A Good Idea Gone Bad
The Daily Press reports from Colorado. “It is true. Foreclosures have increased in Montrose County. The total number of sales in the area are down. Home values have also decreased and there is a larger buyers market than ever before. Montrose native Dave Weber bought his house about three years ago. He knew the house needed repairs, but he never figured that additional construction projects, plus some unexpected medical emergencies would put him in the position he is in now — foreclosure.”
“About a year after he bought the home, he refinanced. Now he spends hours a day on the phone with the company trying to save his home, each time he is told something different.”
“‘When the market was really hot, almost anyone could get a loan,’ said Marjorie Phelps, broker and current president of the Montrose Association of Realtors.”
“Subprime loans were created to ‘make ownership more available to more Americans,’ said Merle Allen, director of counseling for the Grand Valley Housing Initiatives. It was economy driven.”
“‘It was a good idea gone bad,’ he said. ‘The American Dream was to own a home, but it wasn’t available to the working class American. The idea was never being that someone would look at that and take advantage … it spiraled out of control.’”
“From 2002 to 2005, Montrose County saw a large steady increase in sales, according to analysis by Lynn Vogel of Comparable Sales Research. The total dollar sales also increased significantly during that time.”
“Between 2003 and 2004, the total dollar sales growth rate in the city of Montrose was at 58.83 percent. That growth rate was high again between 2004 and 2005 at 29.99 percent. However, data shows Montrose, city and county, started to fall after 2005.”
“‘Our adjustment started in 2005,’ said Vogel.”
“Where the area is seeing the largest inventory, according to Phelps, is in the $240,000 to $325,000 range. However, Montrose has a larger-than-normal inventory in all areas. Phelps said she heard there is a five to 10 year build-out in the county.”
“‘A lot of people move here and want to buy a home, but it’s hurting because they can’t sell their home in California, the Front Range,’ Phelps said.”
USA Today on Colorado. “Foreclosures are ripping through the rows of new homes in the flatlands where Denver turns to prairie. The foreclosure epidemic has swept so quickly through this part of Denver that in less than two years, lenders took action on 919 of the roughly 8,000 properties here, according to city records.”
“‘The people ultimately getting hurt here are the homeowners, often lower-income people that probably should never have been approved for a mortgage in the first place,’ says Sindee Wagner, a deputy in the city’s Public Trustee office.”
“Dave and Suzie Evans’ was a tidy, two-story house on Orleans Street,. Dave Evans admits the $182,000 mortgage they took out was more than the couple could afford, even with both working.”
“‘My parents taught me not to spend more than a third of your paycheck on a house, but that went out the window,’ he says. They wanted to buy and fell in love with the house. For a time, it worked.”
“Then Evans lost his job. The couple fell six months behind on their mortgage. Their credit cards slipped, too. And their car payment. At first, creditors called at all hours. Then even the bank stopped calling.”
“‘Eventually we sat down and said that’s it,’ Suzie Evans says. ‘It was almost a relief when we got to the day when we walked out of that house, when it was over.’”
The Greeley Tribune from Colorado. “Shelley Costigan’s dream seemed so real it felt tangible. The project was a way for Greeley Realtor to create business. She had done similar things on a smaller scale before. She would work with a builder to build a spec home or two, and the homes always sold.”
“That was during Greeley’s roaring housing market. Times, of course, have changed. With the downturn in the real estate market, building has slowed, lots planned for development sit vacant and growth rates are stagnant.”
“She sold two homes right away. ‘Then the market just started changing,”‘ she said. ‘It pretty much just slowed down, totally.’”
“Greeley has about 4,000 vacant units that could be developed. ‘If you look at it as a peak year, you would say we’ve only got about two years of capacity,’ said Greg Flebbe, the senior planner with the city of Greeley. ‘If you look at it as what we’re expecting for this year, you’ve got about 20 years of capacity.’”
“During the boom years, said developer Jeff Demaske, Greeley made a good market because the prices for homes were good.”
“As the housing bubble grew, however, everyone wanted a piece. The city raised its fees, farmers started charging more for land. As builders passed these costs onto the price of a new home, much of the demand dried up. It no longer made sense to commute to Loveland, when a house there cost virtually the same as one in Greeley.”
“‘It’s our own fault to a certain extent,’ Demaske said. ‘There were just too many lots on the market.’”
“‘I don’t think it will ever get back to the growth it was,’ said Costigan. ‘I think part of that was because as a market, Greeley was very low in the pricing of their homes, so there was a big adjustment there.’”
“Costigan said the reasons for the slowdown are varied and complex, but she points to the housing boom itself as a contributing factor. Greeley simply over built. ‘We were building quickly,’ she said. ‘Because for a while we had a definite need for new construction, and we just kept going and going and going.’”
“In retrospect, the housing collapse shouldn’t have caught anyone by surprise. ‘We should have known,’ she said. ‘It always goes in cycles.’”
The Arizona Daily Star. “There apparently is no shortage of deal seekers in the Green Valley real estate market. Dozens of them turned out for Saturday’s auction of nine new homes in Las Campanas Village.”
“The bidding came hesitantly and in increments of only $1,000 or so. Several of the winning bids landed around $140,000 plus a 10 percent auction premium. That’s about $100,000 below the list prices for the two-bedroom homes, which ranged from about 1,680 to 1,760 square feet.”
“The developer, Mark Hughes, called it ‘a bad night in Las Vegas.’”
“Only three of the houses, those that were “absolute” with no cancellation rights, were sold after the auction. Hughes made counteroffers for the other six. Hughes said he probably will reduce the prices of his remaining houses based on the auction results.”
“The winning bids ‘were lower than I expected,’ he said.”
“A drop in prices is not welcome news for some retirees who bought at the peak. Winter resident Joe Morrow, who attended Saturday’s auction, said his Green Valley house is probably worth about $150,000, compared with about $200,000 two years ago. Judging from the prices at the auction, he thought he might revise that estimate to the $120,000s or $130,000s.”
“Gary Beatty, an unsuccessful bidder on two properties, said he felt sorry for other buyers in the Las Campanas neighborhood who paid in the $230,000s or more. He bid about $137,000 on both tries on behalf of a brother. The winning bids were not much higher.”
“‘This market is terrible right now,’ he said.”
From KTAR.com in Arizona. “Some homeowners facing foreclosure are finding a way to take advantage of the slumping housing market.”
“As mortgages structured during the housing boom leave them with negative equity, they are purposely allowing those homes to go into foreclosure while buying another home at today’s depressed prices.”
“Jill Hoogendyk with Home Point Mortgage in Phoenix said it’s a growing trend.”
“‘Many times, homeowners are upside down on their property. They can’t sell the property, so they walk away,’ she said, adding, ‘Before they let that happen, they go and buy another property because their credit’s still intact and their income justifies the other property. Then they move into that property and walk away from the property that they’re unable to sell.’”
“Hoogendyk added, ‘People can’t afford the home they’re in, so they’re actually moving down to a more affordale home for them.’”
In Business Las Vegas from Nevada. “Sales during the fourth quarter for all three categories were bleak, with the 8,668 recorded representing a 50 percent drop from the fourth quarter of 2006.”
“One of the hardest hit areas for single-family housing was 89146. Its prices fell 28 percent to $211,075. Another hard-hit area was east of the Strip in 89169, which has many condo conversions. Its median price fell 52 percent to $204,500.”
“With about 40 percent of the existing home sales in some phase of foreclosure, Dennis Smith, president of Home Builders Research, says he expects the median price to remain at or below the current level.”
“‘It appears many foreclosures are now being sold by banks at roughly 35 percent to 50 percent below peak prices of 2004,’ Smith says.”
“Operators of the Trump International are hoping the resort will be greeted as a breath of fresh air in the Las Vegas market when the property opens its doors March 31.”
“It should. The luxurious 645-foot, 64-story, $500 million hotel and tower will be smoke-free and has no casino.”
“‘It will be a place of refuge for our residents and guests,’ said Steve Shalit, managing director. ‘No clang, clang, clang sounds from slot machines anywhere in the building. And, it has a lot of Donald Trump in it.’”
“Trump International is classified as a condominium-hotel property with about 95 percent of the rooms privately owned. Studio apartments start at $700,000 and the one-bedroom units at $1.8 million. Shalit said because the tower hasn’t opened yet and it’s difficult to gauge how often residents will occupy their units, it’s hard to tell how many rooms will be available for rent on any given day.”
“Trump International is next door to the site of the proposed Plaza hotel project where the New Frontier once stood and adjacent to the construction site of Boyd Gaming’s Echelon. Another new neighbor on the horizon is the Fontainebleau, across Las Vegas Boulevard.”
“‘Besides, we’re right across the street from a spectacular shopping mall in the Fashion Show, and I’m sure many of our guests will take advantage of having those high-end stores nearby,’ Shalit said.”
“Shalit also said, like Mark Twain, reports of the demise of the second Trump tower in Las Vegas have been greatly exaggerated.”
“‘The second tower is designed and will take reservations when the market is right for it,’ Shalit said.”
The Record Courier from Nevada. “Local subcontractors are among the victims of the current mortgage crisis, some of them filing liens against property owned by local developer Syncon Homes.”
“Dana Linehan of Tri Valley Plumbing said Syncon owes them money. Tri Valley is now being sued by one of their suppliers, but can’t make those payments until they’re paid by Syncon.”
“‘They paid us in a timely manner from 2003-05, but we started having problems in 2006-07 and now, they haven’t cut us a check for four or five months,’ Linehan said. ‘I’ve been calling them, but they aren’t returning my calls.’”
“Mike Hansen, division manager of Gale Building Products in Reno, said his company has written off hundreds of thousands of dollars from some Reno developers, but Syncon has done well with respect to payments.”
“‘Other builders are in much worse shape,’ he said. ‘Builders have to understand their finances better. For awhile, they were selling homes as quickly as they built them and at that point, they didn’t have to understand finances.’”
“…they are purposely allowing those homes to go into foreclosure while buying another home at today’s depressed prices….”
This should get a few comments here….
Either they are committing loan fraud or credit isn’t as tight as people think.
I choose the latter. Credit as far as I can tell is no harder to get today than it was 2 years ago. The only exception to that is the grossly outrageous - strawberry picker mentioned here - cases. But for your typical $250K - $350K mortgage, for someone with a full time job and a fico above 600, it’s business as usual.
I agree, in our area you can get a 100% zero down mortgage. The only difference now is you need a FICO of 600+ I have yet to see any tightening other than the FICO rise, although I read about all the time.
It may be business as usual, but dont mortgage companies still ask what debt you have, which would include debt service on any existing mortgages, and then take that into account in qualifying you for the new mortgage? Are the ppl doing this really qualifed to carry two mortages or when asked about it does the buyer say no worries, Im just going to walk away from the other mortgage? Damn America has really gone down the tubes.
There has to be some kind of failure to disclose. If someone already has an outstanding mortgage on one property, how would they qualify under tightened lending standards for another mortgage on a 2nd residence, even with “good credit”? On the other hand, how could the bank not catch this?
I’m wondering how they get around claiming it’s your prime residence that you will live in full time. My guess is that they figure it will be where they will be living full time and when they got the loan on the old one it was the same thing.
“‘It will be a place of refuge for our residents and guests,’ said Steve Shalit, managing director. ‘No clang, clang, clang sounds from slot machines anywhere in the building. And, it has a lot of Donald Trump in it.’”
Wow really ?…I CAN’T image a 645-foot, 64-story, $500 million hotel filled with THAT MUCH HOT AIR
They should probably wait. It will get even cheaper. House prices can only remain high if they continue offering high leverage stunt man loans where a Mexican Strawberry picker making 12k/yr can leverage a $700k home.
Otherwise there is nothing propping up the over inflated prices of houses. They will have to come down to meet incomes.
Stunt man loans are unsustainable. No secondary market investor or firm will want to loose their shirt investing in toxic mortgage securities again unless they want to end up like Bear’s Jimmy Cayne who went from being a billionaire to merely having 60 million.
If they do they will want high interest rates to price for risk.
The only way the government can prop up house prices is if they artificially prop up wages. Without real household income its just an unsustainable Ponzi scheme that is guaranteed to collapse.
Shipping jobs to China and other 3rd world countries will not help this any.
I meant wait to buy a new one but not wait to walk away.
It is in their best interest to walk away now. There is no point in being a 3 job little efl/serf/slave paying interest to some Wall Street banker.
Walk away and enjoy your short life. Screw the bankers. Help yourself and your family and get out of an overpriced home and high real estate taxes now!
Agent provocteur - I like it. Credit is still wayyyy too loose. The culture of debt persists and these lenders need to be taught a lesson about risk.
20% Down or pick up an “Apartment Finder”!
This is just making it harder to get loans. If enough people are doing this the impact will force the lenders to look deeper. But it never fails to amaze me exactly how slimy so many Americans are. Let’s just say I won’t be volunteering for military service to put my ass on the line for these dipshits any time soon.
“Let’s just say I won’t be volunteering for military service to put my ass on the line for these dipshits any time soon.
What would you put your ass on the line for, then?
If it’s nothing, then you’re no better than any other American.
I would gladly put my ass on the line for my family and my friends. In a second. But I most certainly wouldn’t put it on the line for this government. Not in a million years. And I most certainly wouldn’t put it on the line for most of the dipshits I read about every day on this blog! Would you risk your ass for just about anyone quoted in these articles? Seriously?
No friggin way! These people are more likely to rob me than risk their ass for me, and I am more than happy to repay the favor.
I wouldn’t risk anything for these assholes.
These people are more likely to rob me than risk their ass for me, and I am more than happy to repay the favor.
I can’t disagree with you. But I think you just shed light on why Americans behave the way they do. “An eye for an eye and the whole world goes blind” kind of thing…
I always laugh when I hear that not a single member of Congress who voted for invading Iraq had a son or daughter in the military.
Clearly, we as a country feel we have nothing to lose, when there is only someone else’s skin in the game.
When you consider this country was built on “free” land– since the Indians never believed you could “own” land–and our history of wealth up to the past 50 years was based on capitalizing on natural resources (often on the backs of natural resources) it’s not much surprise that we have a “free lunch” society.
NO Single one:
I would expect it, we have a volunteer armed forces, there is something about getting shot it, that makes me think better them then me. Its not about patriotism, its about fighting for what we perceive is right, and Iraq and Vietnam was wrong.
Mark my words someday when the Nam vets are too old and frail to complain, they will miraculously “find” a gigantic pool of oil in the mekong delta.
———————
I always laugh when I hear that not a single member of Congress who voted for invading Iraq had a son or daughter in the military.
Isn’t this effectively what the PTB are proposing in their lender cram down plans except the FBs get a walk?
Phoenix Mug shots of the day…..
http://ktar.com/?nid=237&sid=629655&pid=0
“As the housing bubble grew, however, everyone wanted a piece. The city raised its fees, farmers started charging more for land. As builders passed these costs onto the price of a new home, much of the demand dried up. It no longer made sense to commute to Loveland, when a house there cost virtually the same as one in Greeley.”
We’re noticing the same trend here. Far-flung suburbs are virtually the same price as the metro area, and a lot of it has to do with wildly speculative assessments used to fund infrastructure. Most people moved to the burbs to save money, but that isn’t happening because of all the leeches and the cost of gas.
If I HAD to speculate on real estate right now, I would assume that most people will go for urban multifamily units in the urban core right now. Either that, or mommy’s basement.
Greeley was number one in growth (in relation to existing population size) from around 2000-2003. At that point St George, Utah took over the “title’. From about 2003-to about 2006/7 St George was first and Greeley was second in growth.
My guess is that Greeley is running about a year ahead of us in the pain “index” (1/2 of the Citizens here don’t see any problems in our economic future and the other half think that we’re at the bottom of the “cycle”).
Slightly O/T: One good thing about the bubble hitting Washington County is that we’re getting an In-n-Out burger opening here in a couple of weeks. Exit 10 East off HWY 15.
“‘Many times, homeowners are upside down on their property. They can’t sell the property, so they walk away,’ she said, adding, ‘Before they let that happen, they go and buy another property because their credit’s still intact and their income justifies the other property. Then they move into that property and walk away from the property that they’re unable to sell.’”
Seems surprising and almost unbelievable that banks are giving out another mortgage like this without a lot of questions to make sure this is not happening. It seems quite obvious and the lender would have to be a complete moron not to see it.
Why should the new lender care? They are still making money. It’s the old lender who is getting the screws. Good old-fashioned capitalism here (sarcasm). I suspect that they are more like piranhas than morons, until the same thing starts happening to them as market values fall even further.
If anything, it will grind their competition into the dust if stuck with enough foreclosures, unless the first house was considered a recourse loan.
I don’t know about Big Lenders, but I prefer naive clientele, not overly clever, and in particular, I prefer clientele who think of paying off debt as some honor-bound duty. Of course it sounds corny — it IS corny — but the majority of my clients have that kind of personality. They want me to respect them for their solid performance. GOOD. That is probably part of the explanation of their superprime performance on their subprime incomes. Of course, I cannot think in terms of grinding competition into the dust, only of fitting my services into a niche that the competition (mistakenly) thinks is risky.
I prefer clientele who think of paying off debt as some honor-bound duty. Of course it sounds corny — it IS corny — but the majority of my clients have that kind of personality. They want me to respect them for their solid performance. GOOD
Why is being honor-bound to pay back the money you borrowed corny? I’ll take not overly clever, honor bound, half decent neighbors over sharp all for themselves types any day. (Of course, I’d prefer half decent and clever neighbors.) *grin*
Given that there’s so much potentially going wrong in your client’s lives, I would would tend to think that paying you (a person) back is something that are learning to be proud of.
I personally would have a hard time respecting that they are borrowing money for mostly toys (if I remember your business correctly.) Paying 9% for that is a silly waste of money. But that they feel it’s important to give you back your money - I can respect that.
My guess is that they’re buying REO and the bankers are happy to provide financing to anyone with the income to take the non-performing asset off of the bank’s books. If the new owner/borrower walks a second time the bank is no worse off than where it was (REO again).
“Trump International is classified as a condominium-hotel property with about 95 percent of the rooms privately owned…
So ’specu-vesting’ in Las Vegas is back now that Trump is in the market, eh? I was reading that these condo/hotels in NYC were tanking because people weren’t getting their money’s worth out of them.
I think he is in for a rude shock in Las Vegas. They won’t be able to rely on foreign investors and Wall Street to the same degree that NYC has.
If I were a gambling man, I bet 2-3 years before Trump writes this turkey off to some foreign speculators, or he takes in the shorts and drops prices 50% or more…
Studio apartments start at $700,000
LOL unbelievable. I need to get out more.
“‘Besides, we’re right across the street from a spectacular shopping mall in the Fashion Show, and I’m sure many of our guests will take advantage of having those high-end stores nearby,’ Shalit said.”
Why, WHY would someone want to live across the street from the goat circus that is Fashion Show mall? It’s okay, as malls go, on the inside. But the outside, what these residents would see from their windows every day, looks like a flying saucer crashed into a bunch of huge concrete boxes (modern art).
And whenever you leave your apartment building, you’d have to battle the FREAKSHOW that is the Las Vegas strip. I can barely handle it for a few hours 3-4 times a year.
So basically, I get views of stalled construction on how many sides?
“‘Many times, homeowners are upside down on their property. They can’t sell the property, so they walk away,’ she said, adding, ‘Before they let that happen, they go and buy another property because their credit’s still intact and their income justifies the other property. Then they move into that property and walk away from the property that they’re unable to sell.’”
How is this legal? Once you walk away from a home, are you really just scot free? (other than bad credit)
My question, too. Can’t the bank go after your second home? I understand just walking away and having no assets to seize, but if you have another house?…
In the “non-recourse” states, notably CA and AZ, the stiffed lender has no claim on your other assets, no matter how visible. The purchase-money loan is secured by the specific collateral, period.
It’ll be interesting to see how much attention this will garnish. As home prices continue to fall, and word gets around about this thing - this phenomenon will only get more prevalent - to the point of gaining national MSM attention. At that point - I wonder if the FedGuv will step in and (at the banks’ request) somehow retroactively make all states “recourse” states.
Assuming a full-recourse jurisdiction, the bank could get a deficiency judgment which would be a lien on all real property of the debtor for anywhere from 5 to 30 years (it depends on the jurisdiction). The bank wouldn’t execute on the judgment because it would take title subject to the existing mortgage. The bank’s opportunity for collection is if the former debtor sells the new home prior to the expiration of the judgment.
Hmm, what happens to equity gained in the new loan? Does that make execution of the judgment more beneficial to the original bank, or not?
Or the home prices zoom upwards again in 20 years. Hey Fred and Ethel, remember our long forgotten deficiency judgment 23 years ago… well, we’ve decided to take the house now that it is worth $300k in Old Buck (pre-devaluation) dollars.
‘No clang, clang, clang sounds from slot machines anywhere in the building. And, it has a lot of Donald Trump in it.’”
What parts of Donald Trump would those be, that are ‘in it’? The abrasiveness, the hubris, the supremely alarming combed matter he keeps atop his head, unsteadily balanced? ‘Cause those are compelling and substantive value thingies that would sure make ME yearn to buy in.
HAHAHAHA! Not.
To give you an idea how out of touch the powers that be @ donald & co., are…
The majority of slot machines don’t take coins anymore, thus no clang, clang, clang.
Are you SERIOUS? No ‘clang clang clang’? How long has this been going on? Then why in the world would anyone, ever, put money into a slot machine? Where’s the Pavlovian reward there? Nowhere, that’s where!
When I still lived in Utah I enjoying going to Vegas sometimes–and I will go on about that later– but for now I will stick to this issue, and profess hornswoggledom. I enjoyed playing the nickle and even quarter slots when I did go, and that was because I liked the blinky lights and the ‘clang clang clangs’. See, I would change a piece of grubby green paper into little round metal discs, and then I would put the round metal discs one by one into the colorful noisy device and the device would blink excitingly and clang and tick and bing and so on, and I would squeal and bounce up and down, and I would do this until my little metal discs were all gone, and then I’d get up and go somewhere else and drink beer, completely satisfied. Lights, noise, clangs, and beer. That’s the routine.
If there is no ‘clang’, I am never playing AGAIN. In fact, I’m going to write to someone and complain about this right now.
Olygal: I win all the time on the slots and I don’t mind not having to deal with the coins. I get lovely little tickets I can stick in another machine or stick in a cash out machine that pays me. Got $477.00 for $4.00 in bets in 3 minutes just 2 weeks ago. I always play on their money.
The only reason I used to go to Vegas over the local indian casinos in CA was the extra ‘excitement’ of cashing out the winnings in cold hard cash (coins). Getting a print-out just isn’t that rewarding. Now I have no reason to ever want to go to Vegas again.
The first couple times I went to a casino, I would put cash into a machine just to push the button that returns all the quarters. I didn’t want to actually bet and lose my money but I liked the way it sounded when all those quarters or halves or whatever came crashing out.
Then I would just turn the coins in to get back my 20 or whatever it was.
Interesting thing about slot machines is that ALL of them play the same musical note- which is a C major. Apparently, C major is considered the most melodiously pleasing sound, hence when you walk into a Casino, that’s all you hear. That and the metal pans are purposively made to make as much racket as possible to give the allusion that the winner must’ve won a whole TON of money.
I’ve been to Vegas and Reno a few times. I usually play the penny and nickel machines, but these are getting hard to find. I also saw a lot of the newer machines that took credit cards you could ” charge up” at ATM machines. How lame!
Actually (and the only reason I know this is that I work for a local casino), they do still have the clang-clang-clang in the slot machines. They took them out when the machines went to bill/voucher-only, and patrons missed the sound (and complained about it) so much that slot manufacturers went back and put in something that would make that same sound. Nothing drops, of course, but you still get the same satisfying sound that makes gamblers everywhere drool.
Olygal,
No clangs any more, just that annoying, ubiquitous sound of this era the electronic beep…Not nearly as much fun… And the ‘coins’ go a lot faster now that they are electronic impulses.
the supremely alarming combed matter he keeps atop his head…
Arf!
I see a huge globe in the lobby with a cloud of hair-matter perched atop it, gently wafting in the smoke-free breeze.
I’m scared! Hold me!
“And it has a lot of Donald Trump in it.” I assumed that meant that units came with bleached blond, surgically enhanced golddigger arm ornaments.
That or they brought in a barrel of monkeys to hurl their feces on the walls.
And it has a lot of Donald Trump in it
Hm. Maybe the Donald contributed some, uh, bodily fluids to the concrete.
TXChick - if you get a chance can you drop me a mail as uncle_git on the hotmail service ?
I’ve a couple of questions on telecomms T&M market - like were do you think it’s going with converged services starting to roll out.
I’ve been buying a bit of Spirent as they seem to be in a bit of a turnaround under a dissident shareholder - I’d like your opinion on them.
“‘It was a good idea gone bad,’ he said. ‘The American Dream was to own a home, but it wasn’t available to the working class American. The idea was never being that someone would look at that and take advantage … it spiraled out of control.’”
This quote makes me inexplicably sad.
Homes were indeed available to working class Americans, just not the stainless steel, high-ceilinged and granite laden beauties featured on the housing porn TV channels. Americans were just overreaching for something they felt was their birthright, instead of living within their means.
actually, the stainless steel & granite were not the dominant costs of the housing boom. It was simply LAND VALUES that were being bid up, up, up.
I don’t totally agree, Troy - houses were built much bigger and with higher end finishes, adding to their costs.
More like: Adding to their perceived Value. Just like monster SUVs, inflated size and a few more cup holders, and Voila, twice the price, and huge profit margins.
Well they just now got their wish, didn’t they
‘Senate leaders agree on housing relief’ - one purpose being to keep property values up……..friggin amazing!
Wikipedia’s analysis of the American Dream is well worth the read, house lust being a more recent metastisization.
http://en.wikipedia.org/wiki/American_Dream
All this hullabaloo in the financial markets and now political mainstream media is all because of outrageous home prices that became uncoupled to wages about 9 years ago… of course, all the greed, fraud and reckless speculation (both personal and mortgage market level) that transpired to get us where we are today (or yesterday I should say) has made watching the unfolding of this disastrous hullabaloo all the more interesting.. but make no mistake about it though, it’s all due to outrageously high home prices that were not sustainable, and never were … all of it… every bit … and we’re not done unwinding it yet..
The REIC and little Trumpies and the big Trumpie himself and stamp their feet and waive their hands all they want, but this train is heading south and will remain so until wages and home prices are back in line.. deal with it Donnie..
I normally don’t list predications on how all this will play out, but did so on the Marin Housing blog about 1.5 years ago, to the dismay of many… In it, I predicted a 40-50% haircut in the home prices in god’s country there as well as red ink all over local municipalities in CA and FL with one or both states edging towards bankruptcy…. Most of the predications I’ve seen on this blog for a few years now have come to fruition as sad as that is for many people… I’m sticking with mine as well and my home buying decision in the future will center on them..
“‘Before they let that happen, they go and buy another property because their credit’s still intact and their income justifies the other property. Then they move into that property.”
You may recall my saying that the one “acceptable” bail out would be a “do over” on credit hits during the madness, with previously foreclosed homeowners permitted to buy homes based on normal parameters, perhaps as part of some FHA like situation.
I think like the bureaucrat I long was. The market moves much faster, and beats the need for a “do over.”
“The winning bids ‘were lower than I expected,’ he said.”
I guess of the 10 or so auctions I’ve seen reported here and elsewhere every one says the same thing. It’s never “the bids were quite good relative to my expectations” or even “the bids were about what I expected.”
Since sellers continue to have unreasonable expectations - on a consistent basis, throughout the country - it seems likely that current balance sheet valuations of mortgages are too high, and potential losses to the banking and mortgage industry are not fully accounted for.
Ben,
Thanks for the AZ related thread.
What do you (and other AZ’ers) think of “Proposition 13 Arizona”? It will likely be on the ballot in 6 months, and will probably pass (currently 85% support).
The gist of the proposition is that property tax assessments “roll back” to 2003 levels OR the actual price you paid if purchased after that, with a 2% max per year hike.
The second part is the killer, because how long will it take people to realize that if you pay much more than the 2003 assessment level, you are a chump compared to the neighbors that have lived there since 2002 or earlier?
In my case, the house I bought in 2001 had a 2003 assessment of about $140k. The “peak value” in 2005 was about $330k. Now probably about $250k. So if I sold, the buyer would be paying 160% of the property taxes I would pay ON THE EXACT SAME HOUSE under the new “Prop 13 AZ” rules.
This will cause (even more) chaos in the AZ market, and I can see the local realtors campaigning AGAINST property tax relief - can they be any more loathed at this point?
Any desert rats want to comment?
As a Californian, I can tell you what it has done to our state.
$15B budget shortfall.
The entire Prop 13 thing is a scam. when you get older if you cannot afford the taxes - sell and move. It is the cost of living here. Deal with it or split. All the poor people that were forced to leave because they couldn’t pay their taxes! Ah…too bad. They sold, made a bundle, and moved somewhere else. Cry me a river!
All Prop 13 does is give people a way to avoid paying their fair share of taxes. Talk about doing nothing for your country.
Now, how the money is spent is an entirely different issue. Of course, where the money goes is important. But unless you have a fair tax system to start with, it doesn’t matter.
I disagree with this to some extent; there should be a homestead exception, where taxes can be deferred onto the estate.
Prop 13’s main “mistake” was it being applicable to commercial and investment property. Ooops.
Why should the state have to wait to get paid? I would like an exemption too. One for my medical bills. One for my electricity bill. One for…
Everybody has to pay. If you can’t afford to pay…sell and move. Nobody is forcing you to stay!
“Everybody has to pay. If you can’t afford to pay…sell and move. Nobody is forcing you to stay!”
IMHO: The problem in California is that the “payers” are getting fewer and far between. The “takers” in the State (and their political leaders) haven’t learned (like any lowly parasite) that you do not kill the host.
Sell and move. Good advice. I did (after living in SoCal for over thirty years) and I would highly recommend it to those of you who have the opportunity to do so.
OK, I am curious, where you, an Ex-Cali move to?
Are there already to many “fruits and nuts” from the sunshine state living there?
Did you quality of life improve immensely?
And let’s not forget that they granfathered in commercial real estate, too. Huge office buildings paying taxes based on 30 year old sales price. And it’s applied across the board to all ages and prices even though it was sold as a “save the old peoples’ homes” scam. I know there’s other contributions to the downfall of CA, but before Prop 13 we had the highest rated public schools in the country and a fantastic infrastructure and beautiful public parks and recreation areas.
To blame what’s going on with our schools in even the tiniest percentage on Prop 13 is a non sequitur. The NEA’s most recent report shows CA school revenue per student (the most recent report seems to be from 2005 showing numbers from 2004, see p. 39 here) ranked 20th of the 50 states overall, and teacher salaries 3rd of the 50 states.
The downfall of our state has zero to do with not having enough tax revenue and everything to do with more and more social programs and less and less spending on infrastructure and other things that matter, as proportion of the overall budget. Every request for new taxes is “save the kids, save the police, save the firemen,” ignoring the billions upon billions in spending that have nothing to do with those items, and that the money raised in the name of “the children” is more often spent on politician pet projects and corruption.
With all due respect, if you want to come out and admit you want more taxes, more taxes, more taxes, go ahead and just say it - when you call a proposition to reduce the level of tax increases a “scam,” you’re making your preference for big intrusive government and big taxes to fund it very clear.
As someone who has owned both in a prop 13 state (CA) and a non-prop-13 state (VA) I can say - I am very much *for* prop 13.
In VA - they are raising tax rates like *crazy* right now - e.g. Loudoun County just raised their rate by 16% this year. Why? Because assessments are going down, thus they’re “losing revenue”. So we get screwed on both ends - taxes go up by leaps and bounds when assessments go up, and taxes still go up when assessments go down. The county uses the “falling assessments” as an excuse for enormous rate hikes. This problem isn’t as prevalent in prop 13 states because they don’t have the ability to raise assessments by these huge amounts.
And this is from someone who is not a long-time owner. If I were an old-timer who owned my house for 30 years, and had my taxes go up by huge amounts due to assessments - I’d be majorly pissed. Sure I could sell my house and reap the “equity gains” - but what if I don’t want to sell my house?
People say “it’s not fair for two people to pay different taxes on the same value house” - I say BS. If you’re paying higher taxes because you bought later - you did that out of your own choice. OTOH if you’re in a non-prop-13 state and you’re paying higher taxes just because of your neighbors’ speculation - then you’re screwed and not due to your own choice.
Yes CA has budget problems - but it’s not due to prop 13 - it’s due to overspending and poor planning. Other non-prop-13 states and municipalities are having budget problems that are worse than CA right now.
“Sure I could sell my house and reap the “equity gains” - but what if I don’t want to sell my house?”
Uh…pay the taxes. You have a choice. Pay up or sell and move.
Q: Golly, when did this place turn into Plasticine Stepford McDisneyville?
A: Oh yeah, when we drove away all the real people. Let’s drink some merlot, shall we?
The problem with Prop 13 (and Save Our Homes in FL, and anything else similar) is that it creates a class of long term homeowners who have no reason to vote against ever-expanding government spending, since it’s someone else who is paying the vast share of the bill.
It’s even worse that the long-term owners are disproportionately age 50 and up, gives it the appearance of just one more transfer payment from the young to the old.
If anyone truly is at risk of losing their home due to property taxes, a better solution would be to set up a tax lien payable when the house is sold, while keeping the appraisal on a comparable basis with that of a new homeowner.
The joke is that the “class of long term homeowners who have no reason to vote against ever-expanding government spending” finally get the bill when they try to sell the house, and the purchaser balks at the property taxes quadrupling, requiring a cut in the sales price.
Re: “long term homeowners who have no reason to vote against ever-expanding government spending,” of course they do - property taxes are not the only taxes!
And even if someone were to otherwise agree with your core idea, the devil’s in the details. When is someone “losing their home”? Doesn’t this really just become permanent renter status, where when you die, the now insurmountable property tax bill allows the local government to claim the property? Now you can’t leave a family home to your kids, etc., or even keep it in divorce, because those things are a transfer that will trigger the ever increasing property tax bill.
No, AFAIC, any way that you can keep taxes from going up is a good thing and a way to keep spending down - getting rid of Prop 13 is just another large tax increase, and while you may favor large tax increases, a lot of us, even those of us who are not the beneficiaries of this particular legislation, do not.
Oh, please.. from the USA Today article:
Renting saves her $500 a month, but she says it doesn’t feel right.
“I don’t have anything to leave to my daughter if something happens to me,” says Barcelona, 40. “There’s no place she can really call home.”
Time to bail folks [who don't pay their mortgages] out, because otherwise they just don’t “feel” right, and they won’t have a “home.” Throwing away $500 a month always felt pretty darn good to me too! Anybody got a violin?
Why doesn’t she leave her the daughter the $500 a month she saves renting?
Because then she could just spend it. Her daughter wouldn’t go through the emotional angst of figuring out if she wants to sell the old family homestead and then dealing with months of paperwork, selling, auctions, etc to get the money.
Speaking as someone who is trying to find a nice piece of semi-rural land in TN or WV, I’m amazed at how many primo hilltops and meadows are not for sale because “we’re saving it for the children”.
I ask, “Oh really? Where do your kids live?” Inevitably it’s Atlanta, or Charlotte, or Dallas, or Kansas City.
I’m so tempted to hire a PI to track down the kids and ask them “pssst…. what’d you rather have? Twenty acres in WV in twenty years? Or a check for 30 large right now?”
Well, as a East TN native, it seemed to me that from at least the Knoxville perspective, many of those primo hilltop and meadow areas were being stripped clean and piled high with out-of-stater Mcmansion developments last time I was there. I was honestly sort of disgusted with the way things were going there. It hurts to go back more and more and see what’s become of the area.
It used to be very much like you mentioned- meaning some old folks were saving up their land for the kiddies. Not anymore. I think someone must’ve given granny a quick coupla’ million, which probably made her change her mind.
Exactly. The only explanation I can come up with for why that hasn’t occurred to her is that it’s chump change compared to what she thought (and probably still thinks) a house would bring in over the long term. When J6P finally figures out that s/he isn’t the only one seeing the naughty bits on that particular nude emperor, watch out below.
I think she’s using that $500 to help drown out the shame she feels from being a renter now. “Pride of ownership” has to be worth at least $1000/mo.
Or how about spending the $500/month on her now when they can share memories. Some travel, some savings, etc. Don’t get this saving to leave someone when you’re dead - why not spend on them while you’re still here.
Nice little photo essay for those of you who are familiar with Shady Grove RV Park on Barton Springs Road in Austin, it looks like high rise condos are coming….I guess that’s “progress”….?
I know a lot of people like to bash RV parks, but this place was pretty tranquilo and had a cool vibe….lots of pecan trees and just a few blocks from Barton Springs and Zilker Park in central Austin:
http://tinyurl.com/2s3y5o
Sure, the condos are going up, but what will the economy be like by the time they are completed? Who will move into them?
Doesn’t anybody remember the Intel building? I wouldn’t be surprised to see a similar fate befall many of these projects…
I recall driving around Montrose, Colorado, with my dad at the height of the Bubble (he lived there). He just couldn’t understand where all the people and money were coming from. Tons of construction trucks, landscapers, etc. He would just shake his head and say something like “what’s the world coming to…” Too bad he didn’t live to understand what was going on. As a Depression-era child, he would’ve found it quite interesting. He always said the Boom was unsustainable. Now the Montrose used-house sellers are saying there’s a 5 to 10 year inventory. Unbelievable. And prices are stagnant, not coming down fast at all, houses just sitting there. He said it was a crime the way they were bulldozing farmland and habitat for such crap. Dad, you were right.
Ad on Craigslist for empty lots near Grand Junction (Fruita), Colorado:
“Additional incentive of a $10,000.00 Home Depot or Lowe’s gift card for purchases completed by May 31st!”
The whole East 1/3 and West 1/2 of the state of CO is largely deviod of employment.
Yeah, some day we’re going to wonder how we thought we could live on a termite diet of rotting wood 2 x 4s, gleaned from stick houses built as far as the eye can see. Primo mountain top with a panoramic view?, Bam, plop down a McMansion or two or a dozen….. maybe, just maybe, undeveloped land has value.
Fear about Loaning in Las Vegas, A Savage Journey To The Heart Of The American Dream
“That was during Greeley’s roaring housing market. Times, of course, have changed. With the downturn in the real estate market, building has slowed, lots planned for development sit vacant and growth rates are stagnant.”
You’ve got to see Greeley to understand that there was never a booming housing market there. In CO proximity to the mountains is 30% of property value, and proximity to jobs is another 30%. Lose those two factors and a house in CO is worth no more than one in the middle of Indiana. Greeley is weak on both counts, and has been all along. Greeley is a college town for a 2nd rate college (not a bad one, but just not top of the line) as well there is a lot of agricultural base (slaughter houses and feed lots - tractor sales etc). For a while HP and some other high tech companies had rather large facilities.
All of Colorado is over extended on debt, Greeley was just one of the places where circumstances unrelated to the debt changed dramatically and the numbers show it. There is a lot of weak debt in this state, Greeley is just the canary.
“[T]here is a larger buyers market than ever before.”
Larger inventory does not a buyer’s market make, when prices are still so vastly above the fundamental supports. God, the continual twisting of the words for spin drives me insane…
Does anyone have an opinion what I should pay for a new house in gilbert,az? I have found a new house by kb homes for less than $100 per sqf( specifically 240k for a 2600 sqf house). Is that too much? I plan to stay in the house for 5-7 years, but i don’t want to catch a falling knife.
If its in the boonies, it’s overpriced. Prices in outlying areas are getting hit the hardest.
240K might be a decent deal if it is close in.
While it is easier said than done, figure out what a comparable Gilbert house would have cost in 2002 and pay no more than that. You have Zillow’s record searches, plus maricopa.gov, and probably other online resources to create your estimate. There is no need to hurry, the Salt River Valley is returning to its affordable roots.
I have been reading this blog for more than 2 years now. What a great resource it has been to me. I am in the financial services business, I read the WSJ, IVD, Barrons, etc. No other source has been as accurate in fortelling the bursting bubble than Ben’s blog.
However,over the years, I have learned that optisism pays much more consistently than pessinism(sp)?. I have been long oil & gass for the last 7 years. (I need to diversify).
As a contarian investor, I , feel that it is time too go against much of the opinion espoused on this blog.
Granted, I live in an area that is benefiting from higher commodity prices. People here are geeting paid ‘Mana From Heaven’ that they never counted on.
After I make my bid on a 3552sq home, on the west side of Fort Worth TX, @ $90 per sq. BTW, Pool, 4bd, 3bth, Game room, built 1955, RETRO! I will not liklly log into this sight so frequently. I know, most likley, there will be better bargins. However, I cannot pick the bottom, but, I feel this would be an upgrade from my very modest home/mortage, and to my quality of life.
What should I consider befor I fax the offer?
Consider waiting a couple more years.
Colorado is weirdo central. Seems like half of the state is your typical rural cesspool that makes up about 85% of the USA. The other half is for your holier than thou celebrity types…think Aspen and Vail. WHo would give even 50K for half of the houses in that wierd place?