Mesmerized By The Increase In Values
Consumer Affairs reports on Missouri. “When Sheila Smith got a look at what she thought was her dream home, she didn’t hesitate to take it. Smith, a social services and business consultant in Independence, Missouri, and her family took the chance and signed the papers on the house in May 2000. It wasn’t long before the dream became a nightmare for Smith and her family.”
“Although Smith and her husband were ‘viable citizens with good credit,’ they were quickly steered into an expensive subprime loan with ballooning payments and hidden fees that they couldn’t keep up with. Their home’s builder was indicted and the mortgage broker was quickly revealed to be collaborating with the builder to, as Smith put it, ‘unload crappy homes for pretty quick money.’”
“Trying to sell the home was fruitless, as they received conflicting appraisals due to all of the defects in its construction.”
“Smith was able to use the confusing and ambiguous rules of the modern mortgage market to fight back, and convince lenders and judges alike to let her and her family keep their home — at least for now.”
“Nancy Seats, president of Homeowners Against Defective Dwellings, says that more homeowners should challenge foreclosures by lenders who can’t prove they legitimately hold the loan, and that many innocent buyers are the victims of ‘very unscrupulous activity’ propagated by lenders and investors who are motivated by ‘nothing but greed.’”
“‘They knew [the market] was all going to collapse eventually,’ Smith said. ‘They said, ‘Let’s just make as much money on the front end as possible and not worry about the back end.’”
“Even Smith’s hometown of Independence, a small city of 113,000, has been hit hard. ‘I’ve seen homes that were bought for $1.7 million go back on the market at $680,000 to get them sold quick,’ she said. ‘In a row of ten homes, maybe one-third of them will have foreclosure signs out front.’”
The Plain Dealer from Ohio. “Foreclosure-tainted houses have caused home prices in Cleveland and many East Side suburbs to plummet in 2008 as banks and lenders unload their dam aged goods at rock-bottom prices.”
“The median home sale price in the city of Cleveland has dropped an astonishing 75 percent compared with the first six months of last year - from $62,000 to $15,500.”
“Nearly 59 percent of home loans made in Maple Heights during 2006 were subprime. That southeast suburb of modest bungalows has seen housing prices fall 67 percent for the first six months of this year.”
“In Strongsville, only 16 percent of mortgage loans in 2006 were subprime. Home prices there have fallen just 4 percent.”
“Helen Hertz, a Cleveland Heights-based real estate agent, said mortgage lending has returned to the place it was more than 20 years ago. That means buyers need to have a down payment and pay their closing costs out of their own pockets.”
“The real estate market is not going to recover right away, Hertz said. ‘I think it’s going to take three to five years to reabsorb the inventory,’ she said.”
“Sheila Tomasi walked through the back door of the newly bought house as if stepping into a cave. Slowly. Warily. Ready to shriek. She was a long way from California, where she and her husband, Eric, buy and sell real estate.”
“But she thinks they discovered a gold field in Cleveland, riches to be mined from boarded-up mysteries like this one.”
“If you looked past the cracked plaster walls, the bathroom savagely stripped of plumbing — which she was willing to do — the little blue house at the edge of Slavic Village looked almost livable. The Tomasis bought it sight unseen for less than $3,000. A sign on the front lawn on Portage Street says it could be yours for $500 down, $300 a month. That’s $25,000 in 15 years.”
“Tomasi, a sun-kissed 39-year-old who knows how to surf, is one of the newest players in Cleveland’s shell-shocked housing market. In a little more than a year, she and her husband, the principals behind TSE Properties LLC, have bought up dozens of impossibly cheap homes and resold many of them.”
“The couple purchase foreclosed homes in bunches from banks. They make minimal repairs and resell the houses as handyman specials, offering a mortgage rate less than the neighborhood’s going rent.”
“‘We’re taking a risk, but our investment is limited,’ Tomasi said. Meanwhile, her buyers, usually lifelong renters, become homeowners at 1940s prices.”
“Cleveland Councilman Tony Brancatelli, whose ward surrounds Slavic Village, is not sure what to think.
Lacking a public program that uncrates boarded-up houses and puts them back on the market, he’s supporting the Tomasis and a few other speculators like them.”
“‘It’s a piece of a strategy,’ Brancatelli said. ‘I don’t know if it’s good yet. But you’ve seen my neighborhood. I’m not throwing away any idea. Can this be part of the fix?’”
“Eric Tomasi remains a mortgage broker in the market around the couple’s hometown of San Luis Obispo, Calif. Two years ago, the couple leapt into the misery market, starting in Detroit. They bought their first foreclosed home in Cleveland last year.”
“Eric Tomasi said the move to the distressed Midwest made business sense. ‘It’s hard to lose money when you’re buying duplexes for $1,000,’ he said.”
Crain’s Detroit Business from Michigan. “In addition to running his Warren-based realty company and serving as a national spokesman in the fight against mortgage fraud, Ralph Roberts also flips houses - he has bought and sold an estimated 2,000 foreclosed homes during his career.”
“But Roberts has flipped only one so far in 2008; he invested about $110,000 in a house in Shelby Township and sold it for $190,000. ‘But three years ago I would have sold it for $300,000,’ said Roberts.”
“Roberts said money can be made on a home at any price by following a simple formula: ‘You have to buy below wholesale and sell for wholesale,’ he said.”
The Detroit Free Press from Michigan. “As more condo owners who need to move are stuck with properties they can’t sell and foreclosure rates rise, many homeowner associations are hurting for the cash needed to maintain monthly services.”
“Jon Sabo, who manages Highland Lakes Condos in Northville, says delinquencies are at 5% at the 700-unit complex. ‘Because of oversupply, prices have been devastated,’ said Sabo, who is also chapter executive director of the trade association for all Michigan homeowner, condo and property owner associations.”
“The Highland Lakes property has 16 foreclosed properties, and while sales continue, they have done so at lower prices.”
“At the peak of the real estate market, in August 2005, a lakefront 2-bedroom, 2-bath 1,400-square-foot condo at Highland Lakes sold for $220,000. The same unit now sells for $140,000.”
“Jeff Axt of Bloomfield Hills was unable to sell two condos when he married and moved into a house in November 2007. He rents one in Royal Oak to a renter he advertised for and one in Warren to his dad.”
“Axt ran for the board of the Lancaster Woods Condominium Association three years ago, as he began to question rising association fees that were not accompanied by more services. ‘We were told year after year that the association needed more money, and it was never enough,’ said Axt.”
“Foreclosures are a concern because banks typically do not make an attempt to get association dues on a payment schedule, he said. When the condo is resold, the back fees have to be paid and the banks often have to deal with them at closing, he added. ‘You’re way down low on the food chain in terms of getting paid,’ he said.”
The Star Tribune in Minnesota. “It’s been a tough year for Americans. Home prices have dropped and the unemployment rate is up. No wonder that consumer confidence, according a widely watched survey released Tuesday, is as low as it was in 1967.”
“‘I’m sliding,’ 61-year-old Floyd Ohlson said of his household net worth. Ohlson, who works part-time, had hoped to sell his Rosemount, Minn., home this year to lower his costs and help finance his retirement. He’s had to scratch those plans now and continue working.”
“One measure, the so-called misery index, confirms that people are feeling more miserable today, but not nearly as miserable as their parents or grandparents have felt in the past. The index, calculated by adding the unemployment rate to the inflation rate, was created in the 1960s and cited often during the stagflation days of the 1970s and 1980s as a simple and catchy assessment of the economy’s well-being.”
“Add May’s 5.5 percent unemployment rate to the May inflation rate of 4.18 percent - and the misery index today is 9.68 percent. That’s the highest it’s been since September 2005, but nowhere near the all-time high of 21.98 in the summer of 1980, when the nation faced double-digit inflation and an unemployment rate of almost 12 percent.”
“The era from 1994 to 2000 brought low unemployment, inflation and energy prices, rising wages and soaring stock markets and home values. Many Americans buoyed their lifestyle with home equity and access to credit.”
“‘We got mesmerized by the increase in asset values,’ said David Joy, chief market strategist for RiverSource Investments in Minneapolis.”
“The collapse of the housing market has provided stark evidence that consumer lifestyles and the American economy may have been living on borrowed time and borrowed money.”
“Adrienne Garcia thinks it’s about time for a behavior shift. ‘Everyone’s going to have to adjust their way of living,’ said the 28-year-old St. Louis Park, Minn., resident. ‘If you think of our generation, we’ve always had it good. People need to get back to reality because it’s been way too hunky-dory for a while.’”
Just about everything that has happened in CA and FL happened in Ohio and Michigan a few years earlier.
And will happen in NYC. Or almost.
“The median home sale price in the city of Cleveland has dropped an astonishing 75 percent compared with the first six months of last year - from $62,000 to $15,500. Nearly 59 percent of home loans made in Maple Heights during 2006 were subprime. That southeast suburb of modest bungalows has seen housing prices fall 67 percent for the first six months of this year.”
So much for real estate always going up.
That’s a collapse if I ever saw one.
I reckon most posters in this blog could pay that $15K in cash (they’d probably not want to live there but that’s not the point.)
and yet “sun kissed” bimbos from Clownifornia think they know better
Maybe a bit *too* much time in the sun…
This is a pefect spot for this vermin scum’s website.
First link is: Beneatha the (planet of the apes)
http://www.mariejoatkins.com/index.html
Second link shows my (oceanside) neighborhood.
8 new mcmansion spec homes, and no new neighbors.
http://www.mariejoatkins.com/listing/featured.html
That is one fugly woman.
And she sells “estates”.
BWAHAHAHAHAHHAHHAHAHHHHHHHHHHHHHHHH!!!
50 bucks says that if she has a dog it’s a Pekingese or Shih-tzu.
Any takers? And can anyone confirm?
She looks she could be Tara Reid’s mother.
http://en.wikipedia.org/wiki/Tara_Reid
As a native this is no surprise, drive east of downtown and it looks like Berlin 1945. The east side has always been poor but NAFTA and subprime lending have destroyed this city.
The plus side is that living in a city with infrastructure built for 1 million (in 1950) but only 400K+ residents means NO TRAFFIC, and an excellent public transportation system.
I’ve spent a lot of time in CA and FL but I plan to stay here and buy (in a west side suburb) in 2012-2015. If you have skills/education life is very good here.
“Forty percent of single-family homes sold in Cleveland this year were purchased for less than $10,000.”
Un-freaking-real. That’s cheaper than a good used car. Even at that price I’m sure it’s no bargain. It costs a lot of money to maintain a house, to say nothing of the near-impossibility of selling the thing at any price. Cleveland and the rest of the rust belt/midwest are emptying out; there will always be more supply than demand; prices could in fact go to zero, or nearly so:
“Stonecrest Investments of San Jose, Calif., and Blue Spruce Entities of Rapid City, S.D., have been some of the biggest buyers and sellers in Cleveland in the past 12 months. Stonecrest has bought 62 single-family homes in Cleveland and East Cleveland in 2008. The average sale price? Just over $1,500.”
What ever happened to that Floridian HBB poster who wanted to move to some craphole in Pennsylvania? Oil City or something? It sounds like Cleveland is even cheaper, and he could hang out at the “Rock and Roll Hall of Fame.”
Watch out 1940’s. Here we come!
Watch out 1930’s. Here we come!
Keep the popcorn popping,
Red Baron
The depression has already started–most Americans just don’t realize it yet. Do the following to survive–put these tips on your refrigerator:
1. Get and keep a job.
2. Rent or live in an RV so you can be mobile for your job.
3. Save at least 25% of your after-tax income.
4. Eliminate debt unless you can pay it all off if you lost your job.
The next few years are going to be tougher than most Americans can remember.
Keep the popcorn popping,
Red Baron
What, no advice today about the waiting until stocks reach a certain P.E. before buying?
My advice is to get ahold of any old-timer and ask them how they got through the Depression. Or, failing that, spend a Saturday in the microfiche room at the library and read The New York Times and Good Houskeeping from 1935 or so. Plenty of advice there too.
My grandfather remembered when in the midst of the depression you could buy a share of US Steel for just one dollar. Unfortunately, he did not have even a dollar to invest.
I will someday remember buying a shitload of shares of C or Wamu or Ford @ a dollar per… if they’ll just cooperate and get down there.
I would not touch the U.S. stock market until the dividend yield of the S&P 500 hits 4%–it is 2.4% now.
Keep the popcorn popping,
Red Baron
My dad wrote a book about living through the depression. They had a farm in NW Colorado and it was very difficult times, but at least they had food.
Dunno that much about dividend yield historical perspective, but I modestly offer what might be called the Depression Coal Index.
My mother recalls picking up lumps that fell off trains in eastern Pennsylvania so she could take it home for cooking and heating. And her family was “better off” than many, she recalls.
So when we see people stealing coal from piles along the Ohio River Valley, we’ll know we are in a real world of hurt.
I’m sticking to the Coal Index because my refiners, who usually perform well going into summer season, have been KO’d by the criminal crude manipulation going on.
And no, it wasn’t what some of y’all call “house money.” I can delude myself into thinking it of a paper loss. For now.
Hold the salt and pepper on that popcorn.
Maybe just a handful of brewers’ yeast sprinkled on top.
Better for digestion.
Burp.
Oh, while rambling, an interesting copper chart:
http://futures.tradingcharts.com/chart/CP/M
Illustrates graphically Ben’s earlier link about “savage” home stripping.
Stonecrest Investments of San Jose, Calif., and Blue Spruce Entities of Rapid City, S.D., have been some of the biggest buyers and sellers in Cleveland in the past 12 months.
Buy high and sell low?
I hope they lost their asses on this.
I have a friend who is considering taking a full-time job at the Rock N Roll Hall of Fame. A very good job, actually.
But he’ll have to sell his house here in Chicago and move his young family to … Cleveland. I’m curious to see how he weighs out all the factors.
Tell him that the Monkees should be inducted.
Funny that you say that, Lost — this friend and another that I’ve played in a country rock band with are semi-obsessed with a few of Mike Nesmith’s solo albums.
The Monkees really were good, I’ve just kind of rediscovered them, Randy Scouse Git is a classic. Maybe they appeal to my underformed adolescent mind, but there was some talent there.
I like Mike’s Laugh Kills Lonseome. Also Twilight on the Trail.
Wasn’t he the one they called Wool Hat? There’s a great youtube of his audition for the Monkees, he was terrified, but you couldn’t tell it (there’s a second version where he talks about it). He was running around the room opening drawers and stuff, hilarious.
The New Monkees were unforgivable, though.
Lost! The Monkees!? Say it isn’t so! You’ve been a baaaaad girl…
ROTFL!!
OK, here’s something better:
http://www.youtube.com/watch?v=cmuPJvr89Jw
lol!
Mike Nesmith was “Wool Hat,” and is actually a pretty talented guy.
His early solo albums are considered part of the first wave of country rock and are well-regarded by people who’re into Gram Parsons, The Byrds, The Flying Burrito Brothers and similar groups.
(He wrote the song “Different Drum” (among many others), which was a big hit for Linda Ronstadt.)
Ok, I could last about 10 seconds on that one! Can I please check your coffee?
PS. I live about 30 minutes from here:
http://www.city-data.com/picfilesc/picc39841.php
Hey, you beat me, I got through about 5! LOL!!
This is MUCH better:
http://www.youtube.com/watch?v=6MSyFA84u48
That’s Mt. Hood, right?
No, wait, I know, Shasta.
Please send UPS coordinates, I mean LPD, whatever they call those little things that beam off satellites (I just go by visuals) - I know, GPS!!
ET - I LOVE the Byrds. Eight Miles high was the first psycho-rock song ever. I was born too late. Real music then.
Losty :). Those are the Olympic Mountains, west of Olympia. The Cascades lie to the east. Mt. Shasta is in CA, Mt. Hood, in OR. They are part of the Cascade range. The volcanoes near me (and also part of the Cascades) are Mt. Rainier, Mt. St. Helens, and Mt. Adams. But you probably already know that, and are pulling my leg!
P.S. The Byrds - fantastic. Me born too late too (like that English?).
Hey Bear, you climb? I flew over those mtns once and nearly jumped out of the plane.
No, lost, never got into actual mountain climbing. How about you?
Hey lost,
E-mail me sometime banteringbear @ aol (and I’ll give you my real mail)- I seem to be veering way off topic and I don’t want to waste Ben’s bandwidth and others time.
Used to climb a lot, not technical, just Colorado 14ers and such.
I got lost in SE Utah and all they have there are rocks and cliffs and such, got more into wandering. But not all who wander are Lost.
10-4 good buddy.
There’s a reason why it’s $1500. Even the Mayor says most of these homes need to be demolished. I guess someone needs to take the chance but there are just some neighborhoods that you don’t want to be wandering around in and this might be it.
Right. Why would somebody pay money to be a prisoner in their own home? You risk your own life living in some of those neighborhoods, and they should be razed.
Son of my parents’ friends bought a “fixer” in the late 80s there. Within a month of moving in was shot in the head. Dead.
If we’re headed where some on this board think, the Tomasi’s are going to want nothing to do with going in there to collect mortgage payments or rents.
Wasn’t “Rolo Tomasi” the code name in LA Confidential which Kevin Spacey’s character used to eventually finger his true killer? Coincidence?
There has never been a better time to become a Cleveland slum lord.
I had two Clevelander friends in town last week. They are not in any trouble (quite conservative) and yet the fear on their face was palpable.
They know they have massively overpaid for an asset which is declining.
“Meanwhile, her buyers, usually lifelong renters, become homeowners at 1940s prices.”
Welcome to the future in California and Florida. What has happened in Michigan and Ohio is going to blow away the coasts. I am serious, all the smug Californians do not even know what is going to hit them.
Keep the popcorn popping,
Red Baron
Absolutely can not wait for some people I know of to get hit. FAther of a former friend of my son’s wants to leave LA and move east but can’t because he’s way underwater on his house. Couldn’t happen to a nicer guy–he kicked his daughter out regularly when she was 16,
Smug Californians always seem to forget or ignore the fact thaqt Detroit was one of the best places in the world to live until the 1960’s or so. High paying, exstremely stable jobs were everywhere and easy to get, neighborhoods were solid and people were happy and optimistic. People were moving here from every part of the country and the world. It all went to s**t, and California will too. Much of that state will be one giant smoking hole in the ground that nobody will want to live in.
And Michigan will still have all the fresh water. Suck it, bitches.
I love Michigan. I’d be there tomorrow but I can’t stand the cold weather.
Detroit speculators may be betting on Global Warming bailing them out. The temperature always goes up, you know.
My hubby grew up in Royal Oak (Detroit suburb) and left in 1982. He STILL would not move back. He says they can’t pay him enough to move back. Not saying he dislikes MI per se just the lack of any future there.
Last night I went to sleep in Detroit city,
And I dreamed about those cotton fields and home,
I dreamed about my mother,
dear old papa, sister and brother,
And I dreamed about that girl,
whose been waitin’ for so long.
I wanna go home,
I wanna go home,
Oh Lord, I wanna go home!
Not-so-smug Cali girl here who knows more than a few ex-Michigan residents I’d like to send home.
I think the Michigan accent is one of the worst in America.
“one of the best places in the world to live until the 1960’s or so”.
In other words, until the riots took place, when, in 1967? Nearly all Detroiters that I’ve ever encountered date anything that happened in that city as being either pre-or post-riots. Since I’m not from there, I don’t have an opinion whether anything that went on was justified, but those events pretty much serve as the catalyst for Detroit’s decline and then the oil crisis in 1973 made a bad situation far worse.
Of course, it’s hard to revitalize the city when the mayor is facing a multiple count indictment. There are only 24 hours in a day, you know.
And it was pretty much a “company town”, in that its fortunes rose and fell based on one industry.
But that’s starting to change. At a trade show this spring, I talked to an entrepreneur who was trying to build/broaden a widgets business that is based on the availability of idle design and manufacturing resources in Michigan. The sad part was that his samples had serious quality problems. His company didn’t make the cut in my search for widget manufacturers because of this - competitors from the UK and SoCal were much better on quality.
I think Michigan socialist democrats are making bad tax decisions.
Some stuff isn’t going to work if you require the employers to pay outrageous payroll taxes.
Alabama is attracting a lot of jobs from automotive because there are a lot less strings attached.
John Lee Hooker got it right in “Motor City’s Burnin’.
And no, not all of us in Calif. are “smug.”
I can afford PG&E but yes, ladies and gentlemen, use a “swamp cooler” instead. Techies know them as evaporative coolers. $100 a month electric bill sted of $800 (real numbers).
And growing up in the Midwest, I recall winters so cold we had to take the car batteries inside if we wanted a car to work in the ayem. And scraping windshields with credit cards to get the crappy ice off windshield.
Warmer climes will always attract a demographic. More skin cancer, too, but life involves choices. I favor a wide-brimmed hat.
“I’m a Believer.” Always liked that one, too.
I think another thing Californians don’t realize is that they have some pretty serious competition coming up from behind. I just got back from Huntsville,AL. I could not believe the number of engineering and tech firms there. We’re talking every other billboard was for some research or aerospace company. The difference is that these companies actually made stuff versus simply creating more social networking sites. If you look at where the Bay Area got it’s tech edge, it was from military technology. The same could easily happen in places like Huntsville. Perhaps that’s a stretch. But California no longer holds the key to tech. As soon as they lose that distinction, say buy-bye to all those high salaries and hello to outsourcing to other states.
Sounds like Huntsville, Alabama depends mightily upon the government teat. Ask Los Angeles how that worked out during the last round of spending reductions in the early 1990s.
“I think another thing Californians don’t realize”
hey smug people from other states, please stop talking about Californians like we’re a bunch of clones . . all thinking smugly about how great our state is . . . honestly, it just makes it seem like you’ve been jealous this whole time : )
“they have some pretty serious competition coming up from behind” That’s awesome!! Do you really think we want people to keep moving here? There’s way too many!!!!
if calling us Clownifornicans, etc., will make you feel superior, and thus not move here, I think that’s great. Thanks . . . : )
Except for Ted Nugent, you can keep your state.
Yeah, there’s alot about California I can’t stand but we’ve got the best weather, great restaurants, great wages, lots of illegals,……. oh, better stop now.
Mike
And Michigan will still have all the fresh water. Suck it, bitches.
Well, if MI is anything like Buffalo, NY, where Great Lakes water costs like 4x water in drought-stricken Arizona, methinks MI will need to have a successful and thorough tax revolt first.. Kill the unions and bring tax levels to competitiveness with, say, Alabama or Nevada… And convert the poor into biodiesel.
“The median home sale price in the city of Cleveland has dropped an astonishing 75 percent compared with the first six months of last year - from $62,000 to $15,500.”
Drew Carey is right on…Cleveland Rocks!
Cleveland Rocks!
That is depression level.
To think my wife and I have more than $15k lying about where we’re trying to find an investment ‘home’ for it. I can see it now: “Oh gee honey, that’s a nice color pair of homes, why don’t we buy both of them?”
One of my cousins is about to be assigned to Cleveland for two years. I think my position on rent vs. buy advice just changed for him.
Got Popcorn?
Neil
Hey, you can have your own boudoir across the street.
LOL
i live in cle…..these are dilapidated ghetto houses. i wonder if they can really turn a profit on these.
the suburbs are fine and way overpriced in my opinion….the reos in the burbs appear to have been owned mostly by you guessed it realtors.
there’s cracks….but most all the properties ive been tracking have pulled from market not sold.
I met a guy who is selling his house and moving from Cleveland to Anchorage this Fall. I told him he should consider renting and then buy when he gets to know the market (and prices slide a lot more), but he has a big title and big family and therefore needs the statusy home, so I think he is just bound and determined to take a bath in both markets.
Oh well, not my money…
I like that, the new mantra: “Oh well, not my money…”
That’s hedge fund thinking.
It will be interesting to see how the Tomasi’s do. If you buy a house for $2500, put $2000 of repairs into it, assume another $500 of incidentals, you’re at 5000. Selling it, the down is 500, with 300 a month, so simple payback is 15 months, beyond that, you start making money. But: the buyer still doesn’t have much skin in the game. They STILL may just walk. The fixtures may be stripped again. And the Tomasis are 2000 miles away most of the time (I presume). So it may be a gold mine… or a lead mine. Time will tell. Could be the beginning of a recovery, though.
Cleveland and Detroit sure seem like a can’t lose proposition to a bunch of folks. Other than the shockingly low prices - what else is behind their faith in an inevitable Rust Belt rebound?
I hardly believe these Rust Belt speculators are actually thinking about fresh water shortages at some future point, but they are playing a dangerous game of chicken with Mr. Market.
High risk requires the potential for a high reward. No one should complain if the retire early and rich.
They will be milked dry via property taxes. The only correct response to these cities is to not catch a falling knife.
At zero, the asset has negative value because you have to fork out taxes, etc. each year.
Whether or not one has an opinion of Ralph Roberts in the Crain’s article, the fact is that he’s very, very good at what he does, flipping houses. I was shocked to see he’s only done 1 flip in 2008. To me, that was very telling.
A few months back Ben posted an article about some guy from out west buying 15 properties and calling Detroit a gold mine….wonder how he’s doing??
Is this the same Ralph Roberts who wrote the book that suggested that you toss your business cards into the crowds at sporting events? Personally, I can’t think of a tackier way to promote your business, but, hey, that’s just me.
I wouldn’t be the owner, absentee, temporary or otherwise, of any low end housing in the inner cities like Detroit, Cleveland or even Milwaukee even for the fast money on a cheap flip. Talk about hard time, hard core gamblers
These places could be stripped again overnight, turned into a drug house in no time or be the site of a quadruple gangland slaying like Milwaukee’s “Murda Mobb” in LESS than a heartbeat.
I’m no fan of NAR but in these cases I’d paraphrase those parots with something like… risk location..risk location..risk location
The Midwest does not have a monopoly on crime-ridden inner cities. What about Baltimore, Atlanta, Houston, Miami or Los Angeles, or part of DC? In Cleveland, at the very worst, you pay taxes on 1/6 acre for $3K. You could do worse.
oxide,
You can include San Francisco in your list.
You mean to say that the Tenderloin is not hip and happening?
LOL
An area more diseased than an e:coli-infected burger drenched with some of that salmonella-thick salsa.
FPSS,
Never considered the Tenderloin hip nor did my mother when she lived in San Francisco.
Talk about hard time, hard core gamblers
Not to mention the liability. Those cities are filled with unemployed desperate people who would be only too glad to “slip and fall” on the ice-covered, unmaintained sidewalk in front of your crapbox and sue you for all you’re worth! No thanks, not at any price.
The Tomasis bought a lakefront home for $250,000.
“‘We’re taking a risk, but our investment is limited,’ Tomasi said. Meanwhile, her buyers, usually lifelong renters, become homeowners at 1940s prices.”
Dang it all Ben, now they are finding statistics back to the 1940’s? I tell ya, if after all this… we don’t get a 3 page Escrow signing…it will have been all for nothing. ;-(
“Although Smith and her husband were ‘viable citizens with good credit,’ they were quickly steered into an expensive subprime loan with ballooning payments and hidden fees that they couldn’t keep up with. Their home’s builder was indicted and the mortgage broker was quickly revealed to be collaborating with the builder to, as Smith put it, ‘unload crappy homes for pretty quick money.’”
“Trying to sell the home was fruitless, as they received conflicting appraisals due to all of the defects in its construction.”
So somebody unloaded a piece of crap on you, and we’re supposed to feel sorry for you and the government must bail you out. But you tried to unload that very same piece of crap on somebody else, didn’t you. Damn hypocrites.
I don’t care what kind of credit the Smiths had. These idiots have 8 kids. Even if they had a 6 figure income, which I’m betting they don’t, they couldn’t afford the house in the first place.
Eight kids would have driven me insane.
Somebody’s been H.A.D.D.
“Nancy Seats, president of Homeowners Against Defective Dwellings, says that more homeowners should challenge foreclosures by lenders who can’t prove they legitimately hold the loan, and that many innocent buyers are the victims of ‘very unscrupulous activity’ propagated by lenders and investors who are motivated by ‘nothing but greed.’”
..
H.A.D.D. = Homeowners Against Delusional Developers
No honor among thieves, apparently.
To briefly reiterate:
Some mortgage salesdroid sold Sheila Smith a multifaceted mortgage bomb to finance a defective house that some slimy house salesdroid sold her. When she tried to sell it, she got conflicting (no doubt some bogus) appraisals. Then her mortgage services goes belly-up and the new servicer is conveniently anonymous, and in addition got a default judgment against themselves by failing to appear in court. But they somehow (fraud?) unloaded the defunct mortgage on another servicer, who now cannot prove that they hold the note.
Everyone gets screwed. First someone buys a lemon shack with time bomb attached. Then everyone plays “toss the hand grenade” for a while. Next step? A circular firing squad as all parties sue everyone else involved. The proposed solution? More regulations, as in “Kill them all and let God sort them out”.
If William Shakespeare were alive today, he wouldn’t have to invent bumbling fools to spice up his comedies - they would write themselves.
“Much Ado about Housing”
“The Merchant of Menace”
“A Midbubble Blight’s Ream”
“Dumbio and Bubblette”
“Julius Cramer”
“The Tragedy of my Hamlet”
etc.
LOL. Great stuff!
LOL
great plays.
“A plague o’ all your houses.”
“Eric Tomasi said the move to the distressed Midwest made business sense. ‘It’s hard to lose money when you’re buying duplexes for $1,000,’ he said.”
Wow. I have to agree, having just invested in a Wii with all the accoutrements for about $400. Double that for a duplex? Are prices really that low? I can’t imagine the neighborhood is nice, but the Tomasis may have a viable plan.
Or like Mac says above, maybe not.
If it sounds too good to be true…
“Even Smith’s hometown of Independence, a small city of 113,000, has been hit hard. ‘I’ve seen homes that were bought for $1.7 million go back on the market at $680,000 to get them sold quick,’ she said. ‘In a row of ten homes, maybe one-third of them will have foreclosure signs out front.’”
Harry Truman must be rolling over in his grave about now.
“Foreclosure-tainted houses have caused home prices in Cleveland and many East Side suburbs to plummet in 2008 as banks and lenders unload their dam aged goods at rock-bottom prices.”
They left out the ‘n’ in ‘damn’ (damn aged goods…).
Good one, stucco!
unload their dam aged goods
Freudian slip?
BOMBSHELL ALERT!
Freddie Mac, Fannie Mae Plunge on Capital Concerns (Update1)
Dow off 141 points:
July 7 (Bloomberg) — Freddie Mac and Fannie Mae plunged in New York Stock Exchange composite trading on concern the two largest mortgage-finance companies may need to raise more capital.
Lehman Brothers Holdings Inc. analysts said in a report today that an accounting change may force Fannie Mae to add $46 billion of capital and Freddie Mac to add $29 billion. Speculation that the companies may need to make further writedowns also weighed on the stock, said John Tierney, a credit strategist at Deutsche Bank AG in New York.
“There’s a lot of apprehension about writedowns,” Tierney said. “If they have writedowns, they have to raise capital. How much do they raise and how easily can they do that? Those are the questions that everybody is asking.”
Freddie Mac fell $3.31, or 23 percent, to $11.19 at 1:04 p.m. Fannie Mae dropped $3.43, or 18 percent, to $15.35. The cost to protect against a default by Fannie Mae or Freddie Mac on their bonds also rose.
http://www.bloomberg.com/apps/news?pid=20601087&sid=asb4r81Ls6kE&refer=home
fre & fnm still hiring and offering healthcare for life after 5 years
big gov backed
Folks talking to our favorite, Maria B with the stripey colored hair now, sorry just had to add that.
Anyway, Maria, and the boyz are all saying do not buy into housing stocks, finances etc. Not for quite some time.
WHewwwwwwwww?
Most folks in “middle america” don’t watch this show, so they are going to still get the BS on regular tv.
Other guy this morning was telling on CNN that the 401ks offered are bogus and that the fees are usury. That the majority of people who have 401ks are being taken to the cleaners. The Corps and the Servicers ie: JP MORgan etc, pay each other for the service, which although legal, is hardly without serious CONflict of interests.
No wonder mine isn’t bigger. My 401k that is.
Where can *I* get a deal like that?
S&P 500 hit a 52 week low today. Three different ppl at work today asked me to help restructure their portfolios due to fear. These ppl used to be in the housing values never goes down for long crowd (it was just “never goes down” last year).
too late now; they should have talked to you in December
I know. It’s hard. I cant advise pulling large amounts out at this point. If they listened to me earlier, they would have pulled out last year, and I would now advise them to put X into aggressive growth each month. Some ppl never learn. My family does the same thing. Buy when high because everyone brags about how much they are making. Sell on the way down because they are scared. It’s all backwards.
Yes, I told my brother to move some into cash in early December. He didn’t listen and now he doesn’t want to talk about it. At least mom listened…
My biggest ever success with advising friends and family was convincing my dad to fire his investment adviser and pull all his dough out of the stock market (spring 2007). For the moment, I am feeling vindicated.
Good work. I hate to do it, too, because you can always be (very) wrong on the timing.
How old is he Prof Bear? I’m thinking my mother should do the same thing, and right now. I’m afraid if things get too ugly, she’ll never have time to recoup the losses.
“How old is he Prof Bear?”
80 at the end of this month.
“…you can always be (very) wrong on the timing.”
He still has some stock market exposure and lots of U.S. country exposure through his pensions, and he had way too many chips on the stock market table last spring for someone at his stage of life.
Note the persons I would recommend dollar cost averaging to these days are in their 30s and lower 40s. I would try to protect principal at all costs at 80. At least for the majority.
Where are all the gold bugs and inflationistas today?
In line at the pawn shop.
good bottom indicator
Home prices are still very much overvalued in California especially in the Bay Area. Price to Rent Ratios are still 20+ which is way above market fair value at 14-16! There is no way this housing bust will recover within 6-9 months which many analysts are foreseeing. I expect the housing pain to continue to 2011 and beyond.
you are right Alain. This thing has barely even started in some parts of the Bay Area. I am sickened by some of the fools still buying out here. Do they not watch the news? Or talk to other people?
I just walked in the door from that auction I mentioned in the mkt obs thread this weekend. It was a B&B, and the trustee had a minimum bid of $700k, but told us that there was a bid expected of $850k. Well, turns out that was just a beneficiary bid, not a third party. So the house went back to the lender (legally foreclosed) as the only bid was the beneficiary at $700k. But why the little game with the $850 and 700 numbers? Probably to try and draw in potential bidders with the lower asking is my guess.
Also, there was a guy there to bid, but stated he was going to offer less than the $700k asking. This guy was wasting his time. They never accept less than the asking at these things, that I have seen. But it is interesting to note, there was a guy who wanted the property, but the lender shut him out with the high asking.
Oh, and at the last minute another older guy mentioned he was the FBs father, and walked off. This is why I never say anything at these auctions unless I have to.
They have these auctions in this manner to get People through the Doors in the Hope that the action hype of the auction atmosphere will produce a few fools
Did you at least get some free coffee?
No, these things are just stand around affairs. The lady from the title office is on the phone seeing if there is a last minute bankruptcy filing or a postponement. Today one place foreclosed, five lots postponed and 2 houses postponed. Usually, it’s all postponed. So there are hundreds of local properties where no one is making payments, yet they haven’t been legally foreclosed yet.
Is the B&B shut down, will there be bookings that get their deposits not refunded?
Yet another thing to consider - will my vacation package still exist when the time comes to go…assuming one can afford it in the first place.
I would imagine the locks have already been changed. I doubt the deposits haven’t been spent.
I guess it will sit there, decay, get stripped of copper pipes, etc. and lose even more value now than it already has. Sounds like a lose-lose situation to me.
Oh well, not my money…
“‘We’re taking a risk, but our investment is limited,’ Tomasi said. Meanwhile, her buyers, usually lifelong renters, become homeowners at 1940s prices.”
Now THAT is deflation…
OK, Smith and her family deserve whatever happens to them. Independence is one big slum. Sure, there are nice spots here and there, but why live surrounded by decrepant falling down houses infested with drug users, when there are plenty of much nicer towns within a ten mile radius?
Our family just about died when we saw Independence, and quickly found a much nicer locale to rent while waiting the plummet of land prices.
Ben, thanks for the periodic info of Missouri real estate. Being here on the ground and with my background and experience in the industry, I can verify that it’s much worse here than is being reported. Lots of developers and builders have gone under, with more to follow. Too bad they can’t take their eye-sore crap developments with them when they go…
http://biz.yahoo.com/ap/080707/financial_risk_regulators.html
big gov to the rescue
“can I get free-er healthcare with that”?
There are areas in Cleveland where, apocryphally, you can’t give houses away for free. The risk of being a crime victim while visiting or fixing the property - let alone living there! - outweighs the value of the property.
Nonetheless, there are many wealthy suburbs on both the East and West sides of actual Cleveland - but absolutely no wealth in Cleveland itself.
Its amazing how low prices get people thinking crazy thoughts. You’d best understand this: there is an endless supply of these 1915 built crapboxes extending from one end of this oxide belt to the other. There is a reason that they are selling for next to nothing. Ninty five percent have been stripped of obvious metal of any kind; siding plumbing, wiring, gutters. The demographics of this place is such that there is no one to rent these places to, fixed up or not, at any price. The palpable fear that some see is the unsaid fact that this region has slid into a depression housing feet first. Feel free to invest all of that westcoast cash into this opportunity of a lifetime.
“One measure, the so-called misery index, … Add May’s 5.5 percent unemployment rate to the May inflation rate of 4.18 percent - and the misery index today is 9.68 percent. That’s the highest it’s been since September 2005, but nowhere near the all-time high of 21.98 in the summer of 1980, when the nation faced double-digit inflation and an unemployment rate of almost 12 percent.”
This is apples and oranges, though, since the method of calculation of both rates has been changed since 1980 - each time in a way that tends to reduce the numbers (of course). I’ve seen estimates of an 8 percentage-point difference in inflation, and 7 to 8 percentage points in unemployment, which would put the misery somewhere around 25.
Rest assured that Mr. O and the Demos will keep the misery index front and center from now until November.
Fear will sell in 2008 nearly as well as it did in 2000 and 2004.
I’m with Ken on this one. Its way to easy to get caught up in the hyperbolic headlines scattered across the web. Yes, the economy is going through a tough time, but by no means should anyone just right of the housing as a bad investment. There are opportunities out there, you just have to look pass all the shouts and screams.
Welcome to the blog, troll. We thought your kind was extinct.
just right of the housing .. just write off housing?
Nobody’s writing off housing.. we all need a place to live. We’re writing off various brands of numbskulls who think the price of housing can be maintained above the level of affordability.
..as for deals or opportunities, depending on one’s predilections and willingness to search them out, they certainly do exist.. always have, always will.
“There are opportunities out there, you just have to look pass all the shouts and screams.”
If you are going to make such a statement, please post your reasoning or support (e.g., you can find cash flow properties in your area within historical pricing ratios, the reasoning you think prices wont go down further in that area, etc). If there are opportunities out there, I would like to know about it.
Your link indicates that maybe you stand to profit by convincing people that what you say is true.
If you really believe it’s true, welcome to the blog, stick around for awhile and you’ll quickly change your mind. If you’re just trolling, you’re sure to get wounded here, no prisoners taken, as this blog operates on factual evidence, complete with links to backup what’s said. You’re warned.
What’s this? Are you seriously trying to peddle junk in texas??
Why are there $1.5M homes in Spring Branch, TX? I’ve never even heard of the place.
A $1.5M house in Texas has one heck of a nasty tax bill.
not to mention a big flippin’ air-conditioning bill.
it’s a shitty Houston suburb
Hyperbolic headlines? If anything, they are way too hypo-bolic.
I believe Ben threw us the piece of fresh meat I asked for in Bits Buckets today.
“Helen Hertz, a Cleveland Heights-based real estate agent, said mortgage lending has returned to the place it was more than 20 years ago. That means buyers need to have a down payment and pay their closing costs out of their own pockets.”
Can’t the buyers get 100 percent financing from the FHA or GSEs any more? Why not?
“The real estate market is not going to recover right away, Hertz said. ‘I think it’s going to take three to five years to reabsorb the inventory,’ she said.”
After a 75 percent price decline, that is a very pessimistic assessment.
Keep in mind that 75% decline is most likely concentrated in close-in, decrepit parts of East Cleveland and I think it’s a little misleading.
Cleveland Heights actually holds some wealthy households and probably hasn’t seen quite that large a decline, in spite of being just a stone’s throw south of East Cleveland.
I expect the big price declines in high end areas of Cleveland (not to mention the California coast) to show up later in the game, due to (1) more owners in wealthy areas having staying power (no need to sell if they thus far believe they can wait out the downturn); (2) Alt-A and prime resets not peaking until 2010 or so. I expect peak price declines to hit the high end U.S. housing markets over the 2010-2012 period.
True, median for Cleveland Heights sales compared to the first six months of last year was only a drop of 35 percent!! And, this is a city with a very strict point of sale requirement along with active home upkeep police keeping the local trades employed.
The trend for all inner ring suburbs in this area is down. A few more 35 percenters and that westcoast money will start to flow in.
RE: The Tomasi’s
I know it’s cliche and there’s a bit of a pile-on mentality at this point to rip on Californians but, seriously, is there a market that CA specuvestors haven’t touched?
Yup, those pesky Californians.
Californians viewed the other 49 states as potential Gold Rushes…
Later day 49′rs, if you will.
Californians used to have all the wealthy refugees, and exported their equity gains elsewhere. Now there will be poor refugees to join them. This is the epicenter of the economic Hurricane Katrina.
Oh well, not my money.
I buy and flip homes in the western suburbs of cleveland as one of my businesses. The homes alluded to in the newspaper are in the absolute worst neighborhoods and even i would not touch them. There were three people last Friday-Sunday alone that were killed by either a drive-by or hit and run in the areas they are buying. I wish the couple from california the best in their pursuit but in reality its just another version of a toxic loan by a different vehicle. my guess is for a year or two they can show a high monthly cash flow and utilize the value of the mortgages they have as assets to leverage something else. cleveland city proper is an absolute joke, police are way understaffed, the mayor is a clown who can’t even speak english, the average educational level of a cleveland resident is seriously about 10th grade, and more businesses are moving out of downtown cleveland at a faster pace than ever. the only construction that has been done in cleveland has been taxpayer subsidized, nothing more. the rock and roll hall of fame to this day is taxpayer supported as has been since day one. anywho if you have friends moving to cleveland let me know and i can tell you the best places for the money and the safest suburbs. its a great place and supercheap to live as long as you have an iq above 80 and are college educated. if you are you can easily make a ton of money here and winters are actually getting better thanks to g-warming, lol. lifelong resident here
Last week I went to downtown Cleveland to see the road show of “The Jersey Boys” in the biggest single US conglomeration of legitimate theaters outside NYC; driving away within 5 minutes I was at the nexus of three major league sports venues and the largest open-shelf public library in the US outside NYC. Within another 15 or 20 minutes I could have been safely nestled in an upper-class house, or at an international hub airport (LA or London or Paris non-stop), or sailing in the Great Lakes, having 1/5 of the world’s fresh water supply, or biking in a national park…
Cleveland (actually, outside Cleveland) is not a bad place to live. It is cheap, it is small, it is shrinking. And it is cheap. Plus, despite high taxes, it doesn’t cost much.