It Kills The Love In California
The Mercury News reports from California. “Dave Cantrell had become a community leader here, rallying his neighbors to stand up to the builder that was planning to auction off one-third of their new Paseo West subdivision at 40 percent discounts. Cantrell believed he made a difference, that maybe the auction prices wouldn’t be as low as he feared, that they would all recover. He promised to have a block party when it was all over. In the end, he couldn’t even save himself.”
“He had a job in construction management and was making $250,000 a year, plus a hefty bonus. His credit rating was in the 700s. So in 2006, he bought a $670,000 house, then spent $100,000 to add a pool and miniature golf course in the back. It seemed sensible enough at the time. He had made a tidy profit when he sold his last Anderson Home, a smaller one in the next neighborhood over.”
“‘You’re a smart man, Dave,’ the sales agent told him when he bought the house. ‘This house is grossly underpriced.’”
“Cantrell told that story twice to his neighbors gathered in his living room that night last year.”
“He attended the auction in a Pleasanton hotel ballroom last October. Bids barely hit 70 percent. While Cantrell had paid a base price of $658,500 for his house, a nearly identical one sold for $391,000. ‘I’ve lost a quarter-million dollars in value today,’ Cantrell said as he left the ballroom.”
“Some of the original owners welcomed the newcomers, relieved to have neighbors instead of empty houses next to them. But Edgardo Reyes doesn’t even want to say hello. ‘It’s a choking type of feeling. You look at your neighbor every day, and you have that resentment that they paid less,’ said Reyes. ‘We’ve been here two years, and if we can’t get it refinanced, we’ll have to let it go. We’ll just have to walk out.’”
“Rafael and Carroll Aguirre from Paola Place had sold their house in San Jose’s east foothills to move to Manteca to be closer to family. They put more than 25 percent down on a $547,000 house. They depleted their 401(k)s to spend $120,000 improving their backyard. Aguirre lost his job and, with no income for 11 months, the bill collectors started calling and he no longer could pay the mortgage. Selling the Town Car and the diamond ring barely made a dent. In July, they received a notice from the bank that they had 72 hours to leave. Their $270,000 investment was gone, and they were filing for bankruptcy.”
“On that hot summer morning…neighbor asked to dig up some of their trees and plants for her own yard. ‘They might as well have hung me up and whipped me,’ Carroll Aguirre said.”
“They moved into a rental in nearby Lathrop, a neighborhood where the lawns are brown and foreclosure signs line the sidewalk. The stress has been so great, Carroll said, that she’s daydreamed of driving herself off a cliff. ‘I don’t know why we’re still married,’ she said, wearing a house dress at the kitchen table of the rental. ‘It comes to the point that it kills the love.’”
The Press Democrat. “Tumbling home prices are drawing a growing number of investors back into Sonoma County’s battered real estate market. Today, roughly a third of all buyers are investors who don’t plan to live in the home they purchase. The market is not for everyone. Investors must have enough money to make a substantial down payment — at least 25 percent or more — and a very good credit rating to qualify for a loan.”
“But the combination of falling prices and stable rents makes this the best time to buy investment property in more than a decade, said Michael Morrongiello, who organizes investor education programs for the Bay Area Wealth Builders Association.”
“After looking at a dozen condos and houses, Santa Rosa resident Della Ramsey came back to a two-bedroom condo after a dramatic $40,000 price reduction. The lender wanted to clear the foreclosed property from its books, even if it meant selling for a significant loss. The $99,900 price was far below the $245,220 the former owner owed when the lender took back the condo in April.”
“‘I was like ‘wow.’ And then I went and looked at it and it was in very good shape. If you could do it, you had to do it,’ Ramsey said.”
“The condo will net her about $500 a month after homeowner fees, taxes and insurance, a solid return on an investment Ramsey plans to hold onto until Sonoma County’s housing market turns around. ‘With home prices going down, down, down, I was thinking, I had this money sitting in the bank not earning a whole lot of interest. And if you buy low, the market’s eventually going to go back up,’ Ramsey said.”
“Morrongiello said some investors who bought as prices soared during the housing boom that peaked three years ago got burned because they only bet on rising values. Their monthly financing costs far exceeded the amount of money they could ever hope to pocket from rents. ‘That’s what got them in trouble. They were speculating,’ he said.”
The San Francisco Chronicle. “A Southern California development firm is suspending its long-anticipated plan for a major housing and retail project at the former Oak Knoll Naval Hospital. Late last week, SunCal notified the city’s Redevelopment Agency that it was suspending work after one of the project’s chief investors, Lehman Bros., declared bankruptcy.”
“SunCal spokesman Joe Aguirre said in a statement that the company was ‘unable to obtain assurances of continued funding that would allow us to move forward with confidence.’ As a result, he said, the firm could no longer guarantee it would be able to pay a number of consultants and contractors working on the job.”
“SunCal surprised just about everyone by paying more than $100 million for Oak Knoll during a hotly contested federal auction at the height of housing boom in 2005.”
The Sacramento Bee. “In the Central Valley these days, the bankruptcies and foreclosures don’t just affect individual homeowners. They swallow entire developments – and the people who conceive them. Three massive high-end projects in the San Joaquin Valley have fallen into bankruptcy proceedings in the past two years.”
“All three developments were designed to bring the luxury life to the Valley, and that’s where the problem lies. Their struggles illustrate how hard it is to transplant $800,000 homes and designer golf courses to California’s chronically depressed midsection.”
“‘The markets were so overheated they were chasing any deal,’ said Fresno real estate consultant Robin Kane. ‘Part of the problem that always hurts us in the Valley, from Bakersfield to Stockton, is your employment and per capita income (are) not rising.’”
“With the boom a faded memory, unemployment is creeping back up to the 10 percent range in much of the Valley. The real estate market is a disaster. Developers…fell in love with the area’s inexpensive land but ignored its troubling demographics. The Valley is still plagued by low incomes, a poorly educated work force and other ills. ‘We’re not another Silicon Valley,’ said Bakersfield real estate appraiser Gary Crabtree.”
“Developer SunCal Cos. of Irvine borrowed $235 million from Lehman Bros. – part of a $2.2 billion war chest Lehman handed SunCal to develop properties throughout California and Nevada. SunCal had a grand vision for Bakersfield. After buying out the original developer, it doubled the asking price for individual lots, to $115,000.”
“But once the market petered out, ‘those prices were no longer viable,’ said ex-project manager Darryl Tucker. ‘You’ve just got tumbleweeds growing, and that’s about it.’”
“It’s a similar story at Running Horse, which was going to bring prosperity to Fresno’s long-neglected west side. Homes would sell for up to $800,000. Instead, Running Horse became Fresno’s longest-running soap opera.”
“‘It would have been a big deal for Fresno,’ said Harlan Kelley Sr., 71, a west side resident who put $385,000 into the project and was among those allegedly defrauded. ‘We still got our fingers crossed that Donald Trump or someone else will come in and take over.’”
“Many of the trailblazers still live at Diablo Grande, and they wonder when things are going to improve. Darcie Nessinger lives with her parents in a home valued at $275,000. They paid $534,000 three years ago. ‘We expected the values of the houses to go up,’ said Nessinger. ‘It’s a resort area on a golf course.’”
“A quick return to 2005 pricing is unlikely, at Diablo Grande or anywhere else in the Valley. Steve Smiley, who tracks Valley trends for (a) consulting firm, said outrageous housing prices are gone for good. ‘I don’t know if pricing is ever going to come back to that $800,000 house in Manteca,’ he said. ‘In my mind, it shouldn’t.’”
The Guardian. “Victorville was a desert boomtown. Up until a year ago, it was the second-fastest growing city in the US. There are still signs of the boom everywhere. Driving into town, there are signs pointing to new developments, and as you get closer, people stand on the street corners waving signs to try to entice buyers to model homes. But now, 11% of the homes in the city are in foreclosure.”
“One realtor, who I spoke to who but would not give her name because she didn’t have clearance from her employer, said, ‘Dead grass is the give away that the bank has foreclosed.’ Just as in Riverside, some blocks have three or four foreclosures each, she said.”
“This realtor was selling homes in a new 29-house development. Some of the homes are unfinished, and I asked her if the credit freeze had cut off funding and stopped building. She said no, but they have had to cut the price of the homes by $100,000. Three-bedroom homes are selling for about $150,000 and four-bedroom homes are selling for $172,490.”
“I drove across town and found Carlos and Christy Barberena, resellers, who were about to show a home. They are selling homes, but 80% of the sales are foreclosures, Carlos said. The average selling price is $80,000, and now ‘regular folks who saved their money’ are coming back into the market. They were off to show a young couple in their 20s a house. ‘It’s great for them,’ he said.”
The Orange County Register. “Foreclosures are selling in Orange County, just not fast enough. As a result, a growing backlog of foreclosures threatens to push home prices further down, some economists and brokers say.”
“MDA DataQuick, in a special report prepared for the Orange County Register, found that as of early September there were more than 3,300 unsold foreclosures in the county. DataQuick looked at all foreclosures for the year ended in June, and checked to see how many had resold. It found 40 percent were unsold.”
“Banks seized 1,427 houses and condos in August. Banks, and perhaps some investors, sold 862 properties that month that had been foreclosed on in the prior year. Even so, 565 bank-owned properties were added to the county’s inventory of unsold foreclosures in August.”
“Doing the same math for February, gives a net foreclosure figure of 114 properties. Clearly, the county has been adding unsold foreclosures at a faster rate each month.”
“Harry Solomon, who specializes in selling foreclosures for banks, recently checked on a foreclosure in Westminster and found a water line cut, gas disconnected, and earthquake straps removed – all to the house’s water heater. He suspects the homeowners had planned to take the heater, but ran out of time.”
“A similar visit to a house in Rancho Santa Margarita, revealed the people who rented the property from the delinquent owner had stripped it. Toilets gone. Appliances missing. Bedroom doors taken. In both cases, Solomon, suspects the residents were motivated more by anger than by value of anything taken.”
The North County Times. “Faced with a proliferation of dead lawns and weed-filled yards at foreclosed homes, city officials are hoping to use a new state law to force banks and mortgage companies to maintain the properties they take back.”
“Karl Schwarm, San Marcos’ director of housing and neighborhood services, said last week that he plans to ask the City Council this month to let the city levy fines of up to $1,000 a day against owners who fail to keep up foreclosed properties. Such fines became possible in July when Gov. Arnold Schwarzenegger signed Senate Bill 1137 into law.”
“Maintenance often becomes an issue at a foreclosed property because many defaulting homeowners abandon their homes once they learn their lenders’ plan to take the properties. That can leave a home in maintenance limbo during the 60 to 90 days it takes to complete the foreclosure process.”
“‘Unfortunately, that’s when the grass dies and everything gets brown,’ said Schwarm. ‘During that time, the homeowner usually doesn’t care what anybody does to him because he doesn’t own the property anymore.’”
“Data from ForeclosureRadar shows the number of North County homes seized by banks and mortgage companies in August was more than double the number of foreclosures during August 2007. Lenders had started but not yet completed foreclosure proceedings on many more North County properties.”
“ZIP code maps maintained by the research firm showed the foreclosures spread throughout each city —- a trend North County city officials said they had noticed as well. ‘You really can find it in almost any neighborhood,’ said Escondido code enforcement manager Leslie Milks. ‘It’s citywide —- your higher-income areas, your lower-income areas.’”
“A resident of San Marcos’ upscale San Elijo Hills development who declined to give her name said she and her neighbors know what it’s like to watch a once-attractive property become the neighborhood eyesore after going into foreclosure. Built about two years ago, her Verzano neighborhood is filled with large, two-story homes surrounded by neatly kept yards and manicured landscaping. Recent months have seen a number of properties being foreclosed on, though, the woman said.”
“Just a couple doors down…a Weatherstone Way house taken by a bank about three months ago now has a dead lawn that stands out like an ugly brown stamp of shame among its green neighbors. ‘We wanted to water it, but the bank refused to let us,’ the woman said of herself and other nearby residents. ‘They even sent somebody out to put a lockbox on the water (system for the house). And now they won’t even contact us.’”
“A management company that represents the Verzano Homeowners Association has repeatedly tried to reach people at the bank as well, to no avail, she added. ‘I know this (foreclosure problem) is happening all over,’ the woman said. ‘But these banks, they’ve got to keep them up. You can’t let the whole neighborhood start looking bad.’”
“As housing prices soared in this decade, Robert J. Shiller, a Yale University finance and economics professor, turned his eye to the real estate market. He predicted a bubble in the making, starting in about 1998. He also predicted its bursting.”
“Q: Sacramento and California have seen huge drops in median sales prices the past year, which has stirred a jump in sales. Some say bottom is here, or on the horizon. Have you looked at the state?”
“A: I haven’t looked recently at Sacramento. But the other California markets, Los Angeles and San Diego, are down quite sharply already. They’re down 40 percent in real terms. That means they are something on the order of halfway down to pre-bubble levels. Eventually, the slowdown has to stop. I’m not really in the business of forecasting prices.”
“Q: What’s your opinion on bailing out struggling homeowners? What if it had happened earlier to stop foreclosures and spare the economy?”
A: We’ve let it get out of hand. Confidence is collapsing in this crisis. Maybe, they should have done something before this very negative view developed. I would like to see efforts to start bailing them out and put them in a new kind of contract.”
“Q: One of the very interesting parts of your book is how regulators simply could not imagine this downturn. You tell about meeting with people at Freddie Mac in October 2006. They said home prices might fall, at worst, by 13 percent.”
“A: I can tell another story. In 2003, I made an appearance at Fannie Mae. I told them I was worried about real estate risk. And I couldn’t get a response. They didn’t take me seriously. I was talking with some of their economists. I think the people there, they didn’t think there was any reason to expect a price drop, and my warnings were unheeded.”
The Mercury News article is worth the time to read in full.
YES!
“Carroll Aguirre sold her Lincoln Town Car and her aunt’s diamond ring, and still lost her house. Edgardo Reyes lost his job as a trucker and now sleeps on the couch with the TV on all night instead of joining his wife in bed. A renter’s barking pit bull keeps neighbors awake. And in the middle of the block on Grafton Street, a property has become a care home for the disabled. Neighbors are just happy it isn’t a halfway house for felons.”
You can not make this stuff up.
Worse than Fl.
To the neighbors of that renter with the pit bull (and anyone else who’s dealing with this problem): You don’t have to put up with barking dogs. Especially if their noise is depriving you of sleep.
Here are some websites you can use in your fight to regain the peace and quiet to which you’re entitled:
1. BarkingDogs.net
2. DogAssault.com
3. DogsBite.org
Perhaps a utilitarian solution?:
http://www.slate.com/id/2060840/
Benedryl also works very well.
RE: Barking pit bull
After dozens of attempts to get a neighbor to silence (their) unruly collection of caged dogs, and a similar number of official complaints–which went unresolved, several of us recorded the accursed things on a digicam, date and time stamped, then posted each (56 hours worth, total over the course of a month,) on YouTube along with our commentary as to the circumstances. (The offender was the animal control officer for the area!)
I was permanently banned from the site without explaination, (perhaps it was because I mentioned the Kounty I live in, and questioned the integrity of its bureaucracy,) but the nuisance was eventually (at least partially) abated. I recently noted the person’s house is now for sale….
I recommend this approach.
RE: You don’t have to put up with barking dogs. Especially if their noise is depriving you of sleep.
Dogs have more rights than people in this fooked up society.
I use to live in small rural town which had no local ordinaces against nuisance animals.
Barkin’ dogs keepin’ you awake all night…that was TFS.
One dude finally couldn’t take it anymore, and shot-gunned a pair of dogs owned by some trailer trash living next to him.
Got a year in jail for his troubles.
It’s not the dog’s fault, its the human owners. So, the person deserved at least a year in jail–they killed the innocent and let the guilty off without a scratch!
Course, I wonder why people live amidst others if they want the world to revolve around them. If you want peace and quiet, head out into the woods (not just into a rural area) and pict a tent–and then you can argue with the owls, wolves, and other noisemakers er, living beings. I’m sure they’ll all pipe down when you ask because I’m sure they’ll see that the GREAT HUMAN has entered their midst.
IAT
“……now sleeps on the couch….instead of joining his wife in bed……”
Along with about half the other guys in America…….and their point is??”
Well that and how do you spend 120k “improving your backyard”? This I gotta’ see? 12k maybe… but here’s another case where a little advice would have went a long… way.
They paid a 10% early withdrawal penalty PLUS added a collective 120k to their taxable income in (1) filing year!? Insane. Suicide. Utter madness. That’s where the “Love” went sister. Now it’s gone, the guy’s unemployed AND they have zero in their retirement accounts. Anything else?
I choked reading that, too. Big Stupid #1: Spending $120K to “improve the backyard.” Big Stupid #2: Emptying your 401K to do it.
Maybe in addition to forcing people to contribute to 401Ks, they should also prevent them from dipping their hands in the till until they reach retirement age…
I know, I know…then they’d just blow it all the second they turned 59 and 1/2…
smathis,
Don’t get me wrong, there are perfectly legitimate reasons to use your 401k for hardships and medical reasons etc.
But this was just a way for a lot of Americans to say “I’m smarter than everybody else, I ‘know’ what’s right for me and I’ll be retired BEFORE you will!”
Oh and we’ll get to live in some really plush diggs before we cash out and buy a slightly smaller ( but much nicer ) one cash outright and have cash left over! Plus we can stop making those stoopid payday contributions!
I just had this talk with my mom today. She wanted to pull it all out of the 401 and payoff her house. She has 5.5% fixed on a modest house. Where do they come up with this stuff. She is about 4 years away from retirement and her SS check will more than cover the house and tax payments. Hell, apartment rent would be more than her house payment. I told her if SS goes under for her age group, nobody will be paying their bills anyway so who cares.
RE: Along with about half the other guys in America…….and their point is??”
LMAO (with tears in my eyes)…Gulfie, you’re killing me!
I cannot rejoice over others pain, no matter how stupid their decisions were.
‘I cannot rejoice over others pain, no matter how stupid their decisions were.’
Really?
Oh.
Well then, please disregard the link I added in response to your post below. No plentiful rejoicing for you, on this pretty grey day here in WA.
Yeah, really. I’m just not like that. But thanks for the link, I appreciate it. I do love the grey, too, BTW.
The fact that I wish for Paulson, Fuld, Mozilo, Oneal, and the like to pay dearly for their sins has nothing to do with taking personal pleasure or enjoyment in their punishment. While I believe they should they be weeping in jail for the rest of their lives or worse, I wouldn’t rejoice in their personal pain. If I did, I’d be as evil as them. I’d swallow hard and rest easy knowing it was for the good of man and womankind.
I don’t take pleasure in the misfortunes of everyday people who don’t have massive resources to fall back on.
But the greedheads at the top like Orange Modzilla who looted all they could, knowing full well what they were doing was causing massive systemic damage and didn’t care, are something else.
This gave me slight satisfaction –
Lehman CEO Richard Fuld punched in face in Lehman Brothers gym
Richard Fuld, the disgraced head of Lehman Brothers, was punched in the face in the office gym amid the bank’s collapse.
By Jon Swaine
Last Updated: 9:14AM BST 07 Oct 2008
Mr Fuld, who has been testifying on the financial crisis before the US House Oversight Committee, was attacked on a Sunday shortly after it was announced that the banking giant was bankrupt.
Following rumours that the incident had occurred, Vicki Ward, a US journalist, said “two very senior sources - one incredibly senior source” had confirmed it to her. “He went to the gym after … Lehman was announced as going under,” she told CNBC. “He was on a treadmill with a heart monitor on. Someone was in the corner, pumping iron and he walked over and he knocked him out cold.
“And frankly after having watched [Mr Fuld's testimony to the committee], I’d have done the same too.”
“I thought he was shameless … I thought it was appalling. He blamed everyone … He blamed everybody but himself.”
Lehman Brothers, which was particularly badly hit by “toxic” mortgage debt, filed for bankruptcy last month. Its assets were later bought up by Barclays.
In a robust performance in front of the committee, Mr Fuld said that he would wonder “until they put me in the ground” why the US government had not rescued the 158-year-old firm. He said that regulators were fully aware of its plight well before its collapse.
Mr Fuld said: “I want to be very clear. I take full responsibility for the decisions that I made and for the actions that I took based on the information that we had at the time.”
However he faced angry questioning from the committee’s members. Henry Waxman, a Democrat, asked: “Your company is now bankrupt, our economy is in crisis, but you get to keep $480 million (£276 million). I have a very basic question for you, is this fair?”
Mr Fuld said that he had in fact taken about $300 million (£173 million) in pay and bonuses over the past eight years.
Bear, I hear you. The aguirre story was really tough to read in the article. I don’t want to hear about anybody thinking about driving their car off a cliff.
I don’t want anyone to drive their car off a cliff, or take any other murderous action against self or others.
IAT
What’s worse than a bus-load of FB’s going over a cliff?……….an empty seat!
Let ‘em burn…..
Lawyers are getting a big break lately.
I can.
That’s a given.
BanteringBear,
I have to agree, it’s kind of how I’ve felt about things all along. How sustainable is it for a guy that works as a UPS driver and a wife that works part time to be in a 750k home? ( Not very )
Do I want them ‘out’ when it’s amply shown they can’t come close to affording it? Of course. Do I want them to go “postal”? Of course not. Like a lot of people in this bubble, they made some very serious mistakes, that needs to be corrected. What purpose does it serve for them to steal a tank from the Guard base and go on a rampage?
this has always been the sticky point for me. If we’re going to throw them out and then turn around and re-sell the house at half the price to someone else, why not just re-sell the house to the people already there. I wonder what percentage of people could actually pay their loan payment if the loan was half as much? I understand the arguments against this, but it just all seems like it’s turned into a waste of time. Why have the houses destroyed or vandalized, why pay more fees, appraisals, real estate commissions and the like when the end result is for the house to sell for half or less after all that? Isn’t all that now being paid by the taxpayers through the bailout?
Because they signed a contract, and the person who’ll buy the house at half price didn’t. If you sell it to the people who bought it for half price you create a moral hazard in that everyone will take crazy risks expecting to be bailed out. Society cannot survive on that basis.
Plus, everyone who was priced out of markets by the wreckless behavior of those people currently being foreclosed should be ahead of them in line for assistance. That the MSM is painting this as a problem for those heading to or in foreclosure is a standard means of putting a palatable, sympathetic, middle class face on a policy designed to really help the wealthy investment bankers. Don’t believe the hype!
IAT
The first buyer has already shown his ability to evaluate and pay a mortgage. And then when he realized he couldn’t handle it, it probably took a while to move the buyer out of the house when the buyer stopped paying. He’s a credit risk.
You burned me for the first mortgage I gave you when you couldn’t pay. And now I’m supposed to believe you that you’ll stay in the house if I give you more money and it falls another 20%? And this creates a wild incentive for everybody to not pay for a mortgage reduction.
This buyer isn’t going to sign up for a mortgage that is way higher than the market clearing price. But the seller isn’t going to sell his home for dramatically less to this buyer vs. the market clearing price for homes.
So, a far better solution is to put the house out to the public at a market clearing price and get a far superior borrower and be done with it.
“On that hot summer morning…neighbor asked to dig up some of their trees and plants for her own yard. ‘They might as well have hung me up and whipped me,’ Carroll Aguirre said.”
May I volunteer? “Have Joshua tree, wil travel/”
LOL
RE: ‘I don’t know why we’re still married,’ she said, wearing a house dress at the kitchen table of the rental. ‘It comes to the point that it kills the love.’”
The new paradigm for marriage success…double digit house appreciation.
I’m surprised the candidates haven’t started campaigning on: “If we don’t bail out these homeowners, we’ll destroy the sanctity of marriage!!”
The Mercury New link does not work for me.
Try this big long link, bear. And prepare to lauuuuughhhhhh….
http://www.mercurynews.com/ci_10701409?IADID=Search-www.mercurynews.com-www.mercurynews.com
“I was just a guy trying to live the American dream,” he said. “I thought I was doing it right. I was making good money, putting a little away.”
Putting a little away? What about tht drained 401k??
The mercury news…
(1) Denied existance of bubble even after prices doubled from 1998-2000. Look back to 2002-04 editions.
(2) Stated clearly that prices were justified back in 2004.
ie they dont make anymore land …while we had the largest new construction projects in the past 20 years.
(3) incestious relationship with Valley Realtors via high advertising dollars. Does not report RE fraud.
(4) has been grooming the valley as if its LA ’s Bel Air.
(5) has mistated many comments about the bubble from notable people… Greenspans “no national housing bubble, but not hard to see we have regional bubbles”… he was talking about San Jose and nearby cities which doubling of prices. Yet the SJMN only printed “No Bubble”
(5) totaly ignored all the ARM loans were used for the past 8 years.
(6) focused on ‘Subprime’ loans and minorities as main problem, but sidesteps when ultra rich area are also seeing short sales and forclosures. Lots of stories of minorities losing their homes to forclosures. Never discusses the 300% raise in prices over the past 10 years.
(7) encourages forgiveness of loans just to keep current prices high.
SJMN is a very corrupt newspaper!
http://www.mercurynews.com/realestatenews/ci_10701409
No tears shed in the comments section…….
I am thinking of saving copies of that article for each of my kids, and trying to convince them to read it carefully at some day in the future when they move out on their own.
Did the link work for you, Prof?
After a couple of attempts, yes.
P’Bear,
Don’t know why Mercury News articles don’t work for me ever.
What I do is read enough of what Ben provides, then in the address bar, put my cursor at the end of the http address and backspace to com.
From there the Merc’ page comes up and I just figure out what article to open up.
Merc’ new is the only link I seem to have problems with (as I usually read most of the links Ben posts).
Do you have an old computer like me? (She’s running on ME - maybe 10 yrs old)?
LOL. Years ago someone made fun of my old computer, but hey, she does what I want her to do and I’m a frugal gal.
This is why my hubby loves me so!
Speaking of love - stay with me -
From the Merc’ post above -
“I don’t know why we’re still married,” she said, wearing a house dress at the kitchen table of the rental. “It comes to the point that it kills the love.”
Dang, what is wrong with people. IIRC, her hubby has a retired Navy pension.
Not the end of the world.
I am so blessed in so many ways, a hubby I’d rather live under a bridge with than drive off a dang cliff.
Not to judge, some do feel empty without “stuff”, but hey, I can’t imagine my life without my beloved.
I guess Gram is right. The grass looks greener on the other side until you have to mow it.
Rant off.
Almost. I’d vote for the first person who would go on the record and say we’ve got to pay down the debt, personnal, local, national.
O.K.
I feel better now - thanks for reading.
Best,
Leigh
‘I am so blessed in so many ways, a hubby I’d rather live under a bridge with than drive off a dang cliff.
Not to judge, some do feel empty without “stuff”, but hey, I can’t imagine my life without my beloved.’
You are truly blessed in this world. I believe I am similarly blessed, but I have not stress tested the theory by financially hanging our family finances on an unaffordable McMansion purchase.
P’Bear,
We want to purchase - yet we rent.
Ah, and our neighbors like us.
Small town America - for now.
Few on the block have evaported into the night.
Safe for the moment.
Social disorder is quite frightening.
Who knows, if this will pass!
Until the lights go out/sarcam off.
Leigh
Seriously.
No kids here but if I had them, I’d make them read it on their birthdays before they got their real presents.
We’ve heard it all and yet, these people are just so effin’ stoopid, it’s extraordinary.
Good idea, Professor.
I’d send it to Congress and every presidential candidate too, but the lesson would be lost. They’d just want to prop up home values. The moral of the story (which everyone reading these boards already knows) is that even buying within the traditional guidelines of 3x income can be overspending if you don’t have a stable & dependable source of income.
To every seller out there wondering why buyers aren’t fighting to outbid each other for your overpriced POS… do you get it now?
It’s a damn shame our politicians and economic policymakers are hell bent on manipulating prices in a manner that undermines financial prudence.
Do that, and also make sure they know that HGTV, et al, is for SUCKERS. I swear those stupid shows have a lot to answer for. Did people not named Rockefeller spend $100K on pools and their own miniature golf course before the advent of those ridiculous programs? They let the tube hypnotize them and this is the result.
I saw one of those shows over the weekend, long story short, a couple won 600k in the lottery. He’s a cop and I can’t recall what she did…maybe teacher at best, but I seem to recall the notion that it was something that probably earns half of the typical teacher, maybe a librarian or something.
Anyway, they sold their little cottage and moved all-in on a 600k+ house, then proceeded to dump over 100k into it.
He did all the renovations and went way over budget. The stress was obvious, the host made the comment at one point they might be getting divorced, I think he was kidding but only by half. They both admitted several times to regretting selling the old house, she said she regretted it as soon as signing the offer on the new place.
Horrible move for them. I wish I knew the rest of the story. I would be surprised if it ended in anything other than divorce and foreclosure. Perhaps in a final moment of lucid reason they sold the albatross…
That was “moving up” with the guy from Trading Spaced wasn’t it?
That couple and their kids could have been set for life with that money, but they blew it all on a house they won’t be able to afford.
Who caught this bit though?:
“Should”, and “surely”… hmm… where have we heard that before?
Sorry, but Manteca just isn’t a $255k house kind of place. In a correct housing market it’s maybe a $120,000 house kind of place, and only that because it’s in California - any other place in the country and it would be a $70k house kind of place.
“…then spent $100,000 to add a pool and miniature golf course in the back. It seemed sensible enough at the time. …”
It only makes sense if the golf course has a koi pond!
his own miniature golf course ?
This reminds me of that night time drunk party scene out “Air America” except “We DON’T go home now”
Sheesh…my major investment for my backyard this summer was a $15 kiddie wading pool for my crazy black lab puppy. That little clown just loves it and his antics provide cheap entertainment for everyone
Oh, how cute! I got one for my duck, but my cats don’t swim. I wonder if I can hide a puppy from my LL …
Ummm…
Duck…
Labrador Retriever…
You may want to rethink this.
–Shannon
People that took $120,000 out of their 401K’s to “improve their backyard”. California beats Florida in today’s battle of the stupids. Florida vows to come back strong tomorrow, to have Charlie Crist come up with something even more stupid than “the best thing Floridians can do in these tough times is to keep spending.”
It’s not a contest — CA politicians are still spending money like we’re still in a bubble.
I’m in California twice a year (usually) and this year, the traffic was the least I’ve ever seen.
When we moved to San Diego three years ago, traffic was horrible and home prices were astronomical. Now traffic is tolerable and home prices are rapidly correcting back to affordable levels. If this keeps up for much longer, pretty soon everyone is going to want to live here.
You can count me in that population. I left SD almost 5 years ago for a crappier part of so-cal (long beach) for a job. I’m doing everything I can to get back. I’ve been all over the country and San Diego is still by far my favorite.
Where abouts do live?
When you live on Paola (!) Place, cashing out your 401(K) to “Improve the backyard” is mandatory.
“120,000 to improve the backyard”…WTF???… I spent today building a small retaining wall in the front yard. Total investment: $ 250 and a few hours of sweating…
Well, obviously Dave, you have no taste.
–
just kiddin.
You’re right, I should have hired a landscape designer. I’m sure the neighbours will shun me for figuring out by myself the semi circular shape of the wall.
120 grand will buy a helluva a lot of nice farmland in just about any flyover state you can name.
Whatz he got in his pond? Goldfish made out of real gold?
The human species is too stupid to survive.
Seriously.
I overheard willie nelson one time talking about some place he was at where they had these really expensive fish in the pond, and he was laughing about fishing them out.
Yet another example of lazy journalism –just take whatever bullshit numbers “victims” tell you at face value and report as true. I bet there is a vacation, boob job and some unmentioned bling hidden in that $120K of so-called “backyard improvements”.
I like the ending; standing in the rain with an umbrella and jacket in the Pacific Northwest. I’ll be shoveling snow from my driveway for a few more years because of this pecker-head.
That probably had $120k in the 401(k) before they cashed it out… Federal and state income tax, 10% federal penalty, plus both sides of social security contribution probably ate half of it. So there’s really $60k left to spend on the backyard (not to mention the boob job and the european vacation).
“The condo will net her about $500 a month after homeowner fees, taxes and insurance, a solid return on an investment Ramsey plans to hold onto until Sonoma County’s housing market turns around. ‘With home prices going down, down, down, I was thinking, I had this money sitting in the bank not earning a whole lot of interest. And if you buy low, the market’s eventually going to go back up,’ Ramsey said.”
I find this example confusing. Is the $500 coming from renting the condo out, or is this assumed future appreciation? Bank accounts are now fully guaranteed; not so condo price appreciation. Renters often inflict wear-and-tear on a property, and are not always good for payment, especially in a weak economy.
it’s net profit after expenses so monthly positive cash flow is $500, which is pretty damn good for a rental.
I see that in the article. Perhaps prices are getting low enough in some places where they again pencil out as rentals? Next up: These prices become the new comps, affecting the sale price for future sellers in the same area.
“And if you buy low, the market’s eventually going to go back up,’ Ramsey said.”
The blood hasn’t run in the streets yet, any one investing now is still vastly overpaying in most places if they are looking for future appreciation .
If she is making $500/month, she can probably hold on to the place until prices do appreciate in 25 years.
It reads: The condo “will” net her about $500 a month after homeowner fees, taxes and insurance. I think she got hooked up with an aggressive Realtor and can’t discern fiction from reality, as all that we are hearing about is expectations from novices. Now if someone can show me stories about properties that “do” in fact cash flow and has the data prove it, I might be more interested. I somehow don’t think she will be so thrilled next year, but who knows.
I’m assuming there’s already a paying tenant in the property, because otherwise, I don’t get how anyone could know what it “will” net her (or for how long, which is whole different kettle of fish . . . )
Ah, the folly of assumptions. We have watched more than our fair share of FB make predictions about what their property “will” rent for. If pressed, they will admit that they got their estimate from the real estate agent that sold them the property. For shame.
No, actually it’s profit.
Ramsey signed up a property manager and found a tenant the same day she placed the advertisement for the $1,150 a month rental.
–
“Now we’re getting into the numbers where you can actually get some cash flow. Appreciation is the gravy. But that’s not why you should buy property. An asset is something that produces a return,” said Michael Morrongiello, a real estate investor in Sonoma.”
“Morrongiello said some investors who bought as prices soared during the housing boom that peaked three years ago got burned because they only bet on rising values. Their monthly financing costs far exceeded the amount of money they could ever hope to pocket from rents. ‘That’s what got them in trouble. They were speculating,’ he said.”
—
Light at the end of the tunnel!
–
Professor,
Don’t beat me up.
This is still good news. It’s a HUGE shift in thinking.
—
She only pays $600 a month in mortgage, HOA fees, taxes, insurance, and maintenance? That’s pretty cheap.
You’re kiddin’, right?
That was my monthly rent in Chicago less than a decade ago, and I assure you I was NOT living in some dingy hole or an inaccessible worthless neighborhood.
No, I’m not kidding. 10 years ago, you would have to pay probably $900/mo for a 1-bedroom apartment in ugly Clairemont Mesa (ug part of San Diego).
While $100k isn’t a bad price for a condo - sorry the figures don’t pencil out. Even an $80k mortgage at today’s rates is about $700/month just for mortgage and taxes at today’s rates. I know Sonoma taxes - I just moved from Sonoma county. My mortgage was $240k and I paid just over $1,800 for mortgage alone, plus $300/month in taxes (appraised at just over $300k when I bought). That was at mortgage rates that are identical to what we have now.
Throw in HOA (high for condos)and insurance you’re looking at at best $900k, not $600k. Throw in maintenance (which she didn’t include) and you’re probably looking at $1100k or so. So no - she won’t be making a profit any time soon. She’s blowing smoke.
Additionally, I notice that “time without renters (typically 5-10%) isn’t included in the equation. Sure she’s got a renter now, but renters do tend to come and go…
Correction - she is making a profit perhaps if she’s getting $1150 per month - but only about $50 not $500. Is it really worth it?
I agree packman.
Typically these trump want to be’s are full of crap. They like to lie and say they are making a big profit, but the never want to say that they put 50% down. I don’t care how you work the numbers, either you are paying it to a loan, or you are paying it back to your bank account for money you took out. At 100,000 it is still going to cost you at least 1000.00 per month. AT LEAST. No getting around that rule of thumb. So at best 1,150 would leave 150, not 500. Since the lie is already there, count on more lies.
Right - it is good self-correcting news. When more buy, it will help to set the proper (lowered) price for the neighbourhood. It will also make people realize that if she is making a (small) cash flow, this is the right price, and there is no-quick fix bounce back.
She bought it for $99K, and probably took out an $80K loan, so her monthly PITI is probably only $700. If she is able to rent it for $1200 she nets $500 per month. And she gets to write off the interest and taxes. I think she got a good deal. I wish I could find a nice condo for $99K in Sacramento in a good neighborhood.
“But the other California markets, Los Angeles and San Diego, are down quite sharply already. They’re down 40 percent in real terms. That means they are something on the order of halfway down to pre-bubble levels. Eventually, the slowdown has to stop.”
I think the key word here is: EVENTUALLY.
I don’t know where this mythical 40% down “Los Angeles” is. ‘Cuz, uh… I live in a city with the same name and I don’t see any 40% price reductions around here…
You have to look at same-house sale prices. For houses that were bought in ‘06 and sold in foreclosure in ‘08, and there’s a lot of those, 40% matches what I’m seeing in San Diego, which was just as bubblicious as LA.
Ignore asking prices. That’s more likely to be based on what they owe, rather than what it’s worth.
–Shannon
‘”It’s a choking type of feeling. You look at your neighbor every day, and you have that resentment that they paid less,” said Reyes, who lives two doors down from Cantrell and whose wife is supporting the family as a nurse. “We’ve been here two years, and if we can’t get it refinanced, we’ll have to let it go. We’ll just have to walk out.”‘
Check the neighborhood out very carefully before you think of buying an end-user home in California at a big discount to 2005 bubble prices. Otherwise you may end up with neighbors like this fellow, who seems to deeply resent anyone who did not make the same mistake he made.
Until/unless my neighbors agree to share the risks and monthly costs of my purchase, they have zero input in my private business affairs. Anyone who chooses to act on their misplaced feelings of resentment and “teach me a lesson” had better come well armed and in large numbers.
“Check the neighborhood out very carefully before you think of buying an end-user home in California at a big discount to 2005 bubble prices. Otherwise you may end up with neighbors like this fellow, who seems to deeply resent anyone who did not make the same mistake he made.”
One can just imagine a new neighbor and this resentful FB discussing property taxes, driveway to driveway, on a sunny Sunday morning. Rage?
I pointed this out to a friend of mine, a former city planer for sacramento, he told me that this is nothing new, thanks to prop 13, the new comers could always be eaten at that the property taxes for their home are higher than the neighbors down the street.
I must say some of the points people make on this blog have really allowed me to see a different point of view about money and wealth.
I am always amazed that people will apply such social pressure to do what they do, when you dont do it, they will have such an attitude. Tell people your waiting to get a house its “priced out forever time” Get a house next door for half. They resent you…
Have “construction managers” always made $250k/yr + bonus? I had never heard of construction (nonarchitect) salaries like that until the bubble really got going.
I did a “wow” to that salary PLUS BONUS thing myself. I wonder if the bonus was contingent on cutting costs and making deadlines, hence, crap substitutions and crap quality work? Hm.
The miniature golf course thing seems like something out of a work of satire. It’s just really hard to believe we spend money on idiocies like that. Then again, I don’t even much like pools. I like a yard that’s got green pretty stuff and red pretty stuff and pink and purple pretty stuff and fruits and veggies.
Mir
That “bonus” could easily turn out to be a subscription to the Jelly of the Month Club.
Just ask Mssr Griswald
People made stupid money during this bubble and were happy to pay stupid money for something as simple as landscape. A prime example is in CRE, store front leases. I look a alot of businesses for sale and it is the same thing at everyone I look at for sale..They are paying too much for the lease with almost no limit on the rent increases. All the free money and ninja loans made their way to everything including putting a dry cleaner on every corner. And the bankers financed those aswell as houses. I just read that they are closing some and having trouble financing something as simple as Domino’s pizza. Duh, we don’t need one on every corner and in every strip mall, they deliver. Sq ft rates, plus the ridiculous CAM fees are going to kill alot of small shops in a slowdown.
If I ever made that sort of money, I would continue to live a lifestyle of $30k per year, or less. Most of these people whose salaries climbed to ridiculous levels chose the “lifestyles of the rich and famous” path, and they have nothing left.
A high end (maybe 10-20 in the country) do.
Most construction managers are either degreed engineers; some have Professional Licensure. Some have actual construciton management degrees, which are frequently offered through university civil engineering programs.
You might be thinking of a site super for a small time development, but those guys aren’t making much. The guys making $250k a year are the guys that are managing the overall construction of multi-billion (yes, billion) dollar construction projects.
Have they always made that much, or has that just been during the boom? I dated an architect for a short time, and he said that architects with a BS and a certification get $100k. I’m thinking this $250k number is a bubble salary. Too bad the job doesn’t exist anymore, huh?
No, an above-average construction manager with 10 years of experience for a large multi-state construction firm ($200 million in billings a year) might make $100k a year. If the CM delivers projects on budget and schedule netting the company big money they might pick up a good bonus of $25k. Deliver a project behind schedule or over budget and you’re on the street.
Never count on bonus money as permanent is the rule in the field.
(I’m not a CM, I’m a engineer, but work with CM’s regularly and have taken a number of university courses in that direciton. It is an interesting field, for sure. The logistics of something as simple as the construciton of a five-story office is incredible. I’ve scheduled - mind you, just scheduled - the construciton of one, and there are over 1000 individual tasks requiring a multitude of different people and different materials arriving at the right time. Someone that can do it right makes good money. Forgetting to schedule one thing can eat a project, the key is to provide multiple pathways for when something goes wrong. Because something ALWAYS goes wrong.)
Have “construction managers” always made $250k/yr + bonus? I had never heard of construction (nonarchitect) salaries like that until the bubble really got going.
Add another thing that’s about to pop in this bubble — inflated prices and wages Californians quote for their services. I talked to a Ca-located guy about some basic tech maintenance for some websites and he wanted $2,000 for a 6-8 hour project. I had a very good guy based in Savannah, GA. do it for $80/hour.
That construction manager will cost you $40-60k a year in most interior economies.
‘”For every winner, there’s a loser,” said Michael Reiter, a retired law enforcement officer from Tracy who paid $335,900 in June for a house on Grafton Street — a good deal compared to his neighbor who paid $350,000 at auction for a smaller house.’
Oh no, it is really much worse than this. Rather than a zero-sum game, this is a negative-sum game, where society loses on the balance.
Agreed.
The absurd misallocation of capital in this bubble is not to be believed. Instead of anything tangible we blew it all on houses, b00b-jobs, and tchotchkes from China.
At least the internet bubble forced technology down the throats of unwilling corporations at gunpoint which led to future productivity gains. (Not that I’m arguing in favor of bubbles here.)
I think I should take all the money out of my 401k to pay for landscaping improvements to my back yard. What do you guys think?
I have a better one:
My crazy co-worker took money out of her IRA to spend thousands redoing the landscaping in her rental. Her month to month rental.
The IRA she cashed out was from the state teacher pension she had cashed out earlier…
“I think I should take all the money out of my 401k to pay for landscaping improvements to my back yard. What do you guys think?”
“My crazy co-worker took money out of her IRA to spend thousands redoing the landscaping in her rental. Her month to month rental.”
SUPER ideas!! Just wait until BO becomes Prez so you don’t have to pay penalty on that money you wanna take out.
/sarcasm
I spend $18 on a bag of grass seed at Lowes this weekend.
I paid cash.
I could never understand why those house flipper spent lots of $$$ on sod when you can just buy a bag of seed and water.
Well, not all grass types (breeds?) have seed available. Here in TX the common grass is St. Augustine, which generally is not available via seeds…
However, I tend to just throw down a bunch of bermuda seed and water, like you say. Grass is grass, as far as I’m concerned
When I first read this, I though you had paid 18 bucks for a bag of grass.
Deflation has it’s upside….
–Shannon
“I’m not really in the business of forecasting prices.”
Shiller is in a much better business: Providing a fair estimate of current prices.
Nothing to kill love like having less money, honey.
“When poverty walks in the door, love flies out the window”
-Unknown
Well what did they think? What did they think would happen here? With not (1) but TWO depleted 401k’s and zilch-o liquidity, what exactly were they going to retire “on”?
Oh… I get it, they were building their very own Perpetual ATM machine so they could just draw out cash… but wait, at some point they’d have to pay it back..? Dumb.
RE: When poverty walks in the door, love flies out the window”
Geat quote…most appropriate for the times.
No Money, No Honey!
“I would like to see efforts to start bailing them out and put them in a new kind of contract.”
Details, please? How would this work, who would pay for it, etc, etc, etc?
Just a guess: the “efforts” are made by the printing presses and the “new contract” is with the taxpayers.
Not to co-opt the Cali thread, but I just wanted to ask those who follow these things: The Dow is up over 900 today. Are we seeing something similar to like what happened just before the crash back in the Great Depression? I seem to remember something about one last “surge” before TSHTF, where a bunch of financiers led by JP Morgan got together and tried to prop up the pig.
Second thing, I caught the show on the History Channel about the Dust Bowl. Very interesting. With all this talk of brown lawns and Santa Ana winds, wondering if a similar thing couldn’t take place today in areas that have been overbuilt and stripped of natural flora.
Its kind of happening right now in the northern parts of the San Fernando Valley. They dug up the orange groves and flattened the ranches to build new subdivisions - and all it takes are the Santa Anas…..
All those new tract homes are currently in flames - it isn’t getting much coverage on the MSM, what with the huge bounce in the DOW - but my house smells like a campfire, and I can actually see the smoke column up near Porter Ranch. My eyes are watering.
Thanks, speedingpullet. I have a feeling it won’t just be California, but Nevada, Arizona, Colorado, anywhere there’s been overbuilding. The parallels to the Dust Bowl are eerie.
I also found this:
“Black Tuesday, 1929. A wind came by and blew a few cards off the house of said cards. People saw stocks were actually falling (something they hadn’t done in a long time) and the trend reversed. People hurried to get out of stocks and minimize their losses. As this happened, more people did the same which exacerbated the situations. J.P. Morgan made a valiant effort to save the economy by putting the modern equivalent of tens of billions of dollars into certain banks, but to no avail. Folks wanted out quickly at whatever cost.”
I’m not so sure people want out as quickly these days, so maybe “things will be different this time”, but again, there ARE some similarities.
palmetto,
I’m *not saying there ‘isn’t’ a parallel but the sense “I” get is that people in general ( and Boomers in particular ) would much rather be liquidating their Real Estate holdings… but CAN’T! Try as they might?
So since they can’t divorce themselves from their Real Estate malinvestments they’re dumping what they CAN and right now that’s stocks and mutual funds! I really just see this sell off as being an outlet for their anxiety that simply can’t be extinguished or satisfied through dumping their Real Estate holdings?
Even if they are just upside down on (1) property ( their primary res. ) that they’ve been trying to sell for a year and half?
JP Morgan died in 1913…you are either confusing him with Whitney, head of National City Bank (now Citibank) or 1929 with the panic of 1907.
JP Morgan JR
http://en.wikipedia.org/wiki/J.P._Morgan,_Jr.
So, apparently, its the S & S Renaissance Summit Homes that are going up in smoke near Porter Ranch.
“From the high $1,000,000s”
- now, not so much, I think.
Looking out my yard I can see a fire at camp pendleton today. It is the third big one in two weeks. This one is sprouting baby fires. film at 11.
Out here in the central plains, the past 3-4 years the weather has been pretty nice…….winters not too cold, summers not too hot, plenty of rain at about the right time for the farmers (still have that wind problem though……..).
I’ve been trying to keep it to myself. We’ve already had one wave of Californians show up and screw up property values/taxes.
1930s = “Okies”
2000s = “Californicators”?
My viewpoint is that the fundamentals did not change over the week and that the governments of the world can not keeping dumping money into the economy forever. They are merely delaying the enviable.
Exactly, this is a dead cat bounce. Same thing happened in ‘29. Fundamentals have not changed one ounce.
You need to watch Idiocracy.
“You look at your neighbor every day, and you have that resentment that they paid less,’ said Reyes.”
Sounds like a seriel killer in the making. I supspect crime and suicide rates will increase during the next few years. Why doesn’t he look in the mirror and say if only I did my own due diligence and read Ben Jones’ blog like my coworker suggested I wouldn’t be in this mess?
I was out with a friend the other day (who is also a renter) we drove by a townhouse complex in Bergen County, NJ. For those of you who aren’t familiar with that area it is has a high concentration of people who make their living in financial services. She mentions to me that in that complex the average townhouse was selling for around $600k and she figured if she waited a year she could pick one up for considerably less.
I think that the Mercury News article highlights the risk for anyone who buys for less significantly than their neighbors. How are my friend’s neighbors going to react if she pays 50% less than they did? Are they going to walk away from their homes? Are they going to stop paying their association fees? There are a lot of factors to consider other than price.
If all your overpaying neighbors decide to walk away, then they will be replaced by new, lower-paying neighbors. Then you can have friends, no prob.
How are the people who paid full price and kept up with their payments going to feel when their deadbeat neighbors get bailed out (as McCain promised to do)? These people, in my opinion, have every right to be angry (though not at their neighbors, but at America.)
I think that the Mercury News article highlights the risk for anyone who buys for less significantly than their neighbors. How are my friend’s neighbors going to react if she pays 50% less than they did?
I think this is a very good thing to think about. Perhaps it’s better to wait until everyone gives up and your arrival is seen as a sign that the bad times are over and things have finally turned around.
Sidestep the whole problem - rent!
“With home prices going down, down, down, I was thinking, I had this money sitting in the bank not earning a whole lot of interest. And if you buy low, the market’s eventually going to go back up,’ Ramsey said.”
Combo we need your help. Someone still thinks real estate is King and can’t get rid of her cash fast enough.
Tim,
Unbelievable isn’t it? This is why I’m so adamant about getting the tax code changed ( even if it looks a tad unnecessary at this point ) As long as the cap gains exemption remains in place, there’ll be those looking to cash in on it? No matter how ill-advised.
Funny I don’t recall ‘anyone’ running around with a sense of urgency about the stock market in late 2000?
The other major thing about the tax code that needs to be changed is that tax deductibility of mortgage interest. I think that it should be phased out over of the course of a few years. I used to think that the biggest problem with it was the unfairness. Why shouldn’t renters get a similar deduction for the the rent that they pay? However, another problem is the confusion that it causes. I was talking with a co-worker about the miserable performance of our 401(k) accounts and how it might be better if would had taken some of that money and paid off our mortgages early. She, being an adherent of the real estate religion, though that that would be a bad idea because we would lose the tax deduction. That tax deduction causes people to make bad decisions, I’m sure.
The tax deductibility of property tax is a similar thing. I haven’t though that one through yet, though. What do people think, should we eliminate that deduction as well?
“The tax deductibility of property tax is a similar thing. I haven’t though that one through yet, though. What do people think, should we eliminate that deduction as well?”
Personally I do not believe you should be taxed on a tax. So I’m pro-deductibility of property taxes, sales taxes (if you take the time to add them all up) and income taxes - all with no AMT phase-outs. (Of course, I want to abolish the AMT too.)
The mortgage interest deduction is particularly unfair. Even as a homeowner, I am opposed to it.
(I have to add that I’m against EVERY tax deduction. Why can’t we all pay 25% for everything over the first 10K of income and let that be that?)
Not everyone could afford to pay that much. There are a lot of people who have to use every last dime of their full-time paycheck just to cover a room, food, clothes, energy, water, telephone, transportation, a computer, and a few beers on the weekend. If you taxed them at 25%, they would be forced to either work under the table or become homeless.
I think if we taxed everyone at the same rate everyone would understand what taxes are, and elect more responsible government. You wouldn’t have the situation where candidates pledge to reallocate money in order to buy votes (as both McCain and Obama have done.)
Wages and prices would adjust so working people would earn enough to live on.
Palmetto, you read my mind. Though, it would be . . . surreal to have the same down, up, then down pattern again. Any historians out there? Is this a common pattern before, as Palmetto says, TSHTF?
IAT
I’m really wondering, itsabouttime. Paulson does seem to be trying to do a JP Morgan number. The difference, to me, seems to be that people are a LOT slower on the uptake these days. We didn’t have TV then and even though there’s always been spin, it is a lot more prevalent now. I’m actually trying to find “Depression Digs” right now. I don’t think a Florida condo, no matter how good the deal, is going to be the best place for the palmster if TSHTF.
I might just take a temporary fruit or veggie packing job for a few extra sheckels. Bones are a tad too creaky to stoop all day long, I’ve reached the point where, when you stoop down to look for something, you sort of stay there for a little bit to see if there’s anything else you have to do before you get up.
It happened during the tech bubble too.
Candidate A says we need to stop foreclosures for 90 days
Candidate B says we need to put a “floor” under house prices
Quick, somebody help me not to be a statistic this election cycle (as in, “x% of Americans do not vote”).
You can’t be a one issue voter. Anyone who says they support every single thing their candidate stands for isn’t thinking. At All.
And remember that there’s always other parties to choose from. Don’t let anyone talk you into thinking it’s a worthless “protest” vote. It’s a vote for the person you think would make the best President.
So vote!
Definitely a protest vote kind of year. I cannot stomach either mainstream candidate. I’d rather stay home than vote for either, so..yeah, protest time.
Or, if the weather’s real bad election day, stay home time. Which would be the first time I miss a presidential election since I was eligible to vote.
Mir
RE: Candidate A says we need to stop foreclosures for 90 days
So why do these deadbeat hacks get a break?
If this is how it’s gonna be, where’s my personal debt moratorium?
I’ll go with Candidate A and get my 3 months free rent stimulus.
You can also skip the vote for president and vote for the other things on the ballot.
I’ve omitted votes for local judgeships or school boards when I have no opinion (or lazily didn’t bother to research them)
Quick, somebody help me not to be a statistic this election cycle (as in, “x% of Americans do not vote”).
How about this:
You vote for a lot more than president on election day. There are probably 25 contests on your ballot that affect your day-to-day life more than McCain vs. Obama.
Also, you can vote against your congressional rep. if they voted for the 700B bailout:
http://clerk.house.gov/evs/2008/roll681.xml
“They moved into a rental in nearby Lathrop, a neighborhood where the lawns are brown and foreclosure signs line the sidewalk. The stress has been so great, Carroll said, that she’s daydreamed of driving herself off a cliff.
Carroll, if you’re reading this, please, please, try to hang in there for just one more day … just one … more … day. Why? Maureen McCormick’s Here’s the Story: Surviving Marcia Brady and Finding My True Voice drops tomorrow. It’s a tell-all book chock-full of McCormick’s anecdotes about her cocaine binges, her steamy Hollywood romances and sex-for-drugs encounters, and her ups and downs coping with clinical depression. Hope this helps.
Luv,
Jen
I need to see pictures or it didn’t happen.
Is this a paid advertisement? Product placement?
I am a one issue voter with incumbents running; did you vote yes for the bailout?
A yes vote by the rep/sen guarantees my no vote.
You’ll have to be more specific.. which bailout? Or do they have to vote ‘No’ to all of them?
He’s talking about the $700B bank bailout.
Looks like homes in Victorville, Ca are back to there 1992 prices.
“Victorville was a desert boomtown. Up until a year ago, it was the second-fastest growing city in the US. There are still signs of the boom everywhere. Driving into town, there are signs pointing to new developments, and as you get closer, people stand on the street corners waving signs to try to entice buyers to model homes. But now, 11% of the homes in the city are in foreclosure.”
The average selling price is $80,000, and now ‘regular folks who saved their money’ are coming back into the market. They were off to show a young couple in their 20s a house. ‘It’s great for them,’ he said.”
It would be great if this were true. But my family says that only true in the homes that in 1992 were selling for 40K.
VV and most of the high desert is a gang and meth infested, dusty oven. I left there in 2003 and would never return.
Regarding the love thing - this was sent to me yesterday. I think the same principles can be applied to the housing market, just replace CEO etc. with Realtor, and stock terms with housing terms. I’ve emphasized the key one…
CEO — Chief Embezzlement Officer
CFO — Corporate Fraud Officer
BULL MARKET — A random market movement causing an investor to mistake himself for a financial genius.
BEAR MARKET — A 6 to 18 month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no sex.
VALUE INVESTING — The art of buying low and selling lower.
P/E RATIO — The percentage of investors wetting their pants as the market keeps crashing.
BROKER — What my broker has made me.
STANDARD & POOR — Your life in a nutshell.
STOCK ANALYST — Idiot who just downgraded your stock.
STOCK SPLIT — When your ex-wife and her lawyer split your assets equally between themselves.
FINANCIAL PLANNER — A guy whose phone has been disconnected.
MARKET CORRECTION — The day after you buy stocks.
CASH FLOW — The movement your money makes as it disappears down the toilet.
YAHOO — What you yell after selling it to some poor sucker for $240 per share.
WINDOWS — What you jump out of when you’re the sucker who bought Yahoo @ $240 per share.
INSTITUTIONAL INVESTOR — Past year investor who’s now locked up in a nuthouse.
PROFIT — An archaic word no longer in use.
Glen Beck keeps talking about zimbabwe.
He also hints at all out revolution or civil war. Some of his guest also say the same, albeit in semi-coded language.
Glenn Beck (believe it or not) has been somewhat the voice of sanity recently. For instance he really called out congress for repackaging the bailout bill as just the same bill with sweeteners added to make it pass. Spot on.
World May Be Lucky to Get Worst Recession Since 1983 (Update3)
By Rich Miller
Oct. 13 (Bloomberg) — The world may be heading for its worst recession in a quarter of a century — if it’s lucky.
A steep slump looks likely as the credit squeeze crunches economies from the U.S. to Singapore and panic engulfs global financial markets.
“It’s certainly going to be the worst since the 1980s,” says Bradford DeLong, an economics professor at the University of California at Berkeley who worked at the U.S. Treasury Department from 1993 to 1995. “The hope is that it won’t become the worst unemployment business cycle since the Great Depression.”
RE: World May Be Lucky to Get Worst Recession Since 1983
Maine had 10 major paper mills in 1983 employing thousands with the best rate of pay in the state.
They are down to 4 now-all of which are hangin’ by a thumbnail.
Employment is down to a few hundred.
It really is different this time!
Citigroup analyst Steven Wieting wrote that tightening financial conditions and weakening economic activity are expected to continue, and suggest “a more severe recession.” Wieting wrote that even if “traction is eventually regained,” he is nonetheless expecting contraction in the U.S. GDP over the four quarters ending in the second quarter of 2009. “We believe large company profits will now fall 27% peak-to-trough, and the unemployment rate to peak above 8 1/2%,” Wieting wrote.
http://www.marketwatch.com/news/story/citi-analyst-issues-dour-outlook/story.aspx?guid=%7B4BA3893A%2D618C%2D496A%2D9088%2DECF55887FB6E%7D
before it kills the love.
it must first rub the lotion its skin.
fencesitters….if you aint got deep pockets, get off the fence. How mucha month is getting priced out.
inflation tsunami commences in
5
4
3
2
…..
vozworth:
1. That was creepy.
2. Do you think that there will be inflation in house prices?
Personally, I have believed that more housing price inflation was part of the half-baked plan all along. But there are just a couple of issues with this:
1) Almost nobody qualifies, even at current reduced prices, without a return of subprime lending standards.
2) It will be even harder to find qualified buyers in a recession if prices stop declining or stop going up again, than if they continue correcting.
3) A return to housing price inflation will offer builders to add to a record glut, throwing still more money down the REIC rat hole. Adding to the glut will create more downward pressure on prices, which is apparently already considerably high, given that California prices are falling at something like a 40 pct annual rate.
But Edgardo Reyes doesn’t even want to say hello. ‘It’s a choking type of feeling. You look at your neighbor every day, and you have that resentment that they paid less,’ said Reyes.
Now *that’s* petty!
They depleted their 401(k)s to spend $120,000 improving their backyard.
Someone would take a tax-advantaged, judgment resistant savings account and use it to IMPROVE THEIR BACKYARD? I’m flabbergasted.
“An investor bought the Aguirres’ old house from the bank for $255,000; the couple still owed $420,000 when the bank foreclosed their loan. The investor, John Smith, says he should nearly break even on rent. And once the real estate market turns around, he will surely make a profit. ”
Awhile back, I mentioned that central valley housing shouldn’t be more than $150K. I will have to rescind that statement. Houses in Central Valley should be around $50 to 80K.
About 80% of the people I know that live there works for the State or local agencies. I know a few that live there commute to Silicon Valley. Not only is it a brutal drive, but the gas is killing them.
“He had made a tidy profit when he sold his last Anderson Home, a smaller one in the next neighborhood over.”
Then
“While Cantrell had paid a base price of $658,500 for his house, a nearly identical one sold for $391,000. ‘I’ve lost a quarter-million dollars in value today,’ Cantrell said as he left the ballroom.”
Silly gambler, don’t you know that “Heads I Win, Tails I Win” only works for Wall street bankers.
All I can about this thread is common sense is not common.
“He had a job in construction management and was making $250,000 a year, plus a hefty bonus. His credit rating was in the 700s. So in 2006, he bought a $670,000 house, then spent $100,000 to add a pool and miniature golf course in the back. It seemed sensible enough at the time.”
To WHOM did it seem sensible at the time?