A Real Loss Of Wealth In California
The San Francisco Chronicle reports from California. “With lenders reeling from the housing collapse and loan losses mounting, the crunch is intensifying, economists say. That foreshadows a long and difficult stretch for households and businesses, as loan markets struggle to regain footing. ‘Credit is just plain hard to get. There’s not much availability, and it comes at a very high price,’ said Jim Wilcox, an economist at the Haas School of Business at UC Berkeley.”
“Nancy Levine, an executive recruiter from North Berkeley, had her home equity credit line cut back from $100,000 to the low $80,000 range a few months ago. She owes about $220,000 on her two-bedroom, one-bath house and thought she had a big equity cushion.”
“‘It feels like a real loss of wealth,’ she said. ‘You read about things like this, but never think it can happen to you.’”
“Redwood Credit Union, based in Santa Rosa, has always been a conservative lender and has not changed its standards, according to Chief Operating Officer Anne Benjamin. But tough times mean some formerly creditworthy customers no longer qualify for loans, perhaps because the equity in their homes or the value of their investments has dropped.”
“‘A lot of people in our community have been affected by the downturn,’ Benjamin said. ‘These situations do affect their ability to repay a loan.’”
The Mountain News. “The plummeting real estate market that has rocked California and rolled through the rest of the nation has not left Lake Arrowhead unscathed. The number of escrows closed in 2007 dropped 52 percent in Arrowhead Villas compared with 2006, with one-year drops of 48 percent in Cedar Glen, 47 percent in Arrowbear, 44 percent in Twin Peaks and Blue Jay, 37 percent in Green Valley Lake and 19 percent in Arrowhead Woods.”
“A comparison of houses-for-rent classified ads in the Aug. 14, 2008 issue of The Mountain News with similar ads one year earlier shows 89 houses on the rental market this year and only 65 the year before, an increase of 26 percent.”
“‘A lot of houses became rentals when their owners realized they weren’t selling,’ said Sue-Ellen Knapp of Re/Max Lake Arrowhead Realty. And because of the flood of houses for rent, renters can get more for their money.”
“‘What used to go for $1,500 now goes for about $1,200,’ Knapp said. Knapp said…that $1,200 a month might translate into a three-bedroom, two-bath home in Lake Arrowhead, while $1,500 could rent a similar home with a garage. The latter property, she said, would have rented for $1,900 before the economy’s downturn.”
“Rolf Garthofner, who has owned Lake Arrowhead Village-based Arrowhead Property Rental for 30 years, said that whereas his company normally carries an inventory of ‘eight to 10 houses for rent, over the last year (since the Grass Valley Fire) we’ve had an average of 20 to 40.’”
“Brand-new homes that would normally sell in the $500,000 range but have no buyers are renting for $1,800 to $2,000 a month, Garthofner said. Whereas the rule of thumb in the industry several years ago was that rents would be 1 percent of a home’s market value, Garthofner said the ratio has now fallen to less than one-half a percent, meaning a $400,000 home can now be rented for less than $2,000 a month.”
“With only an estimated 250 Arrowhead Woods sales predicted for this year, Bob Bailey, a real-estate veteran who has been analyzing Lake Arrowhead real-estate trends for 19 years. notes in his publication the current inventory of 490 homes on the market ‘is nearly a two-year supply,’ adding that ‘more listings will encourage price cutting as the public and market is tuned to the drum beat of nationwide falling prices.’”
“Just as a glut can drive rental prices downward, ‘more listings could sink this struggling (for sale) market,’ Bailey’s mid-year review cautions.”
“‘There are some good bargains out there now,’ said Clark Hahne, managing broker of Lake Arrowhead Re/Max Realty, referring to homes available via trustee sales. ‘There are probably 50 houses in Arrowhead Woods under $300,000. Let’s face it; it’s tough times now.’”
“Hahne said that ‘for practically every trustee sale the deed was recorded in 2006 or 2007. They bought at the top of the market or refinanced or had a small downpayment.’”
“He cited one Lake Arrowhead house, refinanced four times in 10 years, that had $419,000 worth of mortgages and eventually listed, because of the declining market, at $339,000. Another, a bank repossession, he said, sold in September 2005 for $775,000, with a $620,000 loan, yet was listed not long ago at $399,000, and has a $350,000 offer pending.”
“Another real estate industry observer, who asked not to be named, said ‘now is the best time to buy real estate on this mountain. I haven’t seen prices this low or discounted in years. If I had a lot of money I’d buy as many houses as I could and put renters in them. In the next three years if it (the investment) doesn’t double, I’d at least make a handsome profit.’”
The Bakersfield Californian. “Bakersfield operations of two national title and escrow companies are consolidating this month. Chicago Title Insurance Co. will absorb the staff of Fidelity National Title Insurance Co. around Sept. 22, said Eric Klein, Kern County manager for Chicago Title.”
“Both offices have already pared down as Kern’s market has drastically slowed over the past year or so. ‘We both really had to ratchet down the number of people on staff,’ Klein said.”
“He also said it’s a great time to buy a house since prices have declined so much in Kern. ‘We’re certainly closer to the end of this thing than the beginning,’ Klein said of the housing slump. ‘There’s never been a better time to buy.’”
“More financial and legal troubles have hit the master developer of northeast Bakersfield’s City in the Hills community, Los Angeles-based Mountain View Bravo LLC, records show. The developer, through several subsidiaries, has already defaulted on four loans borrowed against Kern County properties since July.”
“A lawsuit has been filed by a company that bought one of the developer’s now-defaulted loans. That company, Global Investment & Development LLC of Los Angeles, in June took over from Indymac Bank what remained of a $49.5 million construction loan for the Juliana’s Garden neighborhood in City in the Hills. The loan defaulted in July.”
“Separately, Global Investment in July bought 20 acres slated for 84 homes near Highway 178 and Comanche Drive at a fire-sale price from national homebuilder KB Home.”
The Modesto Bee. “Boarded-up windows, dead lawns, yellow auction signs and abandoned houses gave silent testimony Saturday to the brutal impact the foreclosure crisis is having on central Stockton. As a tour bus filled with lawmakers and their staff members cruised the distressed neighborhoods, the message was clear: The Northern San Joaquin Valley is hurting.”
“Changes in federal law will make it harder for first-time buyers to purchase those homes, according to Modesto mortgage broker Patty Amador.”
“‘My message is that we cannot bring this market back by shutting buyers out by limiting their options,’ she said. ‘Eliminating down payment assistance programs, increasing down payment and closing cost requirements, and increasing monthly payments through increased mortgage insurance premiums will once again make homeownership unaffordable.’”
“Amador and other speakers advocated preserving the American dream of homeownership, but Rep. Barney Frank challenged that concept.”
“‘The American dream should be for a decent place to live, and that could be in rental housing,’ Frank insisted. ‘One of the mistakes we made was to encourage people to buy homes who should not have bought. … We have not done enough for rental housing.’”
“All types of housing are suffering in Merced, according to statistics Mayor Merced Mayor Ellie Wooten offered. In 2006, near the height of the region’s building boom, Wooten said an estimated ‘80 percent of home purchases in Merced were being made by speculators, many attracted by the opening of the UC Merced campus.’”
“She noted how home values have plummeted, one in 12 Merced County landowners hasn’t paid their property taxes, businesses have closed and unemployment has soared.’”
“‘We have no reason to believe the situation will be improving any time soon,’ she said.”
From CNBC. “Foreclosures are up 300 percent from a year ago in Stockton’s San Joaquin County, and prices have fallen nearly in half, to a median of $215,000. Go to RealtyTrac and you’ll find more than 11,000 homes for sale here listed as either bank owned, auctions, or in preforeclosure. Only 52 houses are on the market as just regular old resales. That’s not even one percent.”
“No one seems to think we’re through the worst of it. ‘If we have the bulk of defaults in the pipeline now, we could wash it out within 12 months,’ realtor Kevin Moran told me. When I asked if he thinks the ‘bulk of defaults’ is in the pipeline, he answers, ‘No.’”
“Inside one foreclosed home we found all the walls stripped bare, all the outlets torn out, as thieves stole every inch of copper wiring. ‘At one time there was $295,000 owed against this property,’ Moran says. Now he has it listed for $71,000, but given the new damage, ‘I think a more conservative investor will offer (the bank) $25,000 all cash.’”
“‘Business is tough,’ says Joe Anfuso, CEO of local home builder Florsheim Homes. He’s cut his staff by two thirds and is selling his remaining inventory at a loss just to get rid of it. Buyers ‘only care about what the price per square foot is,’ and he can’t compete with the foreclosures.”
“Some here believe that banks have actually been putting off many foreclosures because they just don’t have the manpower to go after everyone who’s late on a mortgage. That could mean wave after wave of homes flooding the market for months (or years?) to come.”
“Realtor Kevin Moran is hanging on, hoping to ride it out. You could say Moran himself personifies all that’s happened in Stockton. Since we first met a year ago, his income has collapsed, and his own home went into foreclosure. Like a lot of other people around here, he’s trying to regroup.”
“‘My ego wants to say it happened to everybody,’ he says. ‘And then my other side wants to say how foolish I was, and I think the truth is somewhere in between the two.’”
Only in America can you moan about a $20,000 loan denial as if ‘It feels like a real loss of wealth’
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“Nancy Levine, an executive recruiter from North Berkeley, had her home equity credit line cut back from $100,000 to the low $80,000 range a few months ago. She owes about $220,000 on her two-bedroom, one-bath house and thought she had a big equity cushion.”
“‘It feels like a real loss of wealth,’ she said. ‘You read about things like this, but never think it can happen to you.’”
It does seem that for 99% of the US debt = wealth, or at least credit = cash.
Went to the mall yesterday and bought a mirror marked down from $400 to $150. Everything in the store was 30% to 80% off, but there were no visible “going out of business” signs - yet.
Also the overall feel at this upscale mall was that it was about 2/3 as full as the same general time last year - it was 106 degrees outside yesterday so usually people would be at the mall in the AC.
Less credit, less cash, less wealth = deflation?
BTW, I stick with my prediction of $99 oil by Sept 30 (made a few weeks ago), and now I’ll go for $89 oil by 10/31, with regular gas at $2.69 by 12/31.
I drove by a mall in Ventura a few weeks ago and noticed two (2) furniture stores holding “going out of business” sales within a few short blocks of each other. Inventory liquidation is in full swing.
Funny you should mention furniture stores closing. Tucson papers have a story of that sort in today’s news cycle.
Which leaves me wondering how we got to having so many furniture stores in the first place. Back when I was a pup, the purchase of furniture was a very rare event.
In fact, my parents, who will be married for 60 years next January, still have some of their original newlywed (or shortly thereafter) furniture.
Other than low-capitalized small builders, furniture stores are some of the first to go under. This cycle, the car dealers are also locking the doors.
You don’t need furniture stores anymore. I am doing well financially so the wife and I upgraded some of our furniture. I thought I would unload the old stuff (still in great condition) on Craigslist for ridiculously low prices (10% of original price). Not a SINGLE taker. Within 3 hours there were 100 new furniture listings, pushing mine off the page completely, and on and on. I have to give the stuff away for free to get rid of it. If you want furniture go to Craigslist and take advantage of all the foreclosed (homeless) people selling all their crap at firesale prices.
I saw a sofa on Craigs List earlier today. Not what I am lookig for, but the sob story is she boght it for $500, only asking $150, barely used, needs money to buy son diapers.
There are a lot of people trying to sell on Craig’s List for nearly 100% of what they paid. I love the stories that people tell about just buying something and found out that it can’t fit through the front door. Please buy for nearly what we paid even though it now has several holes in it from trying to get shoved through the entrance.
Oh, and I love when people call their stuff “custom.” It is only custom for the person who ordered it. On the resale it is no longer a custom piece. Nitwits.
Sheesh.
I got a teak sideboard off Craigslist recently, for free. It’s a beautiful piece.
There are a lot of people trying to sell on Craig’s List for nearly 100% of what they paid.
Craigs is O.K. - Lord I sound like a RE agent - depends on the location (hiding under keyboard).
Ah…LaPlace in Destin had beautiful teak and many other hardwood imports. (Think Bombay)?
This is NW FL, 2002/3?
At the time, nice price, nice purchase.
Then!!!
Going out of business sale. (We knew the buyer and did get a few select pieces).
O.K. I have a point.
They no longer exist. We bought hardwoods; nothing to write home about.
Back to the point - and yes I do have one.
Buy what you can afford and enjoy, without the expectation of any return.
A wise one said earlier:
If you have your family and health (paraphase) you’ve got it good! Stuff is only stuff.
Check.
Check.
Best,
Leigh
My daughter down in north San Diego County has been having a great time these last six months refurnishing her place and the yard with bunches of free stuff on craigslist. I think her husband is tired of the “free” runs for stuff. She’s got to stop soon she’ll be out of room!!
It cracks me up when people attempt to get back whatever they paid for something…I was looking for US Open Tennis tix today and found this one:
2 US open tickets- tonight!- have receipt! - $350 (Midtown)
Just want to get what I paid for them….Section 336 Row K seats 1 and 2
Call with any questions 212-710
Like yeah…you overpaid for tix, so seeing your receipt will make me want to cover your stupidity…
Polly:
I had a job interview at this place today
http://drsofa.com/
and guess what they do?????
—————————————-
I love the stories that people tell about just buying something and found out that it can’t fit through the front door. Please buy for nearly what we paid even though it now has several holes in it from trying to get shoved through the entrance.
That’s an interesting service! And I’m sure Shlomi Galon’s (aka Dr. Sofa) mother is proud of “her son the doctor.”
I heard some guy say that gas should be around $3.50/gallon. Sounds right to me. We’ll see what happens.
Downward pressure - I can see this happening.
Me hopes you are correct.
Leigh
Notice how the gas stations seem reluctant to drop the prices? Beginning of summer, prices were going up every other day. Penny here, nickel there. Highest price I think I saw was $4.69 for unleaded. Barrel prices have dropped more than a third, but the sign still reads $4.33…
One more day…just a little more. Gluttons gluttons everywhere. That hundred and a half grand sitting in the bank doesn’t seem like the Scrooge McDuck pile it was a couple years ago.
Az, didn’t you predict oil going over 114 at the beginning of the year? I think that was you. incredible voyage.
H=home
E=equity
L=loan
O=of
C=credit
Put it all together and what do you have?
Gimme a H gimme a E gimme a L gimme an O gimme a C.
Ancedotally, gimme a fooked system.
Dang.
Who knows or tracks HELOCs?
To the gentleman who does’nt normally crack the amber until the first frost (Grumps?) -
I need some sparkly, shiney jellybeans.
Hurrump,
Leigh
“If I had a lot of money I’d buy as many houses as I could and put renters in them. In the next three years if it (the investment) doesn’t double, I’d at least make a handsome profit.”
There is just no fixing the “stuck on stupid” syndrome! Amazing these people can even tend to themselves.
Well, this person didn’t want to be identified and we haven’t heard from LAY or Mr. Yun in a while. Sort of like a shill bidder at an auction.
I think I can understand why this person asked not to be named. Something about being stuck on stupid.
That must of been David Learah. Of course the bozo asked not to be id’d.
No, if he currently had a lot of money, it would be the result (in large measure) of having successfully resisted that precise tendency toward buying overpriced houses.
“If I had a lot of money”
Now you know why he dosn’t.
What about the gal who bought all the houses in Reno with 40% down, yesterday. They are all getting ready to under.Another retard.
The economy needs these people (or at least their money).
Yeah, yeah, yeah–amazing how everybody would be buying if only . . . right.
To twist an old phrase:
“Those that would cannot; those that can will not.”
The American dream should be for a decent place to live, and that could be in rental housing,’ Frank insisted. ‘One of the mistakes we made was to encourage people to buy homes who should not have bought. … We have not done enough for rental housing.
FLIP FLOP - FLIP FLOP.
He finally got it right.
5-7 years too late, but better than never I guess.
I would respect Frank a lot more if he wasn’t such a big defender of Fannie/Freddie.
Raines and the other thieves running it in the ’90’s gave the Dems plenty of contributions. J. Rodgers said we should have let them fail. No homeowners got bailed out, only Wall Street. Gross at Pimco has been buying up all of Fannies crap the past month. Pimco will make several billions of your money. hehehehehehehe
On the bright side though, the flipper people across the street finally painted the trim on the green house from white to green. Just in case you guys were wondering.
I mean from cream to white.
“He also said it’s a great time to buy a house since prices have declined so much in Kern. ‘We’re certainly closer to the end of this thing than the beginning,’ Klein said of the housing slump. ‘There’s never been a better time to buy.”
It’s past time to start rounding these morons up and having them face the firing squad, I’ll volunteer, my 30/30 is still in working order . Are they programed at birth, by the NAR? Do they use the under the skin chip technology, for control and tracking.
My .357 Magnum works pretty well too.
We’re gonna leave big holes…
just read Evanovich’s book 14, and the kids devised
Potato launchers out of pvc, lighters, and forgot the other thing, Half cooked spuds make a good splat so I shall join you guys. I am also thinking of aiming for some politicians.
Lets Go, lets rumble!
Glock 10 keeping the peace in Mesa
Here’s a shootin’ good HBB get-together idea: Why don’t we AZ HBB-ers meet up at Ben Avery?
“If I had a lot of money I’d buy as many houses as I could and put renters in them. In the next three years if it (the investment) doesn’t double, I’d at least make a handsome profit.’”
A lot of people are out there imagining that the bubble we just got out of will magically re-appear and bless any investor ” smart” enough to buy right this minute a chance to get that same crazy YOY appreciation. Speculative fever still runs rampant. If only they had the money…
Fun with Math!
300K w/3% - 9k down = 291K (P+I)
This will end well.
Leigh
They still have the mindset that the near future (next 10 years) will be an extension of the past 30 years, peaks and small declines superimposed upon a rising slope. In that scenario, every decline was a buying opportunity. The next 20 years may be very unlike the past 30. Imagine now that we’re on the other side of the mountain (the other side of the mountain we’ve been climbing for the past 30 years) and are now headed downhill, except on a steeper slope. Now, any slight increases in prices are selling opportunities. Buying opportunities are still a long ways off.
Exactly right. The past thirty years have been all about the 80-million+ boomers, and as they sail into the sunset their lack of consumer spending will leave an economic depression in their wake. It’s all about demographics, IMHO.
Kondratieff Waves, or K-Cycles, is what you are referring to when you mention the boomers heading through the python and the emptier space behind them.
Many consider his theories to be crackpot, but they are worth reviewing:
http://www.kwaves.com/kond_overview.htm
Thanks!
Every time I see one of these comments [that things boomed but now prices will just "soften"/"normalize"/"insert your favorite euphemism here" and then take off like a rocket], I just want to chuckle or scream at the monitor, depending on what phase of the moon we’re in.
It just goes to show how ignorant people are of history. It’s called “boom and bust”, not “boom and slight correction”. A quick trip to the library would show a wealth of books about what happens in the aftermath of a boom [Extraordinary Popular Delusions and the Madness of Crowds, Devil Take the Hindmost, America's Great Crash, Irrational Exuberance [I and II], etc.]. But I guess these people are in too much of a hurry to spare an evening doing some reading and instead wish to plunge in and commit a substantial amount of their net worth on the belief that things will bounce back in short order.
I guess I shouldn’t be surprised: it seems to be built-in to the fabric of human nature. Going against that takes some amount of intestinal fortitude; sites like the HBB certainly help [thanks Ben!].
“‘The American dream should be for a decent place to live, and that could be in rental housing,’ Frank insisted. ‘One of the mistakes we made was to encourage people to buy homes who should not have bought. … We have not done enough for rental housing.’”
OK, what happened to Barney Frank? Did someone cut his puppet strings and send him through a re-education camp? That’s the first semi-sensible thing that has come out of his mouth in many years.
Of course, if the government is now going to “help” the rental housing business the way they “helped” the homebuilding and mortgage business, I guess I had better sell out fast and find a rock to hide under.
That is, right after the vaporous bubble that “help” will likely engender.
Can’t the darn politicos just stop tinkering and leave the economy alone to lick its wounds and try to heal? Probably the scariest phrase in the English language is: “We’re from the Government and we’re here to help you…”
Frank has always been a big government stooge. Just that his latest pitch now is changing to Section 8 housing.
We don’t have a free market, and we never did…what we have is a “state capitalism” economy. A free market without regulation would mean no SEC, and Martha Stewart would never have gone to jail for insider trading, Enron would not have been taken to task over its accounting, and Salomon Bros wouldn’t have bid up the cost of Treasuries.
Sadly, as long as cronyism, investment, and politics are incestuous bedfellows, there will always be a need for regulation and transparency of the market. Government is only the enemy when people become apathetic and uneducated about it. Instead of less government, we need a system like Australia’s…where every citizen is required to vote.
“Government is only the enemy when people become apathetic and uneducated about it.”
I know a lot of people who are neither apathetic nor uneducated about it, but don’t feel like they can do an effin’ thing to reign in out-of-control gov’t spending (esp. when both parties these days seem to be competing with each other to win the spend-money-like-a-drunken-sailor contest), incompetence, or lack of accountability.
Every other neighbor is a thief, plain and simple. They feel it is their right to vote to take your property, raise your taxes, or do whatever the hell they feel like doing. Society is now on the brink of breaking down in far more serious ways, with financial collapses.
Just because two guys vote to have sex with one girl and the girl votes no doesn’t make it not rape. But at least 40% of the population thinks winning the vote to take and redistribute the property of others is not theft.
Hear, hear. It always amazes me when people complain of cronyism and government corruption — and then propose, for a solution, that the government become more involved in the economy.
Corrupt dealing between business and politics increases pari passu with government regulation of the economy. If government leaves the economy alone, there’s no point in a businessman’s trying to buy the favor of government.
Of course, in a less-regulated economy, a business itself can become corrupt — but at least it can’t get the advantages of a corrupt politician in its back pocket. And unless you believe that investors are universally stupid (as opposed to just mostly so), a company that cheats its investors, customers, and suppliers isn’t going to have many investors, customers and suppliers pretty soon.
“He also said it’s a great time to buy a house since prices have declined so much in Kern. ‘We’re certainly closer to the end of this thing than the beginning,’ Klein said of the housing slump. ‘There’s never been a better time to buy.’”
This will be the same response we here in 2011…….
“Some here believe that banks have actually been putting off many foreclosures because they just don’t have the manpower to go after everyone who’s late on a mortgage.”
=========================================
Banks are sitting on huge unrealized loan losses that remain quiet as church mice and look profitable, as long as they stay on the books…
…as long as they stay on the books…
Q4 will be interesting. As auditors force banks to lower values, the banks might as well dump. Auditors are going to be brutal this year - self preservation amid a bank a week folding from here on out and banana republic announcements during the football games.
If auditors aren’t already bankrupt from future lawsuits and dissolving ala Arthur Anderson and the Enron accounting failure model.
I called up a realtor regarding a foreclosure on Friday. She told me that she represented the buyer. So I asked her what she could do for the buyer that Redfin couldn’t do. She told me that I would get advance listings of the foreclosures. Woo hoo!
She then proceded to mention that these houses (in San Jose) have bidding wars going on. I told her the market was continuing to drop, so why would people even try to outbid one another. She said well you have to be prepared to outbid, none of these homes were selling below the price asked; so I told her I’d buy next year since she had scared me off.
Give her a break. Maybe she just woke up from being cryogenically frozen for 3 years.
“My ego wants to say it happened to everybody,’ he says. ‘And then my other side wants to say how foolish I was, and I think the truth is somewhere in between the two.”
The answer is he was 100% foolish. It did not happen to everybody and those of us sitting on the sidelines are going to make out like bandits. It is funny that something as obvious as a bubble is hard for most people to see.
Now that the bubble has popped they finally can see the bubble. The next obvious thing to happen is a run on the dollar, sometime in the next year.
More evidence of deflation creeping in. Rent drops. This is just the begining.
“‘What used to go for $1,500 now goes for about $1,200,’ Knapp said. Knapp said…that $1,200 a month might translate into a three-bedroom, two-bath home in Lake Arrowhead, while $1,500 could rent a similar home with a garage. The latter property, she said, would have rented for $1,900 before the economy’s downturn.”
I’m seeing substantial numbers of forclosures in Los Angeles South bay. It was only the fringes at first but they are all over the place now. High end, low end, west of PCH, million dollar… everywhere.
Friend of a friend got LO after 18yrs. Also had his HELOC cut in the same week. Hopefully he gets another job in short order.
What ever happens to with FRE/FNM it will probably paralze them for a while as the Fed/Treasury try to understand thier new tinker toy. Hopefully, what evver stupid policy that comes out of this takes too long to enact to stop the needed correction. Then we will only lose a few hundred billion into the whirling blades of death.
I don’t understand this whole “rents falling” thing. I was reassured by all my permabull friends on WSJ online, SDCIA and Nouveau Riche U. that this could *never* happen. They’ve been patiently schooling me for the last 4+ years about how (contrary to silly blogs like this one) there really were no unoccupied flip houses out there. And, in the (highly unlikely) event of falling prices, the newly homeless FBs would all instantly morph into jealous bitter renters (like myself), thus driving up rental demand –and rents– sky high. Obviously, this must be a misprint.
Maybe. The underlying fact is that credit was stupid-cheap a few years ago, and it’s not now. As a result everyone who bought assets on credit is de-leveraging. As a result a lot of asset classes will decline in value.
“Brand-new homes that would normally sell in the $500,000 range but have no buyers are renting for $1,800 to $2,000 a month, Garthofner said. Whereas the rule of thumb in the industry several years ago was that rents would be 1 percent of a home’s market value, Garthofner said the ratio has now fallen to less than one-half a percent, meaning a $400,000 home can now be rented for less than $2,000 a month.”
Or is it that that rental payment of less than $2,000 a month will soon once again represent one percent of the home’s market value at less than $200,000, once the rent-own equilibrium is restored.
This is a classical case of garbage in = garbage out + garbage retained in the brain.
(I’m being polite here and assuming that it isn’t possible for them to amplify garbage. This may be a severe error in the theory.)
I’m trying to get my head around this rental formula. Even with 20% down, your mortgage + taxes is going to be $3000/mo with a market value 6.5% 30 year fixed mortgage, roughly. So why was the traditional carrying cost $5000/mo? Even maintenance and insurance are not going to cost you $2000/mo. I suppose nowadays if you want a profit then you have to pay down your equity quickly, rather than shoot for a cap rate of 10% or more.
Depends on where the house is. In Houston, with a $500K house, you’re looking at about $1400/month in taxes and homeowner’s insurance, which would take that PITI right on up to $4000. I don’t see where the $5000 comes from, though.
Oh hey, you have to have some wiggle room for repairs and stuff. (I’m not a landlord.) But $1000/month? Is that reasonable? Maybe, on a $500K house, if it is an old house in a desirable close-in neighborhood.
I was going to make the same comment! If it’s rending for 2K/month, maybe it’s actually a $200,000 home.
Exactly. It’s not renting for too little, it’s selling for too much.
Hmmm. They still get 1 percent or more here. With low rental SFH inventory rents have been going up.
/syr burb market
One of the old topics on this blog (may still be a topic in the bb, I don’t know) was how YumYum doughnuts is expected to take Starbucks’ place in the world. Someone suggested a YumYum index as a way to gauge the progress of our current wave of the economic cycle. We still don’t have a YumYum’s in our hood, so I guess we’re nowhere near the bottom. Does anyone here have any insight?
“‘My message is that we cannot bring this market back by shutting buyers out by limiting their options,’ she said. ‘Eliminating down payment assistance programs, increasing down payment and closing cost requirements, and increasing monthly payments through increased mortgage insurance premiums will once again make homeownership unaffordable.’”
I wonder if lowering the prices might help? Seems so simple. I’m guessing it was plan “C”.
Someone bitchslap her with a big frozen trout, please.
“I think a more conservative investor will offer (the bank) $25,000 all cash.”
Jesus, what’s happened to my former hometown of Stockton? My parents sold a piece of crap on the bad side of town in the late 1970’s for 25k there. I could pick up 5 of these today, havemy carpenter dad restore them all for cost of material, and be a mogul in 10 years (or at leasta mini-mogul).
Dogpile Intervention!
“Nancy Levine, an executive recruiter from North Berkeley, had her home equity credit line cut back from $100,000 to the low $80,000 range a few months ago. She owes about $220,000 on her two-bedroom, one-bath house and thought she had a big equity cushion.”
A credit line is not “wealth,” stupid woman.
“A credit line is not “wealth,” stupid woman.”
But just think of all the ad campaigns during the bubble (”liberate your equity” was my personal favorite). No wonder loss of a credit line is seen as a loss of wealth. After all, the House ATM was a key reason for jumping onto the housing bandwagon.
And I can recall a classic HBB comment.
Seems that, at one point not long ago, 51% of American home equity had yet to be tapped. To which one savvy HBB-er replied…
Mission control to flight deck: We have 51% of fuel left to burn.
hmmm, “If they will loan me all this money, I must be wealthy” becomes, “OMG! They won’t loan me money! I MIGHT BE…B-B-B-BROKE!”
I have one card that has a $100K credit line. I have a couple more that is half that. I use my AMEX more because I just pay it off at the end of the month. Do I feel rich? Heck NO!
You would have to pay that back. Yeah, a home equity line will have favorable rates but owing someone is not wealth! To me a house is not wealth unless you own outright. For me, enormous amounts of liquid assets is wealth. Cash, Stocks, etc.. If I need 50K in 48 hours, I can do it on a single phone call. And in the end, I don’t owe anyone for it.
I don’t know why so many people can’t comprehend this simple notion. Your equity doesn’t really exist until you sell. Otherwise, you’re just borrowing money based on what you hope your net profit will be when and if you sell.
Every time we’d get one of those 0% credit card offers, we’d yell “free money”. Of course, the game was to read the hilarious fine print.
Can I ask, why do you need a credit card with a 50k limit on it, let alone 100k? I’m guessing if I’m entertaining clients and need 50k, cash is probably more prudent payment…
I have a consulting business. (Cards are not tied to the business) Charge about 25K avg per month on travel and personal. sometimes 50K. My reps use the business card but it has a strict limit (on purpose) so it doesn’t go out of hand.
So far, none of the credit companies lowered my credit line, but I wouldn’t care if they did.
See, here’s the difference between a house and an ATM: The ATM gives you $$ out of your checking account, which you have to ACTUALLY HAVE. The house gives you a loan, which you have to pay back. That’s the diff. Wealth vs. debt.
Big V,
You wouldn’t have made it very far in the bank advertising department : )
It was a stroke of genius for them to package this debt as “home equity” because people already understood the word “equity”. Unfortunately, it meant something entirely different in the stock market but people accepted the Orwellien twist and voila! You’re not going into debt, you’re “managing your assets”. And now they’re going to get their assets handed to them.
Slightly off topic, but can anyone explain to me how it is legal, much less constitutional, for a SMALL GROUP OF UNELECTED MEN, to meet behind CLOSED DOORS, on a WEEKEND, with NO public comment or congressional vote, and decide that the public will now be saddled with 5 TRILLION DOLLARS of additional debt, based on years of obviously fraudulent loans, and announce it as a DONE DEAL Monday morning?
Did you miss the law passed some time ago authorizing some sort of intervention? I believe FNM may have violated some UN sanction or other, or built up a Balance Sheet of Mass Destruction.
Absolute power corrupts absolutely.
and this is more than the war in Iraq costs! While our nation was at war, our citizens spent more money than they actually had and expect the Government to pick up the tab. We have a nation of traitors!
Would you have said the same thing about WWII, the Civil War, or the Revolutionary War? Or just the wars you don’t want to pay for?
I think reuven was just dissing FBs who expect the rest of us to pay their bills.
The difference is we taxed ourselves, at the time, to pay for those other wars. At no other time in our history, except for now, have we had tax cuts at a time of war.
And, for the record, I’d support tax increases!
Change the brackets from 10, 15, 25, 28, 33 and 35
to 35, 35, 35, 35, 35 and 35.
I’d feel very good about that one.
Been happening for years, why should it change now? Here’s some terms for you to Google:
Bilderbergers (just met down the street from me a couple of months ago as a matter of fact).
Skull and Bones
Bohemian Grove
for some prominent unofficial organizations/events at least. There are some very overlapping official organizations such as the CFR and Trilateral Commission.
The most famous of such meetings can be read about in “The creature from Jekyll Island” (referring to the Federal Reserve of course). The Federal Reserve of course has the wonderful advantage of being probably the single strongest non-elected policy-driving organization in the world.
(Boy if that post doesn’t label me a tin-foil-hatter nothing will)
Gross Dereliction Payoff
(GDP)
It’s just Big Business as usual. You vote for W?
Yeah, and it looks like the sheeple are actually considering W, part III, “the CF chronicles.”
I’ve just never had the urge to relive 1930’s Germany. Time to find a new country if W part III happens?
This isn’t just an abstract paranoia anymore. My husband and I are truly frightened about what the future brings. It’s one thing to accept that a democracy entails the compromise of majority rule, and you don’t always agree with everything that is decided but you can live with it, but when the process is completely corrupted, then dark times are truly upon us.
This is “legal” the same way it was “legal” in 1913 to transfer the power to issue the nation’s currency, set inter-bank interest rates, reserve requirements, and dozens of other vital powers into the hands of a few unelected private bankers, who answer only to themselves. Otherwise known as the “Federal Reserve System”.
You would think there would be at least some congressional hearings, some prosecutions, some attempt to recover the 25 million dollar + bonuses these CEOs got. Instead, nothing. Whatever this country is, it’s not a democracy anymore. Not even close. Through the stupidity and complacency of the masses, we’ve now evolved into some sick corporate dictatorship. Now it all ties together doesn’t it…letting in millions of illiterate illegal aliens…dumbing down the next generation…presidential candidates with no experience who seem like puppets for larger interests. I simply don’t see any peaceful way to “undo” this.
Congress can’t take people’s bonus money away just because those people appear not to have done a very good job. If that were the case, none of our paychecks would be immune. The CEOs in question were not employees of the US government.
What about civil prosecution for fraud that could result in stiff fines or judgments against the corp officers of the GSe’s?
It was never supposed to be a democracy.
“and to the REPUBLIC for which it stands”
Mike
Congress voted to write them a blank check. People are stupid.
I heard Dodd on the radio this morning saying that Paulson told them that they would “never use the power” given them by Congress!?!?!?
Does Dodd think we’re stupid? After the Iraq fiasco, how can anyone assume that powers granted by congress won’t be used?
You should vote your congressman out of office if they make such comments. Giving power away with the hope that it won’t be used is irresponsible.
As Jordan Maxwell has eloquently explained, the United States is a corporation, not a country.
lainvestorgirl …..All day long today I have been asking myself this very question you have just expressed so well . This is the biggest obstruction of real Justice act that I have seen in all my years .I mean we should of know this was coming when Paulson was asking for blank checks .
So what are we going to do about this? I mean, this goes beyond house prices now. I feel like our (relatively) free country has been taken over by a band of criminals. This is becoming a national security issue, I might add, as we are now broke, the world knows it, and Russia and China have only begun to walk all over us.
At least with China the prevailing argument is that they’ll keep providing us the debt dope as long as we buy our/their crap. What a great form of detente. Russia, not so clear about their intentions. Oil wealth is turning their petulant heads, and they’re spoiling for a fight. Our misadventure in Iraq is bleeding our resources. but heck, we need to busy our pretty little heads with pondering the vast superiority of “small town” values. Time to reread “Look Homeward Angel,” “The Scarlet Letter” and “Our Town”.
Or even re-read the Bible. Ezekiel 38 talks about a coming attack of Russia, with many Islamic nations, on Israel.
Wow,lainvestorgirl ,you are stating the big concerns I have also .Like you said ,this has gone way beyond house prices now .
The people in control don’t even feel they have to explain in detail
why the options they are choosing were the best and what in detail would of happen had other options been chosen. The powers aren’t even giving the public the right to choose and knowledge of what the price will be .
It’s taxing without representation and it’s letting a lot of criminals or liable parties off the hook for one thing . But don’t worry ,Crammer isn’t worried about the moral hazard . What a joke .
Oh, by the way ,didn’t Congress just authorized a back drop of
loan funds for help to F&F ,in case it was needed ,and wasn’t the amount capped ? I don’t remember that Paulson was authorized to take on a 5 trillion dollar liability and be able to
take over these Companies . If Congress and the Senate changed what they were authorizing Paulson to do ,it certainly didn’t make the news . Does anyone remember that a take-over at any price was the prior authorization of Congress ?
I just don’t remember that at all .
Hasn’t a takeover always been a possibility according to F&F’s charter? I think the blank check thingie was the lynchpin, though.
You should always research a company before investing, always vote in their little election thingies, and get out if you think the shareholders have passed BS.
As far as dumbass Congress is concerned, I’m at a loss. What do we do when everyone in charge is a dumbass?
Pea-brains or crooks running the Country .
“‘Credit is just plain hard to get. There’s not much availability, and it comes at a very high price’, said Jim Wilcox ….”
The War on Savers appears to be turning.
But the question is, what will they say next year when the credit market is really tight?
Got Popcorn?
Neil
Prices are going to be flat a lot longer than 2-3 years. I think it will be 7 years or so.
Bottom isn’t here yet.
Realtor Kevin Moran is hanging on, hoping to ride it out. You could say Moran himself personifies all that’s happened in Stockton. Since we first met a year ago, his income has collapsed, and his own home went into foreclosure. Like a lot of other people around here, he’s trying to regroup.”
“‘My ego wants to say it happened to everybody,’ he says. ‘And then my other side wants to say how foolish I was, and I think the truth is somewhere in between the two.’”
+++++++++++++++++++++++++++++++++++++++++++++++++++++++
Kevin, listen to your Super-Ego. It is telling you that when you were younger and the other kids called you moron instead of moran, they were quite perceptive and saw your future much more clearly.
““No one seems to think we’re through the worst of it. ‘If we have the bulk of defaults in the pipeline now, we could wash it out within 12 months,’ realtor Kevin Moran told me. When I asked if he thinks the ‘bulk of defaults’ is in the pipeline, he answers, ‘No.’””
He’s still smoking the peace-pipe. Not only are there so many more defaults coming, what makes him think demand is all of a sudden going to out-strip supply? What about all those people renting out their alligators right now, waiting for the “market to come back?”, let alone the normal people who will have to sell because of job, illness, or divorce, let alone all of those who don’t need to sell right now, but one or two more years will force their hand?
That’s funny. I got the same crap with my lastname.
I don’t know where my comment went…anyway, as I was saying, this is no longer a democracy, we are now some sort of corporatist dictatorship / kleptocracy, ripe for take over for a dictator, who knows, maybe one promising hope and change and no specifics. All the years of letting in millions of illiterate immigrants, dumbing down our students, getting the public hooked on debt, have finally paid off for our Wall Street masters.
No wonder all the presidential candidates in recent years seem woefully unqualified, they are mere puppets and our democracy is an illusion. Oh well, what does it matter if our country is going down the toilet, as long as I can pick up a few properties next year at 60% off or more, right? Sarcasm off.
This is “THE MORON GENERATION” and i am not a part of it….so why am i still unemployed?
It’s the moran generation (at least in stockton).
lainvestorgirl …..I don’t know if you remember the famous movie “7days in May “. The premise of the movie was what would happen if the Military decided to take over the government .The reason I bring this movie up is I feel there should of been a movie made that warns people about what would happen if a special interest group in effect starts taking over the government .
I’m not sure this is a special interest group! It’s the Average American, with the belief that he’s entitled to get-rich-quick by buying a house, who took over America.
It may sound Democratic, but it isn’t when you realize that 5% of the people pay 50% of the taxes. Until we tax everyone at the same rate, we’ll have no fairness in this country.
What could be more special interest than bailing out Wall Street and the lenders and yes a bunch of borrower gamblers might be thrown into that group also .
Taxes have never been fair in terms of everyone paying the exact same percentage ,and I don’t know if that is ever going to change . i just wonder who the government is going to go after to pay for all the bail-outs .
Housing,
Thanks I couldn’t remember the name of that movie. “7 Days in May” Burt Lancaster and Kirk Douglas. I saw the movie later in the 70s. Good movie.
The great part about the movie was that Kirk Douglas stopped the take over of the government that was attempted by the General ,who was played by Burt Lancaster . The General attempted to take over the government when the President at the time was a lame duck President and had slipped in his ratings . Kirk Douglas ,(who was also a military man )by accident discovered the plot for the Military ,(under the General ) to take over the government .
Excellent movie that is worth renting . The acting was fantastic in that movie also .
Argh. Wall Street is not your master, lainvestorgirl. We all know that corporate bailouts would occur. We just couldn’t predict what form they would take. Like I said before, people are stupid. I guess Congress is no exception. We are in a bind that no one knows how to untangle, so they are panicking. It all started with offshoring of American labor. Vote Obama for the long-term fix.
Excellent. Bring the pain!
I don’t remember making the deal with China that if they will provide our debt money that I would buy their cheap crap and see my fellow Americans lose jobs because of it . I ,as a American ,did not agree to the monopoly of slave labor foreign goods . Me, myself ,and I ,did not agree to carry on with this most bizarre situation of having China financing our debt while we buy their slave labor products . I did not agree to get in bed with the commies .
Does anyone see an inconsistency here? He’s firing people at the same time as he’s saying it’s a “great time to buy”… How ya gonna buy if you got no job?
——————————————————————–
“Eric Klein, Kern County manager for Chicago Title.” says
“Both offices have already pared down as Kern’s market has drastically slowed over the past year or so. ‘We both really had to ratchet down the number of people on staff,’
“He also said it’s a great time to buy a house since prices have declined so much in Kern. ‘We’re certainly closer to the end of this thing than the beginning,’ Klein said of the housing slump. ‘There’s never been a better time to buy.’”
Right ,if they really thought it was the bottom they would be gearing up to handle business and hiring people .
Compare and contrast, the difference nine short months make.
The chief executive of the Nationwide Building Society has told BBC News that he thinks house prices could fall as much as 25% from their peak.
http://news.bbc.co.uk/1/hi/business/7604894.stm
The Nationwide forecasts that annual house price inflation will have dwindled to nil by the end of 2008, describing this as a “significant slowdown”.
http://news.bbc.co.uk/1/hi/business/7150229.stm
And still they are wrong, prices would need to drop 50% to return to a sensible level.
Another real estate industry observer, who asked not to be named, said ‘now is the best time to buy real estate on this mountain. I haven’t seen prices this low or discounted in years. If I had a lot of money I’d buy as many houses as I could and put renters in them. In the next three years if it (the investment) doesn’t double, I’d at least make a handsome profit.’”
Trouble is with these real estate “observers” is that didn’t they learn from this recent bubble? I am glad he has a crystal ball why doesn’t he explain this to Fannie & Freddie. “Just hang on for 3 years and all will be fine”
Never been a better time to buy? Must be a real estate agent saying that. Still looks overpriced to me.