The Vultures Are Circling
The East Valley Tribune reports from Arizona. “Less than two years ago, Gilbert homeowners Tim and Kris Koster moved to the East Valley and shelled out $433,000 for a five-bedroom home. They recently heard a similar-sized home in the area sold for nearly $130,000 less. Looking back, it was the worst possible time to buy with house prices so overinflated, Tim Koster said. ‘I could just remember when we were buying this house, the sense of urgency, because prices were so high we thought we were going to get left behind,’ he said.”
“The Kosters don’t have the luxury to sit tight. They’re faced with a job transfer back to Colorado this summer, and the family’s options look bleak.”
“They already lost $40,000 in equity from their old home, which they used as a down payment. And the Gilbert home is listed at $394,900, a price that would pay off the mortgage and cover closing costs. ‘We leave with the skin off our backs, basically,’ Kris Koster said.”
“She’s put the home on Craigslist and other Web sites as a rental, but the rent wouldn’t fully cover the $2,100 monthly loan payment.”
“The Kosters say their last-ditch option is foreclosure - a dire scenario they never imagined could happen. ‘It’s always in the back of your mind,’ Tim Koster said. ‘I don’t sleep as well as I used to.’”
“Just more than 7,000 Valley properties entered the foreclosure process or were actually foreclosed in January. That compares to less than 4,400 home sales during the same month last year, according to Information Market.”
“When Mesa homeowner Sergio Calderon refinanced in 2006, he knew he was jumping into a ‘horrible loan,’ an interest-only loan with a 8.25 percent adjustable rate. ‘I knew it was a risky gamble,’ Calderon said. ‘As far as the housing market getting cold, I really didn’t see that one coming.’”
“He took out $80,000 in equity to start a landscaping construction business in Goodyear, expecting to sell his house later that year. When gas costs became too much, he rented an apartment close to work and tried to sell the Mesa house.”
“After 14 months, he gave up and recently rented out the place. Even with a tenant, Calderon said he’ll still be paying $500 a month on the mortgage, while also paying $800 in rent.”
“Meanwhile, his construction business is getting hit by the housing downturn, and he worries about losing income. He’ll keep making both payments as long as he can. Meanwhile, his family is cutting back on eating out, day care and other expenses.”
“People believed values would keep climbing, so they could always refinance again, said Joann Hauger, executive director of Community Housing Resources of Arizona. ‘Some of these people started to believe that their savings was their house,’ Hauger said.”
The Arizona Republic. “A small, young Scottsdale-based home builder says it could not compete with prices on discounted resale homes and with the promotions that bigger, more established builders were offering in the slowing economy.”
“As a result, Randall Martin Home decided it could not afford to complete four subdivisions it has started around the Valley, a company spokeswoman said. The decision to walk away from its vacant property and unsold homes has left people who have purchased and moved into the builder’s houses worried about their neighborhoods.”
“Jason and Cheri Diefenbacher of Chandler said they knew Randall Martin was in trouble when a subcontractor recently threatened to put a lien on their house if a $500 bill continues to go unpaid.”
“The couple closed on their home Jan. 18. But since they’ve moved in, they haven’t heard from the builder, who was supposed to complete final repairs within 30 days.”
“‘It’s a concern, because who is going to do the warranty work?’ said Cheri Diefenbacher.”
“Credit is the oil that greases America’s economic engine, and right now, that engine is sputtering. The easy money has evaporated. For Diane Valencia, it could mean losing a home to foreclosure.”
“Valencia is a subprime borrower who has owned her Youngtown home since 2004. She has been able to make her payments at the initial 9 percent rate on her ARM, but when that reset recently above 11 percent, things got dicey.”
“Valencia did succeed in getting her lender to modify that reset rate back down to around 9 percent, but the relief will last for only half a year. After that, she worries she’ll have to sell the home or lose it.”
“‘All I want is a fixed rate,’ she said. ‘They can see with my history that all payments are on time, but no one wants to help.’”
The Daily Courier from Arizona. “Approximately 230 people attended the Central Arizona Partnership Economic Forecast conference. Mike Dougherty, president of the Prescott Area Association of Realtors, said buying options are robust, and mortgage rates are good as Realtors enter the traditional selling season that runs from February through October.”
“Dougherty described the local housing demand as ‘pent-up’ and he believes inventories will decline as unmotivated sellers withdraw from the market because they can afford it.”
“‘In our market, sellers pricing their homes aggressively will succeed because buyers are looking for and getting bargains,’ he said. ‘I think it’s going to be a strong year.’”
“Realtors sold 3,226 homes in 2005, 2,362 homes in 2006 and 2,080 in 2007. Prescott’s median home price is down from $390,000 in February 2006 to $306,000 in January 2008.”
The Verde News from Arizona. “When it comes to sorting out the slide in Verde Valley home prices, everyone’s numbers say the same thing, your house isn’t worth what it was a couple of years ago.”
“‘The problem with statistics is you can make them say anything you want them to say,’ said Dan Mabery, of Mabery Caldwell Banker Real Estate in Cottonwood. ‘We see that coming out of Phoenix and we see that in the way we decipher them. We say it has only been a 5-percent drop. Well, bull. My belief is that it has dropped at least 20 percent. And that may be conservative.’”
“‘Here you don’t have as many comps to work with. But you can look at properties in some of the subdivisions or at townhouses and see that what originally sold for $210,000 is selling in the $150,000 range. That’s a significant drop, and 20 percent may be conservative. It is not over yet. That’s the problem,’ Mabery said.”
“‘At the current rate properties are being sold for the amount listed, it would take three and a half years to sell a home in Camp Verde. The rate is 2.3 years in Cottonwood,’ said Camp Verde real estate agent Rob Witt. ‘We need more buys. It’s as simple as that.’”
“Throw into the mix the foreclosures and the desperation sales, and the basic foundations that support home values are not present, he said.”
“In one area of Camp Verde, the average asking price has fallen from $475,000 two and a half years ago to $312,000. Just six months ago the asking price averaged $373,000.”
“‘I don’t think many Realtors can tell you they have been through anything like this,’ Mabery said. ‘They [prices of homes] have never gone backwards in my experience. But they needed to. They went way too far. The people living here cannot afford to spend the kind of money people were getting. It doesn’t work that way.’”
The Reno Gazette Journal from Nevada. “Home foreclosures in Washoe County more than doubled in January from December and rose six-fold from a year earlier, a report shows. Using data from the Washoe County Assessor’s Office, analyst Brian Kaiser calculated a total of 177 foreclosures of single-family homes and condominiums in Washoe in January, all but one in Reno-Sparks.”
“That’s up 113 percent from December’s total of 83 and a 510 percent jump from 29 in January 2007. By comparison, there were 169 sales of new and existing homes and 57 sales of condos countywide in January. Among foreclosed properties, there were 58 sales in January, all in Reno-Sparks.”
“‘It’s great for buyers, but’s really rough on sellers,’ said Wayne Capurro, president of the Reno-Sparks Association of Realtors.”
In Business Las Vegas from Nevada. “There were 881 new-home sales in January, which includes condos and apartment conversions, 1,124 fewer than in January 2007, says Dennis Smith, the president of Home Builders Research.”
“In January, the median price of the sales was $274,000, a year-to-year decrease of $60,945 or 18.2 percent, Smith says.”
“Most of the recent new-home sales are priced under $250,000, and for the first time in years there are many homes being sold for less than $200,000, Smith says. Centex, Richmond American, Astoria, Rhodes and DR Horton have lowered prices recently at all or some of their subdivisions, he says.”
“Centex, for example, has sold homes at its Mesa Verde community in North Las Vegas for $97 to $113 per square foot, he says. In addition, Centex was offering 5 percent co-op fees and paying some closing costs for buyers.”
“By the end of 2007, there were finished lots selling for little more than $50,000, Smith says. He adds he won’t be surprised if major public builders offer finished lots at some locations for less than $50,000 per lot ‘about half of what many spent on lot improvements less than a year ago.’”
“‘I have spoken to clients who are looking at these prices as great opportunities for land banking lots for two to three years,’ Smith says. ‘The vultures are circling. Most are investors, but not all. I have been contacted by builders that are ready to pounce on the right deal. Obviously, location is a key factor, but at prices that are equivalent to those we saw seven to eight years ago, these price points have to be classified as a can’t-miss investment.’”
“The slowdown in the housing market has some builders thinking about building rental homes in the wake of the apparent success of a similar Las Vegas project.”
“Signature Homes had originally planned to sell all of the 92 detached three-story units it built near downtown Las Vegas, but with the downturn in the market, the builder decided to lease the homes as income-producing property.”
“Late last year Signature sold the gated housing community to Copperfield Investment and Development Co. of Los Angeles, a private equity group, for $18.4 million - $200,000 per unit. It continues to rent the homes.”
“When it envisioned the project, Signature had planned to sell the homes but once the project was under way, the builder realized the market wasn’t going to support it, said Michael Shaffner, a senior associate with Marcus & Millichap that represented a subsidiary of Signature Homes, in the sale.”
“‘Once they started doing the development phase, they were at the point of no return,’ Shaffner said. ‘They were committed and took a gamble and thought they could go ahead and lease them out.’”
“‘I have been in communication with other developers who are looking at this as maybe something they can do to position themselves during these trying times,’ Shaffner said. The idea is that once the market rebounds, the builders would sell the homes as they would any other subdivision they built, he said.”
“A fast-growing 24-hour community lends itself to having a large number of rentals, Shaffner said. ‘The gap between renting and owning is very large here,’ Shaffner said.”
The Las Vegas Sun from Nevada. “Taking a weekend real estate tour on a bus called the Foreclosure Express might seem a touch ghoulish, like robbing the dead or at least whistling past a graveyard. But you would be wrong. On the Foreclosure Express, they sing.”
“‘All aboard the Foreclosure Express,’ Realtor Barbara Zucker sings with a show-tune lilt, snapping her fingers. ‘Climb aboard, get your houses for less.’”
“In the Great Circle of Real Estate, we all have our roles to play, even scavengers. Especially right now. More than 22,000 houses are for sale in and around Las Vegas, Zucker says. Hundreds of thousands of dollars are coming off house prices like the faces melting off the Nazis at the end of ‘Raiders of the Lost Ark.’”
“The story of the Las Vegas real estate crackup is told in numbers, and the numbers on this house, a nice three-bed, two-bath with tile, granite counters and a small bricked yard are as follows: It was first sold in 2003 for $235,000. In 2006, it was resold for $395,000.”
“Today, the bank has it listed at $285,000, and Barbara says she’d offer less. The bank owns too much property and banks aren’t too proud to negotiate.”
“Sometimes, people who lose their houses do awful things to them. ‘Not meaning any disrespect, because you’ve got to have a lot of compassion for them,’ Barbara says. ‘But they put their foot through the wall, they pee pee all over the carpet.’”
“The bus is appalled. How could they do that? What are they, animals? Barbara says, no, they’re just people under a lot of stress. They’ve lost their houses, they’re upset. And they probably got into it, not to speak ill of anyone, because other, less scrupulous real estate agents and lenders told them they could afford it, afford anything.”
“The bus is less sympathetic. ‘Is that an excuse?’ Diane Cortest says. ‘They had to do their homework.’”
“As the bus pulls away from the fourth house, a three and 2 1/2 that sold new in ’05 for $440,000, sold again in ’06 for $469,000 and is now on the market for $269,000, a crowd of adorable, mostly blond children gathers on the curb. They shake their little fists at the bus and jeer.”
“On the way back to the office, Barbara leads everyone in one last round of ‘All aboard the Foreclosure Express. ‘I actually wrote that song in the shower,’ she says. A man pipes up from the back of the bus. ‘I’ll bet it sounded good in the shower.’”
‘About 70 people gathered on the steps of the Washoe County Courthouse this morning awaiting the auction of Copper Canyon, but none made a bid on the 1,300-acre property in Sparks. The property went to auction today because the developer, SunCal, defaulted on its loan.’
‘Caller William Johnson opened the bid at more than $37 million and nobody made an offer. ‘There being no further bidders, the property is sold back to the beneficiary,’ Johnson said.’
‘The Clarkdale (AZ) Town Council directed its staff and attorney to file claims against the companies holding bonds for the Mountain Gate subdivision. Town attorney Rob Pecharich told the council he has had no response from Empire, the owner of Mountain Gate subdivision, to a letter he sent Feb. 5. He said he has been checking regularly with the federal bankruptcy court to see if Empire has filed for Chapter 11. No petitions had been filed as of Feb. 26, according to Pecharich.’
‘Home warranty work is another problem area in that some homeowners still have unresolved warranty issues. When Empire froze its operations at the subdivision and pulled off site, three town homes were under construction. Two of those had not been sold. One was sold but was still two weeks away from completion. No work is being done on those homes at this time. Property owners had been paying dues to the homeowners association, and they now wonder what the status is for those funds.’
“The property went to auction today because the developer, SunCal, defaulted on its loan.”
In late 2006 I had some work with Suncal in SoCal and they had no idea that this bubble was getting ready to pop, just kind of laughed at me when I tried to talk to them about the coming tsunami. At that time they had just purchased (er financed) about 45,000 acres of land near Albuquerque and they were developing land on east side of Chino, CA right next to a bunch of dairy farms.
They know what I’m talking about now.
They defaulted on a large piece of land here recently. Who is running the show there? Alan G?
Not sure exactly I didn’t get in far enough to meet upper management, I think its a family run company.
This vulture is still in his nest sitting on his cash.
Preen, yawn preen, stretch preen preen.
grubner,
I agree, it’s way too early - let ‘em eat granite.
Lowball, please wake me up when it’s 30 cents on the dollar. And tell them I’m a cash buyer. No funny money.
Yeah, no way any self-respecting smart money is going to buy into a economic situation so uncertain and so fluid as this. Doesn’t it even occur to these short bus chmucks that they might want to at least see how deep this recession winds up being?
My guess would be that the short bus riders must have complete and unquestionable faith in the PTB’s self-professed ability to completely rewrite the laws of gravity.
yup.. that’s the thing… due to economic uncertainty, a buyer’s concerns should extend far beyond affordable RE prices. Someone with less than 3, 4 or maybe 5 years of carrying costs and living expenses saved up might want to think twice about buying… unless dad owns the company and a paycheck is guaranteed.
3, 4 or maybe 5 years
oops.. i meant to say months.
LOL, I liked “years” better. We don’t even know which neighborhoods/towns/subdivisions will remain desireable on the other side of this downturn.
It is amazing that so many people thought real estate will always go up, that their jobs will last as long as the mortgage, and their personal incomes will always increase. These very same people want to vote for “change” (Obama “change” style), no matter if it’s big government. Personal finance wise, they don’t accept change. They want our world climate to be the same and to stop nature from its cycles of warm ages and ice ages. They want their own bodies to stay young, so they botox and staple their stomachs. They are all a bunch of spoiled children.
In five years we could be at the critical point where global warming is irreversible for a few millenia. Or not. I’m certainly not a fan of Al Gore. But I am tired of the incredible amount of waste and pollution we have in America. I think it’s not a good time to expect to have a permanent residence to live in and to expect it to be available for your grandchildren. Most of the Florida real estate may be underwater in one generation.
Sheesh, is geography no longer taught in school? It’s amazing the number of people hoodwinked by this nonsense.
Learn about climate cycles, orbital interactions, and solar flares.
The Earth’s climate was never fixed — it was colder and warmer as one looks backwards in the geological record, and will continue that way despite the incessant fear mongering.
Sorry, meant geology not geography.
And Florida real estate is under water today!
I ??!
Preen, yawn preen, stretch preen preen.
Ditto. My investments are growing and the true carnage hasn’t even begun to play out yet, meaning the correlation of forces is only getting better. This vulture is sitting tight for at least the next year.
Go ahead, knife catcher. March into that desert. You’ve got a canteen of water. . . and 50 miles to go. I’ll catch up with you about 20 miles into your hike. Y’all have fun!
“Hundreds of thousands of dollars are coming off house prices, like the faces melting off the Nazis at the end of ‘Raiders of the Lost Ark.’”
Wow, what a wonderful analogy!
And then the whole mountain crashes down/explodes.
Tim and Kris Koster moved to the East Valley and shelled out $433,000 for a five-bedroom home……………………………..“They already lost $40,000 in equity from their old home, which they used as a down payment. And the Gilbert home is listed at $394,900, a price that would pay off the mortgage and cover closing costs.
Which is it? Did they shell out $433,000? or did they just put down 10%, including closing costs?
No, like every other dramatic story of loss and defeat, the newspapers always say the “owner” paid x dollars for the house, even if they put NOTHING down.
In this story, the owner shelled out $40,000, and will probably not get it back………..boo hoo.
“Tim Koster said. ‘I could just remember when we were buying this house, the sense of urgency, because prices were so high we thought we were going to get left behind,’ he said.”
Too bad, eat it. Live by the herd, die by the herd, dickoff.
Amen, brother Palmetto. The vast majority of Americans have become mindless, irreflective herd creatures who would never dream of going against popular “wisdom.” Now as the wolves are moving in to rip the meat from their bones, they’ll discover there’s a price to be paid for blind lemming-like followership and the suspension of critical thinking.
Not to hijack the thread, but there’s a ridiculous article in the Tampa Tribune this morning about the developer building the project on Cypress Street that you were trashing yesterday. The reporter fawns over the guy in classic puff piece fashion. The planned units are all at least 50% overpriced, and that’s presuming that the neighborhood evolves positively. It’s been awhile since I drove down that way, but that area is where Darryl Strawberry got arrested for solicitation a few years ago.
“They’re faced with a job transfer back to Colorado this summer, and the family’s options look bleak.”
Four choices:
1. Walk away,
2. Leave the wife and the family here,
3. Rent it out and let it suck you dry for the next 30 yrs, or
4. Lower the price and dump it with a short sale.
Just another example of how these homes are an anchor around your neck. Location, location, location. Buy and you just might have to live there the rest of your life.
I have always felt that the 2.5x rule came about becuase even though mortgages were available for 30 year terms - most folks once considered it ideal to pay off ASAP and to rely on the full 30 years only as a contingency.
What is so puzzling is how in an age that demands increasing mobility so many came to unquestionably accept that they would need all 30 years - but also contemplated 40 and 50 year loans.
Because real estate always goes up! If you get transferred after a year or two - so what, you can always sell your house and make a bundle.
“rates are good as Realtors enter the traditional selling season that runs from February through October.”
I like how this line reads. The Realtors enter alone.
The gazelle enter the (crocodile infested) watering hole.
the last story from the Las Vegas Sun is priceless, and mighty funny too (in a dark and twisted way)…..best link yet IMHO…
No kidding! I almost “pee pee’d” myself.
yeah. I’m laughing about that group of blond children from a house bought for a price above $400,000 and now selling for under $300,000!
Not a good time to even rent in neighborhoods as disfunctional as that. Better to rent in large apartment complexes. I like Equity apartments. On the east coast I’m not in an Equity apartment, but a different big corporation’s, and I don’t have any bad neighbors. No kids making obscene gestures.
Funny how a few years ago GF’s looked down their noses at us renters and considered us a bunch of dregs. Now many GFs are dregs, and many of them are renting SFHs to dregs. Ironically, the slums are more and more in single unit dwellings, but the upscale civilized places are in large apartment complexes throughout the U.S.
Funny how a few years ago GF’s looked down their noses at us renters and considered us a bunch of dregs.
Yep, how the tables have turned. My wife had to put up with some snide comments and smug “advice” from her Bunko buddies - all luxury-SUV driving professional women - about my insistence on renting back in 2004. They assured her that “it’s different here - real estate only goes up.” Now several of them are underwater on their homes (I gleefully noted that information on the county assessor’s web site) and there’s some definite signs of financial stress/buyer’s remorse among these ladies. We, meanwhile, are sitting pretty and feel fully vindicated by events - and trust me, I intend to reward my wife for her faith in me when it comes time to buy.
More importantly, has SHE been “rewarding” YOU?
“People believed values would keep climbing, so they could always refinance again, said Joann Hauger, executive director of Community Housing Resources of Arizona.
The new economy………..serial refinancing.
I think few people here thought house prices would keep on rising, so I don’t know which people she meant.
I spent last night in Las Vegas with some other snowbirds I know from Maine summers. They are suddenly in a different house, larger and with a better view, which they bought just months ago when it looked like a bargain they couldn’t refuse. Problem is, they made the bid in a hurry and didn’t try to sell their previous house first. They now have the previous house listed at below what they paid for it in 2004. It’s been on the mkt two months. At least they had the good sense to start out with no expectation of profit. They say their listing is the lowest of comps. This isn’t a “sob” story yet, but I think they will have to be aggressive as well as lucky. Asking price $468K, not a range that is selling very well. Will report further…
Didn’t LV have more foreclosures than sales in January?
Luck? How about a miracle from God.
While anything’s possible in LV, i dunno…
“For what one expert thought was the first time, the number of monthly foreclosures exceeded the number of monthly home sales in California in January, according to data compiled by two research companies.”
http://www.mercurynews.com/realestate/ci_8344134
I know someone who is dealing with foreclosure and is hoping just for that.
7 out, credit line away.
Next shooter…
I wonder how many of us are, like me, inveterate Don’t Pass bettors at the craps table.
Apropos of Arizona, I have recently spent a lot of time driving among Joshua trees and Saguaro. Although JTs have an appropriately pricky endmember, the branches are often curved or bent, preventing the application of suitable force. The relatively rectilinear saguaro might better suit the purposes of Slim and exnnv, especially if an automatic applicator needs to be engineered for the millions of likely targets.
Rectilinear is a real word.
http://en.wikipedia.org/wiki/Rectilinear
I thought it was a joke referring slyly to its intended use. But that would be rectallinear I guess.
Now thats funny
“On the way back to the office, Barbara leads everyone in one last round of ‘All aboard the Foreclosure Express. ‘I actually wrote that song in the shower,’ she says.
Previously known as “all aboard the short bus”
All aboard the Foreclosure Bus for future FB’s.
“‘I don’t think many Realtors can tell you they have been through anything like this,’ Mabery said. ‘They [prices of homes] have never gone backwards in my experience. But they needed to. They went way too far. The people living here cannot afford to spend the kind of money people were getting. It doesn’t work that way.’”
A little honesty from a Realtor? I bet his fellow professionals will sit him down for a good talking to.
Attn realtors: your job has been commoditized, just like travel agents and stockbrokers. Get used to it, find a job with Redfin if you’re lucky, and stock up on the Top Ramen.
“Dougherty described the local housing demand as ‘pent-up’ and he believes inventories will decline as unmotivated sellers withdraw from the market because they can afford it.”
This guy should be in Congress - while attempting to spin a belief in “pent-up” demand he reveals his actual belief in “pent-up” supply.
“People believed values would keep climbing, so they could always refinance again, said Joann Hauger, executive director of Community Housing Resources of Arizona. ‘Some of these people started to believe that their savings was their house,’ Hauger said.”
but now all the banks have cut off the heloc’s and people cry as they “see their savings evaporate?”
“a crowd of adorable, mostly blond children gathers on the curb. They shake their little fists at the bus and jeer.”
LMFAO!! Which one of you sent your kids out there?
That was a helluva verbal image.
Distressing, what is next, kids with dirty little faces and torn clothes begging for change.
Next year some of those little fists might be clenching little rocks. Maybe that realtor woman can write a song about that too?
“a crowd of adorable, mostly blond children gathers on the curb. They shake their little fists at the bus and jeer.”
Not me. I’d have sent my kids out to mock the little fist-shaking FB-spawn.
“a crowd of adorable, mostly blond children gathers on the curb. They shake their little fists at the bus and jeer.”
Threatening AND adorable? I’d get on the bus to see that.
The gas to fill the gas tank on the bus might be worth more than the houses soon.
Soon the kids will be replaced with the adult FB’s with tire irons and chains blaming the short bus for lowering their property values.
That bus full of knife-catchers/gawkers might well represent the last best hope in many a year for a momentary halt to the property-value free-fall in those neighborhoods. Better a “below market value” (FB’s eyes) offer from a knife catcher, than no offer at all as prices tank with no end in sight.
To me one of the most compelling reasons to wait until the dust settles, is the the character of entire neighborhoods will be in flux for months or years to come - not sure I want to live amongst a bunch of embittered FBs barely holding on to their “American dream” and subsisting on Ramen noodles while I blithely sailed in and paid 40% less for the much nicer place next door. Those little fists could propell a lot of eggs toward my house out of rage and jealously implanted by their parents.
Good pont.
I find the “mostly blond” part interesting; to me it implies, “wow, this thing has spread to the middle class.” Imagine the outrage if they substituted “mostly black” or “mostly latino”.
They could have said “mostly white”; is that what they should have said?
House prices are like Wile E. Coyote with his Acme jet pack accelerating straight down off the cliff and exceeding terminal velocity. No loans for folks to buy, folks on the sidelines, folks walking away, economic down turn, builders moving inventory, shoddy construction, property taxes, scavenging of copper, trashing the house upon eviction. But this housing market is not really a cartoon where the coyote is back in action in the next frame after being totally flattened. Maybe if we wait long enough the banks will pay us to take over a house after all it does cost money for demolition, liability insurance is needed for a property, back taxes.
“When Mesa homeowner Sergio Calderon refinanced in 2006, he knew he was jumping into a ‘horrible loan,’ an interest-only loan with a 8.25 percent adjustable rate. ‘I knew it was a risky gamble,’ Calderon said. ‘As far as the housing market getting cold, I really didn’t see that one coming.’”
“He took out $80,000 in equity to start a landscaping construction business in Goodyear, expecting to sell his house later that year.”
LOL, ding-ding-ding! We have a Darwin Award winner! What a smacked ass! He knew it was risky, but he did it anyway, because by GOD, he’s entitled. Now, HORRORS! His family has to cut back on day care and eating out!
He did it anyway because he really had nothing to lose.
Look, the masses are figuring out that their wages are not keeping up with prices. They can’t maintain a reasonable lifestyle, let alone acheive the asperational lifestyle they desire.
So, when someone offers you a huge chunk of money to gamble with… come on, it would be stupid to NOT gamble with other peoples’ money. If you win, you keep the winnings. If you lose, you walk away.
The short-bus riders are the people that are SHOCKED that people are walking away.
A recent Mogambo Guru article said the exact same thing: heads I win, tails I break even.
“‘It’s a concern, because who is going to do the warranty work?’ said Cheri Diefenbacher.”
Look in the mirror, genius! But that won’t occur to her, now will it? Welcome to the new America, where debts aren’t paid and warranties are not honored, where illegals can roam free, dropping their spawn and being compensated for it at taxpayer expense.
“…who is going to do the warranty work?’ said Cheri Diefenbacher.”
Mr Diefenbacher??
The funny thing is, while so many can’t do their own repairs - at the same time there have probably never been so many disused powertools sitting idle in garages nationwide - the past profits of Home Despot and rusting relics of the deification of houses.
“…where illegals can roam free, dropping their spawn and being compensated for it at taxpayer expense.”
“The slowdown in the housing market has some builders thinking about building rental homes in the wake of the apparent success of a similar Las Vegas project.”
Back to the future: Levitt and Sons [Levittown] first project was a block of rental homes on Long Island, before switching to a sales operation. Link.
Rental farms, coming to a sub-d near you.
My suggestion for a bubble song would be:
NAR,NAR, NAR, NAR.
NAR,NAR, NAR, NAR.
HEY HEY HEY,
DON’T BUY.
“It was first sold in 2003 for $235,000. In 2006, it was resold for $395,000. Today, the bank has it listed at $285,000, and Barbara says she’d offer less. The bank owns too much property and banks aren’t too proud to negotiate.
Home tours on the Foreclosure Express are the real estate version of speed dating. Everyone is through the house in five, maybe 10 minutes, and it’s off to the next house a mile and a half away. It sold in ’01 for $180,000, in ’05 for $410,000 and today is up for $309,000. Three and two, with wash views.”
These do not sould like good deals to me. The bank is surely paying these used house sales people a comission. Lots of room left on the blade for these falling knives to cut very deep.
If I were looking to buy a house, I would be looking at 2000 price and then adjusting up for wage growth (about 10% since then) to establish a reasonable price to live in.
If I was looking at an investment property, it would have to be less.
The bank is surely paying these used house sales people a comission.
As far as I know, banks have always paid commissions on the sale of foreclosures. I don’t know why a realtor would show a house if they were not getting any money.
And there is so much room for the same kind of herd mentality shenanigans and shillery that fed the boom in the first place.
Less than two years ago, Gilbert homeowners Tim and Kris Koster moved to the East Valley and shelled out $433,000 for a five-bedroom home.
Actually, THEY didn’t shell out any such thing. Their bank did. That is why they lose nothing by walking away.
The Kosters don’t have the luxury to sit tight. They’re faced with a job transfer back to Colorado this summer, and the family’s options look bleak.
Other than members of the Armed Forces, no one is ever FORCED to move for a job transfer. I call BS on this excuse.
My DH works for the railroad, and we have been forced to move, and they haven’t paid for us to move either.
Ouch…
Our move are mostly voluntary. Yes, the company I work for will control job flow by offering promotions where they need talent… but that’s the carrot. We’ll move a large number of people this year and very few will be “your job is moving, are you?” Mostly we’re opening new positions in low cost living areas and we see how many apply.
The two exceptions:
1. If any one department has too many move to one location, the whole department is moved. However, we’ve been seeing departments move to multiple locations. (That’s its own organizational headache.)
2. If any one campus is too depleted of employees, we of course will consolodate.
None of the moves are being done for Charity. Its what is required to hire new talent. All the engineering companies have a tidal wave of retirements going through the system and thus must adapt.
Got Popcorn?
Neil
Other than members of the Armed Forces, no one is ever FORCED to move for a job transfer. I call BS on this excuse.
Maybe not forced at gunpoint, but if your employer says move or you’re fired, that could be considered by many as “forced”. Of course, he could quit and look for another comparable job. In this economy that is a crapshoot at best.
I guess it depends on whether you consider yourself to be “owned” by your employer. If I were told “hey, we’re moving you to Texas” tomorrow, my response would absolutely be “no, you’re not, my services are no longer required, here’s my two weeks’ notice (if that).” The job market would have to be a LOT worse than it is today in order to accept such a ludicrous demand.
Of course it helps that I’m a renter and didn’t do something stupid like take on a mortgage that I can barely afford, so I have a good five years’ worth of living expenses in liquid savings. I sleep well at night knowing that my employer needs me more than I need them.
The best insurance policy in the world, IMHO. Keep ‘em guessing.
I guess it depends on whether you consider yourself to be “owned” by your employer.
A good point. My guess is that most middle class Americans are “owned” by their employers.
Anyway, the job market really does suck out here where I live. Some examples:
Dozens of people, many with degrees, applied for a part time, $12/hr job at the local library.
My employer stopped giving cost of living increase a few years ago. Don’t like it? You are welcome to leave. This is at a Fortune 50 company that is on track to make a $10 billion dollar profit this year.
I about lost my breakfast reading those words from the Realtor(s) quoted from the Camp Verde and Cottonwood areas. I know 100% positive that they were pumping and jiving buyers back in the bubbly days with “Get in now, it’s only going to go higher” advice. I vividly remember their smart-ass smirks and backslapping each other in their offices. They can espouse a rational attitude in hindsight, but they’re lying, self-serving dogs through and through.
Btw, The Verde Independent/News calling itself a newspaper is like McDonald’s calling itself a fine dining establishment.
There you are! I was looking for you in the Florida thread yesterday. You’re the one who wrote the brilliant post a little while back about the decline of South Florida due to the influx of drug money and other factors. Excellent characterization. I know it is inappropriate for this thread, but yesterday Ben posted something about South Florida real estate that was perfect for a replay of your post. Please, I humbly ask, should there ever be another Florida thread dealing with Miami, do it again. You have a way with words that just tells it like it is.
“As the bus pulls away from the fourth house, a three and 2 1/2 that sold new in ’05 for $440,000, sold again in ’06 for $469,000 and is now on the market for $269,000…”
Boy that first buyer must be thinking: “geeeeze, that was close” - you don’t suppose someone may have pointed him here a couple of years ago?
Can someone explain the Joshua Tree reference that keeps coming up? I’ve googled it, and found nothing. I don’t get it.
Thanks in advance.
For profit, quite a few people screwed up the economy. We’ve decided what they deserve is a cactus up the wazzoo. After much debate, it was decide that the majestic and tall Joshua Tree was the appropriate device.
So when anyone tries to sucker someone into a bad real estate investment, we advice the use of a JT. This is also true of proponents of “suicide loans.”
Got Popcorn?
Neil
My daily serving of The Housing Bubble Blog and comments makes believe that there are still some sane people in this world. Not the da’s who buy something they can not afford and then feel outraged to be foreclosed on, but peope who find buying some something you can not afford to start with stupid.
There is another aspect of this property bust. Not sure if anyone has brought the subject up but it could prove to be quite significant unless the banks and credit companies change the rules concerning FB’s who walked away.
There are going to be a LOT of FB’s with ruined credit who will either get slammed with a negative non-payment credit report or, worse, show a bankruptcy. The numbers could amount to several hundred thousand to a couple of million people. Under current rules, by walking away from a property it limits their chances of getting credit between 7 to 10 years. In other words, those FB’s will be out of the potential buyer picture for those periods, thus removing a big property buying segment of the population. That’s if, after getting burned, they are even interested in buying again.
Someone posted that the bottom will not arrive until 2011. I agree with that frame as a minimum. However, if the US continues it’s economic slide with rising gas prices, medical insurance and food prices eating up a bigger and bigger piece of incomes, that 2011 number might well stretch into 2016 +. It took about 9 years for this mess to unfold. It could take 9 or 10 years to resolve which would bring us to 2017.
In any case, we know one thing. When this mess eventually bottoms out - when the cause of this mess Mr. Magoo is in his grave - property prices are not going anywhere for many, many, many years.
In other words, potential buyers shouldn’t worry about missing the boat because the boat is going to be moving very, very slowly for years to come. NOW IS NOT A GOOD TIME TO BUY.
Mike,
The bottom will probably be in late 09-10-11 but will also probably be a quite long.
I’m thinking it might last till 2020. There are some demographics that could push it even longer. The baby boomers are retiring in mass and death rate will be accelerating in the 2015-2018 era. So, demand will be sputtering because of that as well.
Its going to be a big mess from a price standpoint. I’m not sure how it will seem to those of us in the workforce. Population decreases are deflationary.
Its not necessarily that real estate will be a bad buy. Just will be a very poor investment at best.
Many baby boomers, myself included, will work into their late 60s or 70s. I’m 48 years old. Many boomers are in very good physical shape too. I focus on good health. Some of the boomers bought several houses as a stupid approach to investing for retirement. They ignored all the basic personal finance rules. They are so underwater that they cannot afford to retire. I have been renting since 1996 and can live several years without a job, based on my savings. But I would be bored by retiring. I will eventually want to stay in one spot (renting still) and work in that area several years (commuting by electric car or bike). But retirement sounds pretty boring to me.
“a crowd of adorable, mostly blond children gathers on the curb. They shake their little fists at the bus and jeer.”
But what color were their eyes? Were they fat or skinny? And what did this have anything to do with anything? I don’t get it…
All it did was remind me of the old horror movie “Village of the Damned”.
Hey, wait, now it all makes sense!
“a crowd of adorable, mostly blond children gathers on the curb. They shake their little fists at the bus and jeer.”
This sounds exactly like my family reunions! Except there’s also potato salad and lots of profanity. Ah, nostalgia fills me…
“‘All aboard the Foreclosure Express,’ Realtor Barbara Zucker sings with a show-tune lilt, snapping her fingers. ‘Climb aboard, get your houses for less.’”
Picture this: Babs and her foreclosure bus are wending their way to their next viewing, singing their inane little ditty and sharing their mindless observations. Suddenly, all conversation ceases, all eyes turn to stare, as a strange and disturbing spectacle presents itself. A beat-up old hearse with a large, stuffed vulture mounted on the roof falls alongside the bus. Ben Jones is at the wheel, while a dolled-up TxChick, riding shootgun, points to the stylized sign on the side of the hearse: “Ben Jones HBB Knife-Catcher Carrion Spotters.” A diabolically-leering NYCityBoy leans out the window, beer bottles on his fingertips, a la that lunatic from the cult-classic WARRIORS: “Knife-catchers, come out to plaaaayyy-yayyy…knife-catchers, come out to PLLAAYY-YAYYY…”
http://www.youtube.com/watch?v=xITVFgxcDIg
At each stop, HBB stalwarts pile out from the hearse as if from a clown car, accosting the aghast foreclosure tour participants with printed spreadsheets asking them to list their contact information and assets, so that after their “investment” goes south, we can swoop in and divest them of their fungible assets - for pennies on the dollar, we’d make clear to them.
I’ll volunteer to videotape the whole thing on my HD camcorder for the amusement of the board as a whole. What say you, HBB Brethren & Sisters?!!!
You have brilliant ideas! But forget watching, I wanna come. It sounds like the party of the CENTURY. If you let me, I’ll bring the head-bands and the gigantic tape-deck, and frosted donuts.
I think you’re wise to have Ben driving, he strikes me as probably a good driver. I suspect that NYCityboy is a high-strung driver and might just start ramming things, and txchick would probably spot some simple little innocent dog standing there and screech to a halt and jump out and tackle it, to ascertain its health and well-being, which would slow things down and then the tard laden bus would get away.
I ran over a cat the other day. Swerved all over the place, but I finally got him.
Here in New Zealand, possums were introduced into the ecosystem, and have had their way with wrecking birds habitats and other badness.
You are encouraged to hit them, should one be on the road in front of your car.
You will seldom see more road kill, then you do here.
Olympiagal, you would probably not want me driving. But not for the reason you think. When I drove I was a very cautious and safe driver. I do swear a lot, though. Other people’s carelessness really pi$$es me off. Go figure! But I have only driven once in 3 years. I encourage anybody to go a couple of years without driving and then get behind the wheel. It is a little unnerving. That would not be the guy you want driving the Magical Misery Tour bus.
What about Neil and his popcorn, and exnv and his JT’s? Do they have a place in your dark opera?
Oh yes, Neil & the Usual Suspects - you know who you are, HBBers! - would be accorded places of honor on this un-Magical Mystery Tour. I’d follow on my motorcyle - Olympiagal on back? - and she could handle the videography. Heck, we might have a whole gypsy caravan chasing them around by the time we rounded up everyone in here who wanted to rain on Bab’s parade.
Sammy:
One of the great moments in over-the-top American cinema. Thank you.
But hey: your putative Ben Jones is the guy who takes a knife in the hand at the end of the movie.
As to the cat: his father, a Bengal tiger, has just pulled alongside you in a hearse, and is clanking beer bottles together in his claws….Saaaaammmmmmmyyyy, come out to play-ay-ay-ayyyyyyyy……
AAaaaiiiiiiiiiiiiiiiiieeeeeee!! Revenge of the Killer Cats.
Comment by Bill in Carolina
2008-03-02 08:40:17
“Hundreds of thousands of dollars are coming off house prices, like the faces melting off the Nazis at the end of ‘Raiders of the Lost Ark.’”
‘Wow, what a wonderful analogy!’
I remember being annoyed at the disparate Nazi evaporations. One guy melts, one guy instantly mummifies, and weren’t there full face explosions? Torso piercing targeting lightning blasts? What’s with that? Maybe the Ark of the Covenant came with multiple choice outcomes for Ark-fondling evil-doers. Or, harkening back to my post over in bits, maybe it’s like the stages of heaven for Mormons who pay club dues–oops, I mean ‘tithing’–and thereby decide which level of eternal subdivision they will dwell in post-death: Celestial Ridge (luxury), Telestial Farms (midrange), or Terrestrial Circle (starter).
It could be like that–Face Melt for Level 1 malefactors, Instant Flesh Dehydration for Level 2, and so forth.
Is what I’m thinking.
For Diane Valencia, it could mean losing a home to foreclosure.”
“Valencia is a subprime borrower who has owned her Youngtown home since 2004. She has been able to make her payments at the initial 9 percent rate on her ARM, but when that reset recently above 11 percent, things got dicey.”
“Valencia did succeed in getting her lender to modify that reset rate back down to around 9 percent, but the relief will last for only half a year. After that, she worries she’ll have to sell the home or lose it.”
“‘All I want is a fixed rate,’ she said. ‘They can see with my history that all payments are on time, but no one wants to help.’”
…if her starting rate was 9% on an adjustable, she has a fico of around 550. Never should have been approved, and btw Diane, your fixed should be around 12.5%. People like you that don’t pay your other obligations on time, or have a BK, or tax lien.. get the rate you deserve.
On the bright side, since your fico can’t get much worse, a foreclosure wouldn’t have that much of a negative impact on you.
“‘All I want is a fixed rate,’ she said. ‘They can see with my history that all payments are on time, but no one wants to help.’”
You might want to also ask your fairy godmother for a lower loan balance before you get into a fixed rate loan.