Where Any Sale Is A Prized Event
The Associated Press reports on Florida. “Al Ray is so strapped for cash, the only time he eats out is on Wednesday or Sunday, when the local McDonald’s sells hamburgers for 49 cents. Ray lost his engineering job last November, and has been working as high school tutor, scratching out about $1,000 a month - if he’s lucky. He struggled to make his $1,400 monthly mortgage payment and $330 monthly homeowners’ association fee until May, when he stopped paying.”
“Ray is looking for work and renting out a room in his two-bedroom condo in Davie, Fla., for $500, but his monthly income doesn’t match his expenses and he’s facing foreclosure. ‘I barely have money to survive,’ he said.”
“Ray is one of more than 7.5 million people - almost 15 percent of American homeowners with a mortgage - who are spending half of their income or more on housing costs, according to 2007 data released Tuesday by the U.S. Census Bureau. That is up from nearly 7.1 million the year before.”
“‘We had a bubble,’ said Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. ‘This is a case where we absolutely want the market to adjust.’”
The Wall Street Journal. “In 2003, Robert Provost snapped up a $2.5 million villa in Sarasota, Fla. A finance chief for an auto-sales chain, he earned more than $250,000 a year and had an impeccable credit history.”
“Then he lost his job. Provost missed one $10,500 mortgage payment, then another. This month, he put his house, a five-bedroom with sweeping views of the Intracoastal Waterway, on the market for $3.4 million. But the listing thus far has attracted little interest. Provost says he expects to receive a notice of default from the bank in the next month or two.”
“‘A foreclosure would be devastating,’ he says. ‘My wife and I would have to start from scratch.’”
The Herald Tribune. “It is hard to imagine conditions getting worse in the Manatee condominium market. Nearly 400 condo owners have defaulted on loans since the beginning of the year, Manatee County court records show. A handful of developers, including Venice master builder Mike Miller, have been forced to surrender projects to their banks.”
“‘I had clients who walked away from a $90,000 deposit,’ said Jo Rutstein, an agent with Sarasota’s Premier Properties. ‘In hindsight, they did the right thing.’”
“Miller, who developed The Palms at Riviera Dunes in Palmetto, faced a wave of cancellations and ultimately defaulted on a $23 million loan. As a result, his 108-unit, two-building condo project remains half-finished.”
‘Similarly, Darrel Reha, who borrowed $3.5 million to refurbish the Manatee River Hotel in downtown Bradenton, defaulted on his loan and left the once proud building in sorry shape.”
“‘I have heard other developers are getting ready to walk away themselves,’ Rutstein said.”
“Another investor who defaulted after buying a unit at Watercrest for $695,000 in August 2005 was Re/Max agent Marianne Zoll. Zoll, who financed the purchase with two loans totaling the exact amount of her purchase, did not return calls seeking comment. But a blog she posted on the Internet in October to drum up support for an auction told her story.”
“Zoll finally defaulted on her loans in April, and the bank seized her property in July. She is one of 18 people to default on condo loans totaling $11 million at Watercrest since the beginning of the year.”
“‘You think because I am a Realtor and an auctioneer I would know better, but we all make mistakes,’ Zoll wrote. ‘A week ago a bankruptcy auctioneer had an auction and sold a condominium 400 square feet bigger than mine for $322,000.00. It was a model and had all the bells and whistles.’”
“While some of these relative newcomers to the Sarasota-area auction scene are finding themselves in the doldrums, the same can’t be said for some veteran players in the market. For example, at least one longstanding local business, Venice-based Van De Ree Auction Co., is still holding events on a regular basis, and is moving the real estate going up on the block.”
“‘It’s a way to get market value, because right now no one really knows what market value is for many properties,’ said George Van De Ree. ‘I feel bad for the appraisers these days, because they’re trying to appraise properties without much in the way of comps, or any firm sense of what things are really worth in the market.’”
The New York Times. “Come to Fort Myers, population 60,000, the seat of Lee County. Walk the Gulf Coast beaches. Cruise the Caloosahatchee River. Witness what happens when banks dole out easy mortgages and homeowners forget that the money isn’t free.”
“Drive down McGregor Boulevard, or Cleveland Avenue, turn left or turn right, and see the empty houses, the overgrown lots, the signs saying AUCTION and FREE RENT.”
“Shayne Becher works for the code enforcement division’s rapid response team, which tries to keep up with an ever-growing list of abandoned properties needing to be mowed and boarded up.”
“The lawn mower cuts across the front-lawn jungle of an attractive house with great location and move-in potential. Abandoned, in other words. Three years ago, sold for $660,000; today, a ghostly parcel of failure.”
“He finishes mowing, takes a photograph of a job well done, and closes the chain-link fence as though the property were his own. ‘Another day in paradise,’ he says, standing on this street called Sunset.”
The News Press. “Three years ago, banks were throwing money at prospective no-money-down homeowners in Southwest Florida. Now prices have plummeted and banks aren’t as willing to take the risk: demanding hefty down payments as high as 20 percent and triple-checking credit histories and employment.”
“As would-be buyers are forced to sit on the sidelines, how can Lee County’s housing market with an inventory of about 15,000 homes expect to recover?”
“Getting more buyers into the market is key to a turnaround, said real estate agent Brett Ellis in Fort Myers. ‘I’m actually losing a lot of deals over financing, three in the last month.’ In some cases, he said, ‘These were deals already in place, pre-approved up front, and then underwriting standards changed.’”
“The number of foreclosures has exploded in Lee County recently, with 2,156 filed in August. That compares to 1,045 in August 2007 and only 146 in August 2006 when foreclosures were just starting to take off.”
The Orlando Sentinel. “Of Kevin Azzouz’s grand ambitions for MetroWest, none is bigger than his $700 million development called Veranda Park. It’s intended to be Orlando’s second downtown, a 30-acre agglomeration of condos, restaurants and a luxury hotel.”
“Azzouz blames his troubles on the gone-bust housing market and Wachovia Bank’s refusal to renegotiate a $52 million construction loan for a nearly completed 144-unit condo building.”
“Azzouz denies that he has cheated anyone and said he expects all the lawsuits will be dropped eventually. ‘Welcome to the ABCs of real-estate development,’ Azzouz said. ‘One problem can have a domino effect. But if I have a problem, I fix it. There’s no way this doesn’t survive.’”
“William C. Weaver, a forensic economist who teaches at the University of Central Florida, likens Azzouz’s situation to the classic developer’s ‘house of cards.’”
“‘If they get in over their heads financially, they may take money meant for one part of the project and use it for another,’ he said. ‘It’s like robbing Peter to pay Paul, and then robbing Paul to pay Mary, and on down the chain until they run out of money. They get into trouble if there’s not enough money, and then it’s not just one problem; it’s crash-and-burn time.’”
“A condominium-hotel project near SeaWorld Orlando has filed for Chapter 11 bankruptcy protection, more than a year after the project put all sales on hold.”
“Now the company says it has between 50 and 99 creditors, and something between $1 million and $10 million in liabilities. The petition, filed Sept. 12 in U.S. Bankruptcy Court in Orlando, did not include a list of the largest unsecured creditors, as required by the court.”
“According to a Web site for Sage Resort, units were being offered for prices ranging from $469,000 to $1.3 million. The company’s New York-based lawyer, Raymond Sussman could not say Monday how many buyers had invested in the unbuilt condo-hotel.”
The Naples News. “When Cape Coral resident Ronald Luczak pleaded guilty to fraud charges in federal court earlier this month, he was admitting to engineering a scheme to inflate home sales prices - enough to allow for the payment of kickbacks to his wife’s company. Luczak then had straw buyers take out 100 percent financing based on those inflated values.”
“Despite the nearly two-year-old case and Luczak’s recent guilty plea, home sales Luczak handled have been included in the database the Lee County property appraiser’s office uses to calculate assessed values for neighboring properties for taxing purposes.”
“Cindy Franklin, who works for the property appraiser’s office, confirmed two days after the plea that with that particular property - one on SW 40th Terrace - the 2005 sale was still listed as a ‘qualified’ sale. In other words, the property appraiser’s office had viewed the reported sales price of $610,000 as the property’s true value at the time.”
“The home has sold more recently for a mere $175,000.”
“There is a good chance that if you live in a neighborhood managed by an association, you are going to start feeling the pain if you already have not. The symptoms are 3-foot-high lawns, moldy walls and, increasingly, associations that lack the money to maintain the common grounds or pay the water bill, much less maintain abandoned homes.”
“‘People don’t realize how bad it is out there,’ said Tom Cook, who with his wife, own SRQ Property Management in Manatee County.”
“Few of the 16 associations that SRQ manages — encompassing about 1,100 units — have been immune. Besides former owners who have just disappeared, the associations are contending with banks that have taken possession of properties but will not pay the owed fees or fork over money needed to maintain the properties until they are resold.”
“In a real estate market where any sale is a prized event, most homeowner and condo association board members were reluctant to discuss the specifics of their problems with the Herald-Tribune, lest it scare potential buyers away.”
“But a recent survey of 500 associations throughout Florida by a group that deals with lawmakers to protect property values for the state’s community association residents, found a majority of boards are being swamped.”
“More than 60 percent said that banks and mortgage lenders holding title to homes or units are not paying regular fees or other assessments.”
“‘We’ve seen associations that have passed multiple assessments to cover the nonpayments,’ said Ken Arnold, the Hallandale-based Association Financial Services’s CEO. ‘It can run into hundreds or even thousands per unit.’”
“Arnold notes the domino effect that rising assessments can have on a neighborhood. ‘These families got a mortgage they knew they could pay and all of a sudden the guy next door stops paying and their assessments go up and up and up until they can’t afford to pay either,’ Arnold said. ‘It snowballs from there.’”
‘According to a Web site for Sage Resort, units were being offered for prices ranging from $469,000 to $1.3 million. The company’s New York-based lawyer, Raymond Sussman could not say Monday how many buyers had invested in the unbuilt condo-hotel.’
Most of the media still won’t admit just how nutty things got a few years ago, but people paying hundreds of thousands for an unbuilt hotel room pretty much says it all. And what ever happened to those floating condos on the Mississippi?
Ben Jones,
That’s an aspect troubling me over the last several days. As we stare down the barrel of a $700 bil. b/o how much of that can we attribute to primary residence SFH and to what degree is this the fallout from failed condo/condotel/resort/hotel projects?
Thus far the brunt of focus has been on individual homeowners and the impacts of their defaults. It may be years before forensic accounting unearths the truth but isn’t it possible that SFH defaults are much less a factor than we’re being told?
1 Million homeowners each walking away from houses leaving the bank on the hook for $100,000 is One Trillion dollars. This can easily be all from SFH.
One million X 100,000 is 100 billion, not one trillion.
Right, and with so many builders going under and their land options underwater, the “see-through condos” in FL and failed developments from coast to coast yet we’re being sold the notion that this is almost entirely the result of illegal fruit pickers in Gilroy, CA?
Hank just said that whether or not they’re aware the American Taxpayer is ALREADY very much involved in this! Statements like that certainly lend themselves to the notion that “we all in one way or another somehow rec’d ‘benefit’ from the boom and now those bills have come due”.
Or do I have the Treas./Fed’s position wrong altogether?
Gosh! For one lousy zero, you make me a liar?
reuven,
“With all the zeros flying about I kind of lost track myself?”
I’m not trying to absolve Mr & Mrs FB in any way. Glen Beck had a guest last week that shared the story about Paulsen calling Warren Buffet to see if the bailout “passed the smell test”.
Well if this is truly just about FB’s defaulting, why would any CH & WS guys give a rip about what ‘we’ thought about ofthers in our ‘peer group’? Clearly there’s more to this and it strikes me it would be uphill for them to call this The Builder/Developer’s Lenders Bailout Bill.
What has ground me down more than I can ever share is the way that REIC players have somehow managed to make this a “we’re all in this together” situation on so many different levels! Locally we’re all burdened with basic services so that builders and realtors can get the most ( and first! ) We ALL have to pay for new water/sewer capacity so ‘they’ can have THEIR windfall. I’m just so tired of it.
“Gosh! For one lousy zero, you make me a liar?”
Of course we do;
unless you work for the government.
If so, then you’re good.
We’re not talking about the zeroes in Congress; these are real zeroes.
Ben,
I’ve been wondering why we don’t hear anything about this on the news. All we hear about are the greedy ceo’s and the “victims”. While many were preyed upon, why aren’t we hearing about the greed of the average american!
lizziebeth,
Oh you mean… our “new class of criminal”?
Right, the legions of rank and file Americans that wouldn’t even consider having an overdue library book but somehow suddenly rationalize that “just walking away” from their 2nd home on the coast is *not defrauding the bank? Even after the down payment they used for that purchase was done from ‘liberating’ equity from their primary residence through fluffed up income and falsified multiple mortgage applications?
You mean “those” people?
But the bank invited them to take out the equity loan to spend on junk (My credit union still has signs up advocating taking out a home loan to fund a vacation).
Also, the banks get a home when the borrower walks, so it’s not 100% loss.
Virginia Beach,
Your joking, right??
VB VB,
Yes we have that dog ear’d “fly paper” still proudly taped aloft at our bank too ( but I think they just left it up to disguise the bullet hole in the window? ) Besides, who the hell knows? ‘Someone’ might… still qualify?
I’ll agree, I worked downtown ‘Potland’ for years and was offered “smoke” every lunch hour for 15 years. Never took anybody UP on it, but it was there if you wanted.
Yesterday I heard a radio ad promoting a cash-out HELOC. “Add a bathroom to your house…with your house. Take a vacation…with your house. Pay off your credit card…with your house. Update the kitchen in your house…with your house!”
I was too shocked to catch the name of the bank, or I would have looked up the fine print. How much you want to bet there are some really hefty fees involved.
From the AP article:
“Traditionally, the government and most lenders consider a homeowner spending 30 percent or more of their income on housing costs to be financially burdened. But that definition now covers almost 38 percent of American homeowners with a mortgage — 19 million of them.”
How awful! Let’s print up some money and give it to these victims so they’re no longer burdened!
And yet, 28% is considered to be well within your means. I always figured the banks were being aggressive even with the 28/36 “traditional” metrics. It used to be that people were only that burdened on their first house and they would save and pay down equity and grow into it. Now people are getting in that bind in their 40’s and 50’s staring kid’s college and retirement in the face.
Nice juxtaposition of Al & Robert from Florida…
Al’s wondering where he’s gonna scrounge up 49 Cents for a McBurger, and Robert wonders where he’s gonna scrounge up $10,500 for a McMansion payment?
aladinsane,
Statements like that are made for dramatic effect as much as anything. ( I always ordered off the $1 Menu… in good times AND bad )
Now that I think about it, Robert’s mortgage payment put him at over 50% DTI just on his home payment alone.
OT for this thread.
If you’re the same DinOR that frequented Patrick, have you noticed that the latest DataQuick numbers have the Marin median for August at $675K? That’s a tad lower than the $899K in May, methinks.
Even if median isn’t the ideal measure, that sorta fall has to be leaving some marks.
Ha! And I thought I was the only one who ordered strictly from the dollar menu!
When we’re on the road, my wife and I each get a dollar burger, and split a dollar order of fries and a dollar drink. Hard to beat $2.00 per person for lunch.
It was not til the housing boom that these things got marked up.
Cheeseburgers $.69
Fries $.89
Soda $.89
It amazes me that people think they are getting a bargain.
Hard to beat $2.00 per person for lunch.
Burger, Fries and a drink? Hope you are putting the monies you save in a HSA.
Yeah. Kind of like we’ve seen the true cost of artificially low interest rates, the true cost of that food has to take into account more than just the price it is sold for.
My Little Debbie Chocolate donuts just went up from 50 cents to 59 cents.
The price of luxuries are going down, while the neccesities are going up…….
“Burger, Fries and a drink? Hope you are putting the monies you save in a HSA.”
Here come the nanny statists, telling me what’s good for me, and I’d better eat what’s good for me or else.
I said, “when we’re on the road,” idiot!
I always think it’s funny when reporters illustrate how incredibly financially strapped someone is by noting that they’ve “really cut back on eating out.”
I’m sorry, I don’t consider “eating out” a right guaranteed by the constitution. Rather, it’s a nice “extra” that you indulge in occasionally if you can afford it, like trips to Hawaii or leatherbound editions of classic literature. You know…perks. Not necessities.
Yeesh.
You do realize that McD’s is the Modern Day Soup Kitchen, don’t you?
There won’t be any soup kitchens during this modern day depression. This country is far too fat as it is.
Faster Pussycat,
I’ve also drawn the comparison to the 7-11 being the modern day equivalent to the Opium Den. Next time you’ve the misfortune to be standing in line there notice that nearly every vice is being served?
Smut? Got it!
Alcohol? What kind?
Tobacco, you bet!
I’d never thought of MCD that way though. I’ve heard when it gets tough though is when you’re employer is right next door! There’s a recipe for out of control weight gain.
Don’t forget the numbers racket (oh I meant LOTTO)..
Interesting pieces on Manatee County. If anyone’s in the mood for humor, take US-41 into Palmetto. On the side of the highway, not far from the bridge into downtown Bradenton, you’ll see a large billboard reading “The Truth About Palmetto: Booming.”
Sounds like a road trip! Priceless.
Does Palmy know he’s booming?
The Associated Press reports on Florida. “Al Ray is so strapped for cash, the only time he eats out is on Wednesday or Sunday, when the local McDonald’s sells hamburgers for 49 cents. Ray lost his engineering job last November, and has been working as high school tutor, scratching out about $1,000 a month - if he’s lucky. He struggled to make his $1,400 monthly mortgage payment and $330 monthly homeowners’ association fee until May, when he stopped paying.”
BTW: The MyFloridaLicense website has no engineering licenses for any “Al Ray” (or anything starting with Al*) listed. It’s not a big deal, but you’d expect an “engineer” to have enough math skills not to get into this mess in the first place. Who would pay $330/month homeowners fee?
Most engineers aren’t licensed. It’s a big deal for civil and maybe power engineers and engineers that have to deal with the court system.
The office I work in is a mix of PE’s, PhD’s, MSEEs and BSEEs. If you do good work you move up, if you don’t you move out. A PE license doesn’t buy you a cup of coffee here.
There are lots of ways into the engineering world. Paper credentials are nice, but not necessary.
In some states you can’t call yourself an “engineer” unless you are a PE. At IBM “Software Engineers” are called “Programmers” for this very reason.
Absolutely! And in my spare time (mostly in airport carpet clubs) I write nasty letters to companies that advertise jobs for “software engineers”
I spent my entire working career employed as an (electrical) engineer, or further up the food chain in an engineering department, and never had a P.E. license.
Preach it, Climber. My father is a Ph.D./PE engineer. But, as he’s fond of saying, people don’t hire him to be pretty (or for his pretty titles), they hire him for what he knows how to do.
“PE” is not a ginned-up credential, like an Annual Montgomery Burns Award for Outstanding Achievement in the Field of Excellence. You have to pass a difficult test just to be an Engineer-in-Training. Then after some years of experience, you have to take another test to be a PE.
A lot of responsibility goes with the PE title, because lives depend on their recommendations. Exhibit A: Big Dig. Exhibit B: Bridge in Minnesota. Exhibit C: Industrial Canal Levee.
“Who would pay $330/month homeowner’s fee?”
Sadly, that’s typical for the area. We were paying a similar amount two years ago (note: although the article refers to a “homeowner’s fee,” it goes on to say that he lives in a condo, so I assume the writer meant condo association fee). In 10 years our condo fee zoomed from $120/mo. to $325 per month. I was not happy when I realized if the rate of increase stayed the same, in 10 more years we’d be paying nearly $900 a month to the condo association.
PS: We sold the condo.
Problem solved.
I looked at a condo today that has a $620 / monthly HOA fee.
2005 sales in the mid 200K.
I put an offer in at 27K.
At 45K I make 8% return even if rents go down further (a good assumption)
It’s a cash offer of course.
Palmetto, Ben, dimedropped….
If you get to read this. Posted late because of the above.
Market is finally collapsing in the East Coast of the State.
The broker did not flinch at my offer, said it made sense!!!!
Said last week a LOT of closings in his office did not occur. (all were REOs, short sales)
-
Could post more but I am posting so late, oh well.
Just a second! $620K/month (your HOA fee–that can rise to whatever they want it to be) would cover a 100K Mortgage in 30 years.
So even if they accept your 27K offer, you could have bought a $127K house with no HOA fee for the same effective price. (Actually less, because who knows what will become of that HOA fee)
“Ray is one of more than 7.5 million people - almost 15 percent of American homeowners with a mortgage - who are spending half of their income or more on housing costs,”
I know a alot of people in this situation and for some reason most of them are the 20 something crowd. They think this is normal and I tell them (since I grew up in the late 70/80’s) it’s absolutely not. They end up buying and now they have all the excuses not to do anything such as vacation, eating out, going to special events like a concert or a baseball game. They say ” I have too much stuff to do”, “I’m working late”, or flat out, “we are on a strict budget and right now we can’t afford it”.
Just recently a coworker and his wife (in their early 20’s) just bought a townhouse for close to 700K (in CA). Both of them make $110K total tops. They said they’ll have one of their fathers move in to help pay the mortgage. Speechless.
Today, I just paid rent (I pay early), paid the bills, getting the family ready for a short trip to Paris (wedding) next week, wife is almost done Christmas shopping because she hates the frenzy during the season, and thinking about where to go for a great steak dinner tonight.
I know a alot of people in this situation and for some reason most of them are the 20 something crowd. They think this is normal
You sort of can’t blame them. Its the only situation many of them have ever known. Many probably heard about the old days, but for them, after seeing year after year after year of double digit appreciation they came to the erroneous conclusion that this is normal and will always be this way. As far as they were concerned the good old days, like buggy whips, were not comng back.
I have seen this sort of fatalism in their generation in other aspects. For instance: they expect their jobs to suck and to always be one day away from a mass lay off.
In many ways, it’s people like this who got a (fixed) mortgage on a very overpriced property–and are dutifully paying it–who are among the True Victims of this mess. If anyone should get a principal cramdown, it’s them, and not the single-mom-strawberry-picker-who-can-only-pay-her-teaser-rate.
Sadly, we’ll never see Justice here.
Towards the end of the bubble in FL, a recently married couple of my acquaintance - both professionals - bought a house with the husband’s mother because it was the only way they could afford a house. Thus the newlyweds were going to start off their life of wedded bliss nestled into the same small house with the woman’s mother-in-law.
Yep…speechless pretty well covers it.
“The Wall Street Journal. “In 2003, Robert Provost snapped up a $2.5 million villa in Sarasota, Fla. A finance chief for an auto-sales chain, he earned more than $250,000 a year and had an impeccable credit history.”
A villa at 10x gross income? Gee, that’s a sustainable plan…and why the coming AltA and Prime debacle will dwarf Subprime.
Maybe someone from Florida or SoCal can tell me….What is the difference between a “house” and a “villa”?
We have “ranches” around here. The big ones have signs across the driveway saying “Ponderosa” or some crap such as that. The one that came closest to the truth was the sign over the driveway saying “ElRancho costa TooMucho”.
A villa is a house on a very small lot. Typically the side setbacks in villa communities are no more than five feet (10 feet from your house to the one next door). The can be even less. So-called villa communities also usually include an HOA that contracts for all outside landscaping and landscape maintenance.
So, pretty much every house I saw in Santa Clarita was a “villa”……
I feel SOOOOO much more sophisticated now.
In FL, a “villa” is a one-story condo that is not apartment-style (a multi-story building with neighbors on all sides as well as above and below), but rather four or so units connected horizontally, with neighbors on one or both sides sharing walls. A two-story unit connected this way is a townhouse.
Know an old-time rancher over in Utarrr with a ranch called El Rancho Not So Grande. She owns about 10,000 acres.
Our ranch is all hat & 2 cat-tles
“…and why the coming AltA and Prime debacle will dwarf Subprime.”
I am guessing that if the emergency bailout measure passes, a fair share of the $700 bn will be allocated to helping owners of $1m+ valued homes fend off the foreclosure wolves at their doors. Welfare for the wealthy = business as usual.
“In 2003, Robert Provost snapped up a $2.5 million villa in Sarasota, Fla. A finance chief for an auto-sales chain, he earned more than $250,000 a year and had an impeccable credit history.”
“Then he lost his job. ”
Do you suppose they fired Robert when they found out he bought a house at 10x his salary? I wouldn’t want a “finance chief” with that sort of acumen.
(A few years ago the city manager in Saint John lost his house to foreclosure. The city council promptly forced him to resign)
It would be nice if all Employers, when deciding who to lay off, went after the people who foreclosed or walked away from houses first! After all, they’re the ones responsible for this mess, and should be first on the list to lay off when the company has to cut costs….
“I wouldn’t want a “finance chief” with that sort of acumen.”
Well, “finance chief” is sort of a vague term. If he’s the financial officer of the company, that’s one thing. But, most “finance chiefs” in auto sales are the sleazeball types who arrange the “financing” on your car. Crikey, I recently paid cash for a used VW and I STILL couldn’t avoid the “finance chief”, who got all oily with me about buying some “tire warranty”. I said “Thanks, chief, but no thanks”.
People get heist by their own petard, or however the expression goes. Just drinkin’ their own koolaid.
But the irony here is that the Finance Chief should have realized that there was a catch to the deal. He probably got an exploding alt-A type loan and didn’t read the fine print. Or maybe he expected appreciation beyond his maintenance, finance costs, taxes and upkeep. Now he realizes, houses are a lot like cars, and they are depreciating assets. Good for bling, not so smart to let them eat up a huge part of your income.
Still better than ben “subprime is contained” bernanke
Well said, palmetto. I’ll bet he was asking himself “how-much-a-month?” when he bought his house.
Most likely the dealership chain he worked for hit really hard times and they decided that they could do without him, especially if he recommended that they expand and move into one of those oh so popular but expensive Taj Mahal dealership facilities.
Several dealers in my neck of the woods moved into expensive digs at the new auto mall. Car sales here too are in the tank. They were expecting large growth in sales. Instead they got the opposite, and the only thing that grew was their fixed expenses.
There are several recently-abandoned auto dealerships, along with a growing number of other vacant commercial properties, to be seen when driving up North Dale Mabry Highway in Tampa. If you think those buildings look ugly when occupied, they are even worse when empty. At least derelict buildings in Detroit have a certain faded grandeur.
Astute observation. Having extensively mapped both urban and suburban areas in decline - the suburban version of decay is vastly more desolate and bleak. The suburban landscape/architecture does not age well at all.
Example: Downtown Gary, IN with it’s larger and older buildings had a strange gothic appeal - while the nearby declining southern suburbs of Chicago just looked hopeless.
You are right about Gary. A retired elderly relative of mine grew up there and now lives in a nearby northwest Indiana town. For years, whenever I saw him, he would take me on a “Gary tour,” where we revisited places from his youth: a house where his family lived, a soda shop where he hung out, the building where he worked his first job. Almost everything was long abandoned and boarded up. We once drove by a derelict old downtown theater, and he assured me that on Saturday nights back in the day, the sidewalk outside would be packed with throngs of well-dressed people for blocks.
I know he never intended to teach me anything by these tours, but it’s places like Gary that made me realize that real estate doesn’t always go up, and that even a prosperous neighborhood can decay.
In order to bring mortgage payments in line with income, builders need to start building non-luxury homes. Everything is luxury, luxury, luxury!!! Jacuzzi tub, granite countertops (why are these luxury?), marble floors, etc. Who the hell needs that to live in? The house I grew up in in the sixties was well-built but “basic”. No paneled doors, basic tubs, no fancy flooring, etc etc. When did that all stop? What about all the levit homes built after the war?
Why isn’t anybody talking about this?
Awww, renter, you’re raining on the luxury, luxury, luxury!!! parade. Doncha know that this is the only way for people to look rich when they’re not?
I vote that the word “luxury” and the following items be banned from ever being used in the same sentence: Condo, apartment, bathroom, any house under 5,000 square feet, any automobile that costs less than $50K, any car from Korea,…..others?
I second the motion.
“any car from Korea,…..others?”
I would not be so sure.. have a look at the hyundai genesis
dc_renter,
Well “I” certainly have!
I’ve often asked why the avg. American male would even give a rip about what kind of flooring ‘treatments’ were in his house? I swear at one point if I heard the term “upgrade” of “upscale” one…more…time! Dude, it’s a freakin’ f-a-u-c-e-t. You turn it on and water comes out. Sheesh, I hear you man. I hear you.
Safety improvements like smoke detectors etc. I can see, but for the most part features like earthquake bracing aren’t the kind of things you can ’show’ your guests?
Nothing prettier than a well-worn true adobe floor. And it’s really just dirt.
For a great many years OR’s used “mill ends” with sawdust and glue for the “grout” in between! Always great for a breezeway, patio and if done w/ care, the living room. Comfy to walk on too!
This really leaps out at you when you watch TV shows or movies that are 20 years old or more. Even though they’re sets of living rooms,etc. they are so much more modest than what is actually in a lot of people’s homes now.
Wow…a typical middle-class family that has a kitchen with laminate countertops and linoleum floors (instead of Brazilian granite and marble), a 19″ TV in the family room (rather than a 60″ plasma hung halfway up the 30-foot ceiling over the massive fireplace), sofas and chairs that are actually scaled for human beings to sit on them, rather than huge monstrosities that swallow you up so your feet don’t even touch the floor…etc.
Then again, the average family had one credit card with a few hundred dollars on it, a $30,000 mortgage, and only one parent working a 40 hour week rather than both working 80 hour weeks to buy more “stuff”…hmmm, which is preferable?
smathis,
Excellent point! Also when you’re going through photo albums from that “modest era” as well. ( However.. did we manage? ) When anthropologists sift through the wreckage they’ll draw the conclusion that people must have been much shorter in the 70’s and 80’s.
“however…did we manage?”
It’s all relative. Nobody else we knew had marble floors or their own home theater, so we didn’t consider ourselves deprived.
Depraved, maybe. Never deprived.
(and yes, I knew your “however did we manage” line was tongue in cheek..)
I have marble on my bathroom floor. $1.98 ft^2. The linoleum tiles I would have put down were $1 ft^2.
Its not always expensive to do a small bathroom or small entry way with higher end materials.
Good point. The Brady Bunch had a fairly plain-looking home…the kids slept three to a room! No Toll Brother “Princess Suites” for the little angels.
If it’s any consolation, pre-fab is making a comeback. Our State Fair had a model home set up to walk through. Yeah it was a little kitchzey, but for $90K 4 bed, it was pretty nice:
http://www.ohiofireside.com
That “luxury” stuff is all cheap lipstick that allows them more profit. Luxury homes built during the bubble are probably worse quality than non-luxury homes constructed pre-bubble.
Agreed. Don’t even look at anything from 2001 to 2007. And not just anything ‘built’ in that time frame, you don’t want to touch anything that was purchased or re-fi’d then either.
Seller expectations are too high and trust me, you don’t want to deal with them or their cr@pbox.
smathis ( although all are welcome )
Check out the Institute of Official Cheer at:
http://www.lileks.com
A collection of American diners and homes so SPARTAN you’ll want to run home immediately and throw out or give away everything in it!
I remember the first time I saw “The Graduate” w/ Dustin Hoffman. I KNEW the Robinsons’ were wealthy b/c they had carpet AND a bar!
Wow, that is a severely cool site. It is now bookmarked.
RE: The Graduate. My husband and I are always talking about things everyone has now that were “only for rich people” when we were growing up. Color TV, more than one TV, TV with remote control (the big clunky kind with buttons that went ka-thunk when you pressed them)…exclusively owned by people with lots of bucks.
A house with more than 1.5 bathrooms, a dishwasher, a microwave oven (with a dial, remember?)…all signs of affluence.
Ever been to Graceland? By the standards of our time, Elvis lived the last years of his life in a dump.
But he did have wall-to-wall carpet. And a (vinyl-topped) bar.
I can recall living in a neighborhood where my folks were among the very few adults who didn’t want a bar in the house.
Might have been due to my father’s memories of growing up in an alcoholic household. (You know those “I’m a friend of Bill W” bumper stickers? My grandfather was a friend of Bill’s. For real. And, yes, Grandpa did go to AA. For a while.)
Might have been due to some other reason. But I can clearly recall my mother saying some very negative things about the bar-in-the-home idea.
Preach it, VaBeyatch. Family friend used to work for the Toll Brothers. While he was there, he created the following slogan:
Toll Brothers Homes: Guaranteed for five years. Then they fall apart.
That slogan really resonated with my mother, who uses it every chance she gets.
smathis,
Too funny! I absolutely never thought of it that way? Perhaps more Americans should. I do recall a “TV tour” and Priscilla hosted ( pre-boom of course ) She was very proud to show all the features including a custom “lighting system” The King used to set the mood while in his home recording studio.
Given the lighting sys. was basically different colored bulbs and a dimmer switch and the recording studio had a p-h-o-n-o-g-r-a-p-h I suppose ‘that’ just wouldn’t cut it by our standards these days?
Actually when I see homes for sale in Baja on Craigslist, that would actually be just fine w/ me? Roof? Check!
“That “luxury” stuff is all cheap lipstick that allows them more profit.”
Not true. Luxury toilets do exist and my ass can tell the difference.
Muggy,
LOL! ( As usual )
Well even supposing that ‘is’ the case you can always buy a gold plated one out of pocket or just go over to Kimora Simmons house and explain that it really, really is an emergency!
Any one that mentioned “soft landing” should be fired.
Any one that Got into a bidding war over a house should not be bailed out.
The News-Press article on Lee County RE does make me feel that the loan I am about to make ($54.4K on a 3BR/2BA) is essentially Buying a House for Me. How the hell is the investor-owner going to pay me the $585 a month (10%, 15 years) AND take care of taxes-maintenance-insurance AND come anywhere near breaking even?
Guess I am just in a gambling mood because my other debtors are all behaving pretty well. Come to think of it, I haven’t heard from the prospective Lee County borrowers in the most recent 72 hours. Wonder if they got cold feet.
“In 2003, Robert Provost snapped up a $2.5 million villa in Sarasota, Fla. A finance chief for an auto-sales chain, he earned more than $250,000 a year and had an impeccable credit history.”
“This month, he put his house, a five-bedroom with sweeping views of the Intracoastal Waterway, on the market for $3.4 million.”
He can’t be that stupid, he stands to make about $900,000 for living there for five years.
Why not?
He was stupid enough to buy a house at 10X his annual income.
That’s a wishing price. It’ll short sale for maybe $2 million if he’s lucky. More likely it will go for about $1.25 million after the bank forecloses.
This month, he put his house, a five-bedroom with sweeping views of the Intracoastal Waterway, on the market for $3.4 million.
Note to dipwad: Why don’t you at least try lowering the price to closer to what you asked for it to possibly have a chance to sell it? 0% of $900,000 wishing profit is $0!
“He can’t be that stupid, he stands to make about $900,000 for living there for five years.”
The “we’ll be sunk if we cannot sell our house for a million more dollars than we bought it for a few years ago” jumped out at me, too. Is it possible they heloc’d that much more out of it?
I officially hate the term “snapped up” Note to journalists: please come up with a new phrase. Thanks.
I think “snapped up” just means, “saw it and bought it on the spot without thinking it through carefully.” Otherwise known as an “impulse buy” to be followed by “buyer’s remorse” which I’m sure Mr. Provost is experiencing now.
I agree, it’s an absolutely obnoxious phrase. But the word “upgrade” is the one that truly makes my blood boil.
tampaesq,
Also fun to note that “snapped up” tends to imply it was such an obvious BUY that no actual thought NEED be involved! Which in 2003 included 3/2 SFH anywhere in the Lower 48 and American Samoa, 2/1 within a 75 mile commute to min. wage jobs and converted checken coops in the Bay Area.
Btw, upgrade and upscale can be used interchangeably.
Well, if I see any luxury upscale upgrades lying around, I’ll be sure to snap them right up!
DinOR, the implication that you don’t need to think about the purchase is 50% of the reason I hate the term. If it was an article about snapping up 2 for 1 laundry detergent or something…be my guest, snap away.
The other 50% of my hatred is directed at lazy writers. Come. up. with. something. new. It’s like every real estate story in the English speaking world was written in 2000 and all subsequent stories are just re-arranged phrases. Did microsoft release a product for this? RealEstate X-Press or something?
Florida snowballs?
“Arnold notes the domino effect that rising assessments can have on a neighborhood. ‘These families got a mortgage they knew they could pay and all of a sudden the guy next door stops paying and their assessments go up and up and up until they can’t afford to pay either,’ Arnold said. ‘It snowballs from there.’”
Before this is over, properties that require any kind of HOA will sell at a marked discount for a long time to come - relative to non-HOA SFH.
What bowled me over in this boom is how properties that required HOA sold at comprable prices to those that didn’t. $400k could get one a new luxury condo or a so-so bungalow.
Can we assume (at this point in time) that none of what is happening in the real estate market will matter if we don’t save our economy?
http://www.fedupusa.org/
PLEASE look at the video/videos and email to ALL.
Thanks guys!!!
First think about what an economy is. It’s people engaged in fair trade exchanging things of value.
Where does any of the government crap proposed so far fit in to a real economy?
Is the government boosting productivity with new technology? Is the government increasing the amount of trade goods to our trade partners?
Our financial system is flawed, saving it will not save our economy. The government is putting more leaches on an already anemic economy.
Did you bother to watch the video before posting?
the video has NOTHING to do with our government…..
YOUR points are MY points EXACTLY !!!!
It appears the tide has gone out and everybody is naked!
(except for regulars on this blog, that is)
Early this morning, I had a terrible dream. It woke me up, in fact.
I dreamt that I was at a beach, and I was swimming close to shore when a big wave came up behind me. I didn’t see it. But somehow, I managed to climb aboard and run in place on top of the wave. (Isn’t interesting how the laws of physics get repealed in ones dreams?)
By doing this running on water thing, I was able to make it to shore. And, at first, I was elated at my good fortune. Then, I realized that many, many, MANY others weren’t as lucky.
The shock and grief rousted me out of my sleep.
Slim, we must be on the same track. I woke up at 5 am dreaming that my ex had written the world rules for renting on his wall, don’t remember what they were, but I remember thinking, jeez, that’s crazy.
Since I was already up, I hoofed it up and filmed the sunrise over the San Juans, beautiful, got some great shots and it cleared the mind. Lemonade.
“Then he lost his job. Provost missed one $10,500 mortgage payment, then another.
Mr. Provost bought a $2.5 million villa on an income of $250K. Anybody who purchases a house at ten times their income and who is in the finance business deserves to lose their home to foreclosure and have their credit ruined! To me it looks like just one more case of greed and someone trying to impress others with a home they could not afford. What bothers me the most is this guy is in finance and should have known better, but greed and easy credit clouded his better judgement.
“‘You think because I am a Realtor and an auctioneer I would know better, but we all make mistakes,’ Zoll wrote.
It was not a mistake Zoll, it was GREED!
“we all make mistakes” = “mistakes were made”
Quickly vying for “snapped up” for annoying phrases.
“You think because I am a Realtor…I would know better”.
I feel so disillusioned.
Why? Because you took a couple of weekend classes at the Holiday Inn to satisfy the licensing requirements?
“In 2003, Robert Provost snapped up a $2.5 million villa in Sarasota, Fla. A finance chief for an auto-sales chain, he earned more than $250,000 a year and had an impeccable credit history.”
$2.5 m / $250,000 = 10X income. Wasn’t the old rule of thumb to not buy a home for over 3X income?
But the old rules no longer apply!!! We’re working off an entirely new model!!!
If his payment was $10.5k per month on $2.5mm, then he put about $400k down (16%) for a 5% conventional loan. He’s still an over-extended fool, but because he assumed his high flying job would last forever, which is a dangerous assumption, but somewhat understandable.
If it was an interest only loan at 5%, then his payment would be around $10.5k per month.
Anybody wanna take guesses on what type of loan he went for??
The News-Press article on Lee County RE does make me feel that the loan I am about to make ($54.4K on a 3BR/2BA) is essentially Buying a House for Me. How the hell is the investor-owner going to pay me the $585 a month (10%, 15 years) AND take care of taxes-maintenance-insurance AND come anywhere near breaking even?