequence of a sinking real estate market where property values have tumbled so much that thousands of homeowners owe more on their houses than they are worth.”
“About 3,900 houses are available for sale in Fresno and Clovis, and, thanks to falling prices, the percentage of families in Fresno County that can afford an entry-priced house has climbed to 44% from 19% at the peak of the housing boom in 2006, according to the California Association of Realtors.”
“Don Scordino, president of the Fresno Association of Realtors, said 10% of all the houses sold through Fresno’s MLS in 2007 were foreclosures.”
“Real estate agents say investors also are back in the market, looking for houses to rent and, in some cases, flip. ‘I just sold a beautiful fixer-upper in University Portals for $160,000. They will put in $20,000 and rent it at $1,600 per month to four roommates from Fresno State,’ he said.”
“Michael Gilmore believes many others are waiting for prices to fall even more. ‘I’m still of the opinion that incredible pent-up demand is still sitting on the fence waiting for things to bottom out,’ said Gilmore, who operates The Mortgage Professionals in Fresno.”
“‘Prices have fallen, interest rates have fallen and there is blood in the water,’ he said. ‘It could be worse before it gets better, but we’re getting near the end of this cycle.’”
The Orange County Register. “Faced with plummeting home sales and reluctant buyers, some homebuilders are offering a plan designed to take the worry out of buying when prices are falling.”
“One plan promises to lower the amount a buyer pays for a new home if prices drop after they buy, but before they get their keys. Another lets buyers back out of deals and get their deposits back if their home is appraised for less than they paid.”
“So far, none of these plans is available in Orange County, although Los Angeles-based KB Homeswill begin offering oneat an O.C. project later this month.”
“The issue of price became more apparent last week when DataQuick released figures showing that the median price of a new home in Orange County fell 6.2 percent in January from the year before – and 26 percent from December. New home sales last month fell 62.8 percent.”
“‘It’s a way to get people comfortable,’ said Ric Hernandez, sales and marketing VP for Newport Beach-based Capital Pacific Homes, which is offering price guarantees through Feb. 28 at eight Inland Empire developments.”
“‘Everybody wants to buy at the bottom or when it’s going back up. We’re trying to find ways to overcome this challenge of buyers just waiting (the market slump) out,’ he said.”
“Irvine real estate consultant John Burns said the program actually is nothing new. Builders traditionally give buyers a break when prices fall before their escrow closes, but didn’t advertise those policies.”
“‘They’re trying to get some fence sitters to the table by advertising a policy they were already implementing,’ he said.”
“Some residents who bought condos in Tustin’s Columbus Square last spring complained in October after homebuilder Lennardropped the price by at least $100,000, lowering the value of their homes.”
“And some residents in a small development in Garden Grove sued their builder, Brandywine Homes, a year ago after prices fell by $140,000 after they had closed escrow. The homeowners accused the builder of manipulating appraisals to make it look like homes were more valuable than they were, which the builder denied.”
“One Brandywine official complained at the time that homebuyers get upset when prices drop after they buy, but never offer to share their profits with the builder when prices go up.”
The County Sun. “They don’t call this community Chapman Heights for nothin’. Yucaipa’s upscale neighborhood is surrounded by the Yucaipa Valley Golf Club and sits in full few of the majestic Crafton Hills. But like other communities that sprouted up during the housing boom in recent years, foreclosures are more commonplace these days.”
“Every couple dozen homes, you’ll find dead grass and a real-estate sign. In fact, more than 80 properties in Chapman Heights were listed as mortgage defaults, foreclosures or up for auction on Friday, according to RealtyTrac.”
“Robert Reintschler moved to the Chapman Heights neighborhood in July 2006 after living in Redlands for 30 years. ‘It ain’t Redlands, but it’s close,’ he said. ‘We downsized. We’re retired.’”
“With its two-story stucco houses and meager front yards, the housing tract has a ways to go before looking like an established community.”
“Reintschler and his wife bought their $525,000, amenity-filled home at the height of the housing market, but they’re not bothered by that. ‘We probably bought close to the peak, but we sold close to the peak,’ he said about his prior home in Redlands. ‘I was trying to capture some of that equity for retirement.’”
“There’s plenty of ‘common space’ where residents can walk or ride bikes around Crafton Hills. But resident Frank Awad isn’t concerned with that. ‘I’m not finding it interesting living here,’ the Jerusalem native said.”
“Over the years he moved from Los Angeles to Fontana, to San Bernardino, to Highland, and eventually Chapman Heights. ‘I just didn’t want to raise my kids in L.A.,’ Awad said. ‘It’s more quiet out here.’”
“Now that quietness is turning into boredom. And the $59 he pays every month in homeowners association fees isn’t cutting the mustard. ‘I’m not seeing anything worth being part of the homeowners association,’ Awad said. ‘I’m still wondering what I’m paying for.’”
‘Reintschler and his wife bought their $525,000, amenity-filled home at the height of the housing market, but they’re not bothered by that. ‘We probably bought close to the peak, but we sold close to the peak,’ he said about his prior home in Redlands. ‘I was trying to capture some of that equity for retirement’
?
Apparently, retirement for Reintschler includes a glue-sniffing habit.
From another article on Reintschler : http://tinyurl.com/35oh73
“It ain’t Redlands, but it’s close,” he said while pruning a Chinese tallow tree in his front yard. “We downsized. We’re retired.”
He wasn’t a complete idiot.
Whoops, it was the same article, different news wire.
‘It ain’t Redlands, but it’s close,’ he said. ‘We downsized. We’re retired.’”
From the article I inferred sold for $X ($1M?) and bought for $525K. The ‘we downsized’ from Redlands to Chapman Hills. Keep some or most of the profits (tax free) and have a place to live paying all cash. Reasonable.
I did suggest my parents 2 years ago to downsize and keep $400k equity for their retirement. My dad thinks his house would sell in days at $550k, I told him he will probably get a $450k “lowball” offer.
Hmmmm…. my sister and her husband sold their home in Chapman Heights a couple of years ago for 525K (and then moved to Denver, CO).
Wonder if this Reintschler dude is the bag-holder.
‘Sellers are stubbornly refusing to see the writing on the wall - that their asking prices are unrealistic.’
Ah yes, another disciple gained.
Hello ex-nnvmtgbrkr,
Another…er…wingbat lost!
Ya just can’t make this stuff up!
Leigh
“One plan promises to lower the amount a buyer pays for a new home if prices drop after they buy, but before they get their keys.”
That time limitation for this plan–to the short period “before they get their keys”– wouldn’t worry me. Nope, not at all.
‘I just sold a beautiful fixer-upper in University Portals for $160,000. They will put in $20,000 and rent it at $1,600 per month to four roommates from Fresno State,’ he said.”
HEY - that is almost the housing price = 100x rent rule!
$1600 rent for a fixer-upper in Fresno?!! You can’t be serious.
I hope he has a sizable budget for repairs. College students aren’t known for treating rental properties kindly.
“‘I’ve got new listings coming in on the high end,’ said Gary Swanson, a broker with SCF Realty in Capitola. ‘There probably has not been a better time to buy.’”
I don’t get what this guy is saying at all. Is he talking about the High Number of listings coming in or the High asking price of his listings? Either way, I think there will be a better time to buy in the future, and I also think that many of those that were duped into buying in the past three or four years would have to dispute what Einstein Jr. has to say about his keen insight into timing the real estate market.
About the only thing I am buying lately is tin foil to make some tin foil hats to protect me from all of the scary stuff I have been reading lately. Plus, I have to wonder if a tin foil hat will protect me from whatever scrambled these peoples brains and makes them constantly repeat. “BEST TIME TO BUY, NEVER BEEN A BETTER TIME TO BUY, MUST BUY….”
I wonder if this is why we are going to shoot down that satelitte. It is probably sending down radio waves, that turn the feeble minded into Best Time to Buy Zombies…
It’s amazing that people still keep repeating these mantra…. Best Time to Buy, Market’s only going to go Up. Maybe it’s a yoga thing… I don’t know. The herd mentality and mania is still alive and well.
No better time to buy? How about 2003, 2002, 2001, 2000, 1999, 1998, 1997, 1996, 1995, 1994, and 1993?
I had the same thought. I hope his intent is to tear it down or do a major rehab in the near future, and was thinking I dont really care if it gets trashed in the meantime. Otherwise, he will end up having to tear it down or do a major rehab regardless of intent.
does the $20K improvements include a rubber floor so the frat boys can bounce their brews to each other?
try $20K/yr in repairs
Yea im seeing ripoff rents in many locations. People, including my parents have suggested I rent but I am not about to spend $2000 a month or $200k to buy a house in PSL, FL. The only reasonable rents im seeing are on million dollar plus houses. Theres one at $1,125,00 with a $3500 rent but of course I can’t afford it. Not paying $1500 rent either on a $200k house.
Bye,
I know your a bit north of me (I am in Jupiter), but you really should be able to find some great deals on rentals; we certainly have them down here, that’s for sure. My current rental last sold for 511K, and my rent is just shy of 2K a month. I can also verify that 1M dollar homes (well, last sale at 1M) seem to rent here for the same price range as you’re seeing (3-4K a month), however, I just don’t need that much space, and frankly, don’t want to pay extra for it just to have to cool it for 12 months of the year!
A 200K home in PBC will rent for about 1K a month (max); however, as I am sure you are aware, there really is almost nothing that sells for 200K in PBC, so that’s kind of a “made up” example. I can tell you that I see townhomes all the time (selling for 300K+) renting at 1250-1500/mo.
As soon as you break the 1500/mo number, that’s when the price/rent ratios go really, really crazy. There’s just not much demand for 3K/mo rentals; all the people who can afford that have already been sucked into the “FL house flipping bubble”. Because of that, 3K buys you one he** of a house!
Any possibility of getting a roommate or 2? You guys can split a 3K rent, still have a reasonable monthly payment, and certainly have WAY more room then either would have a 1500/mo rental. Shoot in PSL, wouldn’t surprise me to find a 5,000 sq/ft home renting for 3K a month!
Nah, Bye wants to live in a rural retreat somewhere that he can buy a place for $35k and live well. Disregarding the 10,000 people in the county he’s moving to have 3 last names. In-bred and your kin must have lived there back to the times when GW rode thru fighting the Revolutionary War else you have to buy the time-of-day from them. Not realizing they are all anxiously waiting on his arrival to STICK it to him in every conceivable way possible.
One place I lived was represented by a banjo on the map. One New Year’s Eve I lost track of time. All of a sudden, a shotgun goes off. Couple minutes later, another shotgun answers. “Hillbilly fireworks,” I said to myself, “Happy New Year.”
I can’t stand roomates. Been there, done that. If there isn’t much demand for $3k rentals, will those million dollar houses crash hard in price then? Im not staying in PBC for good reasons anyway.
Better yet move to north Idaho- I rent a 4K sq ft house for $1100. World class resort town… lake in summer and snow ski in winter! If you want to buy, bend over, but rent is CHEAP right now.
“Local Realtor Andy Krotik said agents in his real estate office are seeing encouraging signs of life, including multiple offers on homes and houses selling for above the asking price.”
Oh, boy. This is scary. Isn’t this how this current mess got started??? Do people ever learn? Sheesh!
BayQT~
I should have said this this is *one* of the things that happened that got us in the current mess.
BayQT~
I say that quote smells like complete bull sh*t. I’m thinking of finding Andy and asking him to support his statement with some hard data. Somethin’ got twisted there.
Nah, the process is simple:
Undercut other homes by quite a bit and watch ‘investors’ flock and bid it up.
Then you get ‘winner’s curse’.
That’s what I mean by something getting twisted. I’d ask the papers not to print something like that without presenting the whole story. But we already know whose side they’re on.
dead cat bounce?
No. The myth of multiple bidders is something they’re trying to keep alive. Its only discouraging those ‘priced out forever.’ Demand for transfers to low cost areas is skyrocketing. Look at the sales rates!
You cannot have sales rates as low as they are and even begin to pretend that multiple bidding is the norm! Good try by the Realtors ™. Total BS.
Got Popcorn?
Neil
I sold my house in 3 days with 2 bids in a bidding war and got 5K over asking price of $249,900 (October 2007). I listed the house for 8K less than I paid for it in Feb. 2005 ($258K). (I also plumbed, framed, wired, and dry-walled the basement while I was there total cost: $5000). My neighbor bought it, finished the basement (carpet, tile, paint, etc..) and now has it listed for $295,000. I lost $15K on the transaction, but I made $15K on my last house, so it is even.
I didn’t know how quickly things would tank and I didn’t want to have any contingencies on the sale, so I priced it sell. I figured that if I priced it to low then I would get multiple bids and if I priced it too high that I would lose more money in the long run. I have this blog to thank and am enjoying being a “bitter” renter now that my upside down friends are envious of our larger house that costs the same per month as their small town house.
Multiple bids are not a thing of the past if you set the price right.
I’m actually not surprised that what few houses are selling get multiple bids. The vast majority of homes around here are so overpriced it’s shocking. When a home comes on the market that is actually reasonably priced, I’m sure that the few people still looking would bid on it.
I’ve seen that trick pulled here with a great deal of success. I think people in San Diego are just so desperate for anything that seems somewhat reasonable. They swarm all over theses dumps like flies on a warm pile of cr@p.
This realtwhore trick is best done with a real dump, one that needs about 40 to 50k worth of work to make habitable, at least 20 years of grime and a super cheapo price. Magic price in 92123 is tree fif-fee ($350K).
Anyway, I’m not bitin’. I’d rather be sittin’ on a fence than a JT.
I’m throwing the BS flag on this one.
Auction, several people bid on the property?
I believe Andy Krotik was Merced Going Quickly’s former whipping boy.
“‘Prices have fallen, interest rates have fallen and there is blood in the water,’ he said. ‘It could be worse before it gets better, but we’re getting near the end of this cycle.’”
I agree, we’re nearing the end of this cycle and about to enter a new one……the real one, where the carnage will make the first cycle a picnic. This is the year we stop using the term “subprime meltdown” and replace it with “mortgage meltdown”. Prime Op/ARMS, ALT-A, even full-doc prime come crashing down. Stay tuned.
I’ve been saying “mortgage meltdown” for a while, but I keep reading “subprime” meltdown. I’ve been wondering when the two will converge. Your guess of this year is a good bet.
As someone who only recently started reading this blog, I honestly thought you folks were being a too bit harsh on the average realtor.
But I don’t see one quote in the above series of links where the realtor doesn’t come off as either completely removed from reality or crooked as a dog’s hind leg. Or possibly both.
You see it, I see it, they see it, and yet the papers print it. Nice!
How can one be to harsh in describing people with little or no formal education making insane amounts of money during the boom by spouting off inaccurate information and lies to marks they were leading to financial ruin, and who used that money to get fancy new cars, have cosmetic surgery, and engage in their own reckless form of debt leverage?
But hey, there are some honest realtors, and my hat’s off to both of them.
They’re not so bad - they only lie when they talk.
“Michael Gilmore believes many others are waiting for prices to fall even more. ‘I’m still of the opinion that incredible pent-up demand is still sitting on the fence waiting for things to bottom out,’ said Gilmore, who operates The Mortgage Professionals in Fresno.”
I have heard just too much about this pent-up beast.
Will somebody produce a graph of the pent-up demand.
Perhaps Yun has an 11×14 copy at the NAR hq.
Excellant point. Yesteryears loose lending wrung just about every FB out of the market by putting them in a home they couldn’t afford. The only pent-up demand I see is relatives willing to move their hosed FB family members in.
My concern for those of you in CA, AZ, FL and NV is how will you all buy your Hondas and get service in restaurants once all of the Real Estate Professionals go back into real estate to handle ALL OF THIS PENT UP DEMAND?
Good luck with that.
I’m not worried.
There is barely pent-up demand. The problem was than when 50% of the houses were being sold to speculators, and each of them was stating that it was to be an ‘owner-occupied’ house, the statistics went all out of whack.
Remove the sizable speculator purchases, and you’ll see that the current sales numbers are a little below normal market levels.
Remove all the easy-fraud from the scene and notice how the sales #s have no chance of picking up to 2005 levels.
“Pent-up demand” — yes, we hear this cliché constantly from the REIC crowd, but what exactly are we supposed to visualize? Who, or what, is doing the penning?
Even worse are the cringe-inducing mixed metaphors in the quotation: pent-up demand sitting on the fence waiting for things to bottom out. Ugh. All he’s really saying is that transactions will happen again when prices fall to what people are willing to pay– a tautology.
I guess it depends on how you define pent up demand because I for one believe that it does in fact exist. I think we are still bubbly and that if prices magically dropped back to historical ratios tomorrow, we would have a great sales year based on historical comparisons. The demand is pent up because current prices prevent them from acting. Of course to tap this demand prices need to fall 40% or more, but that’s just a minor detail.
In my mind pent up demand for real estate just means that ppl still want to buy real estate but they view it as over priced so they do not act. Well no cht. I do agree, however, the statement is meaningless.
“I guess it depends on how you define pent up demand because I for one believe that it does in fact exist.”
I’m married with young children, and a SFR provides a measure of permanence, which is a good thing, IMHO. I’ve seen military families up close, moving all the time, and I wouldn’t care to do that to my dependents. If I didn’t have children there’s no way I’d buy into any community especially with the looming boomer bust ahead. Remember that when a local government entity sends a RE owner a bill it’s really a lien. It’s like when the cop turns on the red light, you are technically under arrest. Don’t think so? Try leaving!
But keep in mind there is also a whole lot of pent up supply. People who would like to sell but have taken their homes off the market “until things pick up”. REO’s the banks haven’t listed yet. The next wave of REO’s, still in some stage of foreclosure. “Investment” homes currently being rented out at a monthly loss.
Personally, I’m betting there is more pent up supply than pent up demand.
True. See three post downs. I agree there are supply issues preventing prices from being lowered to where they should be. I guess my point is that I believe there is still more demand now than historically existed in the past, but supply issues are creating inefficiencies preventing equilibrium.
Assume prices do drop by 30% or so. Who is going to have the means to be buying after that? That will wipe out the equity of a good many people who already own, and a hefty percentage will be carrying a default on their credit record for several years to come. The move-up market would be crippled, even if the move-up market is rationally priced for “normal” times.
The first-time buyer market might hold up pretty well, though. They’d be new buyers coming onto the market without the baggage of the equity declines of few years prior.
As you stated, first time buyers can enter the market again (much of the 20-35 crowd is renting because they were locked out), as well as ppl that hold cash. My house fund is over a million right now, assuming housing over corrects, I have no problem buying multiple properties in the most over-corrected markets as long as they cash flow significantly because ppl that would otherwise buy cant obtain credit. They say home ownership is at an all-time high (or was before the foreclosures spiked). Maybe I just hang with an over-educated crowd because I have never seen so many 30-40 somethings renting because they wont pay $500k or more for a stucco cht box.
The term “pent-up demand” is being misapplied. It should be applied to things that people might want to purchase at prices they could afford, typically for items where might be a supply issue.
It means nothing if the item is something you cannot afford whether for a house , luxury vacation, etc. or for something you would never buy at current prices even if you could pay that amount. Is there really pent-up demand to pay $500K for a small crap box with bars in the windows in the hood?
Why cant the inability of prices to be lowered to meet demand because of ppl being upside down on their mortgages and banks refusing to lower their prices on foreclosures because they dont want to show losses to shareholders and regulators be deemed a supply issue?
The pent up demand is for the post bubble $250k crap box.
True. Assuming that current prices, rather than historical prices, should be the baseline kind of misses the point.
During the 20th century US home ownership rates averaged 55% - then according to GB (below) that rate hit an unprecedented 70%! This would seem to indicate that all chips are now in the pot - no more betting.
National Homeownership Month, 2006
A Proclamation by the President of the United States of America
White House News
Owning a home is an important part of the American dream. During National Homeownership Month, we raise awareness of homeownership and encourage more Americans to consider the benefits of owning their own home.
Nearly 70 percent of Americans enjoy the satisfaction of owning their own home, and my Administration continues to promote an ownership society where the promise of America reaches all our citizens. The American Dream Downpayment Act of 2003 is helping thousands of low to moderate income and minority families with downpayment and closing costs, which represent the greatest barrier to homeownership. Since 2002, when I announced our goal to help 5.5 million minorities become homeowners by the end of this decade, the rate of minority homeownership has climbed above 50 percent, and more than 2.5 million minority families have become new homeowners. My Administration will continue to provide counseling and assistance for new homebuyers and expand homeownership opportunities for all Americans.
During National Homeownership Month and throughout the year, we applaud the men and women who work to achieve the dream of homeownership, and we are grateful for those who provide counseling, lending, real estate, construction, and other services to these individuals. The hard work, financial discipline, and personal responsibility of our country’s homeowners help transform neighborhoods throughout our Nation and reflect the best qualities of America.
NOW, THEREFORE, I, GEORGE W. BUSH, President of the United States of America, by virtue of the authority vested in me by the Constitution of the United States of America, do hereby proclaim June 2006 as National Homeownership Month. I call upon the people of the United States to join me in building a more hopeful society and recognizing the importance of expanding the ownership of homes across our great Nation.
IN WITNESS WHEREOF, I have hereunto set my hand this twenty-fourth day of May, in the year of our Lord two thousand six, and of the Independence of the United States of America the two hundred and thirtieth.
GEORGE W. BUSH
Well here it goes everybody - I’m probably one of the few devoted HBB followers (ever since the blogspot days) who is jumping in and catching a falling knife. Supposed to close escrow in a couple days. I’d be lying if I didn’t say I was nervous as heck, but at the same time my wife & I have our reasons (or rationalizations). In no particular order, here they go.
1.) We really love the house. Despite the fact that it needs updating, it has been very well maintained. The layout is exactly what we’ve been envisioning, and the only structural changes we can envision would be some minor tweaks to the kitchen - and one wall taken down. Otherwise, we’re thrilled.
2.) Location is great for us. Extremely close to a great elementary school (and in a good school district), we love the view, a short drive to the in laws (when we eventually have our little knife-catchers it will be great to be close to them), and in the neighborhood we’ve been keeping our eyes on since 2004.
3.) The lot is very large (by OC standards) - just about a half an acre, almost totally usable. Lots of grass area and a pool - both things we’ve always wanted.
4.) While very well maintained, we’re not paying for upgrades that we don’t like. In other words, since it needs updating, we get to choose the configuration of the kitchen, cabinets, appliances, etc. We’ve seen many updated kitchens, which probably are great for a number of people, but not our taste. This way when we decide to update it we can do it exactly our style. Same goes for the bathrooms. My father in law is very handy, and for whatever project we can’t tackle I expect there will be plenty of hungry contractors willing to swing a deal just to keep working….
5.) My mom was recently diagnosed an illness that isn’t good at all. It’s not a terminal illness, but it’s still a bad situation. I’d really like to spend more time with her, and have her (and the rest of the family) spend time with us. The house has plenty of room for her & other in the extended family to stay for extended periods of time. Where we live right now that just isn’t an option. Believe it or not, this is a HUGE factor for me right now - the truth is family is more important to me than anything else. Yes - I truly expect the house will be worth less in a year than it is today (and that trend could continue for some time), but if it means we can have more family gatherings & spend more quality time together it’s absolutely worth it to me.
6.) My wife & I want to have kids soon, and our existing apartment isn’t very kid friendly for a number of reasons.
7.) As I mentioned previously, we’ve been looking on and off since 2004ish. There have been very few homes we really liked since then. While I know there will be other great bargains available in the coming two years (or more??), I’ve spoken to a number of friends & colleagues that still remember that house that they let get away. Now, 20 years later, they still regret not getting the one they wanted.
8.) Price is pretty good for today’s market. We’re getting it for a bit over $250 sq. foot. I know a lot of you think that’s still a crazy number, however here are some neighbor comps in sq foot. I know this could be apples to oranges in quality, but it’s a start.
1998 - $364.
2000 - $220
1998 - $143
1999 - $217
2005 - $586
1994 - $141
Our price is 68% of the original list price. Well - that isn’t totally true as they listed it once (over a year ago) with an out of area agent for roughly 2x what we’re paying.
Our monthly mortgage is approx. equal to the asking rents I’ve seen for comparable homes.
This is a mature neighborhood, and while I’m sure there is plenty of HELOC goodness going around, it’s not like a new development where everybody bought in the somewhat recent past, potentially leading to more issues.
*****
So the toughest pill to swallow right now? Clearly the fact that I expect our 20% down payment to evaporate in terms of equity. Mitigating that downside is that we’re comfortable with the payment (we stretched - but only to the point of the edge of historical guidelines), envision this easily being a “30 year home”, and are looking forward to starting our family in this home.
So there you have it - one example of the “pent up demand” out of thousands of HBB readers. See - the Used House Sales People aren’t lying
Wish me luck!
And what if you lose your job? Youd have to walk away from the house. You are throwing that 20% downpayment down the drain, a much higher cost than renting another 2 years more.
We can swing it on my wife’s income alone…but I won’t lie, that would be too tight to really “live” and save. If there were a transition time after I were canned there are savings we could tap if necessary.
Fortunately my wife and I are in totally different industries - so I don’t envision us both getting canned at the same time.
And what if your wife loses her job?
“so I don’t envision us both getting canned at the same time.”
Ummm, I’d start at least envisioning it.
…and what if I get leukemia, and what if my arm gets sawed off by the pencil sharpener at work, and what if aliens attack and take my car so I can’t drive. There are lots of what if’s. Not all risks can be completely mitigated.
Here is the outlook for her profession. The reality is she can pick up extra shifts virtually whenever she wants. Unless there is an unforseen sea change coming in her profession, I think we’ll be fine.
http://www.bls.gov/oco/ocos079.htm#outlook
In the worst case scenario we could cover our mortgage for years by borrowing against savings & 401k.
Dude, if aliens are attacking your car, your mortgage is going to be the least of your concerns.
If you really love the house and it fits your lifestyle, then I say “congratulations!” My husband and I are in a similar situation. We’re not closing on a house or anything, but we’ve decided that if we find a place in the area we love, and it is at an incredible price and our payments are around our current rent, then we won’t turn away. We’re just not running towards purchasing a place.
I guess we’re in a holding pattern. But, anyway, it sounds like you and your wife are in it for the long haul, which is entirely appropriate AND you’re thinking in terms of “what if”….something FBs and the like neglected to do.
ex-
Don’t be so negative as a pharmacist in the O.C. she’ll never be unemployed there are a lot of legal options for her line of work, illegal as well if times get really tough. LOL I don’t see a downside…
Good luck, but that’s not a nut for me. I sold in 2004 and it will be a long time or a great, great deal before I buy again. Anything at $200K or over will have to be in great condition as I wouldn’t pay anything to modify anything at that level or above.
good luck OC_Stomp
we were in similar straights last year — you can’t always time everything to co-incide with market peaks and troughs….sitting out a decade due to “bubbles” greenspan was enough and we caught a knife outside of Boston last summer….Unlike modern economic theories, we can’t always live life seeking the highest economic unit of value, but need to deal with messy details like life, spouse’s desires (both turned 36 last year and are kidless), in-law illnesses, and a desire to live instead of waiting for the best possible moment to transact. Sure, you don’t maximize economic value, but you get to live a bit. (and we paid $214/ft^2 — $20 too high, I think, and prices are moving that way now). Oh well, maybe in 15 years we will no longer be underwater….but as long as we don’t have a need to transact during that time, should be OK.
apparently, we renters are prisoners and only “owners” are able to live freely?
15 years now, you’ll no longer be underwater? An overpriced house is always overpriced (think wage inflation (deflation Oh god!) relative to the cost of the house).
Cinch
Well it’s mostly a matter of preference. Renting is fine. Changing residences is fine. But having moved 15 times in the last 20 years (due to goofy roommates, vagueries of life, etc.) can cause some people to say emough is enough. At some point, some people want their own place (I’m one).
True, there are very few things one can control and the only major one is entry/purchase price. Sometimes you roll the dice and can live with a 10 - 20% too high purchase price and ride it out long enough to not have too huge of a negative impact on you life. It’s not perfectly efficient, but it’s not the end of the world either.
Renting is not all sunshine and lemonade either. Landlords can suck. Ownership changes can bring sudden reversals and changes to your living situation.
I guess my main point is that not every decision is about achieving optimal financial efficiency. Decisions need to incorporate non-economic factors, as well. As long as one appropriately values non-economic costs/benefits into a decision and can make appropriate adjustments to a cost/benefit analysis for a rent/purchase decision, then I think it is OK to purchase. Not all overpriced purchases are poor decisions (when incorporating non-economic benefits and costs).
“Not all overpriced purchases are poor decisions”
Please, go sell stupid somewhere else.
Thank you!
I was wondering who was going to carry out the inevitable “hit”, and the Master of the JT did not disappoint.
Buying a McCrapBox using 30 years of your labor on the line when we are quite clearly headed into the Mother of All Recessions isn’t your average “poor decision”.
“Retarded” is the word that comes to mind. “Mega-retarded with whipped cream on top” also comes to mind.
Funny - I think his reasoning makes perfect sense. In fact, I’d argue the logic and thought in his posts far outweighs what you’ve added….but that’s just my opinion.
Which part of “30 years of indentured labor” headed into a Mega Recession did you not understand?
“…incorporating non-economic benefits and costs…”.
That is the rub, since many people tend to over-estimate both the costs and bennies. I do understand what gillsie and OC_stomp are saying, but it’s hard to hear because “spouse’s desires” sounds a lot like my brother saying “happy wife, happy life” and capitulating to her housing (and all other) desires for the sake of a yard and good schooling for the children, while they are still in the crib. Her inability to listen to reason, his inability to stand up to her and his need to have the “freedom” to build a deck have them in a financial bind. I hope that they don’t blame each other until he finally snaps and I see him barreling down I-80, the top down shouting, “Freedom!!”
I’d like to get back to a time when it’s OK to make a decision if the numbers and reason outweigh feelings and your gut! But I do understand that there can be some value in the latter. Just tough to value “correctly”.
MrBubble
PS: Forgive the rambling personal nature of the post. Just had a few cocktails…
Buying a McCrapBox using 30 years of your labor on the line when we are quite clearly headed into the Mother of All Recessions isn’t your average “poor decision”.
Pussycat, you seem to be missing the obvioius point that in 30 years, he will no longer be paying a mortgage, and renters will still be paying rent. It is not 30 years of indentured servitude by any means. Congrats to the gentleman for finding a nice home for his family. If he’s been reading here, I’m sure he knows of the pitfalls out there.
We’re missing nothing.
We’re saving the difference between renting and buying, and that will more than pay for the rent in 30 years time.
We could equally well argue that in 30 years time, his marriage will have dissolved from the stresses of the stupid financial decision. It is indentured servitude for 30 years in every sense of the word.
And this was when? LOL, this is one of those “the past was different, dmnit” things that always make me laugh. The past, give or take a tiny margin of error, was exactly the same as today. The real difference now is people “see” people living a broader range of lifestyles through TV. This is true worldwide. We exported a consumer culture to the world, and to ourselves.
The people are the same. The _marketers_ have changed. They’ve grown up from running sideshows with a chimp, selling snakeoil, to doing 500-house housing developments in a swamp. For that change, we can blame the financiers. As always.
Good luck, sounds like you found your perfect house. Money is nice and all, but some things you just can’t put a price on. Sounds like you have weighed your options and are more than willing to lose a bit of your downpayment in order to live life on your terms. Nothing wrong with that, and I am confident that you will most likely be very happy that you made this call fifty years from now as well, when you are looking back over your forks in the road. Best of luck to your Mother in her sickness.
There are many excellent reasons for wanting to own your own house and not rent. In my case: 2 kids, 2 dogs, 2 cats, and 3 chickens. I’ve rented in the same house for the last 9 years, and if we ever had to move we’d be screwed. I am a great tenant and mt landlord thinks I’m great, but who would rent to us? (and our Rottweiler?)
I hate our kitchen, wish we could renovate the basement, and would love to plant some trees and know that I might enjoy them in 15 or 20 years.
At a certain point, especially when you have a family, stability is important.
And I certainly don’t envision being 70 or 80 years old and being a renter…
So count me in as part of the pent up demand. But I also know that there’s no way I am going to buy until it makes sense with my savings and income.
OC_Stomp, please post your daily journal again a year from now and let us all into your little world then. We’d love to know.
Got Prozac?
I’ll be posting much sooner than that…with pictures. Picture me on the left now…and where I’m sure I’ll be a year from now.
http://www.drugfree.org/Portal/DrugIssue/MethResources/faces/index.html
OC stomps purchase has more going for it than against because of 2 main reasons: he is buying the house to LIVE in it and he knows ALL of the financial conditions pertaining to its purchase.
give the guy a break already. sure, houses rise & fall in value but when you use one for its main purpose, which is to live in, then as long as you can afford it everything else is just passing scenery in which you can elect to participate. or not.
Comment by OC_Stomp
2008-02-18 18:16:21
“We can swing it on my wife’s income alone…”
I’ll add to the fodder.
Some want to purchase NOW. Others want roots…run the numbers.
Hubby and I are such ones…retired, want to have a bit of woods and land to work. Family can be priceless!!
You have family, that you love dearly. (That is a blessing).
I believe you want a 1/2 ac.
The question is: is this a home or investment?
My guess is it’s a home.
Follow your heart - if you and yours are ready to hunker down, so be it! Heed advise from the board, but know we will suport and celebrate you decision!
Best Always,
Leigh
Thanks, Leigh. It’s a home through and through. Absolutely not an investment. If I considered it an investment there isn’t a snowballs chance that I’d be buying right now.
We have no intention of moving up (we skipped the starter home), so we wanted a good house & good bones to start with. From here we’ll update and make changes as we see fit on our on timeline.
The board has been a great resource…and I’m not leaving at all. I’ll stick around.
A home is an investment if you like it or not. If it wasn’t an investment they would be charging you money and signing all the papers and stuff. You can’t just call it a “home” and change the nature of the transaction.
The only thing you are talking about changing is the time horizon about how long you are planning to hold it.
So, you will locked in with negative equity. Bad bad move.
There isn’t any reason you can’t wait it out while renting. Not one at all. You will not be tied down.
Bingo.
Maybe we should put up a sign saying, “This is the HBB. We do not perform Absolutions”.
Leigh,
You should know better. Realtors have been playing the “home” game for a while. Its crap. A house is shelter from weather.
Its not like I’m not emotional but sometimes you just have to look at things completely dispassionately.
Think like Spock.
James
Right on, OC_Stomp — all very good reasons!
If we were a “power couple” we would have done the same thing, but I’m doing-it on one engineering income, so we had to move north. Good luck with everything, and be sure to check-in once in a while with an update.
BTW, look over the disclosures very close. Be sure that you are signing what you earlier agreed to; these folks who are going charge ‘ya have a nasty habit of changing things when ‘yer not looking!
Thanks, rms. Great advice - I appreciate it.
Good luck w/ everything to you as well. We made the decision to both keep working (once we have kids), with the in-laws near by helping on the days my wife works.
Despite the fact that I don’t post often, I’d say I read the blog at least 3 times a day. I’ll be back often…and will post when I think it adds value. I figured my post might get some dialogue…and it appears it has
At least I now know I’m not just retarded, but “Mega Retarded”.
You forgot the part about the “whipped cream on top”!
Hi OC Stomp:
I realize you’re probably in bed now, but I can’t help but notice that you think you’ll only need help on the days your wife works. Like her days off will be spent working and your days off will be spent, well, off.
Sounds pretty unrealistic to me. Motherhood is a big job, and it’s not very fair of you to expect your wife to bring home the bacon and cook it too just so you don’t have to use reason in your decisions.
Hi Big V,
Sorry you got that impression - that’s not at all what I meant. I’m a desk jockey, working M-F. My wife’s schedule is not so predictable - working every other weekend. Clearly those weekends I will be responsible for kids. Her days off and when I’m working she’ll be responsible. Days we both work we’ll look to in laws or, as a last resort, day care (not that there is anything wrong with daycare). On the days we are both off we’ll be jointly responsible - however my guess is she’ll be cracking the whip for me to work on the honey-do list, including the yard and any number of little (or bigger) projects that we’ll have. Sorry if you thought I was giving her the Heisman with the kid thing - not at all the case.
Hey family is everything. You can get another house (even if the worst happened and you lost this one) you can get another car, but what you can never get back is this year with your mom if you pass up grabbing it.
And I’m sure she’ll love to see the new grandkids closeup too
I see no downside to what your doing, and I’m a pretty risk-averse person. There is a herd mentality on the blog too, but it runs in the snarky critical direction.
I wish you luck. Its not my business to tell ppl how to spend their money (unless they want me to bail their ass out), and hope everyone finds happiness. I think you could find much better for less in two years, but only you can determine what is right for you.
I don’t think he will be happy a couple years from now when he is deep underwater and bigger, nicer houses sell for less than what he paid. And if either he or his wife loses the job, they will have to tap into their retirement savings to keep paying the mortgage on a house that is worth far less than what they paid. That purchase is going to cost them 5-10 years worth of retirement because they couldn’t wait a few more short years for the bottom.
They would be far better off walking away once they end up underwater or either loses their job and go back to renting while prices fall. Write off the loss of the 20% downpayment off your taxes and please hold onto your retirement money!
OC-Stomp - curious how much you think this house would have sold for at peak versus right now?
My guess is 35% more, give or take a few percent on either side.
Remember what the comment about what if you lose your jobs. The point of that is if you get into a situation you will have zero equity to fall back on.
If the environment is deflationary then its possible a lot of companies with debt will fail. Contracts will have to be negotiated downwards. No sure things in this.
I say wait it out especially if you are in a nightmare location like So Cal, Sacramento, Vegas or Phoenix. Still too far to fall.
Each person’s situation is different.
My favorite John Lennon quote is:
Life is what happens to you while you’re busy making other plans.
Sounds to me you found your home - who’s to say what’s right for anybody else. Sometimes it’s just a house - just an investment, and other times it’s your lifelong home. Bravo to you.
I agree. Everyone’s life situation is different. You’re obviously going into it with both eyes open and willing to bear the opportunity cost of putting your money into a depreciating fungible asset for your own personal reasons…I personally hope it works out well in the short term as well as the long term.
I say congratulations and best of luck in your new home. Sounds like its a well-thought-out purchase and you are well aware of the potential downside and are going into the whole thing with the right frame of mind. I say be happy with your decision, enjoy your house, and good on you for buying what you wanted at a price you can live with.
I rented for half my adult years, and for most of that time, I couldn’t imagine owning–the headaches, the worry, the expense! But the down side was that we didn’t like the places where we were living.
We decided that the solution was to pay more rent. Wrong! Our two high-priced rentals were frying pan into the fire. So in 1989 we bought. And we moved up a couple of times. Now we’re in our dream home. One unanticipated perk of a dream home is building a library. I was so tired of lugging books from one place to another that I hadn’t bought a book in years.
I disagree with James about a home being mere shelter from weather. These days people are doing at least some of their work from home, and that could increase if the price of gasoline goes up. Plus, these days we find ourselves relaxing at home instead of going somewhere on vacation. We have the money to travel, but we actually enjoy hanging out here.
Could our house lose money? Absolutely. But so could our mutual funds. So could our checking account, due to inflation. Could we have saved money by waiting another five years to buy? Probably. But life is lived going forward, not knowing what’s next. In a few years I could be dead.
Sure, I’d love it if we all lived in walkable villages. In 1977 I refused to buy a car because I thought the government should do the responsible thing and introduce reliable, frequent, energy-efficient mass transit. Two years later I sighed and bought a car.
Good luck OC.
I keep seeing this term “pent-up demand,” and I suspect it’s being misused in this context.
I’m no economist, but here’s one economist’s definition of the term that I quickly found on the web: “When demand for a product is exceptionally strong, perhaps because the demand built up during a recession when people could not afford to buy the product or because the product was temporarily not available to be sold.”
My understanding is that “demand” generally connotes a willingness and an ability on the part of a consumer to obtain some quantum of “supply” from a producer.
That doesn’t appear to be the situation in the housing market at all. What these REIC-types seem to be commenting upon is actually a LACK of demand. At best, they’re stating the unremarkable proposition that there would be increased demand for new and used houses if prices were lower. Well, no kidding. Many potential buyers are currently priced out; others are unwilling to pay current prices. But I’d argue that just because a lot of people would buy a new [house/car/TV/etc.] at a lower price than currently offered in the marketplace does not mean that they are part of any “pent-up demand.”
For example, if the space shuttle were on sale tomorrow for $200, I might be inclined to go out and pick one up. But I think it’d be silly to consider myself part of a “pent-up demand” for space shuttles.
Pent-up demand, as these cheerleaders are using the term, is not demand at all.
At best, they’re stating the unremarkable proposition that there would be increased demand for new and used houses if prices were lower.
Funny how they’re discovering that housing is an ‘elastic market.’
Yes, at a lower price there is more demand. But wait… deflation ahead. I’d love to buy a 52″ HDTV for the wife (of course for her…), but knowing it will get cheaper over the next three years does styme the impulse to buy. If the price is low enough… I won’t care and I’ll just buy. Both the price and the perceived inflation/deflation play a part in the purchase decision. Since both are in favor of the waiting game…
Its amazing seeing the sales rates plummet. How the heck are Realtors ™ paying their mortgages… oh wait a second… I frequent OCrenters BMIT blog!
I see your bid on the shuttle and raise it to $500. See… there is pent up demand out there.
Got popcorn?
Neil
Bidding war on Space Shuttle.
Buy now before you are priced out forever!!!
I’d rather bid on one of those Stealth bombers. Very cool.
Price of Space Shuttles increasing by 150% every few minutes! There’s never been a better time to buy!
I think I’d rather buy a used Pinto than its aeronautical equivalent in the Space Shuttle — that flower-of-seventies-technology cobbled-together engineering abortion.
At least when something (inevitably) goes wrong with a Pinto, what’s left of you doesn’t get spread across three states. (Apologies for the poor taste.) I think it’s safe to say that even at $200, I’m not part of any “pent-up demand” for a space shuttle.
Neither am I any part of any “pent-up demand” for an OC condo at any price, whose monthly expense amounts to more than 50% of what I could obtain renting the place to a family of illegal immigrants — the only true “backstop” of demand hereabouts.
‘We probably bought close to the peak, but we sold close to the peak,’ he said about his prior home in Redlands. ‘I was trying to capture some of that equity for retirement.’
Well, they didn’t capture anything, but they did break even. Back in the 1980s bubble, those who bought and sold at the peak did in fact break even. The victims were those in my generation who merely bought at the peak. The beneficiaries were those who sold and moved away, since that bubble was much more narrow.
This time, however, you have whole new groups of losers — the HELOCers, the flippers, and those who sold to them.
I am worried when people say we are at the bottom for Florida homes. I saw PSL homes where it’s now cheaper to buy than rent!
Don’t worry Bye, we are definately not at the bottom in FL, not a chance in he** in PSL (or any place south along the east coast either)!
As per my post above, you need to find a new RE agent to help you find a rental. Prices are ALL over the place for rentals in most of these “spec” communities; I was in 2 identical homes 3 doors apart when looking for my rental. One was renting for 3800/mo. The other one (where I now live) was under 2K/mo. And these homes were IDENTICAL.
Just do you’re shopping, and, whatever you do, don’t jump into this home market. People are getting BETTER deals now, but that does not mean we are at, or even approaching, the bottom.
Remember, many of us (and others) believe that this is going to lead to a nasty recession; that will just totally collapse home prices; and make those with cash the only ones able to continue life relatively without interruption. This is NOT the time to tie yourself to a FL home…
All of that said, if you can buy something in PSL for a REAL steal (50/sq/ft), you might be ok… Otherwise, you’re just asking for trouble.
Also, on another note, (I will post this tomorrow as well, as it’s really a bits bucket topic), my CC just wrote to me. Limit increased another 10K. It seems that the scaling back on credit is really not effecting those of us with good credit, and no debt. The limit on this card is (and already was) just insane; although I make a good income, I can’t imagine having this thing maxed out; the interest would have to be a few thousand a month, maybe more (you can tell how often I carry a balance on it, I don’t even know what the interest rate is).
“(you can tell how often I carry a balance on it, I don’t even know what the interest rate is)”
Says nothing. I know someone with a pile of carried cc debt, and she doesn’t know the interest rate.
But point is understood. I also am a non-carrier of debt, and my cc limit was increased a month or two ago, by about 20%.
There’s been some news lately about credit card companies dropping clients who don’t carry a balance. There’s a simple solution to that. Just make sure your cc is at the bank where you do all your banking. They won’t risk running off a good client by taking away the card!
We too carry no CC debt, and get about $25 in free gas each month as a result (I also don’t know what the rate is). I’ve wondered how long the CC company would continue to keep us as customers.
I love credit cards. When used properly (i.e. no debt carried on them) they are very easy to use, accepted almost everywhere, and provide nice little perks (like free gas). We use ours for all of our monthly expenses (groceries, gas, some utilities, totaling $1k/month). I almost never carry more than $10 in cash now.
That’s why I am leaving FL alltogether. Even the rent isn’t affordable without a bunch of roomates which I won’t get along with. Sorry but I am not one of those rich people making 6 figures which the realtors would love to point out as part of the reason why houses are so expensive. Yes I am priced out for now. Maybe I will return to FL in a few years, it remains to be seen.
“roomates which I won’t get along with. Sorry but I am not one of those rich people”
Shocked I tell you . . .
“‘Local people can now qualify to buy that same home,’ he said.”
The language of the bubble lives on. One does not, in general, ‘qualify’ to buy a house: just pay the seller money, right now I’m sure they’ll be happy with asking price. I think he means ‘qualify for a mortgage’. There’s a big difference! When your house becomes part of your qualifications, like a high-school diploma or a degree, obviously a bigger house means you’re a better person. And thus are gullible buyers preyed upon. Are you worthy of this 2500 sq.ft. McMansion? Yes! You’re qualified to buy this home. You’ve earned it!
I don’t know many people whose self-esteem goes up because they have a big mortgage. We might get a more rational real-estate market if we save ‘qualifying’ for the negative things, like mortgages. And Joshua trees.
Haha, your rant about FBs reminds me of that Saturday Night Live character, Stuart Smalley: I’m Good Enough, I’m Smart Enough, and Doggone It, People Like Me!
‘One does not, in general, ‘qualify’ to buy a house: just pay the seller money, right now I’m sure they’ll be happy with asking price. I think he means ‘qualify for a mortgage’
God I love it when you guys put a finer point on this stuff than I ever saw.
Per Reuters, a small but very important bit of news - banks “quietly” borrowing $50 bln from the Fed:
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20080218&id=8205153
More and more banks hitting up the 3 AM crack coke dealer. Btw, is it true that banks stopped lending each other money?
Yep
The government in England taking over banks
US dolling out cash for worthless pieces of paper
Got to love capitalism.
Btw, is it true that banks stopped lending each other money?
It’s only true if you consider CountryFried a solvent bank.
Banks are still lending money but they are selective on lending to banks/people that are capable of paying them back with interest.
Report from Long Beach CA, one of the major RE meltdown epicenters for LA County.SCal.
I have just finished tracking homes sales in long beach using zillow. tracked sales last two months in selected LB zips in both bad and good zip areas. Astonishing enough the bad zip parts of LB show same sized homes selling as much as the good parts of LB. Maybe not surprizing as the buyers in the crummy LB zones tend to be ignorant uneducated low class working imigrants without a clue
as to current RE trends.
I checked out prices being paid in the better cleaner eastside LB zips(90808.90815)and i am seeing large 1600 sq ft 4/2.s on 5000-6000 lots going for $400,000-$450,000. These are stable clean middle class parts of LB with good schools, good parks,ect. If anyone has any familarity with LB this would indicate a major RE depressionary collapse as these hoods are highly desirable areas of LB.
My conclusion after looking at the data is the lower class naive
immigrant buyers which were a major part of the market in the LA marginal and ghetto areas got, and continue to get,screwed by the REIC and /or are simply uneduated, functionally illlterate and unable to grasp even simple RE/business contracting principles.
They pay equal prices in crummy slumzones when they
can make a deal in good areas for same price. Maybe they are more comfortable in slumy hoods than clean hoods.
Peter m
The words you used to describe the people in the crummy part of town ignorant, uneducated, low class, without a clue, naive, functionally illlterate and unable to grasp even simple RE/business contracting principles.
You could change one word uneducated to educated and describe most of the FBB no matter what zip code they are in
Was going to say the same thing.. Peterm. what gives?
You could change one word uneducated to educated and describe most of the FBB no matter what zip code they are in
Now that quietness is turning into boredom. And the $59 he pays every month in homeowners association fees isn’t cutting the mustard.
“I’m not seeing anything worth being part of the homeowners association,” Awad said. “I’m still wondering what I’m paying for.”
Chuckle. Oh, the irony. He bought an overpriced house at the height of the insanity and he’s worried about the measly $59 per month HOA.
When I read about Awad being from Jerusalem I understood why he’s bored. I’m sure there just aren’t nearly enough homicide bombers in that neck of the woods to make life interesting. Maybe he should move to Watts.
Some things never change. Just read Wikipedia entry on the previous S and L collapse. Deregulation, gutting the remaining regulatory bodies, and then trying to bail out your donors. It’s almost an exact replay to today.
The Keating Five (or Keating Five Scandal) refers to a Congressional scandal related to the collapse of most of the Savings and Loan institutions in the United States in the late 1980s.
Following the deregulation of the banking industry in the 1980s, savings and loan associations (also known as thrifts) were given the flexibility to invest their depositors’ funds in commercial real estate. (Previously, they had been restricted to investing in residential real estate.) Many savings and loan associations began making risky investments. As a result, the Federal Home Loan Bank Board, the federal agency that regulates the industry, tried to clamp down on the trend. In so doing, however, the FHLBB clashed with the Reagan administration, whose policy was deregulation of many industries, including the thrift industry. The administration declined to submit budgets to Congress that would request more funding for the FHLBB’s regulatory efforts.
In 1989, the Lincoln Savings and Loan Association of Irvine, Calif., collapsed. Lincoln’s chairman, Charles H. Keating Jr., was faulted for the thrift’s failure. Keating, however, told the House Banking Committee that the FHLBB and its former chief Edwin J. Gray were pursuing a vendetta against him. Gray testified that several U.S. senators had approached him and requested that he ease off on the Lincoln investigation. It came out that these senators had been beneficiaries of $1.3 million (collective total) in campaign contributions from Keating.
Some things never change. Just read Wikipedia entry on the previous S and L collapse. Deregulation, gutting the remaining regulatory bodies, and then trying to bail out your donors. It’s almost an exact replay to today.
The Keating Five (or Keating Five Scandal) refers to a Congressional scandal related to the collapse of most of the Savings and Loan institutions in the United States in the late 1980s.
Following the deregulation of the banking industry in the 1980s, savings and loan associations (also known as thrifts) were given the flexibility to invest their depositors’ funds in commercial real estate. (Previously, they had been restricted to investing in residential real estate.) Many savings and loan associations began making risky investments. As a result, the Federal Home Loan Bank Board, the federal agency that regulates the industry, tried to clamp down on the trend. In so doing, however, the FHLBB clashed with the Reagan administration, whose policy was deregulation of many industries, including the thrift industry. The administration declined to submit budgets to Congress that would request more funding for the FHLBB’s regulatory efforts.
In 1989, the Lincoln Savings and Loan Association of Irving , Calif., collapsed. Lincoln’s chairman,Charles H. Keating Jr., was faulted for the thrift’s failure. Keating, however, told theHouse Banking Committee that the FHLBB and its former chief Edwin J. Gray were pursuing a vendetta against him. Gray testified that several U.S. senators had approached him and requested that he ease off on the Lincoln investigation. It came out that these senators had been beneficiaries of $1.3 million (collective total) in campaign contributions from Keating.
And one of them was John McCain, was it not?
BTW, this is something for the Ron Paul brigade to think about. A libertarian is going to reduce government regulation. It is also true that they would not act on a bail out either. So if you think that one of the causes of the housing bubble is unregulated lending practices, think twice about support for Ron Paul.